Q3 2021 Curtiss-Wright Corp Earnings Call
[music].
Good day and thank you for standing by welcome to the Crickets right third quarter of 2021 financial results Conference call.
This time, all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During the session you will need to press one on your telephone and if you require any further assistance. Please spread sars email I would not like to have the conference over to speak up.
Today, Jim Ryan Senior Director Investor Relations. Please go ahead.
Thank you Laurie good morning, everyone welcome to Curtis right third quarter of 2021 earnings Conference call.
The call today, a president and Chief Executive Officer of adventure.
And Vice President and Chief Financial Officer first part.
Our call today.
And the press release as well as a copy of today's financial presentation.
For download through the Investor Relations section of our company website Www Dot first rate dot com a replay of this.
Also can be found on the website.
Please note today's discussion will include certain protections in statements that are forward looking as defined in the private Securities Litigation reform. In 1995. These statements are based on management current expectations and are not guarantee of future performance, we detail those risks and uncertainties associated with a forward looking statements and our public.
With the SEC.
Reminder, the company's results included adjusted non-GAAP view that excludes certain call in order to provide greater transparency.
Ongoing operating and financial performance.
Also note that both are adjusted results and full of your guys' exclude or build the current exploration product line.
737 next program as well as the German balance, which is classified itself for sale in the fourth quarter of 2020.
Gas to non-GAAP reconciliation for current and prior to your peers are available in the earnings release at the end of this presentation and on our website any references to organic growth exclude the effects of restructuring impairment of acetone personal foreign currency translation acquisitions and divestitures unless otherwise noted now I'd like to turn.
The call over to Lindsey to get things started.
Thank you Jim and good morning, everyone I'll begin with a key highlights of our third quarter performance and an overview of our full year 2021 out book, then I'll turn the call over to Chris can provide a more detailed review of our financial results and updates to our full year guidance.
Finally, I'll wrap up our prepared remarks before we moved the Q&A.
Starting with the third quarter highlight we experienced a strong 12% increase in overall sales of which 4% with organic R. A N D markets improve 15%, reflecting solid growth and commercial aerospace naval defense and yet another quarter of strong performance from our past our acquisition.
Having just completed his first year under Curtis Wright ownership I'm pleased to report the Pasdar is executing very well and it's integration remains on track the <unk>.
Business as well positioned for continued strong topline growth and is closely aligned with the Army's top modernization priority.
Turning to our commercial market, we experienced strong year over year growth, which was led by both our industrial vehicle and process market. As these industries continue to sharply rebound looking at our profitability adjusted operating income improved 12% with adjusted operating margin strong at 17 pie.
5% reflect the higher sales and operating income across all our segment.
As well as the benefits of our operational excellence initiatives. It's important to note that the strong performance was achieved while we continue to invest strategically with with a 4 million dollar incremental investment in research and development as compared to the prior year.
A result, we are on track to invest $12 million in incremental R&D this year to support our future organic growth initiatives.
Adjusted diluted EPS was $1.88 in the third quarter, which was slightly above our expectations due to the strong operational performance.
And the benefits of our consistent share repurchase activity.
Free cash flow with similarly, strong up 76% compared with the prior year with strong free cash flow conversion that exceeded 125% and keeps us on track to achieve our long term objective.
Turning to our third quarter orders, we achieved 13% growth and book to Bill exceeded one time sales driven by increases within each of our three segments.
And a little deeper we experienced solid growth of 7% in our A&P market orders as well as a robust growth of 25% in our commercial market, providing continued support to our strong backlog.
Next I wanted to address the global supply chain disruption on our business overall I am really proud of the team strong execution in light of this challenging supply chain environment.
As we expected and as we indicated last quarter. Our operations continued to be faced with some supply chain disruption caused by both delays in container shipment and shortages in electronic component principally impacting tales within our antennae and defense electronics segments.
Thus far these disruptions have been immaterial to our full year 2021 result, essentially limited to timing rather than the lost revenues based upon the teams untiring efforts to mitigate these impacts to sales and to preserve our profitability. We continue to aggressively manage the timing of product within our supply.
