BWX Technologies, Inc. Q1 FY2026 Earnings Call

Ladies and gentlemen, welcome to BWX Technologies First Quarter 2026 Earnings Conference Call. Operator Instructions: I would now like to turn the call over to our host Chase Jacobson, BWXT's Vice President of Investor Relations. Please go ahead.

Thank you. Good evening, and welcome to today's call. Joining me are Rex Geveden, President and CEO; and Mike Fitzgerald, Senior Vice President and CFO. On today's call, we will reference the first quarter 2026 earnings presentation that is available on the Investors section of the BWXT website. We will also discuss certain matters that constitute forward-looking statements. These statements involve risks and uncertainties, including those described in the safe harbor provision found in the investor materials and the company's SEC filings. We will frequently discuss non-GAAP financial measures, which are reconciled to GAAP measures in the appendix of the earnings presentation that can be found on the Investors section of the BWXT website. I would now like to turn the call over to Rex.

Thank you, Chase, and good evening to all of you. We had a great start to 2026 with very strong first quarter results. Revenue grew 26%, 11% of which was all organic. Adjusted EBITDA grew 14% and earnings per share grew 22%, all ahead of expectations. Outperformance in the quarter was driven by improved throughput, favorable pacing of work and exceptional operational execution across our business lines. We ended the quarter with a backlog of $8.7 billion, up 77% year-over-year and 19% sequentially. Supported by robust bookings in government and consistent backlog in commercial, providing clear visibility to future growth. Demand for commercial nuclear power components and services continues to accelerate across the U.S., Canada and Europe. As projects launched, we believe that localized manufacturing capacity will increasingly differentiate BWXT, making the establishment of a U.S. commercial manufacturing footprint to complement our Canadian operations a strategic priority. To that end, in April, we announced the acquisition of Precision Components Group, PCG, a U.S.-based manufacturer of complex heat transfer components for the U.S. naval and commercial nuclear markets with two facilities and more than 400 highly skilled employees. PCG represents our first step toward building domestic U.S. commercial nuclear manufacturing capacity. While most of PCG's current revenue and backlog is related to naval programs, its facilities have immediately available capacity that we intend to utilize for the commercial market, with products such as reactor internals, pressurizers, heat exchangers and reactor head assemblies. Beyond the PCG acquisition, we intend to expand our U.S. commercial manufacturing footprint, likely with a greenfield plant at our Mount Vernon, Indiana site on the Ohio River. This facility will be capable of producing larger heavy nuclear equipment, including steam generators and reactor pressure vessels. Ultimately, our goal is to build scalable U.S. commercial nuclear manufacturing operations that can serve U.S. and global SMR and large reactor projects. By adding domestic capacity, we are positioning BWXT to meet rising commercial demand while creating meaningful synergies with our existing U.S. operations. Beyond commercial power, we are making disciplined growth investments across the portfolio, supporting existing businesses, adding new technologies and capabilities and pursuing opportunities in advanced nuclear and other national security applications. Turning to segment results and market outlook. Government Operations revenue was up 4% and adjusted EBITDA was up 1% in the quarter, slightly ahead of our expectations. We had strong bookings, including $1.4 billion from the second portion of the pricing agreement for Naval reactors awarded last year and long lead material procurement contracts for out-year production. This led to segment backlog of nearly $7 billion, up 25% sequentially and 93% year-over-year. In naval propulsion, we are driving operational efficiencies in our plants, which contributed to our good margin performance in the quarter. We anticipate continued revenue growth with a steady pace of Virginia-class production, growth in the Columbia class and early work on the next Ford class ship set. The President's FY '27 budget request supports these programs and shipbuilding generally, further reinforcing our confidence in longer-term growth rates. In special materials, our legacy programs delivered solid results and our defense fuels enrichment and HPDU programs are progressing in line with early program schedules. Specific to defense fuels enrichment, we completed construction of the Centrifuge manufacturing development facility earlier in the year and have begun prototyping the first units. In April, we engaged with the NRC regarding our plans to build an HEU enrichment facility in Erwin, Tennessee. This engagement is an important milestone as it creates alignment with regulators in the NRC approval process. For our new large HPDU contract, we are organizing the supply chain and preparing for construction of the new facility in Jonesborough, Tennessee. That program will ramp through 2026 and continue over the next several years before transitioning to commissioning and production. The growth potential in special materials is exciting, and we continue to pursue new scopes with existing customers and evaluate entry points to new markets. Technical Services has delivered strong equity income growth over the past few years with multiple strategic wins. We are pursuing new opportunities in the DOE market and in other new markets with the next wave of contract awards expected over the next 12 to 18 months. Moving to microreactors and advanced nuclear fuels, the market is evolving rapidly in land-based defense, commercial and space markets. We continue to see strong demand across the board, including TRISO fuel for demonstration reactors and future commercial projects with multiple reactor developers. Of note, Kairos, with whom we have a collaboration agreement on TRISO, recently began construction of its Hermes 2 reactor for Google in Oak Ridge, Tennessee. Finally, we are continuing our close engagement with the Army on the Janus Program. Turning now to commercial operations. Results in the quarter were well ahead of our expectations. Organic revenue grew 39% and total revenue rose 121% with robust double-digit growth in commercial nuclear and medical and contribution from Kinectrics. While the outperformance was partially due to timing of outage work and progress on large component manufacturing, we also improved operational performance with accelerated throughput and reduced lead times. Following an 85% increase in backlog in 2025, backlog was flat sequentially in the first quarter, but still up 33% year-over-year, supporting our expectation for low-teens organic growth in commercial power this year. The outlook for new build nuclear projects remains very positive. Notably, the U.S. and Japan announced plans to invest up to $40 billion to build up to three gigawatts of GE Hitachi SMRs in the Southeastern United States. Our role as the reactor vessel supplier on the first GE Hitachi BWRX-300 SMR in Canada puts us in a good competitive position for these future projects. Given BWXT's industrial scale and engineering and design capabilities, customers are increasingly coming to BWXT to supply critical nuclear components for their current and future SMR and large-scale nuclear projects, which should lead to further backlog growth over the next 12 months. Kinectrics continues to exceed the acquisition business case, having delivered another very strong quarter. A key highlight in the quarter was Kinectrics being selected as the design and fabrication partner for a U.K. tritium loop facility, which will be the world's largest and most advanced tritium fuel cycle facility. This presents an entry point for engineering services and specialty equipment manufacturing and the nuclear fusion market. With that, I will now turn the call over to Mike.

