BWX Technologies : BWXT 2Q20 Earnings Presentation

2020 Second Quarter Earnings Call

Presentation

Reported August 3, 2020

Forward-Looking Statements Disclaimer

BWX Technologies, Inc. ("BWXT") cautions that statements in this presentation that are forward-looking and provide other than historical information involve risks and uncertainties that may impact actual results and any future performance suggested in the forward-looking statements. The forward-looking statements in this presentation include, but are not limited to, statements relating to our 2020 strategic priorities, including U.S. Navy procurement, medical radioisotope industrialization and organic growth opportunities; bookings and backlog, to the extent they may be viewed as an indicator of future revenues; the expected U.S. Navy long-term procurement schedules and forecasts; estimated pension costs; the expected Canadian nuclear power forecast for services, refurbishment timelines and opportunities; disruptions to our supply chain and/or production, changes in government regulations and other factors, including any such impacts of, or actions in response to the COVID-19 health crisis; our outlook, priorities, growth opportunities in our businesses and guidance for 2020 and beyond. These forward-looking statements are based on current management expectations and involve a number of risks and uncertainties, including, among other things, the availability of federal appropriations to government programs in which we participate; our ability to win new project awards; capital spending of power generating utilities; the extent to which the COVID-19 health crisis impacts our businesses; the impact of COVID-19 on our employees, contractors, suppliers, customers and other partners and their business activities; the extent to which the length and severity of the COVID-19 health crisis exceeds our current expectations; the potential recurrence or subsequent waves of COVID-19 or similar diseases; adverse changes in the industries in which we operate; termination, delays and other difficulties executing on contracts in backlog and adverse changes in the demand for or competitiveness of nuclear products and services. If one or more of these or other risks materialize, actual results may vary materially from those expressed. For a more complete discussion of these and other risks, please see BWXT's filings with the Securities and Exchange Commission, including our most recent annual report on Form

10-K and subsequent quarterly reports on Form 10-Q. BWXT cautions not to place undue reliance on these forward-looking statements, which speak only as of the date of this presentation, and undertakes no obligation to update or revise any forward-looking statement, except to the extent required by applicable law.

2

2Q20 highlights and progress against 2020 strategic priorities

2Q highlights

2020 strategic priorities

Progress

1. Strong results; 2Q revenue up 7% and EPS of $0.71(1) up 15%

1. All 12 sites remain open and fully operational

1. COVID-19protocols remain effective, minimizing business interruption

1. Awarded $13B contract from DOE for Hanford Tank Closure

1. Divested non-core, U.S. commercial nuclear services business (NSG)

1. Issued $400M senior notes due
   2028… no debt due until 2025

Continue Navy capitalization while

1 simultaneously ramping to full-year Columbia production cadence

Increase medical isotope capital investments and

2 progress on Mo-99 commercialization milestones

Seek new opportunities in

3 nuclear services and government microreactor development

1. Invested $66M in NOG capital YTD

1. Accelerated material purchases and increased manufacturing volume

1. Increased NOG 2020 revenue growth guidance

1. Radiochemistry hot cell construction complete

1. Continued schedule progress; still anticipate mid-year 2022 production readiness

1. Invested $44M in NPG capital YTD, primarily for medical isotopes

1. Awarded $13B Hanford Tank Closure Contract

1. Awarded $26M TRISO capacity expansion contact

1. Accelerated DOE pipeline for upcoming bids

1. Non-GAAPfigures exclude any mark-to-market adjustment for pension and postretirement benefits recognized and other one-time items. A reconciliation of GAAP to adjusted, non-GAAP items can be found in the appendix of this presentation or on the investor relations website at www.bwxt.com/investors.

