BWX Technologies (BWXT) Q3 2026 Earnings Call: EBITDA Up 19%, Cash Flow Guidance Raised

Key Takeaways

• Third-quarter revenue increased 10% year over year to $953 million, including 7% organic growth. Adjusted EBITDA rose 19% to $180 million.
• Adjusted EPS increased 26% to $1.26. Free cash flow reached $151 million, supported by earnings, advance billings and working capital management.
• Government Operations delivered a 22.6% adjusted EBITDA margin, with adjusted EBITDA up 22% to $144 million despite revenue growth of 4%.
• Commercial Operations revenue grew 25%, including 15% organically. Adjusted EBITDA increased 17% to $41 million, with a 13.2% margin.
• BWXT raised the low end of its 2026 free cash flow guidance to $350 million-$360 million. It maintained adjusted EBITDA guidance of approximately $667 million and adjusted EPS guidance of $4.72-$4.77.
• Management expects high-single-digit to low-double-digit growth in adjusted EBITDA and adjusted EPS in 2027 and reaffirmed its 2030 targets of $5.5 billion-$6.0 billion in revenue and $1.1 billion-$1.2 billion in adjusted EBITDA.

Core Financial Data

Business and Operating Performance

Government Operations benefited from productivity improvements, operational discipline and higher manufacturing volume. Naval propulsion secured its annual $189 million fuel contract, while BWXT continued negotiations on its next multiyear pricing agreement.

Special Materials remained a major growth driver. BWXT is designing a highly enriched uranium facility in Erwin, Tennessee, and industrializing centrifuge technology in Oak Ridge. Management said prototype centrifuge testing remains scheduled by year-end.

Under its $1.6 billion high-purity depleted uranium contract, BWXT began constructing a large-scale facility in Jonesborough, Tennessee. The program targets annual production of 300 metric tons and is expected by management to contribute meaningful revenue growth in the fourth quarter and through 2027.

Advanced Nuclear completed the core barrel assembly for Project Pele. BWXT’s BANR microreactor was selected for the U.S. Army’s Janus program and for Prodigy Clean Energy’s transportable nuclear power project in New Brunswick, the company’s first international microreactor win. BWXT also signed a multiyear agreement to supply an initial fuel allocation to Antares using its Lynchburg TRISO production line.

Commercial Operations benefited from double-digit growth across commercial power, Kinectrics and Medical, plus the PCG acquisition. The Cambridge facility expansion increased heavy-component manufacturing capacity by approximately 50%. PCG added close to $500 million of backlog, while management estimated its facilities were about 50% underutilized when acquired.

BWXT is finalizing plans for a new U.S. manufacturing facility for large steam generators and reactor pressure vessels. Management expects a final investment decision by year-end and said the project is not dependent on firm orders.

Management Guidance

For 2026, BWXT maintained its operating assumptions:

• Adjusted EBITDA of approximately $667 million.
• Adjusted EPS of $4.72-$4.77.
• Free cash flow of $350 million-$360 million, with the low end raised following year-to-date performance.

For 2027, management provided the following preliminary outlook:

• High-single-digit to low-double-digit growth in adjusted EBITDA and adjusted EPS.
• Government Operations revenue and adjusted EBITDA growth in the high-single-digit to low-double-digit range.
• High-single-digit organic revenue growth in Commercial Operations, but low-single-digit total revenue growth because of the planned Medical divestiture.
• Commercial Operations adjusted EBITDA margin expansion of 50-100 basis points and high-single-digit adjusted EBITDA growth.
• Free cash flow flat to slightly higher than 2026.

Management said the 2030 financial targets are supported by core capital spending equal to 5%-6% of revenue and do not require acquisitions.

Risks and Areas to Watch

Management identified risk allocation—not financing—as a key obstacle to final investment decisions for some commercial reactor projects. Discussions involve how project risks are divided among hyperscalers, utilities, governments and technology providers.

The timing of new commercial reactor orders remains uncertain. Management continues to see potential for U.S. newbuild orders by year-end 2026 or during the first half of 2027, while stating that modest commercial newbuild success is embedded in the 2030 plan.

Scaling newer Special Materials and Advanced Nuclear programs may create margin-mix pressure. BWXT expects productivity gains and operating execution to help offset that effect.

For larger-scale TRISO capacity, management said investment would require concrete demand from projects such as Kairos’ Hermes reactor and multiple BANR orders, as well as commercial availability of HALEU.

Free cash flow in 2027 will face approximately $10 million of additional pension contributions, growth-related working capital investment and milestone timing effects in newer enrichment programs.

Analyst Q&A Highlights

• Government margins: Management attributed the strong margin performance primarily to higher efficiency in naval nuclear work. Newer programs are performing well but remain too early for significant margin adjustments.
• PCG integration: Integration was described as progressing well. Management is identifying cost opportunities and evaluating how PCG’s unused capacity can support the U.S. commercial nuclear market.
• Commercial newbuild sequencing: Management believes SMR opportunities are ahead of large-reactor opportunities. Darlington units 2-4 are expected to lead, followed by potential reactor projects at Clinch River and Bellefonte, with AP1000 opportunities later.
• Manufacturing capacity: BWXT pointed to the completed Cambridge expansion, underutilized PCG assets and the planned U.S. facility as the main capacity sources for future large-component demand.
• BANR positioning: The BANR design provides 22 megawatts of electrical output and 75 megawatts of thermal output. Management said its scale supports military-base and industrial-heat applications while remaining rail-shippable and factory-built.
• Capital allocation: Organic investment remains the priority, followed by disciplined acquisitions and shareholder returns when suitable investment opportunities are unavailable. Management expects modest 2027 share repurchases to offset dilution.