Thanks, Rex, and good evening, everyone. I'll begin with total company financial highlights on Slide 4 of the earnings presentation. First quarter revenue was $860 million, up 26% year-over-year with 11% organic growth. Strong performance in commercial operations was complemented by steady growth in Government Operations. Adjusted EBITDA was $148 million, up 14% year-over-year driven by robust growth in commercial operations and modestly higher Government Operations, partially offset by higher corporate expense relative to an unusually low level in last year's first quarter. Adjusted earnings per share were $1.12, up 22%, reflecting strong operating performance and approximately $0.08 of higher nonoperating contributions. Our adjusted effective tax rate for the quarter was 15.8%, benefiting from timing of stock compensation. Our updated full year tax rate guidance of less than 21.5% is modestly higher than last year's rate, reflecting strong growth in international earnings, mainly from Canada. First quarter free cash flow was $50 million, a strong result for what is typically our seasonally weakest quarter, reflecting solid earnings and effective working capital management. Capital expenditures in the quarter were $43 million. We continue to expect our full year capital expenditures to be around 6% of sales. However, it is possible that CapEx may exceed that level in future periods as we advance targeted growth investments including expansion of U.S. commercial nuclear manufacturing capacity and advanced nuclear and fuel capabilities given the significant business we expect to capture. We are carefully balancing these strategic investments with our financial return metrics as we evaluate the numerous growth initiatives across the business. Moving to the segment results on Slide 6. In Government Operations, first quarter revenue was up 4% with growth in special materials and naval propulsion offsetting lower microreactor volumes. Adjusted EBITDA in the segment was $118 million, up 1%, resulting in an adjusted EBITDA margin of 20.4%, as better revenue, solid operating performance and timing of technical services income benefited margin. Given first quarter performance, we now expect government operations margins to exceed 19% for the year. Turning to Commercial Operations. Revenue was up a robust 121% including 39% organic growth, reflecting increases in both commercial power and medical and contribution from Kinectrics. Growth exceeded expectations due to increased throughput on large commercial nuclear component projects, mainly associated with the Pickering life extension and better-than-expected performance from Kinectrics. Adjusted EBITDA in the segment was $36 million, up 162% from last year. Adjusted EBITDA margin in the quarter was 12.9%, with higher sales and strong execution, offsetting the impact of growth investments as we continue to scale the business. Turning to our 2026 guidance on Slides 7 and 8 of the earnings presentation, which I will note does not include contribution from the recently announced PCG acquisition. We expect revenue of at least $3.75 billion, up high teens compared to 2025. In Government Operations, we expect low-teens growth with over half coming from the defense fuels and HPDU contracts. In Commercial Operations, we increased our revenue growth expectation to approximately 30%, driven by low-teens growth in commercial power, high-teens medical growth and a full year of contribution from Kinectrics which, as mentioned, has outperformed our expectations to date. For adjusted EBITDA, we are increasing the guidance range by $5 million on each end, resulting in revised adjusted EBITDA guidance of $650 million to $665 million. Regarding the cadence of operating earnings, we continue to expect our full year results will be slightly more back half weighted than usual with about 55% of full year EBITDA anticipated in the second half, and we expect second quarter EBITDA to be roughly in line with to slightly below first quarter levels. These assumptions lead to non-GAAP earnings per share guidance of $4.60 to $4.75 with the increase driven by higher operating earnings. We expect free cash flow of $315 million to $330 million, inclusive of mid- to high-teens operating cash flow growth supporting continued reinvestment and long-term shareholder value creation. Regarding the recently announced acquisition of PCG, the business generated approximately $125 million of revenue with low double-digit EBITDA margins in 2025, and we anticipate mid-single digits revenue growth in 2026. The acquisition, which will be included in our Commercial Operations segment, is expected to close in the second half of the year. As such, our annual financial guidance does not include contributions from PCG at this time. Overall, we're off to a strong start in 2026. Our robust backlog provides us great visibility for the remainder of the year, allowing us to focus on margin expansion, cash generation and capturing new high-value contracts across the defense and commercial nuclear markets. With that, I will turn it back to Rex for closing remarks.