3

2Q20 and 1H20 company results

($million, except per share amounts)

				1,047
Revenue		505	888	+18%
	471
		+7%
	2Q19	2Q20	1H19	1H20
GAAP	0.62	0.67	1.13	1.46
				1.50
Non-			1.13	+33%
GAAP(1)		0.71
EPS	0.62	+15%

			2Q19	2Q20	1H19	1H20
		GAAP	81	82	144	181
and		17.1%	16.3%	16.2%	17.3%
					185
	Non-
Income	margin		86	145
GAAP(1)	81
				17.7%
	17.2%		16.3%
Op.			17.1%
			2Q19	2Q20	1H19	1H20

1. 2Q and 1H revenue up 7% and 18% respectively, driven by increases in Nuclear Operations Group (NOG) and Nuclear Services Group (NSG)

1. 2Q non-GAAP EPS up 15% primarily from higher volume, lower costs, higher other income, lower interest and lower taxes.

1. 1H non-GAAP EPS up 33% driven by $0.28 of operational improvement, $0.04 of lower operating costs, and $0.05 of higher pension income and lower interest expense

1. 2Q operating margin ~flat… 1H non-GAAP margin expansion of 140 bps on higher NOG margin and NSG operating income, partially offset by lower NPG margins due to business mix and COVID-19 impacts

1. Non-GAAPfigures exclude any mark-to-market adjustment for pension and postretirement benefits recognized and other one-time items. A reconciliation of GAAP to adjusted, non-GAAP items can be found in the appendix of this presentation or on the investor relations website at www.bwxt.com/investors.

4

1H19 to 1H20 non-GAAP EPS(1) bridge

($ per diluted share)

	0.04		0.05		1.50
	0.28		Lower R&D expense	Higher pension income
1.13
		Lower corporate expense	Lower interest expense

NOG volume, margins

NPG volume, margins/mix

NSG income

1H19

Operating segments Other operating costs Pension / Interest

1H20

1. Non-GAAPfigures exclude any mark-to-market adjustment for pension and postretirement benefits recognized and other one-time items. A reconciliation of GAAP to adjusted, non-GAAP items can be found in the appendix of this presentation or on the investor relations website at www.bwxt.com/investors.

5

2Q20 segment results

Segment	Revenue		Op. Income / Margin	Summary
($million)		410			86.0	o Revenue up 14% on accelerated timing of
	358			75.2
				procurement of long-lead material and higher
		+14%
					downblending and naval nuclear fuel production
NOG
			21.0%	21.0%	volume
						o Operating income up 14% primarily from higher
	2Q19	2Q20		2Q19	2Q20	revenue
	87		GAAP	14.9	1.1	o Revenue down 22% from lower component
	68	manufacturing and medical isotope volume, partially
		Non-		1.6%	offset by the Laker Energy acquisition
NPG
	(22%)	GAAP(1)		2.4	o Operating income and margin down on lower
		17.2%
				3.5%	revenue due in part to COVID-19 and an unfavorable
	2Q19	2Q20		2Q19	2Q20	shift in product mix, including the absence of the
		China steam generator project

NSG

GAAP	1.5	4.1		o Operating income up primarily from lower costs
			5.1
Non-			associated with business development activities
1.8
GAAP(1)

2Q19 2Q20

1) Non-GAAP figures exclude any mark-to-market adjustment for pension and postretirement benefits recognized and other one-time items. A reconciliation of GAAP	6
to adjusted, non-GAAP items can be found in the appendix of this presentation or on the investor relations website at www.bwxt.com/investors.

1H20 segment results
Segment	Revenue		Op. Income / Margin		Summary
($million)		834			176	o	Revenue up 26% on accelerated timing of
	663			133
	+26%				procurement of long-lead material and higher
NOG					21.1%		Columbia production and naval nuclear fuel volume
			20.0%
				o	Operating income up 33% primarily from higher
							revenue and favorable contract adjustments
	1H19	1H20		1H19	1H20
	171	156		27.5	9.6	o Revenue down 9% from lower component
		GAAP		manufacturing and fewer recurring service outages
					6.1%		and medical radioisotope volume due to COVID-19.
NPG		(9%)	Non-
			11.0
		GAAP(1)		o	Operating income and margin down from lower
				16.1%
						revenue and an unfavorable shift in product mix,
					7.1%
						including the absence of the China steam generator
	1H19	1H20		1H19	1H20
			project
			GAAP	3.1	10.5
					11.5	o	Operating income up primarily from increased
NSG			Non-				income in U.S. commercial nuclear service outage
		GAAP(1)	3.4			work and lower costs associated with business
							development activities
				1H19	1H20

1) Non-GAAP figures exclude any mark-to-market adjustment for pension and postretirement benefits recognized and other one-time items. A reconciliation of GAAP	7
to adjusted, non-GAAP items can be found in the appendix of this presentation or on the investor relations website at www.bwxt.com/investors.

