BWX Technologies, Inc. (BWXT) Earnings Call Transcript & Summary

Good morning, and welcome to BWXT's 2021 Investor Day. I'm Mark Kratz, Vice President of Investor Relations. I joined the company about 4 years ago, which was coincidentally the last time we hosted an Investor Day. So we're grateful to be back today and very grateful to be back live. It's good to be with you this morning. We appreciate the opportunity to speak with the investment community. We value the time and interest of both our current investors as well as new potential investors. There's a lot of unique and compelling activity going on across BWXT, and I'm particularly enthusiastic about the outlook for the company. This morning, we have an exciting event plan for you, where you'll gain further insight into the business, the strategy and the vision this management team has for BWX Technologies. Today's presentation is being webcast live, which is available on the BWXT website and in yesterday's press release. Before we begin, a few housekeeping items. For those attending in person, in the event of an emergency, please follow NYSE personnel to the exits. There's a staircase located by the elevator bank in the rear of the room, and there's also another emergency exit down the hallway to my right. During today's presentation, we'll discuss certain matters that constitute forward-looking statements. Those statements involve risks and uncertainties that are described in the safe harbor provision found in today's earnings materials and also the company's SEC filings. We will also make reference to non-GAAP financial measures, which are reconciled to GAAP measures in the appendix of this material. Turning to today's agenda. You'll have the opportunity to hear from several members of our executive leadership team, all having played important roles in BWXT's success during its first year -- 6 years as a standalone public company. Rex Geveden will lead today's discussion with an overview and strategy, followed by Dr. Rob Smith, President of Government Operations, who'll discuss the company's 2 operating segments that are focused on government solutions. We will also hear from John MacQuarrie, President of Nuclear Power Group, who will discuss the company's commercial operations, including nuclear power; and also Martyn Coombs, President of BWXT Medical, who will discuss the company's strategy and nuclear medical manufacturing. Lastly, our new CFO, Robb LeMasters, will present the company's financial strategy. We'll take a short break around 10:30 a.m., and we will hold a Q&A session at the end of today's meeting. Please hold your questions for the end. For those attending online, you can submit your questions at any point during the presentation. I will moderate the Q&A, and we'll take questions from both the live audience as well as those attending virtually. In addition to the presenters today, you will also hear from a couple of other members of the executive management team. Susie Sterner, Senior Vice President of Government Relations and Communications; Joel Dooling, President of Nuclear Operations Group; and Ken Camplin, President of Nuclear Services Group. Before we begin, we would like to share a short video, highlighting BWXT's unparalleled capabilities through its strong employee base, rich history and drive for innovation. [Presentation]

Thank you. It's now my pleasure to introduce Rex Geveden, BWXT's President and Chief Executive Officer.

Thank you, Mark, and good morning to everybody. Good morning to everybody that's here live. Good to see all of you and also to all of those who have joined us online. I'm glad to be back on -- at the stock exchange. The last time I was here was December of 2015. We were down on the floor of the exchange up in the balcony, ringing the bell to commemorate the launch of BWXT as a public company. There is still a bull out in front of the building at the time. I had joined in October of 2015, very excited about the future of the company. At that time, that excitement was well founded as it happens. We've been on quite a journey for the last 6 years, and I can't wait to see what the next 6 years hold for us as a company. When you look at BWXT as a company, I think it's fair to say that our identity is that we're a nuclear manufacturing and technology company, but we also like to talk about our corporate purpose and you got a tease of that in the video. Our corporate purpose is to employ nuclear technology to attack some of the most important problems that face us as a nation and as a globe. For example, we use nuclear technology to provide for global security, and we're very proud about that. We use nuclear technology to produce clean energy, particularly through our Canadian Commercial Nuclear Power business. We enable the exploration and future habitation of space with nuclear technology. We produce nuclear medicines to diagnose and treat very challenging diseases such as heart disease and cancer, and we use nuclear technology to perform nuclear environmental remediation for our government customers at legacy cold war sites, and we're very proud of that fact as well. When you look at the history of this company, I think it's fair to say that we've made our money in manufacturing, but we've -- our growth has been driven by innovation. It's taken us into new markets and created new and interesting opportunities for us, and so this chart here kind of depicts that innovation history. It goes back 165 years to Babcock & Wilcox, which is the originating company to Stephen Cox's patent of the water tube boiler, which revolutionized both the safety and performance of steam generating power systems at the time. Our nuclear history goes back literally 75 years, back to supporting with both with technology and manufacturing the Nautilus submarine, which is the world's first nuclear submarine and into the modern era of BWXT launch -- starting in 2015, where we're using nuclear technology to design new failsafe fuels. For example, we've done innovations around medical isotopes. We're designing a mobile reactor for the Department of Defense. We're designing a space reactor for NASA. And so that innovation DNA that we have is what's leading us into these new and exciting markets and creating new growth verticals for us that were not available before. This chart here depicts really our value proposition, which is that there are unique differentiators in this company, BWXT. And I'm using the term precisely here. I mean truly unique in the sense that we have unmatched credentials to participate in these markets. We have an unmatched history. I think that was demonstrated by that last chart. And we also have capacity that a number of our competitors do not possess and that leads us into superior competitive positioning in most of the markets, and most of the opportunities in where we play. In fact, we're a sole source supplier on a number of our franchise programs, and there's very limited competition in some of our other programs because of the very hot barriers to entry into these kind of businesses and markets. You'll be hearing from our executive team, our proven team throughout the day about these differentiators and how it leads us into our competitive positioning, and you'll also be hearing about the innovations that I mentioned and how they're driving our future growth. And I think when you hear all of this, you'll agree that BWXT is certainly a compelling investment opportunity poised for future growth. We're going to present our business into 2 primary components today. The first one being the government component. That will be represented by Rob Smith, who's sitting down in front here. You'll hear from Rob later on. He's the President of Government Operations and that contains 2 segments of the business. One is nuclear operations, which contains our flagship Nuclear Navy business, but also has some other interesting components that are providing for some growth, including strategic nuclear materials and also specialty fuels. He'll also be describing the Nuclear Services Group, which is the home of our technical -- our historical technical services piece that does management and operations and nuclear environmental remediation, primarily for government clients, but it's also the home of our Advanced Technologies group. And so you see the micro reactor work going on here, some of the advanced fuel developments going on in this group, and it's the isotope technology that's driven our entrance into and nuclear medicine originated from this group, and it functions really as kind of the central R&D hub for BWX Technologies. And then you'll hear in our commercial business, which is represented by the Nuclear Power Group. You'll be hearing from John MacQuarrie, who's sitting up front here, and he'll be describing all the components of that business, including our component manufacturing fuel and services and other things that we do in the market. And then he'll hand it over to Martyn Coombs, who runs the Nuclear Medicine business and will be describing our position in that market. So we'll give you a lot more color around nuclear medicine. I think a number of you have been anticipating that. So when you look at the businesses that we have grouped into government and into commercial components, they're very different in some ways, very obviously. But what they have in common are the set of differentiators that we have listed in this kind of wagon wheel chart. These businesses produce products that are what we call high consequence. Generally, that means they operate in complex environments, challenging environments, and they absolutely cannot fail. There are also products that have -- that are highly engineered, high product complexity. They're built to exacting quality standards. There's logistical complexity because we are handling nuclear materials in the forms of fuels and special materials and medical isotopes in some cases. And sometimes, these businesses have high capital intensity associated to them. So all that -- what all that means is that these products are hard to make. And because of that, there aren't that many players and because of that, it discourages competitive entry. And so there's this whole set of positive characteristics that sort of comes with that set of qualities, and those are things like -- these are very long-cycle businesses, where you can get into a superior competitive position and put a pretty deep moat around your business. And the way that we've constructed this business, we have really no effective exposure to global CapEx and GDP cycles. Just none of our businesses are sensitive to that. We have highly visible backlogs, and we have a certain amount of pricing power that shows up in our margins. And so this is the kind of business that we're in. This is the kind of business that we'd like to be in, and we look for vectors of growth. We're looking for this set of characteristics, high-product complexity, heavily regulated. In other words, hard stuff. So how are we doing as a company? I think we've put together a track record that's -- that I would say is commendable in our 6 years as a public company. We've been delivering on our commitments, keeping our customers satisfied, maintaining our positions in our markets. We've been growing our core. We've got some shots on goal to grow outside of the core business, and we'll be describing all that today. But to put it in financial terms, we've improved the top line by 50% over that 6-year period. We have more than doubled the bottom line going from $1.42 a share to $3.03 last year. We have been expanding our margins. We're up a couple of hundred basis points from the time we spun as a public company, and on top of all that, we've returned more than $1 billion to shareholders through dividends and through share repurchases. So I think we've been -- as we've grown a shareholder-friendly company. Along the way, we've been picking up some accolades and awards. We've been named by Investor's Business Daily, the last 2 years, a top ESG company. And in fact, in 2020, we were #1 in the manufacturing category. We were named this year, for the year 2020, the #1 manufacturer of the year. By Industry Week, we found ourselves in the Fortune 1000 this year, and hopefully, we'll wake up one day and find ourselves in the Fortune 500 as we grow this business and create this future for ourselves. And all the while -- and this goes back to our long and I think, impressive history. We maintain best-in-class OSHA numbers. Our safety record is really unparalleled. We're always in the top quartile, and generally, we're around the 95th percentile or above in safety performance, and that's something we have to focus on given the heavy manufacturing work that we do and given the nuclear qualities of our business. The nuclear business, the nuclear markets are actually creating a lot of excitement and attracting a lot of potential entrants. It's hard to get in the business for the reasons that I said earlier, but there are a lot of people that are sniffing around these markets because the climate goals, clean energy, carbon reduction goals are driving a lot of interest in commercial nuclear power. We're poised to take advantage of that, and you'll hear that from John MacQuarrie later on. But -- so clean energy is really driving interest in nuclear. Nuclear medicine is a market that will grow -- maybe explosively is not too provocative award to use, particularly around therapeutics, and you'll be hearing about -- hearing about that from Martyn Coombs later. We have this new market in space and defense reactors, and it's creating a lot of interest because there are classes of problems and national security and space that are begging for a nuclear solution. By the way, this market didn't exist 6 years ago when we were a public company -- when we came out as a public company. So for all that reason, there's a lot of interest in the nuclear markets, and there's a bunch of start-ups that are trying to enter these markets. And they have big ideas, and they have PowerPoint slide decks. They're impressive, and they've got paper reactors, which are hard to beat because they're cheap and they're easy to build. And so that's the sort of the competitive landscape that we find ourselves in. But what I say about our business is, look, this is the killer differentiator right here on this chart. We have decades of nuclear operations experience and nobody has the experiential qualifications that can match that, and these are hard businesses to execute. These are hard products to make, I've argued earlier. And people that haven't been in the business don't have the experiential qualifications to judge how hard it is. We have world-class manufacturing facilities. What you're seeing on this chart is a beautiful sort of a sunset view of our plant in Lynchburg, Virginia. That's where we do a lot of the nuclear navy work there. Inside the fence, there are about 2,200 employees there, but we have 12 such plants across North America. Five of them are in the U.S., which are primarily the nuclear Navy plants, and we have 7 in Canada. And of these 12 plants, 6 of them handle nuclear materials in some form, whether that's nuclear fuels or special nuclear materials or medical radioisotopes, and the other 6 are manufacturing nuclear qualified products. And so this is an unmatched footprint. It's a deep capability, and it's the way that we beat that start-up competition that is so interested in these markets. It's with our capabilities that we can assert into the market. We are also highly credentialed in a unique and important way. We're the only company to possess this category in Category 1 NRC licenses, which permit us to handle special nuclear materials. It's the only such a license that exists. And because of all of these reasons, we find ourselves, as I mentioned earlier, in a sole-source position on a lot of these mission-critical programs, and that's a good place to be. So when you look at these 2 components of the business, our government business and our commercial business, there are significant growth drivers in all of these businesses and in all of these markets. And you'll hear about it throughout the day, but it's fair to say that our core business is growing nicely in all cases and our new businesses around nuclear medicine and space and defense reactors and other such things are also in a position to grow, and that story will unfold today. Now this chart focuses on generating shareholder value. I've been saying since I came into the CEO job that I think there's a pretty simple way to think about what a CEO is supposed to do with the business, and it's really just 2 basic jobs: one is to run the business as well so that they generate cash, that's job one; and job two is to take the capital that's created, invest it in such a way that it creates long-term shareholder value. That's really it. That's the bottom line of it. There are important things to do, such as team building, communications, business development, addressing ESG concerns, board relationships, understanding the competitive environment. You have to do all those things, too, but they're all subordinate to these 2 things. These 2 things are run the business to generate cash, invest that cash wisely. It sounds conceptually simple, but you have to overlay strategy on top of this to make it work. And that's what leads you to this concept here. How do we do that? I think I would say that we're using a disciplined 3-horizon strategy to build our future. So we think about an execute phase of the business, which is to run our core businesses to generate cash, as I said on the prior chart, and we do that by focusing on our customers and deploying our existential capabilities into the market. And then we're trying to expand into nuclear adjacencies, I think that's a real success story for BWXT and that will unfold throughout the day. And we're doing that through technology innovation and by the assertion of our capabilities into these new markets. And then we're also exploring long-cycle opportunities, primarily those would be nuclear, but our aperture is open for other possibilities. And we're doing that through investing modestly, but investing meaningfully in R&D so that we can find other new horizons from the for the growth of the company. Now developing that idea a little bit further. If you take the prior chart and sort of move it 90 degrees counterclockwise, then we can put these growth horizons into a time scale, and you can see that along the bottom here. So obviously, executing the core businesses in the present timeframe. That middle light gray stripe is how we expand, and we think of that time frame is in the 1 to 4-year timeframe and then the future one is 5 years and out. And so executing the core business, obviously, we're focused on Naval Nuclear Propulsion. We're focused on our Commercial Nuclear Power business, the DOE site management that we do, environmental and management and operations, and we have an active medical isotope portfolio that we have to execute. We're delivering products every day into the market, and that's our focus. But we're also building this next layer of shareholder value. By the way, I should say, when you think about the value perspective on that first piece, we think of it in terms of free cash flow and return on invested capital, and we get measured and rewarded on that by our Board of Directors, but that's the value perspective there. Now that middle stripe one, where we're doing the tech-99 generators, certain therapeutics for nuclear medicine, we may have an opportunity for global nuclear power and propulsion, depending on what happens with this trilateral security agreement between Australia, the U.K. and the U.S. called AUKUS. So that one's kind of interesting. We've got -- with small modular reactors feel like a very real opportunity right now. And so what would happen with those businesses there is, ideally, we pull those into the core and may become present businesses at some point in the very near future. I would tell you that as a CEO, one of the most challenging things that I face is maintaining conviction while you go about building those future businesses because they consume cash. Sometimes they're capital intensive. They create expense and depreciation drag, and they pull from your core business. And so it's important to maintain conviction through that phase as you build these new businesses because ultimately, those migrate into the core, and we've got substantial growth related to that in the future. And then finally, in that explorer phase -- by the way, in that expand part of the growth horizon, we think of that value perspective in NPV because these businesses are not yet generating meaningful cash or earnings. But when you discount the future cash flows, for example, on the radioisotope business, you're going to see what kind of value we're creating there, and I think you're going to find it to be very compelling. And then finally, in that explore phase, this is really what we do with our R&D. It's the far out stuff, but already, we're seeing very interesting things there. For example, we have a very novel, very interesting approach to radioisotope power systems. There's a new class of medical isotopes called theranostics that combine, the diagnostic and the therapeutic isotopes together to both treat and image disease states. So there are things that are out there that we know we can grow into and that creates a lot of excitement within the business as well. So where does all this leave us? When you think about the investment thesis for BWXT, I think what you could say about it is, look, we have a set of core businesses that are very attractive. There are high barriers to entry, as I mentioned earlier. So these businesses have a fairly deep moat around them. They have -- we have long-term visibility for these businesses. We can see our backlog in the Navy business and the 30-year ship-building plan. You look at the backlog in commercial nuclear power, these refurbishment projects go out for 1.5 decade, and then the life of those reactors has extended 40 years. Those are the kind of businesses that we are in, businesses that are well defended and have high visibility and generate cash. And then we've got the unique -- we've got the innovation DNA and the unique assets to enable new growth verticals. That's what I talk about in the Explore horizon of the business and beyond that. And then finally, we're entering a cash generation period -- rich cash generation period for the business. We've come off to large capital campaigns. We'll be rolling into a cash-generating period and that would position us for shareholder-friendly investments and return of capital to shareholders. And that -- so I think it's a very compelling investment thesis, and we'll try to unfold that as we go throughout the briefing today. So what I'm going to do now is introduce Dr. Rob Smith. Rob came to BWXT in January this year at the peak of the pandemic, comes to us from Lockheed Martin, where he's running a $2 billion portfolio in radars and sensors. And he is the President of Government Operations, and will be describing the 2 segments that I outlined earlier. So I'll turn it over to you, Rob.