Full Earnings Call Transcript

Complete Earnings Call Transcript

Management Remarks

Operator

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

Chase Jacobson

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 third 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.

Rex Geveden

Thank you, Chase, and good evening to all of you. Just over a month ago, at Investor Day, we outlined our path to $5.5 billion to $6 billion of revenue and $1.1 billion to $1.2 billion of adjusted EBITDA by 2030 supported by predictable core significant incremental organic growth opportunities focused on operational excellence and disciplined capital allocation. Our third quarter results reinforce that guidance with 10% revenue growth and 19% and adjusted EBITDA growth, including double-digit growth in both operating segments. Our businesses continue to execute well. We are converting opportunities into meaningful new awards, and we are expanding the industrial capabilities needed to support the next phase of nuclear growth. The demand environment remains exceptionally strong, the need to address economic, national and energy security challenges globally is driving increased investment by our customers in nuclear national security and commercial power markets.

Our national security customers are investing to reconstitute strategic deterrence capabilities that diminished after the cold war and to radically improve energy resilience. Our commercial customers are investing in sustaining and growing their nuclear power generation fleets. Funding is coming from public and private sources, and there are solid bipartisan political support. What differentiates BWXT is our ability to translate that demand into executable programs and sustained financial growth. Our technical capabilities, industrial scale and position in the nuclear value chain enable us to deliver integrated solutions for our customers and capture opportunities across these markets.

Turning to our segment results and outlook. Government operations delivered a strong quarter with good operating performance across business lines, driving adjusted EBITDA margin of 22.6%, reflecting the continued benefit of improved efficiency operational discipline and higher manufacturing volume. In naval propulsion, we booked our annual fuel contract for $189 million and are actively negotiating the next multiyear pricing agreement. In special materials, our defense fuels, enrichment and high-purity depleted uranium programs continue to ramp, driving the majority of government operations revenue growth in the quarter. For defense fuels, we are designing an HEU enrichment facility in Erwin, Tennessee, and industrializing centrifuge technology and our Oak Ridge facility. We remain on track to test a prototype centrifuge by the end of this year. On HPDU as part of our $1.6 billion contract to produce 300 metric tons of high purity depleted uranium annually, we initiated construction of a new large-scale facility in Jonesborough, Tennessee that will drive meaningful revenue growth in the fourth quarter and through 2027.

Our technical services teams once again boosted earnings in the quarter with out performance on key programs, including Hanford and Savannah River, among others. From a business development standpoint, we were selected to provide a conceptual design for a Lithium Processing Facility at the Y-12 National Security Complex in support of strategic deterrence. We expect the down selection for the next phase of this program in the first half of 2027. Further, our technical services team is rapidly adopting AI to drive site performance and generate operating efficiencies. And -- this further differentiates TSG as we develop new growth opportunities in that business to augment our base of predictable core earnings. Moving to Advanced Nuclear. It was a busy quarter for operations and business development. We completed the core barrel assembly for Project Pele. And 2 weeks ago, we hosted Energy Secretary, Chris Ride at the BWXT Innovation Campus to see our progress firsthand before we deliver the reactor to Idaho National Laboratory next year.

We also secured new wins for the BWXT advanced nuclear reactor called BANR. We were selected for the U.S. Army's Janus program that aims to install more than 20 micro reactors of various sizes across 5 military bases. We are working through the first phase of the contract, including final site selection at Fort Campbell, initiating nuclear regulatory processes and Trio fuel production. In parallel, we are working with our partners to fully define the program's costs, execution approach and operating plan. In addition, BANR was selected by Prodigy Clean Energy for its transportable nuclear power plant project in Belledune, New Brunswick, Canada. Our first international microreactor win. This is an excellent example of cross segment collaboration as it brought together capabilities from our advanced nuclear teams from Lynchburg and commercial power and Kinectrics teams from Ontario which will supply chain development and licensing services to Prodigy, highlighting the benefits of our broad capabilities across the nuclear value chain.

And lastly, we entered into a multiyear agreement to supply and initial allocation of nonoptical fuel to Antares, our first large-scale commercial customer. This fuel will be manufactured in Lynchburg on the same TRISO production line used for Project Pele. The Antares Mark-0 Criticality Demonstration reactor and others. We will also manufacture Trice for the Janus program on that line. These awards are tangible proof of BWXT's leading position in the advanced nuclear market as we uniquely combine microreactor technology, TRISO fuel manufacturing and life cycle services into a differentiated integrated offering. Turning now to commercial operations.