2020 guidance increased based on strong YTD performance

BWXT consolidated guidance		Other information

Revenue		Non-GAAP EPS(1)		Cap-ex
up ~8%		$2.80 - $2.90		~$270M
		(vs. ~$2.80)

Operating segment guidance

		Revenue	Operating margin / income
NOG		up ~10%		"high teens" + CAS pension
	(vs. up ~9%)		reimbursement
NPG		down ~1%		~11%
NSG		N/A(2)		~$25M(3)

Green = positive revision vs. prior guidance

Red = negative revision vs. prior guidance

1. Other segment operating expense primarily for R&D: ~1% of revenue

1. Corporate unallocated costs: ~$15M

1. Other income, primarily related to pension and other post-employment benefit plans: ~$37M

1. Non-GAAPeffective tax rate: ~23%

1. Average diluted shares outstanding: ~96M

1. Depreciation & Amortization: ~$65M

1. Non-GAAPEPS exclude any mark-to-market adjustment for pension and postretirement benefits recognized during 2020 and other one-time items, which are not known at the time guidance is provided. A reconciliation of GAAP to adjusted, non-GAAP items can be found in the appendix of this presentation or on the investor relations website at www.bwxt.com/investors.
2. NSG revenue is not consolidated for minority positions in Joint Ventures, which comprise most of the segment's activity

3) NSG operating income guidance assumes Hanford Tank Remediation project transition to occur in 2020

8

2019 to 2020 guidance non-GAAP(1) EPS bridge

($ per diluted share)

	~ 0.02			2.80 - 2.90
~ 0.09			~ 0.03

~ 0.05

2.62 0.05 - 0.15

NOG volume

NSG income

NPG volume, margins/mix

2019 non-recurring items in NOG (favorable EAC to backlog contracts) and NPG (China steam generator and Asset Retirement Obligation)

Lower corporate expense

Lower R&D expense

2019	Operating	Other operating	Pension	Interest	Tax rate	2020 guidance
	segments	costs

1. Non-GAAPfigures exclude any mark-to-market adjustment for pension and postretirement benefits recognized and other one-time items. A reconciliation of GAAP to adjusted, non-GAAP items can be found in the appendix of this presentation or on the investor relations website at www.bwxt.com/investors.

9

Long-termnon-GAAP EPS(1) guidance

On Aug 3, 2020, the Company
reiteratedits long-term							Low
guidance assuming COVID-19
					double-digit
conditions through 2020, that						CAGR
excluding the benefit of tax						$2.80 - $2.90
reform, it anticipates an EPS(1)					$2.62
Compound Annual Growth				$2.39
Rate (CAGR) in the low-				$2.05
double digits over a three-to-		$1.76
five-year period from 2017
$1.42
based on a robust organic
growth strategy and balance
sheet capacity.	Non-
	GAAP
	EPS(1)
		2015	2016	2017	2018	2019	2020	Long-term
							guidance	guidance

1. Non-GAAPEPS exclude any mark-to-market adjustment for pension and postretirement benefits recognized during 2020 and other one-time items, which are not known at the time guidance is provided. A reconciliation of GAAP to adjusted, non-GAAP items can be found in the appendix of this presentation or on the

~$0.30 favorable impact from Tax Cut and Jobs Act of 2017

investor relations website at www.bwxt.com/investors.