Well, good morning. As Rex said, I'm Rob Smith, and it's a real honor to be here at the New York Stock Exchange. I was thinking about it when I was walking up -- and this is my first time here. Unlike Rex, I haven't had the opportunity to be here before. And I remember when I was a kid, and I would be watching the news and seeing the tickers and the CEOs ringing the bell, and I thought I want to do that one day. I haven't quite got there yet, but it is good to be here. As Rex said, I'm from Lockheed Martin and joined BWXT at the beginning of the year. And I have to tell you that Lockheed is a great company, and -- but what really attracted me to BWXT was just the great business with the competitive advantages, and Rex really talked a lot about that. And I saw a great opportunity for growth in the government operations business. And now that I've been here for, I guess, almost a year, I have more conviction than ever that we are going to deliver on that growth. Leadership really makes a difference. And when I interviewed, I was really impressed with the comradery of the leadership team, how they help each other. And BWXT is still small enough that leaders make a really big difference, and I feel like that's a big differentiator for us as we think about all of our stakeholders, our customers, our employees and, of course, all of you, our shareholders. See if I can figure out how to use this. So what I'm going to talk to you about today is the business -- Government Operations business. I'm going to focus a lot on our future expectations and where we see this business going. And I hope at the end, you'll see as I do that this is a growth business. I've never seen a business that has stronger visibility as our Naval Nuclear Propulsion business with a 30-year shipbuilding plan. Our hard-to-replicate businesses and facilities and people, whether that's our CAT 1 facilities that Rex talked about, our people with their clearances, their knowledge, their experiences in the nuclear industry as well as our overall credentials as a company, being an owner operator of nuclear facilities. Also, I'm going to touch on some growth vectors that we have. While our core businesses are fantastic, we do have some options for growth. We expect wins in our Technical Services business to get back to historical peak profitability over the medium term. We have sole source contracts in advanced reactor fuels. We're in competitions for what we believe will be winner take all advanced reactors. And then we have also a new business that we call HEU metal or uranium conversion and purification, and we expect that to continue to grow and be a meaningful contributor to our business. Let me start with the Nuclear Operations Group, which is led by Joe Dowling. This is a $1.6 billion revenue business with about 5,000 employees. That operates in 2 markets: the Naval Nuclear Propulsion market as well as the Nuclear Fuels and Uranium Processing market. Over in NSG, our Nuclear Services Group, that's led by Kenneth Camplin, and you will hear from both of those in the panel later today. And that business, it has our Technical Services business and then our research lab, which we call Advanced Technologies that Rex talked about, which is the local -- I mean, the centralized business or centralized organization probably a better word to use, that does the research and development of the new products. And that's where our advanced technology and our advanced reactors are today. Our Technical Services business mostly operates through joint ventures and therefore, is not consolidated to our financial statements. However, just to give you a little bit of a scale -- of a scope of the scale and size of this business. If you looked at the consolidated pieces of the Nuclear Services Group and then you looked at our percent ownership of our joint ventures and multiplied that by the revenue and the employees and then you added that together, you would have an $800 million business with about 2,500 employees. So what that means from a government operations level, looking at the consolidated business as well as the unconsolidated piece of the business, we have equivalent of about $2.5 billion in revenue and 7,500 employees. And this is about 90% of the operating income of BWXT as a whole. These 2 businesses share a culture of excellence of nuclear credentials, and we are able to share those across these businesses. It's also a real big benefit to us when it comes to employee development as we're able to move employees between these businesses, whether that's moving them into our TSG and going to DOE sites, running major operations there or vice versa. It really helps us develop and create our next generation of leaders, which is going to be really important for us. Additionally, we're able to share security clearances and other employee credentials. Okay. Now I'm going to talk specifically about our Naval Nuclear Propulsion business. Rex talked about the competitive advantages, and I think they are just in spades in this Naval Nuclear Propulsion. If you look at the engine room, which is the red box, we make the fuel, the reactor, the pressure vessels, the control rod mechanism, the pressurizers, steam generators, the heat exchangers. You could think of it as all of the mechanical equipment, except for some pumps and valves, and we do this across all of the Navy platforms, both the Virginia and the Columbia, the nuclear platforms, both the subs, the Columbia and Virginia as well as the Ford The Nimitz aircraft carrier. So we view all of these as franchise programs, and it's a real honor for us to be able to deliver all of those components into all of these platforms. I want to just spend a minute talking about each of these platforms and put some context around some comments and some perspectives that I'm going to share with you later. The Virginia, which is the fast attack submarine, has the least relative value to BWXT. What do I mean by that? When I'm talking about relative value, I'm saying, what is an order of Virginia, what is its impact on shop volume, revenue and our operating earnings. Both all the Virginia, the Colombia and the Ford are what I would say are in early stages of their manufacturing and the Nimitz is now complete, and we are rolling off on the refueling. The Virginia and the Columbia have life of ship power units. So we put on power unit in, powers the ship until it's retired. The Ford and the Nimitz are both refueled at about half life at 25 years. The Ford, as you can see on the chart, has a very high relative value. So carrier orders have a large impact on the business, both shop volume, revenue as well as operating earnings. Our Nimitz reload and Colombia are in between. One of the reasons why the Ford and the Nimitz have such a large impact is not only do they have 2 power units in each of them, but each of the power units is much larger, as I'm sure you can imagine. So again, I'm still on our naval nuclear propulsion business. So we have long-term visibility with a 30-year Navy shipbuilding plan that is published. I believe we have very strong support for our programs. As the country transitions from what historically has been or most recently been the global war on terror, to the peer -- near peer competition, if you will, from CENTCOM to the Pacific and Indo Paycom. These platforms become more and more important for the defense of the country. The Columbia is the #1 Navy acquisition priority, and that just bodes well for what we see over the next 30 years. So as many of you know, the Navy shipbuilding plan can change. It does change. It's not written in stone. However, what we've seen is that there's been an acceleration and increases over the recent past to this plan, and we would expect continued strong support for our platforms. So as I mentioned earlier, let me -- there's one correction I need to say on this chart. If you look at the Ford order, that was actually in BWXT 2020, not 2019. We got -- we were under contract in '19, but the order wasn't actually placed until '20. But what you'll see here is that BWXT, because of our long lead of the power systems that we provide, we get the order about 2 years or 2 years before the shipbuilders get their order. And also, you'll see on this that the last -- with the last Ford being ordered in 2019 and the next one in '26, before we get back to a 4-year cadence, is a headwind to the business. Again, that -- if you look back and you say, if you think about the size of a Ford carrier and the amount of volume and revenue that it drives, the fact that there was that gap is a headwind for us in the early '20s until we get the next Ford in the middle of the decade. That's partially offset by the Columbia ramp-up, but not completely. Also want to note here that later, you'll see some discussions about SSN(X), which is the next Virginia attack submarine. I should also mention on this prior chart -- let me go back here. You can see the growth that happens in the second half of the decade and on as the Ford ramps up and the Colombia becomes the full production. And I'll show you a little bit more about that, and we'll talk about the implications of that in a later chart. I thought I'd give you contracts 101 at least as it applies to our Naval Nuclear Propulsion business. Typically, we get 2 or 3-year ordering period contracts with the customer. So we negotiate every 2 or 3 years. And in that agreement, we have the number of platforms, subs, carriers that the Navy would expect to buy in that 2 or 3-year period. These contracts were run over 8 years. If you -- let's just take a 2-year ordering period, and then 8 years to produce the power for systems and the other related components for a carrier, you easily see how you get to 10-year contracts. These are fixed price incentive fee contracts, meaning we agree on a price of a platform. And then if we are able to produce that for less, we share in the underrun and our operating income, our margins go up. If we overrun, then the customer also shares that with us, but our operating income and our margins go down. So it's really important for us that we have a culture, and we do, of continuous improvement, and we continue to drive innovation and efficiencies into the manufacturing process so we can continue to deliver as we expect to high-teens operating margins in this part of the business. Typically, these are 15% fee as sold. So think of a return on sales of 13.5% or so. And we have multiple contracts running at the same time. Again, I think that's probably fully intuitive. If you're doing it every 2 years on an 8-year cycle, we have multiple running at the same time. And typically, we do have higher margins on contracts that have been running longer because we've had more time to drive innovation and cost synergies and other things into our business. Last point I want to make on this chart is that when we have demonstrated savings in the next multiyear agreement, whatever we've delivered in those savings are the baseline for negotiations of the next marketing agreement. So how do we drive the margins from as sold to the high teens? There's really 3 different ways: the first is through operating efficiencies, the second is through procurement savings and the third is through cost management activities. Operational efficiencies, I mentioned this earlier, but we are always looking at bringing in new technologies. We're looking at how we can do things faster, how we can do things better without sacrificing quality because, for us, quality has to be number one. These power units and systems, they go into Navy platforms, they're all over the world and they have to work. They have to work right and they can't fail. Procurement savings, you could think of this as bulk buys to be able to get things lower than what we expected. And then cost management is typical for what you would generally see in most businesses, how do we manage our overheads, how do we manage the cost of labor, health care and other expenses that are in the business. My expectation is that we will continue to effectively run this business and continue to deliver the high teens margins operationally that you have come to see in the past. You've seen this chart before. There's a couple of additional information in here that I want to share with you, and those 2 pieces of information are the fixed cost, the fixed infrastructure as well as adding the refueling to the carrier because as you saw, carrier refueling is an important part of the business and has relatively large value to us. When I talk about the fixed cost, I want you to understand that, that's a little less than 50% of the total cost of our business. And it has a typical manufacturing cost that you would see in there, depreciation of equipment facilities that would be in most manufacturing companies. We also have additional costs in there like NRC licenses, Nuclear Regulatory Commission licensing fees as well as a guard force, given the fact that we have a CAT 1 facility and handle nuclear materials that are highly enriched. This is critical that we protect that material. So this is a real large barrier to entry for others into the market because these -- this fixed infrastructure would be required even if we only made one nuclear sub. We would also expect over time, we've just finished a large capital or finishing -- it's not quite done yet, a large capital investment and for our naval nuclear propulsion program, and that created capacity -- growth capacity for us to be able to support this build plan. So over time, as we ramp up -- and we continue to have the Columbias come on in the Fords on 4-year ordering cadence, we would expect the variable cost to go down some -- the percentage of variable cost to our total cost to go down. We -- also, as I mentioned earlier, have headwinds because the Nimitz refueling is rolling off, and these headwinds will last through the middle of the decade. They will be partially offset by Colombia, and we do have inflationary pricing or escalation into our bids, which will create a situation where our -- for our Naval Nuclear Propulsion business, we expect over the 5 years to see revenue CAGR of about 2% to 3% and over the 10 years, 4% to 5%. I'm going to switch gears now, and I'm going to talk about 2 other components of the Nuclear Operations Group business. The first one is going to be our nuclear fuels, and the second one will be our uranium processing. Let me start in the center. You can think of the bottom as low-enriched-uranium is what's used commercially. The high assay, low enriched uranium in the middle, that's a new fuel, which will likely be used for advanced reactors. There is a special fuel called TRISO, which is inherently safe as it's a coated fuel that holds the fission products within the actual fuel to create a much safer fuel. So these reactors can be deployed safely and efficiently. And then when you get to 20% or more, that's highly enriched uranium and that's for government use. And as Rex mentioned, and I think is a critical part of our business, that's a CAT 1 license that only BWXT has commercially. Moving to the left, these are our research and test reactor business. Think of these as developed fuels that are in manufacturing, and we provide that to a number of different research and test reactors and other customers. And this is -- this business is tens of millions of dollars. And it's stable and it's steady, and we would expect that to continue into the future. On the right-hand side, you see the development of new technologies, including TRISO. Today, we are the only company producing TRISO at scale and that has been radiation tested. We are in a good position to continue to ramp that business. Today, the right side, the development fuels are also in that tens of millions of dollar range, but we're optimistic that, that will grow, and I'm optimistic that, that will grow over time as the advanced reactors begin to finish development, moving into production and get into use. I'm going to now move to uranium processing, the last piece of the Nuclear Operations Group. And it's the same here. On the left-hand side, this is our historical business. Uranium -- high-enriched uranium downblending. That's about $80 million a year. We expect it to be stable through the middle of the decade, potentially longer. And what we do there is, we take HEU and downblended blend it to LEU for commercial reactor fuel as well as other nonproliferation -- government nonproliferation activities. On the right-hand side is a new program that we have. Sometimes you might hear it called HEU metal, uranium conversion and purification. And in this program, we take the uranium from the government, we purify it and we send it back to them. That has to happen every so often to keep the uranium pure. Today, that's about a $20 million a year business where we're under contract to do the design and a pilot process. Our expectation is that this business over time will grow and will be very similar in size, scope and scale and profitability to our downblending operations. So I'm going to pull all this together for you in this chart, and this is for our Nuclear Operations Group. And we see this business financially in 3 time frames, if you will. 2016 to 2020. As Rex mentioned, the earnings at EPS of BWXT doubled, and a lot of that was driven by the NOG operations. A number of tailwinds, including the Virginia tempo, the FAS/CAS pension benefit, Columbia development and initial awards. '21 through '25. We are expecting moderating growth, as I mentioned earlier. And really, that's around the Ford -- the roll-off of the Nimitz refueling as well as the Ford ordering cadence and acceleration in the 6 years in between the first -- the last order of Ford and the next one before it goes to the 4-year centers. I will note that we don't have, what I say, we'd call, potential upside in this forecast. Rex mentioned AUKUS. We'll see what happens. The governments are doing 18 months to determine how they're going to meet the needs in Australia. We stand ready to support whatever is needed. We have the capacity to be able to do that, but it is not currently in our forecast as we don't know how that -- all of those discussions are going to roll out. It also does not have a second -- I mean, 1/3 Virginia or some of the other things that have been talked about overtime. The '26 to '30, we expect to get acceleration of growth again as Columbia production, tempo and the factory gets full with Columbia, we start to see the SSN(X), which is the next Virginia development. Ford refueling begins, potential AUKUS work scope as well as the increased Ford order cadence. Okay. Now I'm going to move to our NSG businesses, our Nuclear Services Group business. This business has been operating for 30 years, and it has fantastic business characteristics. Typically, we use investment dollars to create the JVs, do the negotiations with our partners and to put the proposals in. After being selected, these contracts are typically 5 years with various timeframe options, which gets you to a total contract timeline of about 10 years. Sometimes you get extensions past that. So we have very high visibility once we win these contracts and very low financial risk. They're typically cost-plus contracts. Fees, low single digits for some of the contracts and mid- to high single digits for some of the other contracts. And as I mentioned, typically, we operate this Technical Service Group business through joint ventures that are unconsolidated on our balance sheet. We leverage our nuclear operations credentials for this business. Last point, some contracts do require working capital upfront, and we've seen this trend accelerate. And typically, you get higher -- the higher fees on the contracts that require working capital. I think I hit most of what was on this chart in my comments at the beginning. We are in about -- own about 1/3 of the major acquisition contracts plus both Michoud and Stennis for NASA. And there are a number of upcoming opportunities that we say and I list 4 of them here. You probably heard that we have won the Savannah River site integrated mission completion contract, and we're excited about getting started on that. We would expect the Pan-12 -- Pantex and Y-12 M&O award in the fourth quarter any time. Obviously, it's out of our control, but that's what our expectation is now, and then a number of other upcoming opportunities. When we look at the significant number of opportunities in this business, the needs of the customer and what these bids require, we have high confidence that we're going to continue to see growth in this part of our business. You see, historically, in '12 and '13, we had peak profitability of about $60 million, and we are -- we have confidence that over the midterm, we are going to be back in that range. really excited about the future of this business and where we're going to be over the next couple of years, and the Savannah River award is just hopefully the first of many. Really excited about that contract. Switching gears now and talking about the advanced technology and specifically the advanced reactors under the Advanced Technology business. We at BWXT operate in all these horizontals. We operate in commercial nuclear. We operate in SMRs mostly through John's business, and then he'll talk to you about that. And we have an emerging opportunity in micro reactors. Government operations, we're really focused on the micro reactors segment because this is the segment that we believe that our customers are most interested in because it really meets the government requirements to have remote power, space power, whether that's propulsion power or on the moon or Mars or something. So that's really been our focus. We are under contract -- numerous contracts for both fuel as well as reactors. I want to spend just a minute on how we see and how I see the BWXT micro reactor projects, kind of what their timeline is, and how these programs and projects are developed by the government and how they roll out. Initially, you create an approach and think of this as analysis of alternatives, looking at different technologies, different missions, different power levels and doing trade-offs to determine what the best solution is for that particular customer need. This is typically on company investment -- modest investment. Then you move to a development stage. Usually, we see these as cost shares with the government could be fully paid for by the government as well. And in this, you're actually starting to develop the technology. Your -- there may be some key technical hurdles that you need to overcome that you need to demonstrate. So you're developing the technology. Usually, there will be multi-award. You may have 2, 3, 4 different competitors going to a down select. Down select usually happens in the demonstration stage because this is a much more expensive to actually make the first of a kind. You might consider that an engineering development model or prototype, and these are usually in the hundreds of millions of dollar kind of revenue. And typically, paid for by the customer, although cost shares wouldn't be out of the question in some cases. And once it's demonstrated, then you get into the program of record. And the program of record is where you would do serial manufacturing, driving down a learning curve and deploying these reactors. And this is something that would be -- we expect, as I said earlier, to be winner take all. And in that case, you would replicate, if you will, some of the dynamics that we see in our business that are important to us that Rex talked about earlier. What I show here are just the multiple customers. And I would say, our best guess on a timeline for the development, demonstration and production phase of these programs across the different market segments, whether it's the -- maybe call it the Army, Air Force, Terrestrial, at the top, space, power and propulsion for civil uses. Same types of activities as being space power and propulsion for national security activities and then commercial reactors -- advanced reactors at the bottom. One other note on this. We are just one example of our leadership position in advanced reactors. We are 1 of 2 companies for that off-grade and remote military applications, which is a program led by DoD, the strategic capabilities office, and we would expect to down select maybe next year to be able to move into a demonstration phase. So that's the furthest along of these different market segments. So when I pull this all together for the government operations, so I'm elevating you back up now to government operations. We would expect EBITDA growth of about 4% to 7% over the medium term for our overall government operations. I went through all -- many of the pluses and minus, probably all of the pluses and minuses on this chart in my remarks. I would just remind you that, that doesn't include an additional Virginia. It doesn't include any significant work scope for AUKUS and some of the other activities which could create upside to this. And we're really excited, because we -- after the midterm, as I mentioned, we expect accelerated growth in the middle of the decade. So finally, I hope through my comments, and I look forward to the question-and-answer session, you'll see this as a growth business. There are some near-term headwinds, which is masking the underlying strength, as I have talked about. There's significant competitive barriers to entry in this business. We have decades of high consequence nuclear experience unmatched by anyone else in the industry. We're the sole provider of naval nuclear components, process and fuel. We are only the company to possess a category 1 nuclear credential. We have differentiated capabilities in emerging nuclear reactors. And I would say not just nuclear reactors, but I talked about our U-metal program. I talked about our new fuels for advanced reactors and many of the other growth options that we have. And unmatched record in safety, quality and performance, and Rex talked about that in his opening remarks as well. So thank you for giving me the opportunity to talk to you a bit and to share our vision for the government operations. And with that, I'm going to turn the mic over to John MacQuarrie, and he's going to talk about our commercial operations.