Thank you, Mike. It is an exciting time at BWXT. We are delivering on our commitments to customers and shareholders in driving value through process optimization, technology adoption and disciplined growth investments. Our 2026 guidance supports meeting or exceeding the medium-term financial targets we introduced at our Investor Day in February 2024. We look forward to providing an update at our next Investor Day this fall. As I wrote in a recent Washington Times op-ed, BWXT is not betting on a horse. We are betting on the race. We participate across the nuclear value chain in defense and commercial markets and as a merchant supplier and a technology provider, enabling us to win across a broad range of competitive outcomes. We have record backlog, unprecedented demand and the financial strength to continue investing for growth. We intend to build on our market-leading position in nuclear solutions for defense and commercial nuclear markets, thereby driving long-term shareholder value. And with that, we look forward to your questions.

Operator Instructions: Our first question comes from Matt Akers from BNP Paribas.

I may have missed this, but did you say how much you're planning to pay for PCG? And then another question on the footprint build-out because you mentioned this is the first step towards building out the footprint. How should we think about what's left? Is it more capacity driven? Is it technology? Is it head count? How should we think about that?

Yes. Thanks, Matt. From a purchase price standpoint, we didn't put it in the public release, but it was roughly around $200 million, in line with the multiples we've seen in some of our more recent acquisitions. Depending on the timing, we'll see when that will close out this year, but we fully expect that to move along pretty rapidly. When you look at this as a first step, there are a couple of ways to think about it. One, we like the capabilities and the workforce. We certainly need the square footage from a capacity standpoint. This is primarily focused on manufacturing of certain aspects; it will not be able to handle some of the very large, heavy components we need to manufacture. So we're looking at a multiple-step approach, which we announced in our last earnings call, including the potential for a new facility, potentially adjacent to our Mount Vernon location, which could handle some of the heavier large components. So we're looking at this from both a capacity and workforce standpoint.

Great. I was wondering if you could touch a bit on the space end market and the opportunities that you're seeing there. I saw you just added Dan to the Board recently from Maxar. I'm curious what you think of the opportunities coming up in the pipeline there.

Yes. So this is Rex. I would divide it into two areas. There are civil space opportunities and NASA seems interested in two things: nuclear electric propulsion and efficient surface power for a lunar base, plus a long-term commitment to nuclear thermal propulsion according to the NASA Administrator, Jared Isaacman. We have opportunities to play in all of that, certainly on the fuel side and on delivering a reactor for any of those missions. It's an interesting market. It's kind of a one-off market in the sense that you typically do one of those systems. I think probably the more fertile ground for us is national security space. I believe we'll see more applications for power and propulsion there, and we're well positioned to pursue that opportunity.

Our next question comes from Jeffrey Campbell from Seaport Research Partners.