10

Appendix

11

Pension summary

($millions)		2015(3)	2016	2017	2018	2019	2020 est.
Benefit obligation at end of period	1,566	1,572	1,543	1,186	1,309
Fair value of plan assets at end of period	1,210	1,218	1,258	1,024	1,150
Funded status over (under)	(356)	(354)	(286)	(162)	(158)
% Funded		77%	77%	81%	86%	88%
Pension funding (company contributions)	13	12	56	158	4	~ 7*
Reported in other income
Net periodic benefit cost (income)	36	2	(19)	6	(11)
Recognized net actuarial Mark-To-Market (MTM) loss	61	28	8	37	9
Net periodic benefit cost (income) excl. MTM loss	(24)	(26)	(27)	(31)	(21)	~ (37)**
Reported in operating income
Recoverable CAS(1)	costs	58	50	56	44	47
FAS(2) service cost		24	7	8	10	9
Total FAS(2)/CAS(1)	differential	34	42	48	34	38	~ 31**

1. CAS - Cost accounting standards in accordance with the Federal Acquisition Regulation and the related U.S. Government Cost Accounting Standards - used as basis for recovery of costs on government contracts
2. FAS - Financial accounting standards in accordance with GAAP and the way we report our financial results
3. Presentation of 2015 amounts reflects adoption of ASU 2017-07 which requires non-service cost components of net periodic benefit cost to be classified outside of operating income

*Similar funding levels anticipated for 2021 based on current projections

**Similar levels anticipated for 2021, 2022 and 2023 based on current actuarial studies and projections

12

Non-GAAP reconciliation for 2Q 2019 and 2020(1)

For the Three Months Ended June 30, 2020 (In millions, except per share amounts)

			Restructuring		Costs Associated with		Debt Issuance
		GAAP		Costs		Sale of Business		Costs		Non-GAAP
Operating Income	$	82.4	$	1.3	$	2.7	$	-	$	86.4
Other Income (Expense)		1.6		-				0.5		2.2
Provision for Income Taxes		(19.7)		(0.3)		(0.6)		(0.1)		(20.8)
Net Income		64.4		0.9		2.1		0.4		67.8
Net Income Attributable to Noncontrolling Interest		(0.1)		-		-		-		(0.1)
Net Income Attributable to BWXT	$	64.3	$	0.9	$	2.1	$	0.4	$	67.7
Diluted Shares Outstanding		95.6										95.6
Diluted Earnings per Common Share	$	0.67	$	0.01	$	0.02	$	0.00	$	0.71
Effective Tax Rate		23.4%										23.4%
NPG Operating Income	$	1.1	$	1.3						$	2.4
NSG Operating Income	$	4.1				$	1.0				$	5.1
		For the Three Months Ended June 30, 2019
		(In millions, except per share amounts)
			Restructuring
		GAAP		Costs							Non-GAAP
Operating Income	$	80.5	$	0.3						$	80.9
Other Income (Expense)		(2.8)		-							(2.8)
Provision for Income Taxes		(18.7)		(0.1)							(18.8)
Net Income		59.0		0.3							59.3
Net Income Attributable to Noncontrolling Interest		(0.1)		-							(0.1)
Net Income Attributable to BWXT	$	58.9		0.3						$	59.1
Diluted Shares Outstanding		95.7										95.7
Diluted Earnings per Common Share	$	0.62	$	0.00						$	0.62
Effective Tax Rate		24.1%										24.1%
NSG Operating Income	$	1.5	$	0.3						$	1.8

1) Tables may not foot due to rounding.	13

Non-GAAP reconciliation for 1H 2019 and 2020(1)

For the Six Months Ended June 30, 2020 (In millions, except per share amounts)