Good morning. I'm John MacQuarrie. I'm President of the Nuclear Power Group, and I've been leading the Canadian business for BWXT for the last 8 years. It's a pleasure to be here. I'm going to be talking about our commercial operations business, which we report as the Nuclear Power Group. That business is made up of 2 businesses, the nuclear -- the commercial nuclear power business or the Canadian nuclear power business and our nuclear medicine business, also known as BWXT Medical. Together, they are about $400 million in revenue in this year with the nuclear power business being about $350 million of that. I'm going to present the nuclear power business, and then I'm going to hand off to Martyn Coombs, who's going to present the nuclear medicine business. So these are the key messages that I'd like to share with you about our nuclear power business. And I'm going to get into each one of these in a little bit more detail, but here's the highlights. It is a highly unique business. And as Rex talks about, like all of our businesses, we're in a very unique position here in the products and services that we offer to the market. In the Canadian market, we're fortunate to have a very long-term demand for our products and services that is visible to us over that long period. And we're also very fortunate to be lifted by a life extension cycle that we're in the midst of that is really driving additional demand. We're also finding that we're very well positioned to serve the -- what appears to be the emerging market for advanced reactors with many relationships with the developers of these advanced reactors and with the capability to meet their needs. And we're seeing that, that is being driven by the global need for clean energy -- and nuclear power has got a lot to offer that in terms of achieving truly clean grids. So first, talk a little bit about our unique strengths and capabilities. So first up is our customer relationships. And I'm sure every company would say that, that's the strength of theirs that they've got great customer relationships. But the nuclear market is truly different in this regard, at least from my perspective. What you find with many nuclear operators, our customers, is that they struggle to find suppliers for their business. And they actually are concerned about losing suppliers because of the high barriers to entry into this business. And because of those high barriers to entry, it means that suppliers that may be thinking about it are concerned about making that investment and not getting a return on it. And so what that means is if you're in the business, you develop a really unique relationship with your customers. And if they know that you can deliver for them, like they know about us, that creates a really interesting situation where they actually encourage us to get into new parts of business that meets their needs. And so that truly is a really unique and important strength for us. There's 2 large customers in the Canadian nuclear market. We've been serving them well for 40 years. They know they can count on us, and that makes a big difference in our business. To illustrate this sort of limited supply situation in nuclear market, you just look at the other 4 points that we're making here on this particular chart in that there aren't a lot of suppliers for really important products and services. We are the only designer and manufacturer of large nuclear components in North America. So products like steam generators, that are critical to a nuclear power plant, we're the only designer and manufacturer of those types of products in North America. We're also the developer of the on-power refueling system for the CANDU reactors. CANDU reactors are highly unique in the world. They are the only power reactor that is refueled while it operates. And you can imagine that's a very complex endeavor, requiring a really challenging technology to be able to implement that. We developed that, and that is providing a great deal of demand in our business to continue to serve that whole system. So we're the only manufacturer of big components, we're the OEM of the on-power refueling system, and we provide field services and engineering services related to those. And of course, that makes our business unique because we're the OEM of that. We understand those products like no one else and we could go into the field and do work with very specialized technologies that very few others offer. So we've got very specialized field services, and we're 1 of 2 fuel manufacturers in the Canadian market. There's only been 2 for 30 years, and I think there will only be 2 for the next 40 years of operation in that market. So some very specialized and unique strengths and capabilities. With regard to our strategy, there's really 4 aspects to our strategy that we have been executing over the last 6 years or so. First, as I said, be the supplier of choice, have that great relationship with your customers. And that has really helped to lift our business. So I'll give you an example. There was only one supplier of spent fuel containers in the Canadian market. And one of our customers was really uncomfortable with that, couldn't find another supplier, just as I was explaining earlier. They came to us and said, "Hey, we like what you do for us. We want you to be our second supplier. We'll help you with the capital; we'll help you figure out how to make the product right and we'll allow you to move into this business in a comfortable low risk way." That's what we did. We now have about half of that market and expect to have that for the next 30 to 40 years. So that's why it's important to be that supplier of choice. And there's more examples of that. Second thing is that we've really focused on being a lean business, being competitive. Yes, we know we have a unique business, but we still want to make sure we are competitive. We want to give no reason to our customer to think about anybody else other than us. And so we've worked hard to be lean. And as we've grown, we've worked really diligently not to add overhead into our business. And you can see the margins have improved over the last 6 or 7 years quite significantly because of that work to really manage our costs. Third, as we could see this growing market in Canada, we've diversified our business through acquisition mostly, but some organic means as well. And that's allowed us to really tap into that demand that's happening in the Canadian market and really grow our backlog over the last 6 years, significant growth. And now, as I said earlier, we found ourselves well positioned to be a supplier for future advanced reactors that Rob Smith spoke about. We've got the capability that we're finding that these advanced reactor technologies need either to manufacture components for them or to provide other types of equipment. We've got the capability that we're finding that these advanced reactor technologies need either to manufacture components for them or to provide other types of equipment. I want to tell you a little bit more about the Canadian nuclear market. And really, when you think about the Canadian nuclear market, you can think about the Ontario nuclear market, province of Ontario. There's 19 reactors in Canada, 18 of them are in Ontario. So very much concentrated in Ontario. Canada, about 38 million people, 15 million in Ontario, so the most populated province. Uniquely, the electricity grid is 60% generated by nuclear power in Ontario. So a very significant part of the grid. And also very uniquely, and I think not as well known as it should be, the Ontario grid is highly clean. So there is very low carbon emissions. At times, there are no carbon emissions because there's 60% nuclear, there's a significant portion of that, that is hydroelectric. And then there's a smaller portion that's renewable. So when jurisdictions around the world talk these days about how do we take carbon out of electrical grids, Ontario has done it. In 2015, it shut down the last of its coal-fired generation, which was the majority of the generating technology in Ontario, at times operating one of the world's largest coal-fired stations. And through what is, I think, the largest climate change measure in North America, it has created the cleanest grid. And I think when you look at the future, 1 thing you can take away here is that it's possible but it needs nuclear power to achieve a low-carbon grid. There's 2 major operators, as I said, in Canada, Ontario Power Generation, which is owned by the province of Ontario; and Bruce Power, it's a private operator. We're located -- our facilities are located very close to these customers. And so we're able to serve them in a very rapid way. So a little bit about what drives demand in our business. There's really 2 aspects of what drives our demand. There is a sort of a recurring demand for support as the plants are operated and as they have been operated for the last 4 decades and for the next 4 decades. This is what you need to essentially fuel the plant and to maintain it as they take them off-line for outage work. And in this recurring market, as we call it, we need all of the products and services that we offer to support our customers. And you can see some of these products and services up there, whether it be fuel, engineering services, field services and various components. It's a long-term type of visible market for us. We know when outages are going to occur. We know what the customers are going to need from us. And so that gives us great visibility to that demand. The second part of -- or category of demand that we see is life extension. So it's really extensive life extension program going on with reactors in Ontario. And that is a major undertaking. There's over $26 billion being spent on life extension of these units. And it's actually quite a long-term market, as you can see here in this chart, upwards of 15 or more years of steady demand for our products. To be able to service this market, you have to know CANDU technology. There's no other way to do it. And so that makes -- it's good for us, but it's a challenging barrier to entry for others who would like to be a part of this growing market. So a little bit more about the size of these 2 segments of demand, total about $1.8 billion annually in our estimate, about half of that is driven by recurring needs of the plants that are operating and the other half by life extension. Now the mix of products and services that we provide to meet these 2 types of demands are a little different. So as you can imagine, in the recurring market, they need fuel to operate, they need outage services when they shut down briefly to maintain their plants, engineering services and sometimes some components are replaced during those outages. Contrast that with life extension. Now essentially, what you're doing uniquely for a reactor or any commercial reactor is you're essentially renewing the reactor. You're replacing all of the core components. And that means there's a big drive for the large components that we manufacture and for services related to install those components. There's also demand for waste containers because all of the core components that you pull out need to be put in containers. So that's very positive for our business. The one bit of headwind that life extension creates for us is that while these units are off-line, the demand for fuel is less and the demand for certain maintenance services is a little bit less. But generally, a very positive situation for us. You can see on this chart, there's 10 reactors that are going through it, 4 for Ontario Power Generation, 6 for Bruce Power. We're just approaching the midpoint of that cycle of life extension. So I want to turn our attention to an emerging market that looks really exciting to us. And that is a market for advanced nuclear reactors for power generation. We see lots of signals here that there's a great deal of interest in this, certainly from governments. So we've seen in the U.S. President's budget request significant increase for funding for nuclear energy and for things like the advanced reactor development program. In the case of Canada, there are more than 10 reactor vendors that have gone to the Canadian nuclear regulator to license their technology. They see it as a very attractive market for their product. The federal government in Canada has provided over $100 million in advanced funding to develop some of these designs. And I think most excitingly, the largest utility that operates nuclear power in Canada, Ontario Power Generation, has said that it wants to be connecting a small modular reactor to the grid by 2028, which would be the first of a kind for the globe. And they're -- I think they're well on their way to doing that. In the case of private industry, there are a lot of players that are developing products and putting a lot of money into the development of these products. We've shown some of them here. We're fortunate to have a relationship with many of these companies as they look at how they are going to do detailed design work for their components and manufacture those or other types of equipment that they need for these plants. So it's very exciting. It's not just in North America that we're seeing this. We're seeing that the French have said they're going to build more nuclear plants including SMRs, and the British have put funding together and are looking to build an SMR in the U.K. So it's a global trend that we're seeing. What's driving this is the need for clean energy that we're all hearing so much about these days. And nuclear is a clean energy. It is a dispatchable carbon-free technology. Dispatchable being a key word there. Many renewables are not dispatchable. And so when you look at how do you achieve what Ontario has achieved, you need something that is dispatchable and that's economic and affordable. Nuclear power does that for you. In the case of the Canadian government, they're really leaning in on this. So there's legislation in place to phase out all coal generation in Canada by 2030, not so far in the future, and I believe it will happen. 8 of the 10 provinces do not generate any power with coal. They're committed to net 0 by 2050. They're committed to the Paris agreement. And as I said, they are committed at the provincial level in Ontario to be the first to connect an SMR to the grid. So a very exciting market that we see here. So that's commercial nuclear power business, just summarize by saying really unique products and services, unique strengths and capabilities in our business. We're operating in a market that has got significant long-term demand for our products and services, very visible to us. And significantly lifted by life extension work that's ongoing. We're well positioned to capture business for the next generation of reactors, these advanced reactors. And we think that's going to be driven by this global need for clean energy. So I'm going to be handing it off to Martyn Coombs, who is President of BWXT Medical. But before I do that and by way of introduction, I just wanted to give you a bit of understanding about why we entered the nuclear medicine manufacturing business. So as Rob Smith described in our government operations, we have this fantastic capability around radiochemical expertise we've had for decades. And the very talented people in that organization developed a way of making the radiochemical that is most needed in nuclear medicine. It is the dominant product in nuclear medicine. They developed a much better way of making that. It was a really remarkable invention. And as we thought about that, we looked at our business that we have in Canada and thought of a new way to irradiate the starting product for that radiochemical in a power reactor, which is a completely different paradigm than what is the current practice. And when you put those 2 very innovative and disruptive technologies together, and we looked at the nuclear medicine market globally, we saw a very attractive market. We see a market that is growing, that when we enter and have that cornerstone product, we're well positioned to tap into the other growth that we expect to see there. And what we saw in that market a few years ago was great. What we see in it today is even better. So we're just as excited about that market, and that's why we entered it. So before Martyn joins us. We've got a brief video that will give you an overview of our nuclear medicine business. [Presentation]