And remain encouraged by our strong backlog as we move forward. This remains to watch item for us and should we encounter further revenue push out we anticipate offsetting any delays through the strength of our combined portfolio.
I'd also like to address our press release from mid September where we announced the board support for a substantial increase in our share repurchase authorization from $150 million up to $550 million, we immediately and Opportunistically began to repurchase 200 million.
Of our stock in mid September I'm pleased to report that we recently completed this program and bought back more than 1.5 million shares we.
We are on track to complete at least $250 million of share repurchases in 2021, and we will remain well positioned for the continued return of capital to our shareholders holders going forward with $350 million of remaining authorization.
Finally, turning to our full year 2021 adjusted guidance, while we maintained our outlook for sales operating income margin and free cash flow, we tightened and raise the bottom end of our adjusted EPS guidance range, we now expect to achieve between $7.20 and seven.
35 cents essentially double digit growth compared with the prior year based on our strong year to date performance and the benefit of our repurchase activity.
We remain very much on track to deliver strong results in 2021 now.
Now I'd like to turn the call over to Chris to provide a more thorough review of our third quarter performance and our outlook for 2021, Chris.
Thank you and good morning, everyone.
I'll begin with the key drivers of our third quarter results will be again delivered another strong financial performance with higher sales and operating income and all three segments.
Starting in the aerospace and industrial segments sales increased 14% in the third quarter led by strong increase in demand for our products and services in both commercial aerospace and general industrial markets.
Within the segments commercial aerospace market sales increased more than 20% year over year as we experienced improved OEM demand on narrow body aircraft as well as a solid increase an aftermarket sales.
We also experienced higher sales for industrial vehicle products, including both on and off highway which continue to benefit from improved demand and strong order activity.
Turning to the segments profitability adjusted operating income increased 34%, while adjusted operating margin increased 240 basis points to $15, 7%.
Ah results reflect favorable absorption on strong sales and the savings generated by our prior year restructuring actions.
And the defense Electronics segment revenues increased 22% in the third quarter, principally reflecting the contribution from our packs for acquisition.
Where organic sales reflect the timing on various C. Five ISR programs in aerospace defense as we experienced the shift of about $10 million to $15 million in lower margin system sales into the fourth quarter, which was mainly due to the global shortage and electronic components.
This segment third quarter operating margin reflected favorable mix for our higher margin embedded computing revenues, which was more than offset by $4 million in incremental R&D investments and about $1 million an unfavorable FX.
And absent these two unfavourable impacts this segments third quarter of 2021 operating margin would've been in line with the prior year strong performance.
Next in the Naval empower segment revenues increased 3% in the third quarter, but by higher sales of naval nuclear propulsion equipment and higher valve sales to process markets, where we continue to experience strong demand.
This segments adjusted operating income increased 4%, while adjusted operating margin increased 20 basis points to 18.6%, reflecting favorable absorption on sales and approximately $2 million in restructuring savings.
It's also worth noting that we achieved higher profitability in this segment. Despite the wind down on the cap 1000 program in our commercial power market.
For some of the third quarter results overall, both sales and adjusted operating income increased 12% and across Kurdish right. We drove 10 basis points of year over year margin expansion, while adding $4 million in incremental R&D investments, which represents a 70 basis point headwind on our overall profitability.
Turning to our full year 2021 guidance I'll begin with our end market sales outlook, where we continue to expect total Curtis right sales growth of 7% to 9% of which 2% to 4% is organic.
And while our sales guidance remains unchanged I wanted to briefly highlight some specific dynamics within a few markets.
Starting enabled defense or guidance remains unchanged at flat top 2% and we continue to see strong order activity for our nuclear propulsion equipment on critical enable platforms.
For example, as noted in our September press release, Kurdish rate was awarded contracts valued at approximately $100 million to provide pumps for the U S. Navy's Virginia class submarine Columbia class submarine and Fort class aircraft carrier programs.