Organic revenue increased 15% and total revenue grew 25%, driven by double-digit growth in commercial power, Kinectrics and Medical, along with contribution from the PCG acquisition. During the quarter, we completed the expansion of our Cambridge facility and began utilizing new sections of the plant. The expansion increases our heavy component manufacturing capacity by about 50% and and will improve operating efficiency and throughput as we execute on our deep backlog associated with CANDU life extensions and SMR projects and other new awards. In the United States, we are finalizing design details for a new commercial manufacturing facility for large steam generators and reactor pressure vessels -- the expansion will complement our existing operations and amplify our role as a super merchant supplier of critical, highly engineered nuclear components.

We intend to make a final investment decision by the end of the year. In Europe, we are also seeing high interest in nuclear power, particularly in markets where energy security is a national priority. I recently met with governments and business leaders in Poland where there is a strong appetite for nuclear power to address their energy security and decarbonization goals. Specific to BWXT, there's a meaningful opportunity to deploy microreactors there and participate in the SMR supply chain. In a decision to invest in manufacturing capacity in Poland would be backed by firm orders and appropriate government partnerships. Commercial nuclear demand is precipitating rapidly on a global scale now and we continue to expect to convert that term orders in 2027 and in the years to come as the trickle becomes a flood.

With that, I will turn the call over to Mike.

Michael Fitzgerald

Thanks, Rex, and good evening, everyone. I'll begin with total company financial highlights on Slide 4 of the earnings presentation. Third quarter revenue was $953 million, up 10% year-over-year, including 7% organic growth. Strong commercial operations performance was complemented by steady growth in government operations. Adjusted EBITDA increased 19% to $180 million, driven by double-digit growth in both operating segments partially offset by higher corporate expense as we continue to invest for the future. Adjusted earnings increased 26% to $1.26, driven largely by higher operating income as nonoperating benefits from lower interest expense and a lower tax rate. were partially offset by lower other income. Third quarter free cash flow was $151 million, reflecting strong earnings, favorable advanced billings and disciplined working capital management.

Given our year-to-date performance, we raised the low end of our 2026 free cash flow guidance, resulting in a revised range of $350 million to $360 million, significant long-term demand. Our improving credit profile, including its inaugural investment-grade rating and Moody's positive outlook revision reinforces the strength of our financial position and provides flexibility as we execute on our disciplined capital allocation strategy. As we discussed at Investor Day, our top capital allocation priority is investing in attractive organic growth opportunities containing the capacity to pursue disciplined acquisitions and return capital to shareholders when appropriate. We continue to view balance sheet flexibility as an important competitive advantage as BWP executes on its next phase of moving to the segment results on Slide 6. Government operations revenue increased 4%, driven by growth in Special Materials and Advanced Nuclear partially offset by modestly lower naval propulsion revenue from reduced materials procurement compared with a strong prior year quarter.

Adjusted EBITDA was $144 million, representing a margin of 22.6% and and up 22% from last year, supported by strong operational performance, productivity improvements and higher technical services equity income. As we look ahead, we remain focused on sustaining productivity improvements in our established businesses, while scaling special material programs and our expectation for adjusted EBITDA growth broadly in line with revenue in 2027. Turning to commercial operations, revenue increased 25%, including 15% organic growth, driven by increases in commercial power, Conectric and Medical plus the contribution from the PCG acquisition, which closed in early July. Growth in commercial power and Conectric reflected the continued strength of our Canadian components manufacturing and services businesses as well as increased engineering services revenue in the United States. Adjusted EBITDA in the segment grew 17% to $41 million. Adjusted EBITDA margin in the quarter was 13.2%, and as higher and good execution more than offset mix and continued investments to scale the business for future growth. Turning to our consolidated guidance for the remainder of 2026 and and our preliminary outlook for 2027. In 2026, the assumptions in our operating guidance are unchanged. We anticipate adjusted EBITDA of approximately $667 million and adjusted earnings per share be $4.72 to $4.77, both at the midpoint of the previous guidance ranges.

Looking ahead to 2027, our preliminary outlook reinforces the financial trajectory outlined at Investor Day. We expect high single-digit to low double-digit growth in adjusted EBITDA and adjusted earnings per share. Importantly, we expect this growth to be driven by continued expansion in our core businesses, increased contributions from special materials and ongoing improvements in operational execution and productivity. 2026 has been an exceptionally strong year, and we have a solid foundation for continued earnings growth in 2027, primarily supported by our existing businesses and programs with additional opportunities as new programs and commercial awards progress. Within government operations, we expect high single-digit to low double-digit revenue and adjusted EBITDA growth.

Special Materials will remain a significant growth driver complemented by increased naval propulsion and advanced nuclear activity. We expect continued productivity improvements and operational execution to help offset the margin mix effects associated with scaling new programs. In commercial operations, we expect high single-digit organic revenue growth and low single-digit total revenue growth due to the planned medical divestiture, which is on track to close later this year. Organic revenue growth will be supported by our components manufacturing and services businesses. We also expect commercial operations adjusted EBITDA margins to improve by 50 to 100 basis points, reflecting higher volume, continued operational improvements and better absorption of growth investments, resulting in high single-digit adjusted EBITDA growth. From a cash perspective, we expect another year of solid generation in 2027 and with free cash flow anticipated to be flat to slightly higher compared to 2026. [Audio Gap] .