Congratulations on the strong quarter. My first question: would your new commercial facility, the one that has not yet reached FID, have any limitations regarding components it could build for customers such as Hitachi, Westinghouse or Rolls-Royce?

No limitations at all. When we look at our demand signals, we're certainly seeing some capacity constraints even in our Cambridge facility as we look out multiple years. Being localized in the U.S. creates a competitive advantage, and we're excited to add capabilities to ensure we have a U.S. presence, which we view as a differentiator from a market standpoint. Ultimately, the idea is to set up centers of excellence: certain facilities focused on reactor internals, tanks and pressurizers, and other facilities focused on large steam generators and reactor pressure vessels. We would serve multiple customers and multiple platforms across those centers.

Okay. Great. I appreciate that color. My other question: you've made the case for PCG's acquisition for the budding U.S. commercial activity. Does the acquisition have any positive effects for your naval business as well?

Yes, I think it could. PCG has a qualified nuclear workforce and plenty of capacity, and we'll make immediate use of that capacity. Nuclear manufacturing credentials are rare and hard to get; you need certifications like N stamps and U stamps and nuclear-quality systems. Those are hard to establish and PCG provides immediate capability. It's certainly beneficial to our Navy customer, which has been using that capability for a long time, but more importantly, it supports our commercial expansion in the U.S., where we need manufacturing capacity and capability and can start work right away.

Our next question comes from Bob Labick with CGS Securities.

Congratulations on the results and the exciting outlook. I wanted to expand on the U.S. capacity build-out. Have you decided yet how much capacity you want to add? Could you give us a sense of the capital needed for a U.S. greenfield and how long that might take to build out?

Yes. We're presently doing a 60,000 square-foot capacity expansion at our Cambridge plant. The capacity we're considering in Mount Vernon would be roughly 50% to 60% more than that, so think on the order of 100,000 square feet and then to outfit that factory. The Cambridge expansion is brownfield; Mount Vernon would be quasi-greenfield and thus more expensive. The Mount Vernon site is attractive because we already have a rail spur, crane capacity, radiography facilities and nuclear-qualified workforce nearby, creating natural cost synergies with our Navy business. In rough terms, the budget would be about twice what we're doing at Cambridge.

Okay. Great. And then there's so much demand out there. Is there any thought about exploring customer funding for commercial capacity growth? How do you de-risk building out incremental capacity on the commercial side versus the government side?

We have the balance sheet to do what we need to do in terms of capacity.

Our next question comes from Pete Skibitski from Alembic Global.

You talked in both segments about improved throughput. Could you put some color on that? Are there specific initiatives in place to help throughput, or is it just net hiring?

We have formal initiatives called Driving Performance Excellence, or DPX, which is our operational excellence program. We've expanded DPX across the enterprise and we're using it in supply chain, human capital and other areas. We also have dedicated throughput projects, for example the Pickering steam generators and TheraSphere. We had an important throughput project in our Lynchburg plant last year focused on higher-tier work. We're focused on throughput because we need more capacity and can get it in one of two ways: increase throughput, which is the cheapest and best way, or add square footage through acquisitions, brownfield and greenfield plants. We're doing all of the above because demand requires it.

Okay. And last, Air Force DIU had ANPI awards to Radian, Westinghouse and Antares. Were you disappointed you didn't get an award? Are there further ANPI opportunities? Is the focus really more on Janus and your BANR reactor? These initiatives seem related; could you sort that out for us?

No disappointment because we didn't pursue those opportunities. Those awards were for smaller-scale reactors for lower power output, and none of those reactors is transportable like our Pele reactors. Our transportable Pele reactor fits certain use cases but not those particular competitions. We also have a commercial derivative of Pele, called BANR, which is about 20 MWe and addresses different use cases. So those competitions weren't really for us. We are focused on Pele follow-on work, Janus, and we see plenty of opportunities for microreactors and for microreactor fuel like TRISO.

Our next question comes from Marc Bianchi from TD Cowen.

Following up on TRISO: there's been more focus recently with other manufacturing companies going public. Can you talk about your process and how you think your competitive positioning will stack up over the next few years? I know you're producing today, but how do you think about scaling and competitive position?

We are currently the only producer of TRISO at any meaningful scale. We're producing hundreds of kilograms per year; we made all the fuel for our Pele reactor and we're making fuel for Antares and some other clients we haven't disclosed. That is the limit of our current capacity—a few hundred kilograms per year. To scale, we are considering brownfield and greenfield opportunities and have publicly discussed doing something on a larger scale in Wyoming. The market needs a very large-scale plant to drive down TRISO costs and make these reactors commercially viable. Being in the fuel side of microreactors and SMRs is a strategically strong position for us. We produce for our own purposes and for the market, and we intend to continue expanding that capability.