And now I'd like to introduce Martyn Coombs, President of BWXT Medical.

So thank you, John. So I joined BWXT just over a year ago. So I thought I'd start with why I joined BWXT. I've worked in nuclear medicine for over 25 years in leading positions for some of the leading players in nuclear medicine. And there's been 2 recurring themes. It's been good overall, good growth, though small. The 2 recurring themes, I would say, is firstly, very fragile supply chain. It's frequently patients do not get the products they need for their procedures. And occasionally, and this happened frequently in the last 25 years, there's been a major problem with shortages all over the world. So that's been one theme. Another recurring theme has been the emergence of radiotherapeutics, first slowly and then very rapidly. So when I looked at BWXT, I saw just over a year ago, I saw the solution to those 2 challenges. Firstly, on the fragile supply chain, BWXT's technology is dramatically different to the existing technology. It doesn't use research reactors, it uses powerful commercial reactors and doesn't use uranium. It's completely different and there's been a step change in dependability. And secondly, this company, Nordion's got the capability to source, isotopes and manufacture sophisticated radiopharmaceuticals. So Nordion was a diamond in the rough, I think. And the acquisition was a master stroke. It happened before I joined, so I can't take the credit. But I think it was a master stroke and it will create a sort of beachhead to the market. So anyway, I joined just over a year ago, and working with my colleagues here and elsewhere, we've been building the team and building the company, and we've had some traction. So what I want to try and explain today is how we're going to make this into really 2 things, one, one of the leading nuclear medicine companies in the world; and secondly, the go-to company for pharma when pharma is seeking to develop new pharmaceuticals, new radiopharmaceuticals. So maybe firstly, I should explain what nuclear medicine is. As the name suggests, it consists of 2 things: Firstly, a drug, and this drug is kind of like something that can hone in on a specific target in the body. So it's designed to hone in on cancer, specific cancer, or heart disease. And the second part is an isotope, a medical isotope. And you can choose an isotope that would be appropriate for diagnostic imaging for visualizing the body or a different sort of isotope with a bigger payload where the radiation travels over smaller distances to create a therapeutic. So the combination of the 2 is what we call nuclear medicine -- covering both diagnostics and therapeutics. This is the market worldwide, about half in the U.S. As I said, it's been growing slowly over the last 20, 25 years. But we estimate it's going to grow very rapidly from here. This is independent market research. So at the moment, the total global market is about $6 billion. And the forecast is -- the estimate is for this to grow to about $30 billion by the end of the decade, so within 10 years. So that's about -- say we're doing the math, it's about 16% growth year-on-year. And you'll see this is driven by the therapeutics. This is by new therapeutics coming on to the market. But the therapeutics are also driving the growth in the diagnostics, and Rex alluded to this. I mean, 5 or 10 years ago, diagnostics were used as a one-off kind of discrete event to stage cancer, for example. But now their use is much more entwined with the therapeutic to select patients with treatment or to see very quickly who's responded into the treatment or if so, to switch. So diagnostics are also growing very rapidly. So it's a very exciting market to be in and to get into right now, as John mentioned. This is the value chain representation of the different sort of players in nuclear medicine sector. So if we go from left to right, right on the left, you've got the radiators and this could be reactors, nuclear reactors, or cyclotrons accelerators who irradiate the product. And then on the far right-hand side of the value chain, typically, you've got things like radiopharmacies, which dispense the product into unit doses for delivery to the patients, companies like Cardinal Health. And you're getting more and more drug companies coming into this value chain. Now where we are is right in the sweet spot right in the middle. We are in nuclear medicine manufacturing, and we have taken the product, the irradiated product from reactors, we're processing it and manufacturing finished products for delivery to radiopharmacies, for example, and ultimately to hospitals for the patients. So we're right in the middle of this -- we're right in the heart of this, I would say. And our competitors, typically companies like Curium, Lantheus; one of my old companies, Jubilant. These are the companies. These are the main players in this value chain. So if we look at this from the perspective of our company, BWXT Medical and pharma companies, on the left-hand side, you can see the sort of things we do. We can source the isotope, can arrange for the targets to be irradiated. We can do all the processing. We're FDA approved to be approved by the nuclear regulators. And we can manufacture sophisticated products. We've got a rich history of that. So Rex mentioned barriers to entry. So you can see there's a lot of barriers to entry here when we regulate it from a pharmaceutical point of view and from a nuclear point of view. On the right-hand side, you've got the pharmaceutical companies interested in entering this exciting area. They've got the drugs, expertise in clinical trials. They work towards FDA approval of the clinical trials and all the channels to market. But what they don't have is the capabilities on the left-hand side. So what we are seeking to do is to partner with pharma in the development of this new market. And what pharma is doing is seeking to partner with us. So we get a lot of inbound inquiries about how to take this market forward. This is just an example of some of the excitement around this sector now. And this is from last March, Novartis issued some data to do their submissions as submitted to the FDA. So this is a Phase III clinical trial for prostate cancer. So it is a therapeutic for prostate cancer. And as an illustration, we can see one patient, just one sample patient. And the image on the left shows a scan, it's a nuclear medicine scan of a gentleman with advanced metastatic prostate cancer. So you can see the scan, you can see his lungs and things which is normal on the scan for those who are not used to looking at these sort of things. But you can also see a lot of metastases, so the dark dots. This is a very unfortunate situation, and this will be all of the different alternative treatments have been tried by this point. There's no alternatives. So in this case, this particular product was used in 3 different treatments over a period of about 5 or 6 months. And you can see that this patient responded. So this is miraculous for this patient when this patient had no hope. So this is causing a lot of the excitement in these new products, they are offering hope to patients who had no hope. And that leads to very high valuations. So these are some of the companies who have been in the sector or come into the sector. If you look on the top row there, you can see Bayer came in about 10 years ago when they bought Algeta. And up until that, pharmaceutical companies haven't been interested so much in nuclear medicine. But then Novartis came in and bought AAA for about $4 billion and followed up very quickly with the purchase -- the acquisition of Endocyte for $2 billion. So this is a big play into nuclear medicine by one of the leading pharmaceutical companies. Then if you look to the third row down, just as an example, this is one of the players within nuclear medicine, this is Curium. They just had a refinancing and valuation, which is over $3 billion, which is about 16x EBITDA. So high valuation. So where we are in this company, we're in the bottom row, we've had experience in the sector in terms of target manufacturing of isotopes for a long time. But really, BWXT went into the sector in '19 -- in 2018, with the acquisition of Nordion and really the investment in the new generator manufacturing technology. So Nordion is $200 million, just over, and $300 million in this new technology. So about a total investment of $500 million to become a player in this market. So I think this puts us in a very good foundation for going forward. So again, if we look at Nordion and what that gave, the marriage between Nordion and BWXT and what BWXT brought. Nordion had a stable, mature set of products including Strontium-82 and TheraSphere. And since then, since the acquisition, there's another couple of products that the company has managed to get it approved. And we've got the molybdenum and technetium product in development. And as I indicated at the start, there's a lot of core capabilities underpinning this. The 2 facilities, which are licensed; the ability to work with radiopharmaceuticals and build new products; very skilled workforce. And BWXT brought to this the new technology that John mentioned, a new way of doing things, totally different than what's been done in the past. And also the relationships with the NRC, the CNSC. So there's a lot to bring together. And what's not on the slide, but perhaps equally important is to this marriage, Nordion brought the relationship with TRIUMF. So TRIUMF has the largest cyclotron in the world. And BWXT brought the relationship with OPG and Bruce Power, which are power reactors and the way of working with them. So you can see this really pulls together a very powerful entity. So just something about people. This isn't just nuclear fuel or reactor people talking here, this is people who understand nuclear medicine. So I've been in this field for 25 years. And in the last year, we've recruited a lot of people who were really dyed in the wool nuclear medicine people and 2 of them I've worked with before. So these are people who have worked for some of the leaders in nuclear medicine, they're growing in their careers, and they decided to come and join us at BWXT Medical because they believe we have a really high potential chance at becoming the leader here. And we will work with these people, and they will lead us to success in this sector. Just to explain a little bit more about the differences between the supply chain. So there's a lot of information on this particular slide. But if we think about the current supply chain, current industry dynamics, you see we've got irradiation, processing and then generator manufacturing. So this works almost all the time, but it's at capacity. And there's a few disadvantages here. One, most of these reactors are very aging. Opal is 2008, but the others are well over 50-year-old, okay? They are research reactors that often don't work in a way that commercial companies do, and they're aging. They use uranium, which is obviously a problem, nuclear proliferation. And there's some distance between where we irradiate, where we process and where we manufacture, and there's a lot of waste in this process. If we compare it to our new process when approved, we'll be irradiating in commercial power reactors. And then we'll be moving the product up the road to process in Kanata, where we do the radiochem, radiopharm and generator manufacturing. We don't use uranium. So this has so many advantages over the current system. It's a real step change in dependability. So we plan to come into this market and really have a big market impact, if I can say that. If you look at -- this is just looking at the technetium generator market worldwide. It's between $400 million and $500 million worldwide, maybe slightly less than half in the U.S. And our strategy is to go first in North America. So we've got the infrastructure put in place now really to progress in North America. We can distribute actually from North America worldwide. This is what Lantheus does. So we can do that. But we believe also that having 3 solutions: 1 for North America, 1 for Asia and 1 for Europe. So we are going fast ahead with North America. With Asia, you've probably seen that we announced the joint venture we've got for GMS, the GMS which will replicate what we do in North America in Asia. And then Europe will follow. We'll follow Europe once we've achieved FDA approval in the U.S. In terms of major milestones, and this is a big project. There's been so much work, so much work done at our various sites in this project, particularly in Kanata, but not just in Kanata. And we're nearing the last leg now. All the equipment is in place, and we're doing a test and the cold runs. And we're going forward, and we will be doing validation runs. So we plan to submit to the FDA -- submit application to the FDA. And as previously indicated. And our plan is this will be around Q1 next year. Then approval after that is obviously under the purview with the FDA, but we will seek priority review. And if successful, we would hopefully get approval either at the end of next year or a little bit afterwards. So that's the time line we are driving for at the moment. Just some examples, I think, some strategy in action. The first one, Boston Scientific, you saw on the video. They've got a great product, this TheraSphere product for liver cancer. And they've invested in that a lot in terms of clinical trials and broadening the indications. So we've come up with a very good agreement with them, which we announced earlier this year. And the agreement is basically a long-term agreement. It's a 10-year exclusive agreement where we'll be the manufacturer, and we've invested in automation and to dramatically increase capacity. So we will support their anticipated growth. So this is a very good product for us, they trust us to manufacture their crown jewels for them, which we do. And on the right-hand side, these are some examples of the pharmaceutical partnerships I mentioned earlier. So the top 1 is with Bayer. So again, we made a press release on this, and this is to do with actinium-225. So if you've seen the press release, I think you see that we indicated part of it is sourcing actinium-225 and part of it is how do we -- moving to actinium-225 based products. Now what we haven't announced and perhaps today is the first time we've mentioned it, is that we've got similar strategy and plans to do with lutetium. And there, we're partnering with another big pharma. So we hope to be in a position to be able to make that public going forward. But I think you can see our strategy here. These are the 2 most important isotopes in radiotherapeutics for the near term and the medium term. So we want to be having strong partners, I mean, leading partners and make sure that we can supply the isotope and we can manufacture the product and then grow with them. This is our strategy. We call this our ABC strategy, easy to remember. So A, achieve approval for our generator -- for our fantastic new generator project and commercialize it. So we've talked a bit about that earlier. That's well in hand. And we will launch this and it will be a great success. B, part of our strategy is really building on our existing products. We've got some very good products. Each of them, I think, we can grow significantly, and TheraSphere will be a good example of that. Another example is that we've got good isotopes, iodine-123 for example, where we can make generics of those radioisotopes. So in the future, we will enhance our plans on that. And then Part C of our strategy is really all about creating and capturing the radiotherapeutics market, partnering closely with pharma. We're not going to become a drug discovery company. We leave that to the pharmaceutical companies but we'll do the other things that we can specialize on, and we'll create partnerships that will have enormous value, I think, for BWXT. All right. Let me put my spectacles on for this chart. So here, we're trying to explain how we're going to build this into a great business and what you should expect over time. So Column A here is to do with the acquisition of Nordion. So this is USD 213 million. And for that, we acquired a company with sales of about $45 million and EBITDA of about $13 million. So a good EBITDA profit, good EBITDA margin, although obviously a small company. But all the -- more importantly, all the capabilities I mentioned earlier. And the sales of the former Nordion, if you like, it's $45 million, it was. It went down a little because of COVID or stabilized because of COVID, but we've been able to grow it a fair bit after that. It's now about $50 million, and we anticipate that next year, it will grow to $60 million. So that will be the base business before we start adding or overlaying the technetium generators or everything else. So the second column is to do with our investment in molybdenum and technetium generators. So the target delivery system, Darlington, radiochem or radiopharm generator line at Kanata. So it's about $300 million investment. There's a certain amount of start-up costs inherent with that with getting ready, setup costs, the people, what we need to put in place. And that's been about $15 million or $20 million for the last year or 2. And so if you put this with BWXT Medical, which you should, you can see that business unit, BWXT Medical needs to be supported by BWXT by $5 million to $10 million a year for the last couple of years. And we'll see that continuing also into 2022. And then just the third column is the early stage of the commercialization and ramping up of technetium generators. So you can see we'll carry on with the start-up costs, $20 million a year, but very quickly, the sales will increase, we think, towards $125 million plus. And then the EBITDA will be -- start to become strongly positive. So what I should mention on this as well is even though this is about EBITDA, there will be depreciation kicking in after we launch the product -- after we commercialize of about $20 million a year from, let's say, the point of commercial -- the point of commercialization. And then the last column, Column 4 is about where we see ourselves in 2025. And we estimate sales of over $200 million and EBITDA over $75 million, okay? And this is driven by the generator, our existing products and a very, very small amount on the radiotherapeutics. The generator will grow from there and the radiotherapies will really start -- this is when we start getting into our stride after 2025. So there's a lot of detail on them. So I hope that made some sort of sense. Let me summarize anyway, my last slide. So as I think I tried to show we've got a very strong market growth driven by therapeutics. The sort of BWXT Medical position, it directly addresses the current challenges, main challenges and the future needs of the market. We've built a very strong team, and we're driving to become one of the leaders in nuclear medicine, and like I said, the go-to company for pharma. And right now, we're at the inflection point. And our view is we're going to build significant shareholder value in BWXT Medical. Okay. So thank you. It's my pleasure to hand over to our new CFO, Robb LeMasters.