Unknown Executive

[indiscernible] I will leave you with 3 thoughts. First, our core businesses continue to deliver strong predictable performance, providing the nation for our long-term growth. Second, the opportunities we discussed at Investor Day are blossoming. We are securing new contracts, executing on strategically important programs and investing in the industrial capacity needed to grow the business. And third, our focus remains on execution. We recognize the significant opportunities ahead of us and know that long-term value creation depends on converting those opportunities into profitable growth and strong cash generation. BWXT is exceptionally well positioned to do that in our performance this quarter underscores our confidence in the 2030 financial targets we established at Investor Day.

With that, we look forward to your questions.

Operator

[Operator Instructions] Your first question comes from the line of Matt Akers with BNP Securities for BNP Paribas.

Question-and-Answer Session

Matthew Akers

I wonder if you could talk -- touch a little bit more on the government operations margins. It was a really good quarter. And I know you guys -- you called out the equity income, I think even excluding that was pretty good. So maybe you could just kind of talk through kind of the big drivers there.

Unknown Executive

Yes. So Thanks, Matt. Look, we're really, really proud of kind of the execution that we're performing within government operations. We've seen a significant increase in our overall margin from our expectation beginning in 2026. I think when you get down to it and really what's happening is we're seeing a substantial increase in the efficiency of the volume of the work that we've performed specifically in our naval nuclear business. So those contracts are performing very well. We're very focused on managing our volumes so that it's highly efficient work. And we're seeing the results of that. So excited to see that.

I think if you look at some of the newer programs that we've talked about, no major changes there. I think that the growth on those programs, they're performing well, but they're in early stages. And as we've discussed before, we don't take large margin adjustments on those until we get further on from a progress standpoint. So what you're seeing is really the excellence in the efficiencies of our core business. And certainly, it's great to see.

Matthew Akers

Yes. And then was there a backlog acquired as part of the PCG deals, it looks like your commercial backlog is up a bit. And if so, can you talk about what that is, sort of how that runs off and how that fits in with your plan to capacity for BWXT work?

Rex Geveden

Yes, that's right. I mean when we announced the PCG deal, what we had said at the time was that there was still -- most of that business, I think -- 75% to 80% of that business was still in the kind of naval work and ultimately, the rest is commercial. We have close to $500 million in backlog associated with that transaction. So that came on to the books associated with that. That will burn off over a period of time. I mean the thing that's encouraging is we're seeing growth in the PCG business.

But as we stated before, a lot of the -- if you look at the capacity, we thought that the factories were about 50% unutilized and that we could, with some modest maybe CapEx investments be able to get another 50% of that. So, we still want to continue to see that government work continue to be performed, and we'll see some growth in that, probably at a low single digit. But where we're able to do the commercial work is going to be in tapping into that unutilized capacity that currently exists at the site.

Operator

Your next question comes from the line of Bob Labick with CJS Securities.

Bob Labick

Congratulations on another strong execution and continued to create. I want to dig into 3x leverage by 2030, you'll be spending, I think, somewhere between $3 billion and $4 billion going forward. And you just reiterated you want to spend this on attractive organic opportunities as kind of first thing you want to spend it on.

So could you maybe tell us the top priorities, maybe 3, 4, 5 opportunities out there? And then how much of that $3 billion plus spending is necessary to reach your revenue and EBITDA numbers? Or how much is upside? How should we think about that capital allocation?

Unknown Executive

So one of the things that we laid out is that we had -- if you looked at kind of the slide from our Investor Day, it actually showed that amount of kind of additional capital. So the way I would think about it is the 2030 targets are really anchored to the 5% to 6% core CapEx spending that we've discussed from a target standpoint. We also stated that we didn't need any specific M&A per se to be able to hit those 2030 targets. So I would think of that as additional deployment opportunities above and beyond the core business and what we laid out there from a 2030 target standpoint.

With that said, I think we're seeing opportunities out there. However, we've made it very clear that when there's not organic opportunities or when there's not additional M&A targets, that we would return that capital to shareholders as appropriate. So I still think there's a real possibility for that. If you look at our 2027 guidance, we'll do some modest share repurchase consistent with our prior practice of offsetting dilution. But we are focused on kind of the -- those capital allocation priorities as stated. When you look at from a priority standpoint, we continue to build off the momentum that we've been seeing.

So we've talked about capacity investments that we've made across the business. We certainly have talked about the special materials, and that's been a great part of our growth story. And then I think you'll hear more around we're seeing a lot of -- some traction happening with our microreactor business with the program Janus and BANR being selected in Canada as well. And so excited to see that market. And hopefully, there's some additional opportunities there.

Bob Labick

Okay. Super exciting. I'll jump back in queue. I know there's a lot of questions to follow.

Operator

Your next question is from the line of Tomo Sano with JP Morgan.

Tomohiko Sano

Good evening, everyone. Maybe just on commercial operations. Your full year guidance closed for roughly 45% growth in this business. given where you are through Q3, that implies a pretty big step-up in Q4. Is there something specific a large order or revenue recognition event driving that acceleration, please?