On the Japan announcement—$40 billion for GE Hitachi—when would it be realistic for awards to be made to the market for that equipment? I know you still need to win it, but in terms of timing when could that be added to backlog?

I think this and the AP1000 opportunities are fairly near-term for nuclear projects. I'm in touch with top leadership at GE and Westinghouse. These deals are being negotiated with urgency, including with the Department of Commerce. It wouldn't surprise me if orders start to be received this year related to those bulk reactor buys, but there are hurdles to clear between now and then.

Our next question comes from Jeff Grampp from Northland Capital Markets.

Rex, on the commercial expansion at Mount Vernon, how long might that take to get operational from when you decide to move forward? How important is having that operational to winning U.S.-based business?

It will take roughly two to three years to complete, which puts it in the right time frame to handle some of these large orders. Localization of supply chain is increasingly important in nuclear. Canada already emphasizes local capabilities, and I expect Europe will do the same for economic development reasons. Localization in the U.S. will matter, particularly for government projects like AP1000 and X-300s. We're trying to position capacity in advance of orders because these are long-cycle projects and you must have existential capacity when the order comes. We're very bullish on this opportunity. If you think long-term, global decarbonization and increasing energy needs could require hundreds of large reactors and thousands of SMRs, so we're building capacity ahead of orders.

Helpful detail. On the enrichment side, can you provide a high-level timing or progression on the Centrifuge Manufacturing Development Facility and the NRC licensing engagement? Any milestones to watch?

We completed the Centrifuge Manufacturing Development Facility in Oak Ridge, Tennessee, and are outfitting it and working on prototypes now. Technology transfer from Oak Ridge National Laboratory to BWXT will occur over the next few years. Licensing for the HEU facility should progress normally over the next few years. The more interesting part is when we get into Centrifuge Production for an HEU cascade. In the long term, how we address gaps for LEU and HALEU is an important business development question.

Our next question comes from David Straus with Wells Fargo.

This is Josh Korn on for David. I wanted to ask about Medical. You had strong double-digit growth in the quarter—any specific products or markets to call out for the outlook there? Also, any update on Tc-99?

Medical is a good news story for us. After three years of roughly 20% compounded growth, we're forecasting high-teens growth this year. We see strength in strontium, germanium and TheraSphere. Actinium-225 is growing rapidly but off a small base; we're ramping up production of stabilized isotopes like ytterbium-176. We have new therapeutic products in the pipeline such as lead-212. Tc-99 is progressing but there's no different news to disclose; we're evaluating approaches to the market based on our product's particularities and we don't have any Tc-99 contribution in our 2026 forecast, but we are continuing to advance it.

On defense: you were a recipient on the SHIELD contract for Golden Dome. With the FY '27 budget, can you provide color on what that work may involve and what the addressable market is for you?

We are a Golden Dome contract awardee. Those awards went to many companies; ours was for a broad infrastructure scope that is interesting to us because of our nuclear capabilities. If Golden Dome needs microreactors to power missile defense sites, radars, distributed power or small modular reactors, we could play a role as a fuel supplier. It's undefined at this point, but we have a license to pursue opportunities and will work to turn that into specific activity.

Our next question comes from Scott Deuschle from Deutsche Bank.

Kinectrics brought revenue connected to the broader power and grid infrastructure space, including high-voltage testing and cable commissioning. How big is that business for them and what's the growth outlook?

That business is about 10% of Kinectrics today and growing faster than many parts of the portfolio. It's a high-voltage testing capability, similar to an Underwriters Laboratory-type function for grid components. The most promising growth area is cable testing for offshore wind in Europe. We've invested in portable test sets and have a good share of that market, so it's a meaningful and growing exposure to a different market for us.

Do they have any direct exposure to the data center build-out given high-voltage data centers?

I don't know the details, but I suspect we do have some exposure there.

Mike, when you talk about CapEx potentially exceeding 6% of sales in the future, is there a maximum threshold you could share? Would it still be less than 8% of sales or could it exceed that?

We feel comfortable with 6% for 2026. The comment was that if we decide to proceed with a greenfield U.S. facility for large-scale manufacturing, we may exceed 6%. I would see it somewhere around the 7% range. We don't want to return to the 9%–10% CapEx levels of previous large spending cycles. We'll keep it reasonable, but it could go up into the 7% range.

