Q2 2023 Curtiss-Wright Corporation Earnings Call
Yeah.
[music].
Please standby your program is about to begin if you need assistance during the conference today. Please press star zero.
Welcome to the Curtiss Wright second quarter 2023 earnings conference call. At this time, all participants have been placed on a listen only mode and the floor will O will be opened for your questions. Following the presentation. If you would like to ask a question at that time. Please press star.
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So others can hear your question clearly we ask that you pick up your handset for best Sound quality. Lastly, if you should require operator assistance. Please press star Zero I would now like to turn the call over to Jim Ryan Vice President of Investor Relations. Please go ahead Sir.
Thank you Carrie and good morning, everyone welcome to Curtiss Wright's second quarter 2023 earnings Conference call. Joining me on the call today are chairman and Chief Executive Officer, Lynn Bamford, and Vice President and Chief Financial Officer Christopher.
Our call today is being webcast and the press release as well as a copy of today's financial presentation is available for download through the Investor Relations section of our company website at Www <unk> com.
A replay of this webcast also can be found on the website.
Please note today's discussion will include certain projections projections and statements that are forward looking as defined in the private Securities Litigation Reform Act of 1995.
Payments are based on management's current expectations and are not guarantees of future performance.
Detail those risks and uncertainties associated with forward looking statements in our public filings with the SEC.
As a reminder, the company's results include an adjusted non-GAAP view that excludes certain costs in order to provide greater transparency in the Curtiss Wright's ongoing operating and financial performance.
Any references to organic growth on an adjusted basis and exclude foreign currency translation acquisitions and divestitures unless otherwise noted.
non-GAAP reconciliations for current and prior year periods are available in the earnings release and other website now I would like to turn the call over to Linda to get things started.
Thank you Jim and good morning, everyone.
I will begin by covering the highlights of our second quarter 2023 performance and a brief update on our full year financial outlook, then I'll turn the call over to Chris to provide a more in depth review of our financial results and updates to our 2023 guidance finally, I'll wrap up our prepared remarks before we move to Q&A Steve.
With our second quarter 2023 highlights sales increased 16% overall to $704 million and improved 12% organically.
Our results reflected the strength of our combined portfolio as we delivered higher year over year sales growth in all our end markets.
Underscored within this performance in aerospace and defense, we demonstrated strong 23% growth.
This is principally driven by the easing of defense electronics supply chain conditions, including imprint proof men and lead time and component availability and strong conversion on our backlog. We also achieved 20% growth in commercial aerospace as we continue to benefit from strong OEM demand.
Growth in our operating income increased 18% year over year.
And exceeded our strong sales growth this performance reflected favorable absorption on higher revenues in all three segments, and we were able to generate 30 basis points and overall operating margin expansion in the quarter. Despite some unfavorable mix.
Diluted earnings per share of $2.15 increased 18% year over year and exceeded our expectations, primarily due to higher A&D sales.
Adjusted free cash flow was also strong at $99 million in the quarter generating nearly 120% and free cash flow conversion. We continue to experience very strong demand across our A&D end market and for commercial nuclear products to support maintenance modernization and plant life.
Extensions as a result, our order book continues to grow at a rapid pace with new orders up 8% year over year. This provides great visibility and bodes well for our expectations in the second half of 2023, and our long term outlook.
Overall book to Bill was 1.2 times in the second quarter building upon our already strong backlog, which is now up 9% year to date and in excess of $2 $8 billion.
Next some highlights of our full year 2023 guidance, our strong first half results combined with solid trends across our markets and expectations for continued easing of the defense electronics supply chain gives us confidence to raise our outlook for sales operating income and diluted earnings per share.
As we'll discuss this morning, our updated guidance reflects increased sales and operating income in all three segments, mainly driven by increased profitability in the defense electronics segment.
Overall, we increased our full year sales growth to a new range of 7% to 9% along with 8% to 11% growth in operating income and we continue to maintain strong profitability with 10 to 30 basis points of year over year margin improvement. This puts us on track to deliver double.
Digit growth and diluted EPS this year.
In addition, we increased the bottom end of our already strong free cash flow guidance to reflect higher confidence in the full year outlook. In summary, we are well positioned to deliver strong results in 2023.
Now I would like to turn the call over to Chris to continue with our prepared remarks.
Thank you and I'll begin on slide four with the key drivers of our second quarter 2023 results by segment.
Starting in aerospace and industrial we delivered another solid performance as sales increased 8% and operating income improved 10%.
We also experienced solid growth in actuation sales within the segments Aerospace and naval defense markets due to the timing of production on various programs.
And the general industrial market, our results reflected increased sales of electromechanical actuation products and surface treatment services.
In addition, overall industrial vehicle sales were flat as solid growth in the on highway market was offset by the timing of off highway sales.
Turning to the segments profitability, our results reflected favorable absorption on higher sales as well as some unfavorable mix on lower margin actuation and sensors products.