Michael Fitzgerald

Nothing unusual to call out. We've always experienced some ramp in the fourth quarter as we look at just kind of the timing of the all from an execution standpoint. You are -- we are also seeing there will be contribution from PCG as well. So if you look at that on a year-over-year basis, you're going to see some additional growth there. But I don't think anything unusual from a fourth quarter perspective.

Tomohiko Sano

And just a follow-up on PCD acquisition. It's been a few months since you closed the acquisition. How is integration tracking? Are you seeing the synergies and cost benefits you expected on schedule?

Michael Fitzgerald

Yes, absolutely. Actually, integration is going very, very well. We did not -- if you remember the thesis around this transaction, was not necessarily revenue synergies. We did see some opportunities on the cost side, but we didn't put out any specific targets related to that.

However, I would say we're finding a lot of opportunities and the team has been getting very involved in how we can really address this from a U.S. commercial market standpoint. So I'm very pleased with the progress that we've made and they've been a great addition to the overall company.

Operator

Your next question comes from the line of Jeffrey Campbell with Seaport Research.

Jeffrey Campbell

Your recent press release concerning rumors of Poland investment was explicit in saying that such a decision would require firm orders of sufficient side transact. Should we assume the same structure applies to beginning construction of the new gas commercial heavy component facility?

Rex Geveden

No, Jeff. I don't know that U.S. facility does not depend on on firm orders. That said, we -- there's so many things in the pipeline that we're certainly compelled to go ahead with that U.S. plan. the Poland situation had to do with some discussions around how much demand we think will precipitate for micro reactors and small modular reactors in Poland. And there were certainly gigawatt scales of demand that we discussed. But no, we're going ahead with the U.S. plant regardless.

Jeffrey Campbell

Okay. Great. One of the things that impressed me in the Investor Day was the potential remuneration from your exposure to CANDU. Recently, I read that Enlist, the State of Indiana and who's your energy have partnered to evaluate up to 6 gigawatts of CANDU reactors for that state. So high level, what do you think about CANDU potentially finally making inroads into the U.S.? And is it reasonable to assume BWXT could potentially be a component supplier to this project if it ever materializes?

Rex Geveden

Yes. Maybe to put some things in context, Jeff, if you look back at the history of CANDU and there were about 30 CANDU units delivered globally, 20 in Canada itself. And so 10 or so that went to other places, South Korea, China, India, Romania and Argentina. So -- and that's 30 large plants compared to a total global installed base of about 600. So let's say it captured 5% of the international market over the course of those years. And maybe that's a real assumption going forward. I certainly would hope and certainly the Canadian so that they can build some -- can build an international market from CANDU and have a real export capability, and I think that's feasible.

And I certainly do hope that they can export into the U.S. And if they do, we will certainly be in that supply chain, probably supplying fuel, major components, feeders, all the things that we normally do, we would do for that. And that's the purpose of Canada's investment in the CANDU industrial supply base is to be able to to create an industry there that's durable and has export qualities to it.

Operator

Your next question comes from the line of Marc Bianchi with TD Cohen.

Marc Bianchi

I want to ask first on the 207 outlook. It looks like you upgraded the EBITDA growth expectation a little bit from the Investor Day. Could you talk a little bit about that?

Michael Fitzgerald

Yes. I think, look, we're seeing some we've had really strong performance in the underlying margin for this year. We're seeing some continued momentum as we go into 2027. So I would think of it as kind of a refinement of our expectations, nothing material. But we feel confident in ultimately getting to high single to low double digit, both on adjusted EBITDA as well as EPS.

Marc Bianchi

SP1 Okay. Is that more coming from government side of the business? Just given the beat in 3Q here.

Michael Fitzgerald

I think we look at this from a different scenario, so we'll run multiple scenarios. I think it's fair to assume that our government business will continue to perform very well. As mentioned, we're kind of coming off of that some of those older pricing arrangements. And so we're starting to see that come into the financials as we execute successfully on those programs. But I would say we're also seeing continued momentum in commercial. So it's positive across the board.

Marc Bianchi

kay. And then if I could just 1 more. On the -- on the potential orders for commercial, there's -- I think everybody sort of read the news around we've got this DOE, long lead up program for large reactors and then there's a Department of Commerce track for 8 reactors, and there was an announcement, I guess, it's several weeks ago about the Korean program there. Like which one of those fields like we could get a quicker hit? And maybe do you think that BWX is equally positioned for both of those programs or maybe more weighted to one than the other? Just curious for any color you can provide.

Rex Geveden

Yes, Mark, I'll add some color there. I think -- in my opinion is that the SMR opportunity is a bit ahead of the large reactor opportunity. That's just my feel for it. We're certainly in active discussions with Westinghouse and GE on all of that. So I think you'd see -- we've seen more activity in our order book. I think first from the Darlington project, units 2, 3 and 4 up there. I think closely following that would be the TBA opportunities, the 10 reactors there about 5 at Clinch River and then 5 at Belfont I think.

And then with the APs to follow that, would be my guess. Now all those discussions are active, and I think all of that represents opportunity for us, but that's how I see the sequencing. And as I said at the beginning of this year that I expected us to have new orders for U.S. reactor plant builds in by the end of this year. And I still think that's a possibility for us, but certainly no later than about the first half of the next year.