These awards not only support our outlook for overall aerospace and defense market sales growth in 2021, but also provide long term visibility and stability for enabled defense market revenues.
Next a few comments about our commercial markets were overall sales growth remains unchanged at 6% to 8%.
And the process market, we continue to see a solid rebound and MRO activity for industrial valve businesses, principally soil and gas customers.
And the general industrial market based upon strong year to date growth and orders for industrial vehicle products. We are now on track to return to 2019 levels in this market by the end of 2021.
This is one year ahead of what we communicated at our May Investor Day, where we previously expected to reach those levels in 2022.
Continuing with our full year outlook, we're reaffirming our sales operating income and operating margin guidance.
We expect adjusted operating income growth of 9% to 12% and adjusted operating margin growth of 40 to 50 basis points to arrange a 16.7% to 16, 8%.
Diving deeper I'd like to share a few specific reminders about our segment guidance.
Ah begin in the aerospace and industrial segment, where we're expecting operating income to grow 17% to 21%. While operating margin is projected to increase 180 to 200 basis points, keeping us on track to exceed 2019 profitability levels. This year.
Next in the defense Electronics segment, we're maintaining our outlook for solid growth in sales and operating income. Despite the challenges that we've encountered in the supply chain.
As we noted earlier, we experienced the $10 million to $15 million shipped in revenue from the third into the fourth quarter based upon the timing and receipt of electronic components.
We expect these delays to continue and now expect to finish the year closer to the lower end of this segments guidance range for sales.
It is however, a very dynamic issue and we're working aggressively to mitigate the impact on our business as we look to close out the year.
Regarding this segments profitability, it's important to note that we're maintaining our outlook for operating income despite the revenue timing issues.
And are $8 million a year over year increase in strategic investments in R&D.
Lastly, and enable empower segment our guidance remains unchanged and we continue to expect 20 to 30 basis points of margin expansion on solid sales growth. Despite the wind down on the capital program.
Continuing with our financial outlook, where we increase the bottom end of our full year 2021, adjusted diluted EPS guidance to a new range of $7 20 to $7.35, which reflects growth of 9% to 12% in line with our growth in operating income.
Are updated guidance reflects both the lower share count stemming from our ongoing share repurchase activity as well as a slightly lower interest expense, where we continue to maintain sufficient capacity under a revolver for continued share repurchase acquisitions and operational investments.
And lastly, based on strong year to date free cash flow generation of $128 million, we remain on track to achieve our full year free cashflow guidance of $330 million to $360 million.
And now I would like to turn the call back over to Lynn for some closing remarks Lynn. Thank you, Chris I would like to recap some of the key takeaways of 2021 guidance, where despite some caution as it pertains to the ongoing supply chain issues, we are well positioned to drive strong results for this year.
Led by high single digit revenue growth, including the contribution from last year's pack Pack Star acquisition, we expect to generate 9% to 12% growth in those operating income and diluted EPS. This year or 2021 operating margin guidance of $16 seven to 16, 8% reflects our salt.
Would execution, an ongoing focus on operational excellent.
We expect to achieve those results, while investing an additional $12 million or 40 basis points and strategic R&D to facilitate future organic growth.
In addition are adjusted free cash flow remains strong and we are on track to achieve our ninth consecutive year of greater than 100% free cash flow conversion.
We also continue to maintain a strong and healthy balance sheet and remain committed to deploying disciplined and balanced capital allocation to support our pivot to growth. We are focused on investing our capital for the best possible return to drive long term shareholder value and then the case of our recent share repurchase announcements we took advantage.
Age of opportunities to ramp up our activities in this area.
Meanwhile, acquisitions have been and will continue to remain the highest priority for courage right.
With a full pipeline of opportunities I remain ever confident that we will effectively deploy our capital to strategically and profitably grow our business for the long term.
In summary, Kurdish rate is performing well and we remain on track to deliver strong profitable growth in 2021, driven by our diversification and the strength of our combined portfolio R.