			Restructuring		Costs Associated with		Debt Issuance
		GAAP		Costs		Sale of Business		Costs		Non-GAAP
Operating Income	$	180.7	$	1.4	$	2.7	$	-		$	184.8
Other Income (Expense)		1.8		-		-		0.5			2.3
Provision for Income Taxes		(42.5)		(0.4)		(0.6)		(0.1)		(43.6)
Net Income		140.0		1.1		2.1		0.4			143.6
Net Income Attributable to Noncontrolling Interest		(0.3)		-		-		-			(0.3)
Net Income Attributable to BWXT	$	139.8	$	1.1	$	2.1	$	0.4		$	143.3
Diluted Shares Outstanding		95.7									95.7
Diluted Earnings per Common Share	$	1.46	$	0.01	$	0.02	$	0.00		$	1.50
Effective Tax Rate		23.3%									23.3%
NPG Operating Income	$	9.6	$	1.4						$	11.0
NSG Operating Income	$	10.5			$	1.0				$	11.5
Unallocated Corporate	$	(4.8)			$	1.7				$	(3.1)
		For the Six Months Ended June 30, 2019
		(In millions, except per share amounts)
			Restructuring
		GAAP		Costs							Non-GAAP
Operating Income	$	144.2	$	0.3						$	144.5
Other Income (Expense)		(3.6)		-							(3.6)
Provision for Income Taxes		(32.5)		(0.1)							(32.6)
Net Income		108.1		0.3							108.4
Net Income Attributable to Noncontrolling Interest		(0.3)		-							(0.3)
Net Income Attributable to BWXT	$	107.9	$	0.3						$	108.1
Diluted Shares Outstanding		95.7									95.7
Diluted Earnings per Common Share	$	1.13	$	0.00						$	1.13
Effective Tax Rate		23.1%									23.1%
NSG Operating Income	$	3.1	$	0.3						$	3.4

1) Tables may not foot due to rounding.	14

Non-GAAP reconciliation for full-year 2019(1)

For the Year Ended December 31, 2019 (In millions, except per share amounts)

				Pension &
				OPEB MTM		Acquisition	Restructuring &
		GAAP	(Gain) / Loss	Related Costs	Impairment Costs		Non-GAAP
Operating Income	$	325.5	$	-	$	0.2	$	5.8	$	331.5
Other Income (Expense)		(11.8)		3.6		-		-			(8.1)
Provision for Income Taxes		(69.1)		(0.9)		(0.0)		(1.5)		(71.5)
Net Income		244.7		2.7		0.1		4.3		251.8
Net Income Attributable to Noncontrolling Interest		(0.6)		-		-		-			(0.6)
Net Income Attributable to BWXT	$	244.1	$	2.7	$	0.1	$	4.3	$	251.3
Diluted Shares Outstanding		95.8										95.8
Diluted Earnings per Common Share	$	2.55	$	0.03	$	0.00	$	0.04	$	2.62
Effective Tax Rate		22.0%										22.1%
NPG Operating Income	$	53.8						$	2.6	$	56.4
NSG Operating Income	$	14.2						$	2.9	$	17.1

1) Tables may not foot due to rounding.	15

Non-GAAP reconciliation for full-year 2018 and 2017(1)

For the Twelve Months Ended December 31, 2018

(In millions, except per share amounts)

											Recognition of
				Pension &				Debt Issuance		Gain on	One Time Tax
				OPEB MTM	Acquisition	Costs from Former		Forward		(Benefit) /
			GAAP	(Gain) / Loss	Related Costs		Credit Facility		Contracts		Losses		Non-GAAP
Operating Income	$	305.0	$	-	$	2.5	$		-	$	-	$	-		$	307.5
Other Income (Expense)		(24.8)		32.6		-			2.4		(4.7)		-			5.5
Provision for Income Taxes			(52.8)		(7.5)		(0.6)			(0.6)		1.2		(13.5)		(73.8)
Net Income			227.3		25.1		1.9			1.8		(3.5)		(13.5)		239.1
Net Income Attributable to Noncontrolling Interest			(0.3)		-		-			-		-		-			(0.3)
Net Income Attributable to BWXT		$	227.0	$	25.1	$	1.9	$		1.8	$	(3.5)	$	(13.5)	$	238.8
Diluted Shares Outstanding		100.0																100.0
Diluted Earnings per Common Share	$	2.27	$	0.25	$	0.02	$		0.02	$	(0.03)	$	(0.13)	$	2.39
Effective Tax Rate		18.9%																23.6%
			For the Twelve Months Ended December 31, 2017
			(In millions, except per share amounts)
					Pension &					Impairment	One Time Tax
					OPEB MTM					(Gains) /		(Benefit) /		Executive
			GAAP	(Gain) / Loss		Litigation			Charges		Losses	Restructuring		Non-GAAP
Operating Income	$	292.2	$	-	$	(7.9)	$	-	$	-	$	2.6		$	287.0
Other Income (Expense)		3.6		11.1		-			(0.4)		-		-			14.2
Provision for Income Taxes		(147.4)		(4.2)		2.8		0.0		54.6		(1.0)		(95.1)
Net Income		148.4		6.9		(5.1)		(0.4)		54.6		1.7			206.1
Net Income Attributable to Noncontrolling Interest		(0.5)		-		-			-		-		-			(0.5)
Net Income Attributable to BWXT	$	147.8	$	6.9	$	(5.1)	$	(0.4)	$	54.6	$	1.7		$	205.6
Diluted Shares Outstanding		100.4																100.4
Diluted Earnings per Common Share	$	1.47	$	0.07	$	(0.05)	$	(0.00)	$	0.54	$	0.02		$	2.05
Effective Tax Rate		49.8%																31.6%
NSG Operating Income	$	22.1					$	(7.9)								$	14.2