Operator

Your next question comes from the line of Scott Deuschle with Deutsche Bank.

Scott Deuschle

Mike, can you walk through what's been driving the relatively slow organic growth at government operations year-to-date? And maybe just kind of what the headwinds have been? And has the revenue cadence surprised you at all? Or is it consistent with how you thought the year.

Michael Fitzgerald

No, I would say it's consistent. One of the things as we came into 2026 we were going to see a larger ramp on the -- on the newer programs, but specifically on the HPDU program as we go on to the third and the fourth quarter. And so we're continuing to see that. We did discuss, I think, a little bit last quarter how we were performing actually really well on that program. And because of that, it was lower revenue just because we were -- had really strong margin performance, which under a percent complete model actually results in lower revenue. So no surprises. I think those programs are performing well, and we'll continue to see them into '27 as well.

Scott Deuschle

Okay. And then, Rex, if the first U.S. 81,000 builds ultimately get funded by South Korea as opposed to another funding source. Is that a negative as it relates to your content opportunity on those initial builds? Or is the funding source not expected to influence supplier connections?

Rex Geveden

I think it's hard for me to say on that one, Scott. I would say that it's our expectation that we will have to go and compete with do so on and IHI and all the usual suspects when those opportunities come up. That said, I think there's going to be plenty of opportunity for all the players there because there's actually still capacity globally for these kind of components. So yes, we'll compete and hopefully get our share and make a great business out of it.

Scott Deuschle

Is West accounts typically the one deciding who gets the content or someone else?

Michael Fitzgerald

No. I mean, it's my expectation that Westinghouse will be making those decisions.

Operator

Your next question comes from the line of Jeffrey Grampp with Northland Capital Markets.

Jeffrey Grampp

Rex, sticking to the newbuild topic. From your guys' perspective, what are kind of the main gating item or items keeping newbuild projects from reaching an FID? Is it predominantly finance and kind of structuring things related to that? Or are there other particular items that you guys see kind of holding things up from getting a couple of projects across the finish line here.

Rex Geveden

Yes. I'm not in those discussions, but what I'm hearing about is it has to do with the allocation of risk. How much is -- are the hyperscaler is going to take? How much of the utility is going to take if that applies? How much is the government going to take are there any backstops and how much will the technology provider at self-take. And so I think it's about -- we've been hearing this concept that everyone bleeds, but noone bleeds to death as it relates to any overruns or risks in the project.

So I think it's about the distribution of risk. I don't think it's -- I don't think it's so much about financing because because in the case of the 10 x 300s and certainly those 10 AP1000s and then that second tranche, those are going to be funded through the sovereign investments from South Korea and Japan, as I understand it. So I think it's less about financing. It's more about allocation of risk.

Jeffrey Grampp

Got it. I appreciate those details. And for my follow-up, can you touch on BWXT's capabilities to handle multiple awards or projects for larger nuclear new build, if this accelerates into the coming years, how does your ability to scale compared to the business opportunities you guys are seeing? And maybe where does that rank in terms of, I guess, the list of worries on a given day for you guys in terms of just capacity to meet the demand that's out there.

Rex Geveden

Yes. Well, a good problem to have. I would say if we've been trying to anticipate all that, we, of course, just increased our production capacity by about 50% at Cambridge, Ontario, we literally just completed that expansion under budget, slightly under budget and about on the original schedule. So we're prepared there. Of course, the PCG acquisition was around that thesis that, as Mike said in an earlier question, we think that, that asset is about 50% underutilized and we can build some capacity there for medium reactor components.

And then the U.S. plant that we've been talking about for the past couple of quarters is intended to deal with that demand. So I mean, we're stacking up, we're stacking up our capacity -- we're certainly one of the largest players in the world and I think we'll be prepared for it.

Operator

Your next question is from the line of Mark Shooter with William Blair.

Mark Shooter

And Rex, I heard you mentioned that you'll have a prototype test of the dose centrifuge by end of the year. So I was wondering if you can give us some color on the metrics you'll be judging it by and speaking of the NNSA program, I know we also talked about the potential widening that scope to include unobligated LEU and halo enrichment. So I was wondering if you could tell us how you're thinking about that now.

Rex Geveden

Yes. Sure thing, Mark. What we're doing, of course, in that program is taking technology deleverage to National Laboratory and taking it into industrializing that that technology and building production capacity and ultimately, a demonstration cascade at our plant in Oakridge and so I certainly can't cite a particular success criteria for that demonstration. It is just a demo. And what we're doing, of course, is trying to reduce the complexity, exercise the supply chain and be able to build an unobligated system.

So I think sort of just spinning that thing will be the proof that we're looking for, and we'll be building certainly many more units in the future. As it relates to the opportunity in between the technology transfer and the high enriched uranium scope that we have at our Erwin, Tennessee plant, we are certainly pursuing adding low enriched uranium and high assay, low enriched uranium to the scope. Those discussions are ongoing and offer any details on that, but it's certainly in our -- certainly in our sights, and we hope to add it.