Next to defense electronics segment sales increased 32%, reflecting improving supply chain conditions and the conversion of our strong order book, particularly for our tactical communications equipment in the ground defense market.
We also experienced solid sales growth in aerospace defense for embedded computing on various foreign military programs as well as flight test instrumentation on the F 35 program, where we support the testing of aircrafts that have completed the tech refresh three our tier three upgrade.
Regarding the segment's operating performance operating income increased 77%, while operating margin improved 540 basis points, principally due to favorable absorption on the strong sales growth.
Turning to enable and power segment overall sales growth of 12% was principally driven by the contribution from our arresting systems business, which continues to exceed our initial expectations due to the strong international demand for its products.
And as a reminder, the sales from that acquisition or mainly reflected in the aerospace defense market.
Elsewhere in the naval defense market higher revenues, principally reflected the ramp on the Columbia class submarine and solid growth on aircraft handling systems, partially offset by reduced revenues on the <unk> 74 overhaul program.
And the power process market sales increased approximately 5% overall and were up approximately 10% excluding the revenue headwind associated with the wind down in the cap 1000 program.
Our results reflected strong growth in the commercial nuclear market supporting the operation and maintenance of reactors across North America, where we benefited from the timing of a strong spring outage season as well as Gen. Four revenues supporting the ex energy reactor design.
We also experienced mid teen sales growth in the process markets, driven by increased maintenance and turnaround activity as well as the timing of customer investments to expand production.
Turning to the segments profitability favorable absorption on the solid sales growth was offset by unfavorable mix on the cap 1000 program as well as naval aftermarket revenues.
In addition, and partly offsetting the strong segment performance, we experienced an increase in corporate costs, resulting from higher four one K expenses as we continue to hire in support of our growth as well as higher foreign exchange transactional losses from FX volatility and spreads in the current interest rate environment.
To sum up the second quarter results overall strong growth in operating income once again exceeded growth in sales and resulted in 30 basis points and year over year operating margin expansion.
Next turning to our full year 2023 guidance on slide five.
I'll begin with our end market sales outlook, we now expect organic sales to grow 5% to 8% with total sales growth of seven 9%, reflecting an increase in sales of nearly $80 million compared with our prior expectations.
Across the entirety of our aerospace and defense markets. We now expect total sales to increase 9% to 11%.
First in the aerospace defense market, our guidance remains unchanged and we remain on track to demonstrate strong growth in the second half of 2023 based on the timing of the embedded computing revenues.
In ground defense, we now expect full year sales growth of 16% to 18% based on our strong and growing order book for our tactical communications equipment and noticeable improvements in component availability.
Of note our strong performance included approximately $15 million to $20 million in tactical communications equipment sales that were accelerated into the first half as we burn down some of the prior year's backlog at a faster pace.
Yeah.
Next in Naval Defense, where we raised our full year outlook and now expect sales growth of 6% to 8% primarily driven by the timing of production on the Columbia class submarine program.
Turning to commercial aerospace and based upon the strong first half performance. We now expect sales growth of 9% to 11% due to expectations for strong OEM sales growth on narrow body platforms.
And of note. We expect this growth to be driven by higher sales of sensors and surface treatment services in the AI segment as well as improved demand for avionics and flight test equipment and defense Electronics segment.
Outside of our A&D markets, we raised our growth outlook for the power and process market to a new range of up 3% to 5% based on the strong year to date performance and increased demand for both our commercial nuclear aftermarket and industrial vehicle products.
And as a reminder, the outlook in this market includes a $20 million year over year revenue headwind from the wind down on the cap 1000 program as we substantially completed this contract in the first quarter.
Excluding that impact we now expect a high single digit full year growth rate in both our commercial nuclear and process markets due to our strong order book as well as higher nuclear outages in process turnarounds in the first half of this year.
And the general industrial market, we now expect sales growth of three 5% primarily based upon an improved growth outlook for on highway sales in our industrial vehicles business as well as reduced impact from FX.
As a result, we have raised our full year growth outlook for our total commercial markets to a new range of 3% to 5%.
Continuing with our full year outlook by segment on slide six.
I'll begin in aerospace and industrial where our topline guidance has been increased to reflect 4% to 6% sales growth principally driven by the strong first half sales growth in commercial aerospace.
Regarding the segments profitability, we continue to expect favorable absorption on higher sales driving a solid increase in operating income to a new range of 5% to 9%, while our revised outlook reflects the impact of unfavorable mix experienced in the first half of this year.
Overall, we continue to expect strong profitability in this segment and to deliver 20 to 40 basis points and operating margin expansion.
For your modeling purposes, we expect the segment's third quarter sales to be slightly below our second quarter results and operating income to be largely on par with the second quarter due to the timing of sales in our European operations.
Then expect the segment to deliver a strong finish to 2023.
Yeah.
Next in defense electronics, following the strong first half performance improving supply chain conditions and continued strong order activity, we raised our revenue forecast and now expect sales to grow 9% to 12%.