1) Tables may not foot due to rounding.	16

Non-GAAP reconciliation for full-year 2016 and 2015(1)

For the Twelve Months Ended December 31, 2016

(In millions, except per share amounts)

					Pension &	Performance				Framework		Impairment	One Time Tax
					OPEB MTM		Guarantees		mPower	Agreement &		(Gains) /		(Benefit) /		Executive
		GAAP		(Gain) / Loss		Release	Deconsolidation		Litigation		Charges		Losses	Restructuring		Non-GAAP
Operating Income	$	234.4	$	-	$	-	$	-	$	13.9	$	-	$	-	$	4.5	$	252.8
Other Income (Expense)		22.8			21.3		(9.3)		(13.6)		-		(1.6)		-		-			19.7
Provision for Income Taxes		(73.7)			(7.1)		3.4		-		(5.6)		-		(5.0)		(1.6)		(89.6)
Net Income		183.6			14.2		(5.9)		(13.6)		8.3		(1.6)		(5.0)		2.8		182.9
Net Income Attributable to Noncontrolling Interest		(0.6)			-		-		-		-		-		-		-			(0.6)
Net Income Attributable to BWXT	$	183.1	$	14.2	$	(5.9)	$	(13.6)	$	8.3	$	(1.6)	$	(5.0)	$	2.8	$	182.3
Diluted Shares Outstanding		103.8																			103.8
Diluted Earnings per Common Share	$	1.76	$	0.14	$	(0.06)	$	(0.13)	$	0.08	$	(0.02)	$	(0.05)	$	0.03	$	1.76
Effective Tax Rate		28.6%																			32.9%
						For the Twelve Months Ended December 31, 2015
							(In millions, except per share amounts)
					Pension &					One Time Tax
					OPEB MTM		Spin / Other		Impairment		(Benefit) /		Litigation
		GAAP		(Gain) / Loss	Restructuring	(Gains) / Charges		Losses		Proceeds							Non-GAAP
Operating Income	$	236.1	$	-	$	42.6	$	-	$	-	$	(65.7)						$	213.0
Other Income (Expense)		(15.1)			54.7		-		2.9		-		(29.1)							13.5
Provision for Income Taxes		(80.4)			(19.2)		(12.2)		(1.0)		7.7		31.6							(73.5)
Net Income		140.6			35.4		30.4		1.9		7.7		(63.2)							152.9
Net Income Attributable to Noncontrolling Interest		0.1			-		-		-		-		-							0.1
Net Income Attributable to BWXT	$	140.8	$	35.4	$	30.4	$	1.9	$	7.7	$	(63.2)						$	153.1
Diluted Shares Outstanding		107.6																			107.6
Diluted Earnings per Common Share	$	1.31	$	0.33	$	0.28	$	0.02	$	0.07	$	(0.59)						$	1.42
Effective Tax Rate		36.4%																			32.5%

1) Tables may not foot due to rounding.	17