Our next question comes from Jed Dorsheimer with William Blair.

So Rex, if I read between the lines, Mount Vernon signals a balanced approach to AP1000 versus SMR. How are you thinking about the E&C side of the equation, the labor to stand these facilities up, and the broader supply chain? What could the government do to help mitigate delivery risk?

If you're talking about delivery risk for nuclear projects, I think it's an important existential risk for the industry. There are poor examples of project delivery like Vogtle, but counter-examples exist: some refurbishment projects in Canada have delivered ahead of schedule and under budget. BWXT has demonstrated the ability to deliver our internal facilities on time and under budget; our Cambridge project should come in under budget and on time, and we delivered the Centrifuge Manufacturing Development Facility from first shovel to completion in seven months. That shows we can execute on projects internal to BWXT. The bigger risk is the engineering, procurement and construction side: firms like Bechtel and Fluor will need to address those delivery challenges. It will require more talent, possibly AI for planning, and perhaps robotics in the long run. It's a broader industry issue, not something BWXT alone can solve, but it's a gating issue for the nuclear resurgence.

Our next question comes from Peter Arment with Baird.

Could you give an update on overall schedules? OPG recently provided an update on Darlington. How does that align with your first reactor pressure vessel delivery schedule and is everything tracking according to plan?

I don't have detailed insight into the Darlington project delivery, but I hear it's reasonably on track and I expect subsequent orders to come relatively shortly. Regarding the first reactor pressure vessel, I believe delivery is expected next year.

And at a high level, anything in the Department of Defense or Department of Energy budgets that stood out to you, on microreactors, enrichment, or other areas?

I'm encouraged by the budgets: good support for Pele, defense fuels, and some long-lead procurement for Columbia-class submarines. We're seeing indications of adding Columbia units to the submarine force, and combined with AUKUS that's strengthening naval nuclear propulsion prospects. Overall, I'm excited by what I'm seeing.

Our next question comes from Ron Epstein with Bank of America.

Have you seen any changes in doing work for Korea on a possible Korean nuclear submarine program?

No, we haven't seen anything concrete on that. There are discussions between the White House and Korea about nuclear-powered submarines; the Korean intent is real and they may pursue nuclear submarines. The question would be where they source their fuel—I think that would probably come from the U.S. If that demand signal were to come from naval reactors, there could be something interesting there, but it's very early days.

On the M&A front, it seems like you still have dry powder. Are there areas you're particularly interested in today?

We started the year focused on expansion of capacity and that remains a priority. We're also looking at adjacent opportunities to expand capabilities across the full lifecycle of nuclear and how we support customers end to end. Anything that enhances those capabilities is of interest to us.

Our next question comes from Andre Madrid with BTIG.

I want to refocus on PCG. Initially it seems customer sets are mainly government and naval focused, but the capacity is highly fungible. How quickly can you pivot that mix to more commercial? And what could margin or utilization uplift look like as a result?

First, to correct the phrasing: PCG is currently about 70/30 government to commercial. The business has two sites and roughly 400 employees with significant available manufacturing capacity. Immediately, we can move some work we've been outsourcing into those plants to capture margin currently going to the supply chain. We'll continue to satisfy Navy and government contracts, but over time the business complexion may shift more towards commercial as we expand U.S. capacity. Hiring and ramping take time—there's available capacity now and some immediate in-sourcing opportunities that should be accretive.

From our analysis, roughly half of the capacity is immediately available to be utilized. It will take time to ramp and hire workforce—it's a multi-year ramp. There are immediate opportunities to move work in-house which will be accretive from a margin standpoint. Today PCG generated low double-digit EBITDA margins; we expect the potential to increase margins modestly as scale grows and we insource supply chain activities.

Got it. You also mentioned AUKUS. Any color on discussions and how you're gearing up to support the effort?

There's nothing new to disclose. We continue to build infrastructure to support AUKUS and have seen good funding support for that. We're continuing capacity build-outs and are anxious for future awards, but no additional specifics to disclose at this time.

There are no further questions at this time. I will now turn the call back over to Chase Jacobson for closing remarks.

Yes. Thank you, and thank you, everyone, for joining us today. We look forward to speaking with many of you and seeing you at upcoming investor events; we will be on the road and at a few conferences over the next month or so. If you have any questions, feel free to reach out at investors@bwxt.com.

This concludes today's call. Thank you for attending. You may now disconnect.