Our defense backlog remains strong, particularly enabled defense in our commercial orders have been very resilient, reflecting book to Bill of one one time sales year to date, we continue to demonstrate the highest levels of agility in response to that dynamic changes taking place in our end markets.
Altogether, the support us the opportunity to remain on track to achieve our long term guidance communicated at our May Investor day at this time I would like to open up today's conference call for question.
And as a reminder to ask a question you will need to press star one on your telephone.
At our first question is from Peter argument of Bird Your line is open.
Yes, good morning Lynn Prince.
Nice results.
Thank you.
Maybe you could just talk a little bit about the supply chain Rus I mean, you guys have done a very good job.
<unk>.
Is it just your.
<unk> dual sourcing or some of the deep past ratings that you've talked about in the past maybe talk about some of the bigger levers and then how you are kind of working that going forward. Thanks.
Yeah.
Clearly a topic that top of mind and thank you Peter for the question.
It is it is very real and it continues to be a headwind towards us that we're working to overcome.
<unk> that we stated we had some revenues push from Q3 into queue for around $10 million to $15 million in our defense electronics.
Segment do too.
The supply chain pressures. So it's an area that we have a lot of people focused on and are doing everything we can.
We're fighting the.
That's probably the biggest and most.
Notable area, where we're feeling also in the container shipment we're fighting.
The freight costs in transit times, and we're also beginning to fight some deallocation in the chips area, where we have been promised certain levels and when the shipments arrive we've received blush chips and we happened so that's sort of the diet.
As you can imagine that's a very dynamic area, but we absolutely are doing the things you mentioned, we are working dole sourcing wherever.
It's.
Capable we're actually looking even in some of our areas. They have some recent activity, where we're looking to change out processor chips and move to different processor chips and things and that along those lines that there's less pressure on the supply chain. So the teams are really being creative and I'm proud of him for that deep has ratings is another important area.
And we're really working the executive relationships to try and.
Make sure it's visible the impact of us receiving products on both our national security or mobility products really critical things too.
People around the world until the team's doing a great job I said that in my prepared remarks, but it's really impressive to see the creativity.
The teams are applying to try and do this and hopefully we'll see an end of this sometime in the next calendar year and get back to more normal and I guess the only other comment I would make is.
We're chasing queue for still working issues associated with it but planning well further out into 22, and really managing our supply chain needs well into 22, and even somewhat beyond and.
In a manner that we would not have historically done so we're adjusting our practices to really did the best we can stay on top of it.
Just just some follow up another was hearing you know a lot of people and ask you about regarding impacts of a continuing resolution.
It's obviously been getting resolutions and it's gone on for quite a number of years and you had to manage that but maybe you could just remind us how how that impacts you and just maybe high level thoughts about how you think about your defense portfolio growing.
Next year, Thanks again.
Sure. Thank you Peter.
So it it's disappointing to see us repeating this pattern honestly staying in the continuing resolution, it's not healthy for the country. It's not healthy for our National Defence is that obviously blocked the start of any new programs in the world is a dynamic place and that's not how we should be managing our country.
We.
Insulated to some degree to a continuing resolution as.
Or we're not selling so much directly to the government, but into the prime and they are trying to keep things moving along so we can absorb some amount of continuing resolution and not feel the impact immediately but obviously all things.
Through the supply chain system and so.
Eventually it does impact us.
Where we know that we are aligned with top priorities in the defense budget. We're pleased with that they have positive funding and what was.
Proposed by the President's budget, we have the markups that went through the house and the Senate provided good upside for Kurdish right. So I believe they're gonna get it passed and it's just a matter of time and so that will be good for us I mean, I think we feel really good.
A bipartisan support for the Navy continues to be strong the belief in shipbuilding I mean, we really feel like we have aligned ourselves along the top priorities with that does have bipartisan support fell ultimately as it passes I think we'll be in good shape.
And our next question is from Michael shot Molly of truly Securities. Your line is open.
Hey, good morning, guys mixed results and thanks for taking my question here.
