BWX Technologies Reports Solid Third Quarter 2020 Results; Increases 2020 Full-Year Earnings Guidance Once Again

Rhea-AI Summary

BWX Technologies reported third quarter 2020 revenue of $520 million, a 3% increase from $506 million in Q3 2019. GAAP net income was $73.2 million ($0.76/share), down from $74.8 million ($0.78/share) year-over-year. Non-GAAP net income rose to $75.6 million ($0.79/share), slightly up from $75.3 million. The company has raised its 2020 EPS guidance to approximately $3.00, reflecting a solid performance across segments despite challenges posed by COVID-19. The Nuclear Operations Group's revenue decreased by 2% to $387 million, while the Nuclear Power Group saw a 28% increase in revenue.

Positive

• Third quarter revenue increased by 3% YoY.
• Non-GAAP EPS guidance raised to ~$3.00.
• Nuclear Power Group revenue rose by 28% due to higher service activity.
• Operating income for Nuclear Services Group increased by 37% YoY.

Negative

• GAAP net income declined to $73.2 million, down from $74.8 million.
• Nuclear Operations Group revenue decreased by 2% YoY.

LYNCHBURG, Va.--(BUSINESS WIRE)--BWX Technologies, Inc. (NYSE: BWXT) ("BWXT", "we", "us" or the "Company") reported third quarter 2020 revenue of $520 million, a 3% increase compared with $506 million in the third quarter of 2019. GAAP net income for the third quarter 2020 was $73.2 million, or $0.76 per diluted share, compared with GAAP net income of $74.8 million, or $0.78 per diluted share, in the prior-year period. Non-GAAP net income for the third quarter 2020 was $75.6 million, or $0.79 per diluted share, compared with non-GAAP net income of $75.3 million, or $0.79 per diluted share, in the prior-year period. A reconciliation of non-GAAP results is detailed in Exhibit 1.

“BWXT delivered solid results in the third quarter, exhibiting consistent underlying business performance across all segments and indicating the stability of our end markets even under challenging economic conditions,” said Rex D. Geveden, president and chief executive officer. “Another strong quarter of financial results leads us to increase our 2020 EPS guidance for the second time this year, with the opportunity to achieve our long-term EPS guidance in the first year of the outlined 3-year performance period.”

“The Nuclear Operations Group continues to be the bedrock of the Company’s 2020 performance, with continued customer support for mission-critical nuclear components. The Nuclear Power Group is trending positive in both its commercial nuclear power and nuclear medicine businesses and was also able to secure funds under the Canadian COVID-19 Economic Response Plan designed to offset the negative financial pressure created by the pandemic. All of this leads us to increase the full year revenue and earnings guidance,” said Geveden.

Segment Results

Nuclear Operations Group (NOG) segment revenue was $387 million for the third quarter of 2020, a 2% decrease from the prior-year period, driven by higher downblending and naval nuclear fuel volume, more than offset by lower long lead material production. NOG operating income was $68.5 million in the third quarter of 2020, a 27% decrease compared with the prior-year period, driven by higher downblending and naval nuclear fuel volume, more than offset by lower long lead material production, and fewer positive contract adjustments to backlog contracts compared with the prior-year period. Third quarter 2020 segment operating margin was 17.7%. Given the quarterly fluctuations experienced from the timing of certain items, year-to-date results can be more reflective of the underlying strength of the segments. Year-to-date revenue was up 15.4% along with strong operating income growth, resulting in year-to-date operating margins of 20.1%.

Nuclear Power Group (NPG) segment revenue was $108 million for the third quarter of 2020, a 28% increase from the prior-year period primarily due to higher field service activity, higher fuel production and fuel handling services, and the Laker Energy acquisition, partially offset by lower component volume. NPG GAAP and non-GAAP operating income was $29.2 million and $29.7 million, respectively, in the third quarter of 2020, a significant respective increase from GAAP and non-GAAP operating income in the prior-year period driven primarily by higher revenue and funds received under the Canadian COVID-19 Economic Response Plan of $16.6 million to offset year-to-date incurred expenses related to the headwinds created by the COVID-19 pandemic. Third quarter 2020 segment GAAP and non-GAAP operating margins were 27.0% and 27.5%, respectively.