Good morning, and thanks for joining us. First, I want to say how excited I am to be with you today to talk about the promising future we see ahead for BWXT. On a personal note, while this is only my second day on the job as the CFO, I have been intimately involved with BWXT in the past couple of years. I actually formally joined the management team, as many of you know, about 18 months ago to head up the strategy function. And before that, I was on the Board of Directors for about 5 years when we went public in 2015. So I see plenty of opportunity for success here and hope to help take this company to higher highs. So let's get into my presentation. So as we walk through the financial strategy, I want to focus on a couple of different items. First, I want to bring to life the financial story around our growth. It's really, as you've heard from several speakers today, it's about our core growth drivers as well as our near adjacencies. Second, I want to focus on how we'll be wrapping up our 2 large capital campaigns in nuclear medicine and the Naval business, and that's going to drive a pretty significant inflection of free cash flow at the end of next year. Third, I want to just talk about how focused we are on the long term. We really want to set and achieve all of our targets for all of you. I would say that when I was in your shoes just a couple of years ago, it's the visibility that this business has and the long cycle nature that I cherish most. And so I really want to deliver on that promise. And while there's been some volatility in the stock, we've consistently maintained our position with our customer, and we continue to want to do that going forward. Finally, as we focus on free cash flow and all that we'll generate there, we'll remain disciplined in what we do with the cash once we come into all that free cash flow. We've consistently reiterated to all of you that we have a hierarchy of where we will deploy that cash. First, back in our business with low-risk CapEx endeavors. Secondly, with near adjacencies on M&A and then ultimately giving cash back to shareholders. So here's the impressive track record that we can put up on this stage that we're pretty proud of. As we talked today, we've had a remarkable run of growth since 2015, growing the top line 8%, almost all of that being organic. We've grown our margins over 200 basis points. And we've grown earnings almost 16%. Now I added adjusted EBITDA, as many of you know that have followed us, we haven't actually focused on this metric that much in the past. But internally and now externally, we really want to focus on this metric because we really want to be judged on what the core underlying growth of our business is. As many of you know, there are changes going on in taxes, pension. We talked about the CapEx and how we're going to bring in depreciation at different levels. We really want to be judged on what that adjusted EBITDA is. And we're going to provide you the drivers as to how we're going to grow that EBITDA. Remarkably, even that statistic over the past years has been pretty impressive and steady at a 10% clip. So now you guys have seen this slide in the past, which is around our medium-term financial targets. As you know, last spring, we pivoted from just one metric to a couple of different metrics. We wanted to be judged not only on our financial performance, but what we do with the capital that we generate. And what we -- and so we came up with this sort of paradigm, and I'm going to walk you through the elements of that. First, as I mentioned, EBITDA is how we like to be judged operationally and how our performance is. We hope to grow that at a mid- to high single-digit rate over a 3- to 5-year time period. As you know, we anchored that on a 2020 basis. We think we can do that with growth across all of our businesses and minor margin expansion across the business, probably most likely outside of the Navy business given how strong those margins already are. The second aspect of our medium-term targets revolves around what we're going to do if we actually grow the business like that, what are we going to do and how are we going to convert that. We're hoping to convert that net income ultimately to free cash flow at 85% or greater rate. A lot of that will come from the CapEx coming back down to a normalized level towards the end of next year. We're also going to increasingly focus on converting our cash through better working capital management. And then ultimately, what do you do with that cash? That's quite important, as Rex talked about. We've made a commitment already of returning over 50% of that free cash flow back to shareholders. That will come in the form of 2 things. Dividends, as you've seen our payout ratio of net income, has been about 20% to 30%, at the high end of that range: We'll continue to do that. And then we'll also look opportunistically to buy back stock. Our share repurchase effort has already started in earnest. I think people have seen that we actually had a pretty large buyback done in the third quarter. As we saw the inflection likely to happen at the end of next year, we decided that with the dislocation that we've recently seen in the stock, we'd jump all over that. No reason to wait till the end of next year to actually come into that free cash flow, and we anticipate the stock to be higher anyway. So we decided to jump all over that. So we've made a substantial down payment on that commitment already. So now on that wheel, probably the most important one is how are you going to drive the mid- to high single-digit EBITDA growth that we talked about from 2020 to 2025. It really comes in 3 different components. On the far left, you'll see that there's a component of underlying market growth there. That's kind of our core businesses. I would call that sort of the execute part of our strategy. This is around NR part of the NOG business. This is around what John and Martyn have talked about of our commercial businesses. We think that, that will grow about -- that will contribute about 2.5% to 4% of our ultimate target of mid- to high single digits. In the middle category, we have what we refer to as the growth vectors, I think you've heard of a lot of those today. I'm actually going to come back and circle up on a couple of these and provide a couple of examples and a couple of magnitude and timing issues that we have across this page. And then the last bucket that will be a consistent contributor as it has been, as I talked about in my second slide, we've had a history of driving operating margins. We have an effort that we've recently started where we're trying to get ideas boiled up at different business units to the corporate level to enhance our business to become more efficient, to track KPIs and to focus on digital optimization. So that will be a minor but important contributor that we'll look to improve the business. So as I mentioned, there's just 3 sort of items that I want to bring to life on this page because it is a little bit busy. On the left side, you'll see in our core business, obviously, people always ask us, what's the NR piece of that, what's going on with that business. Those are your blue letters there. Rob Smith did a great job, so I'm not going to spend a ton of time on it, but it's really a story of relatively flat volume over the next couple of years. Led by the Columbia, offset by what's going on with the aircraft carriers. I think we've talked about that. There was a large 2-carrier buy a couple of years ago. The sum of that makes it a relatively flat volume for the next couple of years until we turn the corner in the second half of the decade. But that volume will be complemented by inflation. We do have the ability to pass along nominal pricing, and we do have an ability to drive efficiencies with our pricing agreements. There is some minor offsets that we've been working through from a FAS/CAS pension. And ultimately, Rob talked about the fixed cost nature of our business. So that's sort of the NR picture that I just wanted to bring to life I think Rob did a great job, so I probably didn't even need to reiterate that one. In the middle category, another important item for the company will be what happens with the nuclear medicine business. The nuclear medicine business and what our forecast estimates here is largely around what's going on in that Tc-99 generator business, the diagnostic side of our business. We have a very small bit of growth feathered in here for therapeutics and some product enhancements. But I would say that the bottom end of this 2% to 4% could be hit by what we see in the Tc-99 effort. We have a clear line of sight of what we're going to do from a revenue standpoint. This is a relatively automated process. So we have a good idea of cost. And so we sort of have a very good sense for how that will feather in. Now I will note that from a cost standpoint, we do have that start-up cost that Martyn had talked about, that $15 million to $20 million of startup costs, we've actually been bearing that. I think that's an interesting thing for investors to realize today that we've been bearing that cost and actually at the BWXT medical level, we've actually been in the red to the tune of about $10 million of EBITDA that we anticipate changing as we go forward. We have some minor investment as well from therapeutics R&D. So in total, that's sort of the nuclear medicine story from an EBITDA standpoint. I will just draw an underline under what Martyn said about a non-EBITDA point, which is that we do have depreciation and amortization kicking in for the Tc-99 effort in 2023. And so as I look and take over this job, I just want to make sure that some analysts include that depreciation of $20 million there, because that will mute '23 earnings. So while there's an EBITDA page, I'd just draw it to your attention that, I think, the growth rate in '23 from an EPS standpoint will look very similar to '22 from a similar situation that we're dealing with in '22 with pension, we're dealing with that with depreciation in '23. And the last thing that I just talked about on this page is what's going on with the space and defense reactors. I think there's a lot of enthusiasm about that. We've tried to be very conservative on that as a contributor. We're not sure exactly on the timing of how those awards will happen, but these are competitions that have gone from 4 players to 3 to 2, and we hope to 1 to BWXT. And when we've chosen to do those prototypes and to demonstrate that, that will be a winner takes all. And we plan to win. And so we're going to put our best foot forward. And so we haven't wanted to feather in much profit over the next 3 to 5 years from those prototypes. Because, frankly, we're just trying to set ourselves up to win those markets for the second half of the decade. That's our strategy. So in sum total, we believe that we'll be able to grow EBITDA at about a mid- to high single-digit rate over the next 3 to 5 years, using 2020 as our baseline. I anticipate, as I mentioned, '22 and '23, because of the startup costs being at the lower end of that range, call it, 4% to 5% and then accelerating pretty quickly in the '24 to '25 period. So let's take a look at the firepower that we have and how flexible our capital structure is presently. We have the free cash flow that we know is coming in, but just look at our balance sheet, stellar relationships with the credit rating agencies, great balance sheet. We generally have run the balance sheet at about a 2x to 3x leverage, coming from the world of private equity that I used to be in, that's a very comfortable range for me. I think we have plenty of capacity. We're up toward the 2.7x zone right now. We don't have any maturities. And ultimately, we'll come into very strong free cash flow, which will be generated from what's going on from an operating cash flow standpoint. We hope to grow that, as I said, just growth of the business as well as working capital management. But ultimately, CapEx coming down will really generate the free cash flow that, I know, you all are expecting. And so in 2022, our CapEx will step down meaningfully. We're guiding to about a $200 million number next year, and ultimately, down to $100 million number, which is really our maintenance CapEx level. We'll continue to look for what to do with that free cash. We have, obviously, the organic and the inorganic initiatives that any company has. We don't see a large set of projects nor M&A targets that will sop up a lot of that free cash flow. So I frankly think that we will be able to lean in on the return to shareholders bucket. So what -- how have we deployed the $2.7 billion that we've generated since going public, just to give you some frame and what that maybe sets us up to do going forward. When you look on this chart, you can see that about $1.2 billion of that $2.7 billion was reinvested back in the business into CapEx, operational investments, pension funding. And then about an equal amount was distributed back to shareholders in the form of share repurchases and dividends, a little bit over $350 million paid back in the form of dividends. And then our acquisition largely came from -- acquisition spending was about a little over $300 million. That largely came from that seller acquisition we did with Nordion and a couple of other tuck-ins in the Canadian business. So that sort of sets us up for, well, then what does that foretell for the future? So our future priorities are going to be definitely to complete this Tc-99 initiative, which will wrap