Maybe contribute just stay on on defense, So I guess.
Organic growth down two quarters in a row and I guess some of that organic pressure to slide out, but maybe you can you can you speak to the performance of some of the acquisitions I mean are they seeing some of the same challenges and I guess can you touch them on the continuing resolution Excrement Creek.
Some pressure here, but most of your customers have tempered their growth expectations next year should we comma calibrate ourselves for a little bit more of a challenge.
Different environment Europe in the next couple of quarters.
I think we still feel good about.
The guidance, we put forward an investor day.
It is there's a bit of uncertainty out there I think most of the tempering has really been around supply chain and delays. That's what we are seeing so far is we're not seeing where we've seen some challenges it's really delays of revenue not.
Business going away and obviously Lockheed Martin has changed there at 35 outlook and we have content on the F. 35, So that's something that might be a mild headwind for us going forward, but it's pretty minor portion of our our overall revenues, 2% to 3%. So that's one area that we've seen something put out.
To go again, but I think we have a lot more tailwinds then we have headwinds with.
Unable positions the defense electronics positions are investments and most and how we're capturing new business around there that.
And really the packs are acquisition continues to have.
Great feedback from there and customer and great support within the budget. So.
Other than the F 35, that's really the only.
Notable program headwind that we see the others are pretty good. So we feel good about the the guidance with the forward and just to comment on the acquisition sorry.
Just real quick while we were pleased with the performance of our acquisitions and.
They obviously are subject to the overall defense budgets, but they're all doing well and.
And we just reported out a couple of months ago to the board on the performance of our acquisitions and it was pretty much a green light across the board so.
Got it got it and then just totally shifting gears to power you kind of called out the cap 1000 in your prepared remarks anything just trying to get a sense of what we should be thinking obviously you guys don't have anything model being on a go forward basis. There has been chatter out there are reports about Ukraine being interested in India.
1000 other countries.
What else are you seeing hearing preparing for.
How should we think about it if no orders come through any of the capacity to have it.
Facilities, there outside of outside of Pittsburgh can easily get repurposed. If we don't we don't see too much of it if you want to add some activity.
We're definitely.
The dynamic issue and we're working it but we believe we are managing the capacity and below to be able to.
<unk>.
Go through that period, where we as we wind down the cap the 1000 program.
That were very much balancing towards that without the anticipation of an order coming as we wind that down at one would come we very much have plans set.
Set up to be able to assure that we're capable of of scaling up with that I mean, it doesn't the labor load comes a bit after the order you start with the material orders and such and so we have time to adjust our workforce and believe that the the workforce up in that area that there are people in that we will be able to achieve it I mean, it's.
I have to say it then.
<unk>.
Exciting times, it's not as you stated it's not in our in our anticipation that hearing things going on between Ukraine. I mean, there was an announcement yesterday about new scale embarked in Bulgaria, signing an agreement obviously new skills.
The one of the next generation reactors, where we've talked about our content on toe that's great to hear about the tension build out of it elsewhere and just.
Even with the Cop 26 summit, just the realization from a lot of the reports that came out of that that nuclear will be part of the carbon free solution and so.
After some years of not much support.
Sentiment is definitely shifting and I think the dollars will flow in this decades, whether it's 22 or 23 or 24, I mean, I don't know but I.
It's closer than I think we felt it would be for a lotta years. So.
Okay, Okay perfect.
Great. Thanks, a lot from Buckinghamshire.
Had our next question is from Nathan Jones of Stifel. Your line is open.
Good morning, everyone.
Good morning Nathan.
Start with a question on the share repurchase.
Executed a couple of hundred million here in the second half of 2021 is the plan to go back to more just offsetting dilution or do you have designs on utilizing some more of that authorization here in the short term.
So it is.
You know it.
I think what we've said most consistently as we're really committed to deploying our capital to provide value to our shareholders and having not put an acquisition on the board.
So far we had capital available and decided to move forward, we have $350 million of open authorization and we will make decisions with it as acquisitions come into clearer light I mean that is undoubtedly our highest priority.