Nuclear Services Group (NSG) segment operating income was $7.6 million in the third quarter of 2020, up 37% compared with $5.5 million for the third quarter of 2019 driven by lower costs.

Cash and Capital Returned to Shareholders

The Company utilized $7.5 million of net cash in operating activities in the third quarter of 2020 compared with $43.9 million of cash generated from operating activities in the prior-year period. At the end of the third quarter 2020, the Company’s cash balance, net of restricted cash, was $44.7 million.

The Company returned $18.1 million of cash to shareholders during the third quarter 2020 through dividends, bringing the total year-to-date cash returned to shareholders to $74.9 million, including $20.0 million in share repurchases and $54.9 million in dividends. As of September 30, 2020, remaining share repurchase authorization was $145 million.

On October 30, 2020, the BWXT Board of Directors declared a quarterly cash dividend of $0.19 per common share. The dividend will be payable on December 10, 2020, to shareholders of record on November 20, 2020.

2020 Guidance

BWXT 2020 guidance has been updated to reflect year-to-date performance and management’s outlook on the remainder of the year. 2020 guidance continues to incorporate business conditions related to the COVID-19 pandemic and assumes that current conditions will remain in effect through the remainder of 2020.

BWXT updated the following guidance for 2020:

• Increased non-GAAP EPS from a range of $2.80 – $2.90 to ~$3.00 (excludes pension and post-retirement benefits mark-to-market)
• Increased consolidated revenue growth from up ~8% to up ~9%
  • Increased NOG revenue growth from up ~10% to up more than 10%
  • Increased NPG revenue growth from down ~1% to up slightly
• Increased NPG operating margin from ~11% to ~14%

BWXT reiterated the following guidance for 2020:

• Non-GAAP operating income and margin
  • NOG operating margin in the “high teens” with upside potential from CAS pension reimbursement
  • NSG operating income of ~$25 million
  • Other segment operating expense primarily R&D of ~1% of revenue
  • Unallocated corporate expenses of ~$15 million
• Other income primarily related to pension and other post-employment benefits of ~$37 million
• Capital expenditures of ~$270 million
• Non-GAAP effective tax rate of ~23%

Long-term Guidance

BWXT long-term guidance continues to reflect current business conditions related to the COVID-19 pandemic and assumes that current conditions will remain in effect through the remainder of 2020.

BWXT reiterated long-term guidance that, excluding the benefit of tax reform, the Company anticipates a non-GAAP EPS compound annual growth rate (CAGR) in the low-double digits over a three-to-five year period from 2017 based on a robust organic growth strategy and balance sheet capacity.

The Company does not provide GAAP guidance because it is unable to reliably forecast most of the items that are excluded from GAAP to calculate non-GAAP results. These items could cause GAAP results to differ materially from non-GAAP results. See reconciliation of non-GAAP results in Exhibit 1 for additional information.

Conference Call to Discuss Third Quarter 2020 Results

Date: Monday, November 2, 2020, at 9:00 a.m. EST

Live Webcast: Investor Relations section of website at www.bwxt.com

Full Earnings Release Available on BWXT Website

A full version of this earnings release is available on our Investor Relations website at http://investors.bwxt.com/q32020-release

BWXT may use its website (www.bwxt.com) as a channel of distribution of material Company information. Financial and other important information regarding BWXT is routinely accessible through and posted on our website. In addition, you may elect to automatically receive e-mail alerts and other information about BWXT by enrolling through the “Email Alerts” section of our website at http://investors.bwxt.com.