up next year; go commercial, hopefully toward the end of 2022 or early '23. And then we'll start to look at where else we might be able to invest in low-risk projects within the business. I list a couple here. These are significantly smaller consumers of cash than what we've done in our 2 large capital campaigns. We're talking tens of millions of dollars. We're also talking a little bit of a different nature of CapEx. We see the ability to the extent that we win production runs of the microreactors or we see different therapeutics that demand a primary supplier like us or demand finished-drug automation to be built out. These will be contracted. There'll be visible customers. We will align capital to opportunities, and these will be in the tens of millions. We also see this happening toward the end of our 3- to 5-year time horizon. So we need to put some numbers around that, but that's just out there as a priority to the extent that we win some of that. And then third would be that return of cash back to shareholders. We've committed to greater than 50%, largely will come from buybacks, and then we have some potential M&A. I have mentioned buybacks, I guess, a couple of times, so I'll just spend a minute on how I personally think about buybacks, particularly when we line it up here with M&A. I think about buying back stock -- not necessarily, it has an adjacent purpose of returning cash, but I really view that as a way of investing back in your company. And I square that up with M&A. And so when we're looking at M&A, we're looking for interesting targets that have good business potential, have good value, have good management teams. And so when we look at that from an M&A standpoint, we compare that to our own company. And I think you'll agree that when you just look at the number of shots on goal to coin to use Rex's phraseology, I see a lot of shots on goal for this company. So we don't need to go outside and make M&A. We have a great target right here, and I happen to actually like the management team the best of any M&A target I see out there. But we will continue to look. We'll look at a lot of stuff for M&A and probably do very few. We have an excellent M&A function. I've actually headed up that line of business -- or function for the past 18 months. You can see, though, we're looking for pretty interesting assets here that look a lot like BWXT. And I share what you guys try to do every day. It's challenging to find something that looks as unique and has the capabilities and the high barriers to entry that BWXT has, but we're going to stay true to that mission, and we're going to add things that look like our core business. We're also going to add things that add to our financial profile, that are good growth targets, that add to our earnings base. And so you can see that that's really our goal. And it will be challenging, but we will find it and mostly use it to accelerate some of the growth vectors that you have heard about today. This is a 2022 outlook slide that we've presented with our earnings a couple of weeks ago. We're here to reiterate that. Just to spend a minute for those that haven't seen it, that starts with where we're at in 2021 with an EPS number of about $3.05 and building to -- from an operation standpoint, building to an EPS that would have been about $3.20 to $3.40 had it not been for the pension situation that I think we spent plenty of time on the earnings call talking about with an ultimate target of $3.05 to $3.25 for 2022. As I said, it is actually pretty good underlying growth for the business, consistent with what we talked to you about on the wheel, mid- to high single digits EBITDA growth, driven by an overall revenue growth of about 3%, mostly coming from NOG and NPG in 2022. We have feathered in a set of expectations about the timing of Savannah River and other DOE wins. And so we tried to be conservative of what that timing is. But frankly, that creates quite a wide range there, and that's why you see a little bit wider range. And those positives are going to be offset by the continued investment that Martyn talked about. We have 1 step up in terms of our BWXT medical investment, that $15 million to $20 million, as you see on his slide, did -- is going to go up slightly in '22. And we actually planned some acceleration of some of our therapeutics R&D. We're talking a couple of million dollars. So that's the picture under the $0.10 to $0.30. Then obviously, you have what we've done with the share repurchases and ultimately building to the underlying earnings base there. So in summary, we've got a very solid growth story, anchored by core growth and adjacent growth drivers. We've got a good story around what's going to happen with free cash flow. It's in our control. It will happen at the end of next year. We're going to achieve long-term results. We're not going to be swayed by what goes on in the short term as much as our eye on delivering great outcomes over the long term and setting ourselves up for the second half of the decade. Our growth will start out at that mid-single-digit growth for EBITDA and then accelerate, and we have our eyes on that prize. And ultimately, we'll be very disciplined with what we do with free cash flow and look to do shareholder-friendly capital return, where possible. So with that, I'll invite Rex to come back up and provide a few closing remarks, and we'll take some questions.

Okay. Thank you, Robb. We have framed our business in this expand -- execute, expand and explore rubric. And I think we've explained all that today. I would say that if you want to summarize where BWXT is today compared to where we started as a public company 6 years ago, I think it's fair to say we built the business that we set out to build. We wanted to expand these core businesses, thought we could do so and we have done so. And you saw that in the organic growth chart that Robb just put up there. But we also thought that we could create -- use some of the cash from these core businesses to expand into some new areas, which we have done. We've moved into microreactors. We've moved into medical isotopes and other things like that. As I said in my opening session, those aren't generating meaningful cash or earnings in the business right now, but they are future core business. And very shortly, they'll be creating some powerful and positive financial dynamics within the business. And then we're exploring out there on the horizon through our R&D campaigns and through other partnerships, and we have line of sight into new shoots of growth around theranostics and around radioisotope power systems and other things that you saw on that list. And I think to reiterate, recapitulate what I said earlier today, we've built a business that is quite insensitive to global CapEx and GDP cycles. We think that's a very powerful way to think about the business and the way to build the business and also a business that's less sensitive to defense cyclical peak -- peaks, which we may be going through right now compared to our other defense peers. We have shoots of growth that are not related to defensive authorization appropriation cycles. And so we like where that is. And I think it creates a compelling value proposition for our shareholders. With that, we're going to take about a 5-minute break, rearrange the stage and put some tables up here so that we can go into a Q&A session. And so we'll see you back in here in about 5 minutes. Thank you. [ Break ]

All right, we'll now kick off the Q&A session. If you have a question here, just raise your hand. We've got a couple of people with mics. As they come to you, maybe I'll take -- I'm also going to take questions online. So I'll start with one there, but go ahead and start lining up the Q&A for the folks that are here. Our first question that came in online is maybe for you, Rex. You spoke a lot about growth today as did the rest of the presenters, but maybe which growth vector are you most excited about? Or which ones would you point investors to kind of be watching?

Yes. Sure, Mark. I think it's pretty obvious from Martyn's briefing how much opportunity there is to grow in the nuclear medicine business. So that's from a market perspective, that's the one that has the highest potential to grow rapidly. And we like our position there. We like what we've done strategically. And so we have -- we feel like we have an opportunity to really grow with that market as it sort of more than quadruples over the next decade or so. I think it's also -- we also have a pretty interesting position in this market around microreactors for space and national security applications. That's a market that literally did not exist 5 years ago. There was zero demand signal. There was no interest in TRISO fuel. And now all of a sudden, it's materialized. It's there. And we see a potential demand from customers all across the government spectrum, DoD, DOE, NASA. So that one is also very interesting. But all that said, this commercial nuclear power business that we have really has the potential to grow around small modular reactors as the grid is nuclearized and cleaned up. And then in the baseline foundational piece of all this is our powerful naval reactors business, which, as you can see over the decadal view, growing sort of 50% when you just look at quantity, but it's really more like 60% when you normalize it for the scale of those reactors. So we have an interesting picture here where the core businesses are all growing, and we have new and exciting opportunities for more powerful growth. So that's how I see it.

Thanks. I'll take one more and then we'll go to Peter. This question is for you, Robb. It's kind of unfair, you just stepped in as CFO just now but -- and we reiterated guidance today. But do you plan to kind of relook at guidance over the medium term? Or is there anything that kind of you feel is disconnected that needs to be reset over the next couple of quarters?

That is unfair. Well, I guess it's really -- we're not here to probably offer new guidance of any sort, but maybe I could offer a thought or two, just the 2 dimensions that we talked about today. There is a medium-term guidance target that we have out there using 2020 as our baseline. I would make a couple of comments there. I don't see anything significantly changing on that. We still plan to deliver that. I noted in my prepared remarks that likely, you'll see an acceleration towards the end. It might take us 5 years to get to the ranges that we actually want. That's always a 3- to 5-year target, I would offer that. I would also offer that in the next year or 2 in '22 and '23, we will probably grow at the lower end of that range, sort of a 4% to 5% rate of EBITDA. So I'd offer that. And other than that, I would say, generally, I also made a remark earlier, we're not here to give 2023 specific earnings guidance. We're focusing people on EBITDA. But if there was a factor when I looked at the estimates out there, I would say that that depreciation factor in the nuclear medicine business and just in the nuclear medicine or in the Navy business, the sum of those 2 will depress earnings in '23. And so I'd offer that as something that I would keep my eye on.

Thanks. We'll go ahead and shift to questions in the room. Yes, go ahead.

Martyn, in particular, this question is for you, and then one for Robb. But you didn't mention, I think you laid out kind of the challenges in the medical isotope and some of the themes that you laid out, but you also -- but you didn't talk about maybe some of the emerging also competition. I know SHINE and some of the others. Maybe if you could just high level give us BWXT versus some of these other start-ups, how that is -- how you view that? And then just, Robb, on the buybacks, you mentioned that you compare it to the M&A back and forth. But if we think about BWXT last few years, you've reduced the float by about 5%. Is there a target in mind as we start to get to turn the corner and free cash flow inflecting that you have in mind? And would you use leverage at all on the buybacks?

Can I take that, Mark?

Yes.

Yes. So thank you for the question. And I did forget to mention those points. So in terms of comparison with new competitors, and I wouldn't describe SHINE as a start-up. They've been going, I think, 10 years, and they're valued about $1.2 billion right now. But they don't compete directly with us. Their customers are companies like Lantheus and Curium who manufacture generators. Our customers are companies like Cardinal Health or Triad. So we're a bit further along the value chain in moly and technician generators. So I'm very confident about our position. I think SHINE is a fine company. You may know I used to be a strategic adviser for those guys. And I know Greg and Todd very well and respect them. And I think they'll be successful as well, but we will be phenomenally successful. We've got a fundamentally different product than Lantheus and Curium. Adding to that, NorthStar is another one who's -- I would -- is more of a competitor in the generator market, and it is a newer company, if you're familiar with our company. And the -- our product is a drop in replacement from Curium and Lantheus. It looks and feels the same. So we think getting radiopharmacies to adopt this will be relatively straightforward. NorthStar's totally different. It looks more like a photocopier than a technician generator and requires constant operator involvement. So it's very difficult to see that getting any traction in the market. Does that answer your question?