But we're going to make our capital work to provide value to our shareholders.
So that maybe I'll, let Chris make a few comments on kind of the landscape.
Would only ever and we have a very strong balance sheet and we're excited about what we can do with that to support our capital allocation strategy and we think that they'd share buyback is the most effective way to return capital to shareholders.
Over the last five years, it's been $130 million last year during the pandemic It was 200 and.
And we also did the pack star acquisition and this year, we're on track the $250 million.
I think we like where we're positioned I think that we feel we have opportunity and.
The only other thing I might add is that is the recent and does bester day, when we set those minimum financial targets out there you'll you'll notice that we said, 5% minimum sales CAGR and that we said that there would be a 10% EPS CAGR. So absence any further acquisitions you can kind of quickly do the math and see that you need to return capital to Cheryl.
Through share repurchase to hit that 10% EPS CAGR. So.
We're excited about it we feel that it.
It's a great time to buy Curtis rates stock given the position of our multiple and and where we are relative to our peers and or pivot to growth strategy. So we remain committed.
Does the repurchase say anything about the action ability of the M&A pop lightning the short term or are they kind of separate issues.
No. It really does not signal anything about where we sit with M&A that Chris and I worked very closely to model scenarios and our ability to drive acquisitions and we're still very much have a lot of dry powder and are able to move on acquisitions as they become available.
Planned for that to be in coincident with the purchase buyback that we have done so far.
And then just one follow up on a comment you made about the budget mockup staying positive for code is for could you give us a little more detail on on what some of those budget mock ups would that you believe are positive for cut us right.
Sure I think the two that are the most notable is.
Potential for a third Virginia class.
And another DDG 51 or both.
Part of the Mark ups and then additional support within the army for net.
Network modernization, which already had really great support in the in the primary budget that was put forward by the president that even some further potential increases from it.
Thanks for the color I'll pass it on.
Thank you.
And again, if you have any question. Please press star one.
No question, we have a question from miles Walton of UBS. Your line is open.
Hey, good morning, you've got little federal on for miles.
Hello, Hey, so actually think about the $12 million of incremental R&D spending this year, how do how do we think about that going into 2022 to do we stay at the celebrated level or do we we step back.
Somewhere between.
Yeah. That's a question we're asked a lot and we really have.
Not giving guidance of R&D spend going for the forward years and there's a couple of reasons for that one is.
Of our total engineering spend about half as Iraq and about half is customer funded so we're always kind of ebbing and tying as we go through the balance of where we see.
Putting our engineers to work on customer funded programs, having the best return for Kurdish right versus our ideas to spend on Iraq, and so it's a tradeoff than that.
Between those and we really look to make those investments really based on the best use of our spend too.
To drive long term growth and so not.
Putting a fixed amount and saying, we'll just let ourselves spend up to that but really bedding. Each problem is the return on investment to the organization. Some short term some long term some incremental investments to extend product families. Some swings for the pen as the saying goes and really make those decisions as.
The projects come available so.
I'm, a big believer in spending R&D I think it's important.
And so I look for us to continue.
Being willing to spend R&D and.
Taking those steps to grow the company long term.
So I would say, it's likely but we're not putting forth any specific levels and I would only add that we are committed to achieve 17% operating margin. This next year. So that is a big focus of ours.
But we are also working operational excellence initiatives across the organization to continue to free up money for investment. So we'll be able to provide more color on that in in February.
Okay, great. Thank you and just a couple other quick follow ups and is there any update on the assets held for sale for long business I guess that's out there now for.
The years that indicate any maybe the lack of interest or anything like that we need to be mindful of.
No I think we're we're moving along in that process pretty well and.
I am not going to go into the specifics on the sale and exactly where we are but I think we've I think we're well positioned to.
Move on from that property in the near term.
Okay, great. Thank you and then just last one page slide 11 in the deck.
Third quarter or lays out the end market sales growth. It has 4% organic growth were A&D, and then 5% organic growth for commercial markets, but I thought organic growth was only a 1% for the quarter. So.