Mark Shooter

That's great. Switching gears to the other fuel TRISO. Congrats me and Terry's win. And so you'll be supporting Antares, Project Pele, Project Janus, I mean also the Lynchburg facility. So can you remind us what capacity increases are needed today to meet those commitments? And what level of fuel contracting do you need to see to require an expansion past Lynchburg?

Rex Geveden

Yes, I'll offer some details there, Mark. We were able to produce a couple of hundred kilograms a year on that Lynchburg line, and that's enough capacity for fully fueling the core of the Pele reactor and some other things that we did, the Antares demo and a couple of other customers that we actually haven't -- that we haven't disclosed through some technology changes and some capacity we can add and from some operational improvements, we can at least quadruple the output of that facility. That's our Lynchburg plant that I'm talking about, not the greenfield. So that gives us quite some capacity for the near term. I think in terms of making the larger investment decision and getting to multiple megatons of -- sorry, multiple metric tons of capacity say, at a Wyoming plant, we're going to need to see 2 things.

We're going need to see larger demand precipitate first with our partner, Kairos for the Hermes reactor. That 1 as an anchor tenant would consume a lot of TRISO and then others, right, multiple BANR orders, for example, so we need the precipitation of concrete, significant demand in the future, and we also need to see Halo become available commercially. And those are 2 important gates and we'll get to that decision as that becomes clearer.

Operator

Your next question comes from the line of Laurence Alexander with Jefferies.

Laurence Alexander

Just a simple one on commercial operations. The margin improvement expected for '27. How important is that? I mean, given the range of the growth opportunities you're evaluating and the incremental investments to support that. Do you need that kind of -- is that sort of a flexible part of your bridge for next year?

Michael Fitzgerald

Yes. Sorry, I'm not sure I follow. So from a -- we are seeing some margin improvement as we look into into 2027. That's -- there's a large mix. If you kind of remember what commercial, we have kind of a services business component that we have, ultimately, the components margin. So that's just on the components manufacturing -- and then we also will have the kind of the contribution of PCG that would continue. So different margin mix profiles.

I think we're seeing some substantial growth in the underlying revenue base for the business that will -- that is offsetting some of the headwinds that were associated with the divestiture of medical which was a higher kind of margin business as well.

So I think when you blend all that together, I mean, we're not seeing anything unusual. The margin is continues to perform well, and we're seeing a slight uptick, primarily as a result of just kind of overall mix and growth in different aspects of the business.

Operator

Your next question comes from the line of Andre Madrid with BTIG.

Andre Madrid

You had mentioned it before that maybe the gating factor in seeing more commercial orders convert was kind of the allocation of risk. Do you expect tomorrow's midterm elections to potentially, I guess, complicate those conversations any further? Or is that not really a concern?

Rex Geveden

I don't think it's a big concern, Andre, because those deals are constructed outside the framework of congressional appropriations and authorization and they don't come through the President's budget request. And so in some ways, it's outside that whole system. It obviously relates to the tariff deals that were done and the sovereign investments that remain to offset the threat of tariffs. So I think those deals go forward regardless.

And all that said, and I've said this often. I've been in the seat for 10 years and through multiple administrations and support for nuclear has only gotten stronger and stronger, it's by camera, it's bipartisan. It makes sense for so many different reasons. And so just about everyone lines up behind nuclear now. So I don't expect a lot of impatience here.

Andre Madrid

Got it. Rex. That's helpful. And staying on that point of commercial order flow I mean, you said that you were expecting something to start some of these to start picking up in the latter part of this year, but definitely no later than the first half of next year. I mean given the back-end weighted nature of your 2030 targets, I mean, at what point does the pace of commercial order flow start to become a concern.

If we don't see, I guess, a specific number of awards come in, in the first half of next year, does that kind of put risk on the long-term guidance that you guys outlined?

Rex Geveden

I don't think so, Andre. I think we've got multiple ways of achieving that guidance, as we've said, and we've mapped in some modest success in commercial orders for new builds. And yes, we've got multiple ways to win, and we intend to do so.

Michael Fitzgerald

Yes, fully agree.

Operator

Your next question comes from the line of Pete Skibitski with Alembic Global.

Peter Skibitski

Rx, I'd love to get a sense for the revenue opportunity with this new Brunswick Prodigy win, I guess, we can call it. It looks like my simplistic math, it looks like it could be a BANR reactors. But can you give us a sense maybe for what a contract will be signed and maybe if there's a way you could size it or put a framework around it? .

Rex Geveden

Yes. Maybe maybe I'll be a little bit coy here, Pete, because if you look at the way -- so just backing up a little bit, if you look at the way that Janus program is structured by the Army, and DIU. What they're intending to do is create a commercial opportunity for microreactors even though in that case, you're selling into the government market. And this one in Canada, of course, is a purely commercial endeavor and we've got multiple other commercial opportunities around BANR.

So we're not being -- we're certainly not intending to disclose any pricing details because of competitive sensitivities. But yes, I mean, if you think about selling 3 microreactors and it is a significant revenue opportunity for us and has the potential to be an exciting business for us. But it's super early days on that one, right? We've been selected for technology. The financing has got a line up behind it. New Brunswick has committed to an MOU for a power purchase agreement. So there's some government strength behind it, but there's a long road ahead on this one. And I'd like to offer you more details, but I just can't right now.