Just on the buybacks, we have the target out there of returning greater than 50%. So we've looked at several different scenarios and seeing what the free cash flow is, and we're pretty comfortable given where we see M&A going and where we see other projects that we'll have, abundant capital to satisfy that. We don't have a target beyond that. We'll evaluate, as I said, based on whether we think there's a dislocation of stock and lean in appropriately. We'll also, to the extent that we pass through a couple of years and don't need the CapEx dollars or the M&A dollars, they will leave in more. I don't think we have more of a target. You asked specifically about leverage. I don't think we're in the business of taking this into a highly levered circumstance. We pride ourselves on the consistent financial performance. When you lever that up, I don't think that that's really what our management team is about. And so I think on the margin, we would take on leverage, but not push this into a highly leveraged situation.

It's Bob Labick from CJS Securities. Two questions. First, I wanted to start with kind of allocation of R&D, and then I have an isotope question after. But how do you decide on allocating R&D between the isotopes opportunity, which is a fantastic opportunity, and the microreactors opportunity? And are either currently slowed or could either go faster if you decided to allocate more dollars in that direction?

Sure. Maybe I'll start on that one. So the way we allocate R&D is if it's IRAD, if it's corporate R&D, it's based around how we build our strategic plan. We have this almost grueling process, a very granular process for how we develop strategy. And it starts with identifying the markets that we're in or the markets that we want to be in and trying to understand what we would need to do to either improve our competitive position or enter a market with a meaningful competitive position. And then there's a whole bunch of sort of underlying material there, including the actions that we would take, the capital that we would allocate to it, and some of that involves R&D. So I can say, first and foremost, Bob, that sort of 80% of our R&D allocation is highly correlated to how we build our strategy. We just know that in some cases, we're going to have to spend R&D to get into a new market. An example right now is radioisotope power systems. We're allocating a bit of R&D to that. Medical isotopes were the same way. In terms of whether we could accelerate and move into those markets any more rapidly, on the microreactor side, I think the answer is no, because the pacing there depends on what the government customers want to do. So we're in program flow with our customers there. And I don't think allocating more would improve that. The place where we could accelerate, and we are, in fact, doing so is around medical isotopes. So we're putting a little more steam, and Rob talked about this, a little more steam into actinium, lutetium, the therapeutic drugs to bring those forward. We do have -- we did, by the way, when we bought the Nordion asset, acquired some intellectual property around therapeutics. That's turned out to be -- it was sort of in the closet, and it's ended up being a little bit of a bonus for us. And so some of that stuff is pretty mature, but we can accelerate that a little bit. We're also considering whether or not we can accelerate the automation of our TheraSphere line, which is growing very rapidly right now, and the market certainly will want it by that time. So a bit of a protracted answer there, but it depends on the situation, and I think our biggest opportunity for acceleration is in isotopes.

Okay. Great. And then just one other question. You laid out some nice information on the opportunity and the size of the market for isotopes getting to $30 billion by 2030 or something along the lines, with growth in both diagnostics and therapeutics. Can you tell us where BWX will fit in that value chain? And what's the -- that, I assume, it includes Pharma's revenue and everyone else. And so what's the potential opportunity to capture your share of that $30 billion market in less than 10 years?

Yes. I'll take it, and then hand it over to Martyn for any additional color. He -- Martyn presented a chart that looked sort of like a bathtub, where he showed BWXT's position in the value chain. And it's around procuring the radio isotope-based material; doing the irradiation services; doing the chemistry to extract the isotope; and in some cases, going through FDA approvals, but certainly going through the nuclear approvals. And in the end, at the endpoint of that contract manufacturing and nuclear -- finished nuclear product that would go into the market. And when you're in that position in the value chain, which we think is exactly the right niche for us, then we believe we can capture up to 20% to 30% of the total price of these products. And so you can scale it with the market around that idea. Big pharma would be out there on the end of it, large pharmacies and large pharmaceutical networks. But we're right there in the middle, in a place that we think really suits our capabilities. Martyn, would you want to add to that?

No, I think it's a good answer, Rex, apart from the bathtub label for my excellent slide. But I will say maybe 20% to 30% is a good percentage for how the market will develop in the future when the drugs become more advanced. So in terms of the addressable market for us. But I would also say that if you think about growth, a lot of the growth will be driven by the new drugs, which are driven by the pharma companies. Nuclear medicine companies will continue to grow, but we'll have almost like a new arena of competition, which is somewhere in the middle between the drug companies and the traditional nuclear medicine companies. We're enabling the drug companies to enter this market. So our growth going forward will be somewhere between the two I believe. But the addressable market will be 20% to 30%, if that makes sense.

Robb, I guess, knowing you're new to the job, but expectations management seems to be very critical, can outweigh actual performance. And just to make sure, so we're all rowing in the same direction, should we be calibrated flattish EPS through 2023? And then looking at that EBITDA off the 2020 base, it seems like even if you're 3%, 4%, 5%, you get to like a $475 million EBITDA over that time period. Is that how we should be thinking about kind of the expectations management here?

I think that's generally right. I would say that for '22, and while we've given underlying guidance for '22, we see growing EBITDA at a similar rate, as I mentioned before, low end 4% to 5% again in '23 and then having that headwind of both depreciation. So you'll only get a minor step up. You said flat, but we're hoping to get a minor step-up in EPS in '23. And then ultimately, EBITDA and earnings start tracking because you don't have the pension headwind in '22, which is sort of a nonoperating item. You have the depreciation headwind in '23, nonoperating item. You're then kind of -- it's all in the base. And then frankly, you start layering in revenue from Tc-99 therapeutics, microreactors on a base of expense and depreciation, and you're off to the races.

Yes, okay. On that EBITDA, and I'm looking at the slide on Page 69, kind of the commercial and ramp for the nuclear medicine, I guess you exit '24, you kind of have an estimate here, $125 million and $25 million of EBITDA. Should we think though, the D&A at $20 million -- or the depreciation at $20 million and the amort at $6 million? I mean is that still an operating loss business as you exit '24? Or am I -- because you've got total medical EBITDA at $25 million. So is it still running at an operating income loss?

That's what that is. That's right. That's right. That's correct.

Sure, Byron Callan, Capital Alpha Partners. Question for Suzy first, although if you want to weigh in as well. It looks like the National Defense Authorization Act is going to be taken up by the Senate this week, and the U.S. Innovation and Competition Act is going to be appended to that. Will that matter, that kind of sat in the Senate from last June, but it looks like there's a fair amount of money for things in your lane. And then a second question really for Rex and Robb. If you can talk a bit about workforce demographics over the next couple of years, I mean do you think you're fairly balanced? Are there places you need to hire a number of people because retirements coming up or retrain people for some of these new areas that you're focused on?

So starting with your NDAA question, the National Defense Authorization Act, it's timely, we're a week before Thanksgiving because Congress is doing what it normally does, and it's starting the Christmas tree, the bills that are passing through. So with the Defense Authorization Act moving forward, first of all, lots of good stuff in there for us. It covers not just defense, but the national security aspects of Department of Energy, which, of course, is all of our NNSA work and naval reactors. So very good policy there and including setting the foundation for $25 billion above the President's budget request for defense, which has been mirrored in the House Defense Authorization Act and the Senate Democratic proposal for appropriation. So I think we're in good shape there. What was originally the Endless Frontiers Act that was a bipartisan bill by Schumer and Young back in the spring and has been sitting out there with the House finally moving their pieces of it. When that moved, and that was really targeted at countering China specifically on microelectronics, not a direct impact to us, but certainly, we appreciate where the policy is going there. When that started moving, they attacked on the NASA Authorization Act, which is, I think what you're talking about as well. Again, it's the Christmas Tree, they're throwing everything on it. But very strong policy there. These are all policy bills geeking out in my world. The authorization sets the policy appropriation as the annual dollars to achieve that policy, but very strong guidelines. Again, strong on shipbuilding, NASA very strong on support for ARTEMIS, which is the LUNAR program and then continuing on with deep space exploration. As you heard, we're working on the ability to use nuclear power and propulsion in both LUNAR and in future exploration. So all very, very positive package for us.

Want to take demographic?

Yes. And I'll take the demographics part of that question. So generally speaking, we have a pretty even set of demographics. Aerospace and defense was facing this famous bimodal distribution problem a few years ago. I think we're out of that. And if you look across our age spectrum, it's pretty uniform. And in terms of any hiring challenges that we have in this interesting labor market, generally speaking, it's not so bad for our company because we're operating plants in Lynchburg, Virginia; Erwin, Tennessee; Mount Vernon, Indiana. So it's pretty typical for the BWXT job to be the best job in town if you want to work in a plant. Because we have good wages, because we have very generous benefit packages and because people can see their future. They can look out at the shipbuilding schedule and say, "Oh, I can work there for 30 years if I want to." Or if they're in the commercial nuclear business with John, they can say, "Oh, these refurbishment projects go through the early 2030s." So I think people can see their future, these are very attractive jobs. And when we open a requisition, there are normally going to be 60 or 70 people apply to each one. So we've got some advantages just kind of based on our history and geography and some things like that. And the workforce sort of profile is pretty normal.

I think we'll take a few more online and then see if anyone else has questions in the room. Next question that comes in online is about TRISO fuel. Why is TRISO fuel so important for these microreactor programs? And really, how is it different from conventional reactor fuel.

Yes. So maybe I'll take a crack at that one. Robb talked about this earlier, but TRISO stands for tristructural isotropic. What it means is that you've got a ceramic coating around each little fuel grain. So it captures the reaction products and also because it has a ceramic material quality to it, it's meltdown proof. It literally cannot melt down at any temperature you can see for a reactor. So it won't melt down. It captures the reaction products. If it's something on got distributed, because the reaction products are captured inside that little shell, then there's no direct nuclear material exposure to the environment. There's certainly radiation effects, but there's no direct environmental exposure. So there's a lot of reasons to like that fuel. And for all those reasons and some others, it's a fuel of choice for advanced reactors for microreactors. So a lot of different applications for it. And even in cases where it's not specifically TRISO, BWXT makes other coated-fuel forms that have similar properties. We might fly a little different fuel form, coated fuel form for the NASA mission, for example, because of its performance characteristics. But these fuels are nonproliferable that capture the reaction products, they're meltdown proof, fail safe, and that's -- and all of those features differentiated from normal nuclear fuel.

Thanks, Rex. Got another question here internally, and then I'll take one before we're getting the mic there. John, this question really comes from you. I actually have a couple of questions, I'll try to phrase them together. Can you take a moment to comment about the range of outcomes that maybe BWXT has related to OPG, SMR contract? And maybe as well how you see your business competitively advantaged in commercial, but not just inside Canada?

Yes. So for OPG and their SMR project at Darlington, I think we're really well positioned there to be able to supply design and supply components for that project. We're talking to all of the proponents for that project. There's a big buy Canada type of view there that we get from OPG. So I think we're in really good shape if that project goes ahead. In terms of outside of Canada, I'm fairly optimistic about that. There's a fair bit of activity with others there that are interested in what we do. So not only are we the only heavy component designer manufacturer in North America, but we're one of the few in the Western world. And I think our brand is quite strong there. We've had a good track record of exporting successfully to different markets. And we think that if Darlington goes first, then we're through a learning curve that others won't be through, and we're well positioned to pick up on that demand elsewhere.

Thanks, John. Pete?

Pete from Alembic. Maybe one for Rex and Robb. Guys, I think the next couple of years, you're going to have some real nice free cash flow growth just on a CapEx decline. But then the Slide 29 intrigues me. Because as you think about the midterm, it seems like from the medical and also post this kind of aircraft carrier troughing, it seems like NOG will be on an upswing also organic growth-wise. And just kind of looking at the CAGRs, are you going to kind of return do you think to being more of a growth business? Maybe high single-digit organic growth business post the middle of the decade? Is that kind of reasonable for us to think about just given the way the profiles look?

You want to take that, Robb?

Yes, sure. I think, yes, as we exit the '24, '25 time frame, we tried on Rob's slide talk a little bit about the sales dynamic over a longer period of time. So that was our core NR business. We then hope to accelerate with different fuel initiatives as well as microreactors. And so I think it's been very reasonable to assume that you'd start to push up to that higher end in the second half of the decade.

Just on that same Slide 29, I just want to understand, it looks like you've got the flat units going through the facility at '16 through '24. But we've got that CAGR of 2% to 3%. Is that going to be entirely driven by pricing and an inflationary environment? I'm just trying to reconcile the growth trajectory with the flattish units.

That's correct. That's largely the case. Now that's a sales slide, and that's the NR part of the sales slide at 2% to 3% which is relatively flat volume a little bit of inflation. And then hopefully, as you transition to the EBITDA slide, you think about other businesses in NOG as well as efficiency that we can gain there.

Let me add a footnote, Michael, perhaps for your benefit and for others. We're trying to illustrate there sort of a nuance in the delivery and ordering cadence of the Ford. We featured out in the past, showing a 2 to 4 units running through the shop. What that's really about is they get ordered on -- historically on 5-year intervals going to 4, which is going to be, by the way, a big boost to the business when that does happen. But we deliver on sort of 7- or 8-year time frame. And so what that means is you end up with a couple of years in every decade, where you've only got 1 ship set going through the plant instead of 2. That's really what that is. So it's just an artifact of the delivery and ordering cadence and then you get this sharp inflection in the second half of the decade, because it reverts back, reverts back and then the Columbias are laying on top and so forth. And we just wanted to be -- even though the shipbuilding plan changes every time it gets published, based on where we are today, we just wanted to be clear about what it looks like today in our plans.