What am I missing.
Well I think.
You should take a look at our sales growth Q3 year over year. The biggest contributor to the growth was obviously within aerospace and industrial.
On the strength of that market was really driven by what we're seeing an industrial vehicles and then also commercial aerospace for the quarter.
Biggest I would say organic mover with enabling was enable empower and that was really based upon the strength and when we saw year over year enabled defense, particularly the Virginia class submarines.
Looking at defense electronics, while we were up substantially year over year. The majority of that contribution most from pack star, we were slightly down organically roughly $5 million a year over year, but that was really related to the timing of the push out.
Into the fourth quarter due to the availability of electronic components.
Alright, so the 4% organic growth isn't really organic growth for the aerospace defense market as sort of vindicated on that slide.
No I think I think on the full year, we're still holding all of our assumptions in our guidance range I think as we look at that we would say that while we were at what we're anticipating that we're going to be a four to six on the full year, it's probably going to be a little bit more towards the lower end of the range given some of the.
The timing issues that we've indicated within defense electronics, but and we expect to be within all those ranges.
Okay, I guess I, just I thought that was specific to the third quarter, but alright not.
Not a problem. Thank you.
And we have a question from Peter R. Mental spend your line is open.
Just a quick question in the power and processor you talked about.
Strong growth and down to the process market.
What kind of visibility do have there and you could just remind us what you're seeing on general how wimpy outlook, how sustainable it is thanks.
Okay. Thank you, it's an area of the business, we don't usually get as many questions about so it's nice to have.
About it so we definitely continued to see growth opportunities for our severe service applications and the forecast is that the process markets will grow mid to high single digits with full recovery in 2023.
<unk> visibility, it's a fairly short term business. So we really look to market trends to anticipate where we're going and we.
We've tracked well with the market outlook is so we feel good about <unk>.
Tracking that with full recovery in 2023.
We definitely seem favorable trends in 2021 as the industry increases.
MRO work, which is the largest portion of our sales and is generally tied to GDP.
We did have one capex project back in the last quarter pushed into 2022, so there.
There are some mixed bag, but.
We do see full recovery from the pandemic.
Received the call it thanks.
Thank you Peter.
And we have a question from my calls her Molly of true Securities. Your line is open.
Hey, Thanks, guys for taking a follow up just with just another and market I wanted to ask about within industrial what are the trends you see in in the the surface treatment side of the business and maybe any color on where that is in relation to prepandemic and.
Kind of what you're seeing what's your various customers and different geographies there.
Yeah. So just touching specifically on the surface technologies business, Mike, which is really more of a short cycle business, we've talked about that in the past as being the.
Will say the the bellwether certainly in times of economic recession, and it will be the first to drop but in periods of improve.
Improvement it'll be one of the last months to recover because those orders have to come in on the long cycle business as soon.
We've had been since since the lows of Q2. This last year, we've seen a steady improvement.
Within that business quarter over quarter.
The orders continue to support that outlook first steady sequential growth.
Initially I would say that most of that recovery was based upon what we're seeing on the industrial side of the business the industrial.
Real vehicles automation and services.
And the growth rates there has been pretty good but we started off this year, a little bit down in commercial aerospace mainly due to wide body, but we are seeing that pick up and even within that business commercial aerospace quarters continue to grow it's not at the same rate as our long cycle businesses, but it does provide us.
With optimism that we are the right trajectory and the short cycles.
Got it got it helpful. Thanks crust.
Thanks. Thanks.
And there are no further questions at this time I will now turn the call over that Lynn <unk>, President and Chief Executive Officer for closing remarks.
Thank you.
Thank you all for joining US today, we look forward to speaking with you again during our fourth quarter earnings conference call and have a great day.
This concludes today's conference call. Thank you for participating you may now disconnect.
[noise] [music].
[music].
[music].
[music].
Okay.
Okay.
[music].
Okay.
Okay.
Okay.
Okay.
[music].