Peter Skibitski

Understood. So time line is [Audio Gap] so you do for Campbell first and then would caught up [indiscernible].

Unknown Executive

But yes, opportunities in opportunities in Wyoming, opportunities in Poland, Canada, those are all kind of to me sort of running in parallel for second place.

Peter Skibitski

Okay. Okay. Got it. If I could ask one last one, just because it just popped up, obviously, Army and Jenesis, together. But now the Navy is talking about micro reactors, I was wondering if you guys are going to do the reactor for the Navy at NSW in Indiana.

Rex Geveden

No. That's a smaller microreactor and being done by one of our competitors. And by the way, Pete, if I could just add a footnote to this whole discussion. A lot of these micro reactors are out there in the sort of megawatt range, let's call it, there is one 5-megawatt reactor. And what we have, of course, with our -- with our product, the BANR reactor on the Janus program and elsewhere is a 20-megawatt electrical output, 22 actually, 75 megawatts thermal. So -- and it's a very high temperature reactor.

So it's suitable for some large-scale applications, even though it's a micro reactor, you can run large military bases with that. You could provide industrial heat at a large chemical plant, for example. And so we're seeing a range of opportunities that are completely unavailable to our competitors in that space because of the scale of that reactor. That said, it still fits on a train. This is a rail shippable actually modular reactor. When we talk about small modular reactors, those are not small. And frankly, they're not modular. They're built in the field.

These things are actually literally built in the factory just as our naval reactors are. And so we've got the largest scale microreader that's capable of addressing some very big problems, and that's one of the reasons why we're bullish on it.

Operator

Your next question comes from the line of David Strauss with Wells Fargo.

Joshua Korn

It's Josh Korn on for to ask about the free cash flow guidance. I guess what's weighing on cash in the fourth quarter? And then you seem to be implying a pretty big working capital headwind into next year. Just kind of anything you could provide there.

Rex Geveden

Yes. I think -- so fourth quarter is just the timing. We had a really strong third quarter. So you're seeing some of that just on overall timing coming into the third quarter. But we feel good about where we're guiding for the year. And I think we have a great opportunity to execute on that. When you look at 2027 there's a couple of things that are going on. One, we got about a $10 million headwind to pension contributions. This is normal course, primarily associated with the Kinectrics acquisition. We have a little bit of working capital investment for some of the growth opportunities, and there is some timing just overall milestones, specifically on the HPU and kind of our newer enrichment enrichment programs.

But I think at the end of the day, we're seeing -- if you look at kind of the underlying true performance from an OCF perspective, we're still seeing good conversion on our core businesses. So yet a little bit of headwind as we invest for growth and some other kind of unique items, but we still ultimately feel good about where we're going to land for the year.

Operator

Your next question comes from the line of Peter Arment with Baird.

Unknown Analyst

Yes, Mike Chase. A lot of questions asked. Rex, maybe just a quick one on the budgets. If we don't have any budgets resolved post midterms here and things linger into next year, does that have any impact on your thoughts on 7? Or is that not really an issue regarding for you guys?

Unknown Executive

Peter, historically, we've been able to work through those continuing resolutions in pretty good shape because almost everything in our portfolio is a program of record and those get funded at 95% of the prior year or whatever. And we typically have some uncast carryover that's able to sustain us. We sort of got to the end of our rope on some TSG programs last year when that one ran extra long. But broadly speaking, we've been a little bit immune to CRs. And so I don't think -- it certainly does influence how we think about the forecast right now.

Operator

And our final question comes from the line of Michael Ciarmoli with Guggenheim Securities. [Operator Instructions]

Michael Ciarmoli

Sorry about that. Can you hear me guys? Rex, we get this question a lot from investors on the AP1000, the Westinghouse and you guys have, I guess, sized it already at -- that's a couple of hundred million dollars of content. But just given the comments you made, I mean, how much blood are you willing to lose on that content if risk is going to be around. And I guess I think about it from a margin standpoint, are there any terms or any potential content or undertaking that would be too risky for you guys?

Rex Geveden

Say. So Mike, component manufacturing is something that we understand very, very well, right? And the opportunities we'll go after would be things like RPBs and steam generators and those kind of components that we understand how to make. I think that's a very, very different category of risk than delivery risk. Project delivery risk is what it's all about. And I've been saying of late that we need more innovation on the delivery side because these final investment decisions ultimately in the commercial sense are driven by the capital cost and the cost of capital.

So the industry have to deliver these reactors more quickly and more reliably. So it's not -- I don't see that component manufacturing bears the same kind of risk as delivery. Now we'll certainly have -- we'll certainly experience price pressure. We always do that. But we know how to make steam generators, heat exchange -- just bring it on, right, we can accept that risk and we do every day.

Michael Ciarmoli

Got it. And presumably, that's all contemplated in your 2030 forecast in terms of a margin profile?

Rex Geveden

Absolutely.

Operator

And with no further questions in queue, I will now hand the call back to Chase Jacobson for closing remarks.

Chase Jacobson

Thank you for joining us today. We look forward to seeing and speaking and thanks for the support.

Operator

Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.