Forward-Looking Statements

BWXT cautions that this release contains forward-looking statements, including, without limitation, statements relating to backlog, to the extent they may be viewed as an indicator of future revenues; our plans and expectations for the NOG, NPG and NSG segments including the expectations, timing and revenue of our strategic initiatives, such as medical radioisotopes; changes in general economic conditions, reduced demand for our products and services, disruptions to our supply chain and/or production, changes in government regulations and other factors, including any such impacts of, or actions in response to the COVID-19 health crisis; and our 2020 guidance and long-term guidance. These forward-looking statements are based on management’s current expectations and involve a number of risks and uncertainties, including, among other things, our ability to execute contracts in backlog; the lack of, or adverse changes in, federal appropriations to government programs in which we participate; the demand for and competitiveness of nuclear products and services; capital priorities of power generating utilities; the extent to which the COVID-19 health crisis impacts our business; the impact of COVID-19 on our employees, contractors, suppliers, customers and other partners and their business activities; the extent to which the length and severity of the COVID-19 health crisis exceeds our current expectations; the potential recurrence or subsequent waves of COVID-19 or similar diseases; adverse changes in the industries in which we operate and delays, changes or termination of contracts in backlog. If one or more of these risks or other risks materialize, actual results may vary materially from those expressed. For a more complete discussion of these and other risk factors, see BWXT’s filings with the Securities and Exchange Commission, including our annual report on Form 10-K for the year ended December 31, 2019 and subsequent quarterly reports on Form 10-Q. BWXT cautions not to place undue reliance on these forward-looking statements, which speak only as of the date of this release, and undertakes no obligation to update or revise any forward-looking statement, except to the extent required by applicable law.

About BWXT

At BWX Technologies, Inc. (NYSE: BWXT), we are People Strong, Innovation Driven. Headquartered in Lynchburg, Va., BWXT provides safe and effective nuclear solutions for national security, clean energy, environmental remediation, nuclear medicine and space exploration. With approximately 6,700 employees, BWXT has 12 major operating sites in the U.S. and Canada. In addition, BWXT joint ventures provide management and operations at more than a dozen U.S. Department of Energy and NASA facilities. Follow us on Twitter at @BWXTech and learn more at www.bwxt.com.

EXHIBIT 1

BWX TECHNOLOGIES, INC.

RECONCILIATION OF NON-GAAP OPERATING INCOME AND EARNINGS PER SHARE^(1)(2)(3)

Three Months Ended September 30, 2020
		GAAP			Restructuring Costs			One-time franchise tax audit expense			Non-GAAP
Operating Income		$	88.8		$	0.5		$	2.6		$	91.9
Other Income (Expense)		3.1			—			—			3.1
Provision for Income Taxes		(18.7)			(0.1)			(0.6)			(19.4)
Net Income		73.2			0.4			2.0			75.6
Net Income Attributable to Noncontrolling Interest		(0.0)			—			—			(0.0)
Net Income Attributable to BWXT		$	73.2		$	0.4		$	2.0		$	75.6
Diluted Shares Outstanding		95.7									95.7
Diluted Earnings per Common Share		$	0.76		$	0.00		$	0.02		$	0.79
Effective Tax Rate		20.3%									20.4%
NPG Operating Income		$	29.2		$	0.5		$	—		$	29.7

Three Months Ended September 30, 2019
		GAAP			Restructuring Costs			Non-GAAP
Operating Income		$	98.5		$	0.6		$	99.0
Other Income (Expense)		(4.0)			—			(4.0)
Provision for Income Taxes		(19.5)			(0.1)			(19.6)
Net Income		75.0			0.4			75.4
Net Income Attributable to Noncontrolling Interest		(0.2)			—			(0.2)
Net Income Attributable to BWXT		$	74.8		$	0.4		$	75.3
Diluted Shares Outstanding		95.8						95.8
Diluted Earnings per Common Share		$	0.78		$	0.00		$	0.79
Effective Tax Rate		20.6%						20.7%
NPG Operating Income		$	9.0		$	0.3		$	9.3

(1)		Tables may not foot due to rounding.
(2)		BWXT is providing non-GAAP information regarding certain of its historical results and guidance on future earnings per share to supplement the results provided in accordance with GAAP and it should not be considered superior to, or as a substitute for, the comparable GAAP measures. BWXT believes the non-GAAP measures provide meaningful insight and transparency into the Company’s operational performance and provides these measures to investors to help facilitate comparisons of operating results with prior periods and to assist them in understanding BWXT's ongoing operations.
(3)		BWXT has not included a reconciliation of provided non-GAAP guidance to the comparable GAAP measures due to the difficulty of estimating any mark-to-market adjustments for pension and post-retirement benefits, which are determined at the end of the year.