And because that's a couple of years out, the only other thing I would add, because that's a couple of years out, we're clearly aware of that, so is our customer. And so we're going to try to figure out ways to layer that in, but we wanted to provide a very conservative outlook as we look over the next couple of years.

So a question for the commercial side. Just from a longer-term perspective, so whatever that -- supply chains are all on our minds these days. So if you have Ontario at 60% of their electricity is coming from nuclear, if you had that scaled up in many more states, countries, whatever, what does that look like from a longer-term perspective for the people needed to fulfill that growth or the financial capital or the equipment manufacturing facilities, how does that kind of ripple through? And then not necessarily related exactly to BWXT, but just from like a higher-level perspective.

So in terms of the people and facilities at the rate that we would anticipate the demand would be there, I don't think we need a major investment in our facilities or a step change in the people that we have. Now that depends on how significantly that demand grows. But right now, when we look at it, we're well set up in both fronts there. If it goes beyond power generation and into decarbonizing, transportation and other things, then there could be very significant demand there. We probably need to make investments in both. But at this point, I think we're well positioned. Did I answer your question entirely?

Yes, it was open-ended. So I guess -- yes, like just would other players come into -- if someone with a significantly larger balance sheet or something decided, okay, I want to take share because I see this as being -- I'm just thinking of SpaceX and NASA, like someone who's I guess, committed to doing things a different way or someone who's just very market share focused and not necessarily -- maybe earnings focused. Yes. I guess it's a tough question, so...

Yes. Maybe what I'd say to that is we've got a significant head start, right? So yes, there could be others that are interested. There's significant facilities that you need, very significant, and there's a lot of know-how, nuclear, very specialized know-how. So -- and customers are very conservative. They're not easy adopters of new suppliers. So I think it's challenging for anybody looking to enter.

I might add one more thing, just changing altitude a little bit. If you imagine that the U.S. went to a 60% nuclear capacity in the grid, there are about 100 plants today, give or take, a little bit less than 100, and that provides about 20% of the electricity on the grid. So you'd need to build 200 more plants in the U.S. to get to 60%. And I think that's similar across the globe. And so if the globe decides to apply the nuclear solution to the climate problem, we won't be able to build plants fast enough -- build the nuclear plants fast enough, and there will be -- it will certainly strain the capacity of all the existing players and any new players. So there will be a lot of room at the lunch counter for that kind of opportunity.

It's slide -- on Page 36 about growth in Technical Services income and approaching peak levels, is that just incorporating the Savannah River contract at this point? Or is that also assuming additional wins?

Which slide is it? I'm sorry?

Approaching in services income in the medium term...

Oh, yes, yes. So we've built in Savannah River into that one. And then we haven't been explicit about what else is included there. But there are a number of large opportunities, and we've put our best guess on what we thought we could win and bring into the portfolio. So some of that's there, certainly not the enumerated list of opportunities that we showed, it's not all there. But Robb said -- Robb expressed his excitement about that business. The Savannah River one is a cornerstone win for us, and we feel well positioned on numerous large opportunities. And so we like our chances there.

If you look at that 1 page of the different opportunities that we have out there, you'll see that we tried to put some numbers around that. We're in partnership with other companies. So you could assume that we'd be splitting those fee pools with a couple of players. So that gets you an idea of what the EBIT contribution for any 1 win would be for these large ones. I think it's fair to say all those large ones are on the order of magnitude of $10 million to $20 million of EBIT contribution to BWXT.

And another question down here.

Maybe one for Rex and Robb and then maybe Suzy, just following on to Byron's question on the NDAA. It seems like there's chatter on the appropriation side that potentially, you could have your long CR for DoD. How would you handicap that? And how do you think about it if we do get that, that would impact it your 2022 outlook?

You want to take it, Suzy?

Sure. So I actually heard yesterday that staff has been told to look at doing a continuing resolution through February. My concern with that, first of all, it's not the way to run a government. Continuing resolutions are not good for anybody who does government business. So would love Congress to do a shorter-term CR when it expires in December 3 and actually get their work done this calendar year. I can continue to hope, right? But if we go into February, my concern is we start to hit up to all of the primaries and the midterm elections. You've seen the consternation just this year. And the fact that Build Back Better has sucked all of the energy in Washington out of getting almost anything else done, the fact that the Senate and DAA has been out publicly for 6 weeks, which they never do. They usually put it up within days of it going to the floor. So it's not a normal year, unfortunately. So to answer your first question, if we end up in February, I would handicap a year-long CR as extremely likely. We're also hearing that they're planning on '23 already -- fiscal '23 already being through past the midterms. Because they realize Republicans are not incentivized because they're assuming they're going to get back Congress. There's no incentive for them to come to the table, particularly in the Senate, to pass the FY '23 bills ahead of time. So that's not very positive. I'm hopeful with [ Shelby in L.A. ], he's announced he's retiring, that they'll decide they want to go out and actually get the bills done. So let's hope. As for impact on us, we're in a lucky situation that the overwhelming majority of our funding is multiyear, right? So DOD and DOE have various buckets. Some has spend it all in 1 year. Some, you get 3 years. Some, you get 5 years. We're in that longer-range bucket. So it takes quite a while before CR really impacts us. The disappointing part is under a CR, you can't have any changes. Everything is based on the previous year's funding level, not only in shipbuilding, but also in our DOE as we look at environmental management contracts or NNSA contracts that they all had increases. So those increases are now on hold. Some of that's been picked up in the infrastructure bill. But long answer to, hopefully, we're wrong if we go into next year and then a very strong handicap of a very long CR.

Let's take a couple more online questions. First one here, maybe more for Robb and Rex. Talked a lot today about EBITDA is what you want to be measured on for results. So will we be providing those as kind of annual guidance as well as segment level results for EBITDA going forward?

We'll look to put that out. For the fourth quarter, I need to take a look at that, but that's a reasonable assumption. And then for different segments, we will -- unlikely that we'll need to guide for segments, but it's very easy to look. We've disclosed what our EBIT is, what our DNA is. And so you can get to your EBITDA by segment. But no, we'll take a hard look at that offer now. We've gotten that suggestion from a few investors, and we'll take a hard look at that.

Yes, thanks. Maybe next question is for Ken about the recent Savannah River award. When would you expect that to actually start? And is it still in the potential protest period?

Yes. There's -- once you execute debriefs with the government, which happened last week, there's about 10 days that the government usually waits to make sure there's not going to be any issues with the procurement. But we've been told that we should anticipate our notice to proceed soon after Thanksgiving. We're anticipating that. We're -- we've been planning and working on transition for quite a while now. So our team is ready and ready to hit the ground and get going right after Thanksgiving.

Yes. Let me just add a couple of thoughts on that, just as you think about this. There's also a transition period that Ken talked about, which is about 3 to 4 months, which is non-fee-bearing. So you'd be looking at the end of the first quarter of next year, maybe the beginning of the second quarter when we would start to see the ramp-up of fee income coming into the business for that win.

Good point. I'll take a couple of more questions here and then wrap up online.

I want to go back to the isotopes for a minute. And obviously, it's very exciting to get close to the FDA submission for the generators. And if I could jump forward and just assume approval by the end of next year. Could you talk about the path to commercialization? When we'll learn about your customers, how their contracts work and then the ability to take share? How long does that take? And just kind of give us kind of the context of how you've already built it out in the slide that you have the $200 million and $75 million of EBITDA. But what are the steps and the ability to gain that share assuming you get the approval at the end of '22 as we all think?

Yes, I'll try and take that one. What we've said historically is that we have clear view of our channels to market. So I'd say that the numbers that Martyn put up there, we're highly confident that we can achieve. And that's -- I'll just -- I'll leave it at that. Martyn, do you want to add anything to it?

I think you covered it, Rex, but in terms of the general situation, manufacturing companies and I said they were trying to agree agreements with the radio pharmacies for, say 2 or 3 years, typically. That's the sort of cycle. Now we know all these players intimately, and we are very confident of our market access position, and we'll communicate it after we have FDA approval.

Maybe I'll add a little bit of color to try to link specifically on that slide. You've seen the $60 million number building to $125 million of revenue. You can assume almost all of that is Tc-99, some growth of the underlying portfolio for Nordion as well as some therapeutics, as Martyn talked about. And then ultimately, you can draw a line even further to the $200 million number that you have. Yet again, the ramp of Tc-99 is the large contributor there. We've, in the past, said that that total market is $400 million to $500 million. We expect to address half of that immediately in North America, we get a very significant share. So the combination of those 2 would allow you to triangulate what the sort of revenue potential is and all of that would ramp in a very sequential fashion over that period of time.

Another question down here. Mike?

Yes. Just for Rob Smith on the micro modular reactors. I think you said a couple of times it was sort of a winner-take-all kind of playing field. Are we still -- should we still be under the impression you could participate in three ways by being a fuel provider, component and a prime? Or is it truly winner take all?

No, I think that's the way to think about it. Likely, I mentioned our TRISO work and that we're the only company manufacturing TRISO at quantities that has been radiation tested. So we're in a very good position for fuel. There's the different markets that I talked about. We're playing in all of those horizontal markets. I probably wasn't as clear about that. I kind of focused on the DoD one, but we do have contracts in all of those, whether that's technology development for nuclear, thermal propulsion and fuel. So we would expect to play in the market in multiple ways. When I was saying winner take all, that was really for the reactor design, particularly for SCO, because now it's down to 2 and then it's a down select to 1 likely next year.

Got another question here from Byron.

I don't know if you want to speculate on scenarios around AUKUS. I mean there are a whole range of things that are being talked about from technical assistance, even getting old Los Angeles class boats. Any way to kind of size or scale what that might be to you in 2025 to '30?

We have declined to speculate on that so far. Obviously, this is government-to-government negotiations between Australia, U.K. and U.S. Certainly, there's a potential role for us given the propulsion work that we do, and we think it's an exciting opportunity. And from what you hear in the media and other places, it feels like it's maybe 8 ship sets of opportunity there. So could be very interesting for us, but we haven't built it into our strategic baseline, and we haven't speculated about what it might mean for us in the long term. So it's just there.

To be determined.

Any other questions here in the room? All right. Maybe we'll take the last question. I've got one more that came in online, and it's a high-level question, more for Rex. How do you see the company, you've been with the company now for about 6 years, and how do you see kind of the past 6 years and how it may differ from what you see happening over the next 6 years?

Okay. So I alluded to some of this in some of my earlier comments, but it's been a very interesting trajectory for the company over 6 years. I mean if you look at -- turn the clock back 6 years and look at the shipbuilding plan, and it was 2 Virginias until there was a Columbia, and then it was 1 Virginia, 1 Columbia and so on. So the -- and then the Ford layered in on top of that. So the shipbuilding plan was kind of flat, a little bit of incremental volume around the difference between a Columbia and Virginia. But shipbuilding plan was kind of flat. At -- 6 years ago, we did not have disruptive technology to enable us to enter the nuclear medicine market. 6 years ago, there wasn't such a thing as a microreactor for space and defense. It didn't exist. 6 years ago, to me, the small modular reactor market looked dead because the market never materialized around the capability. And look at where we are today, I think the small modular reactor opportunity is very real and very near. We have a robust business line around microreactors. We have a shipbuilding schedule that has 2 Virginias or 2 fast attacks as far as the eye can see. And Columbia layered in on top and Ford layered in on top. So that's a real growth story now. AUKUS didn't exist 6 years ago. I think what you can say about all that is that there's an element of who knows about the 6 -- next 6 years, for sure. But I kind of like that because our team continues to deliver surprises to me, mostly good and finds new innovations. It is a deeply creative team. It is a deeply creative team, and it's a team that has the capacity to act, and it's backed by deep institutional capability. And I talked about that, all the plans that we have and all the capacity that we have, we got this creative team that can bring ideas to bear. I mean I'll give you an example that excites me. We went up to visit the medical isotope business at the end of August, up in Martyn's business to take a look at the state of the moly project. And you go and look at the radiopharm. Radiopharms in this place that was not making it up 2 years ago, in January when I last visited was a gravel floor with some center blocks around it. And now it's a state-of-the-art radioisotope facility, gleaming white with tons of automation, terminal sterilization, dosing equipment. It's amazing, it's remarkable what's happened in the last 20 months in that business. We went down to Peterborough and looked at the target delivery system. That thing is an engineering marvel. I don't know if anyone else on earth could make that system, apart from BWXT. Because you have to have intimate knowledge of the CANDU reactor, intimate knowledge of radioisotope targets and such as that. And that's an engineering marvel, and that was put together in a very short amount of time. Look in Joel Duling business in our Navy plants. If you could get into our Navy plants, which you can't, but if you could get into them, what you'd see is you'd see us producing material and products at record volume, components at record volume, while we're simultaneously building out the capacity of the plant. We've got these plastic curtains up everywhere with duct tape all over them. And on the other side of that duct tape are backhoes and jackhammers and things like that. We're raising dust and creating a lot of noise and vibration, by the way, which potentially affects our products. And so the ability of our team to take an idea and convert it into reality to take on any hard challenge in the nuclear space and address it. Another example, we went from nothing to 90 miles an hour on this HEU metal project. We're making new metal pucks at prototype scale probably 6 months after a contract start. It's a business that has amazing creativity, amazing capacity. And so I think the most exciting thing about the next 6 years, in addition to all the markets and products we've been featuring here, is to see what this team does. It's just radioisotope power systems. We've got novel technology that bubbled up in the last 3 months on that. And we've got some business traction around it. So I can't wait to see what they do is the way I feel about the business. It's quite a thing and we're well positioned for a lot of excitement and growth.

Yes. Well, thank you. And I think we'll end on that. So that wraps up today's 2021 BWXT Investor Day. So thank you all for joining and talk later.