We feel very confident in this improved outlook is a significant portion of our sales are in backlog as of June 30th and we anticipate continued improvement in the supply chain as we move through the balance of the year.
Regarding the segments profitability, we now expect operating income to grow 13% to 17% and full year operating margin to range from 23 to 23, 2%, reflecting 60 to 80 basis points and year over year expansion, which is 30 basis points above our prior expectations.
Of note, we expect our second half results to reflect both favorable absorption and mix on strong sales growth.
And lastly, enabling power.
We now expect strong sales growth of 8% to 10% principally driven by improved expectations within our naval defense and power and process markets.
Regarding the segments profitability, we raised our operating income guidance to reflect growth of 2% to 4% and continue to expect favorable absorption on higher sales. So we maintained our prior margin outlook, primarily due to unfavorable mix.
Again for your modeling purposes, we expect the segment's third quarter sales to be largely in line with the second quarter as well as additional margin pressures associated with the timing of higher development contracts in the power and process market.
Regarding our non segment or corporate expenses, our updated guidance reflects a slight increase in assumptions related to higher foreign exchange transactional losses experienced in the second quarter.
So to summarize our outlook, we expect total Curtiss Wright operating income to now grow 8% to 11% overall in excess of sales growth of 7% to 9% as we continue to deliver on our pivot to growth strategy.
As a reminder, this includes an increase in internally funded R&D investments the shift to lower margin development contracts on customer funded programs and the headwind associated with the wind down of the cap 1000 program.
Overall, we expect full year operating margin to improve 10 to 30 basis points ranging from 17, 4% to 17, 6% as we continue to drive our operational and commercial excellence initiatives throughout the organization.
Continuing with our financial outlook on slide seven.
Building on our solid first half performance and expectations for strong growth in the second half of 2023, we've increased our full year adjusted diluted EPS guidance to a new range of $8 90 to $9 15 or up 10% to 13%.
As we look ahead to the second half of this year and based on the timing of sales as previously discussed we expect our overall third quarter 2023 sales to be slightly below our second quarter results along with a modest improvement in operating income and diluted EPS, followed by a strong finish to the year.
Turning to our free cash flow as Lynn shared earlier, we generated nearly $100 million in the second quarter as improved working capital management and higher cash earnings drove a solid year over year improvement.
As we look forward across the remainder of the year, our greatest challenge and opportunity and free cash flow continues to be in working capital management.
And more specifically inventory reduction and supply chain pressures continue to ease and we execute on our healthy order book.
Regarding our full year guidance, we raised the bottom end of our range by $10 million based upon improved confidence in our full year financial outlook and our intense focus on working capital management.
As a result, our free cash flow outlook now ranges from $370 million to $400 million, reflecting strong growth of 25% to 36%, which still implies a free cash flow conversion rate in excess of 110% at the midpoint of our guide.
Now I'd like to turn the call back over to Lynn.
Thank you, Chris and turning to page eight.
As we have discussed today, we are pleased with our second quarter results and we remain well positioned to deliver another strong year for our shareholders. We're very focused on executing on our pivot to growth strategy to drive long term profitable growth across the organization.
The continuing strength of our order book growing backlog and deep Foundation, and operational excellence provide visibility and confidence to successfully achieve our 2023 financial guidance.
I want to commend our global employee base for their continued focus and dedication to driving Curtiss Wright's success.
Of note for the third straight year and in line with our 2021 Investor day commitments, we expect growth in operating income to exceed our strong topline growth. While also driving double digit growth in earnings per share beyond that and following the strong start to the year, we have improving confidence in our free cash flow out.
Look and continue to drive towards an average free cash flow conversion target in excess of 110%.
The near and long term prospects for Curtiss Wright and the markets. We serve are very healthy and our continued investment in critical technologies and alignment to long term secular growth trends provide a strong basis for current and future growth.
Well, we are excited for these prospects across the full portfolio I would like to spend the next few minutes, providing some additional perspective on our commercial nuclear business, which serves the dynamic and growing commercial nuclear industry.
This is a market that has been gaining increasing interest and presents compelling value creation opportunities for Curtiss Wright and our stakeholders.
Global sentiment shifts towards decarbonization, and bipartisan support strengthened and in effort to restore the U S is competitive nuclear nuclear energy advantage. The industry continues to see increased government funding as well as emerging domestic and international market opportunities.
Third is right is very well positioned in both the U S and internationally to benefit from this momentum in.
In the U S. As many are aware, we have been a critical supplier of commercial nuclear components since the industry's inception with the majority of our nuclear sales today, serving the aftermarket business. The U S. Government continues to increase its focus on funding and support for retaining and extending the domestic fleet of <unk>.
Claire plants and we expect this will continue to bolster demand for our solutions outside of the U S. We continue to advance our position to service the global fleet of operating reactors building upon our content in Canada, and South Korea, and emerging opportunities in other countries as they too need.
To extend the lives of their plants.
On the Newbuild front, we have a tremendous opportunity for long term growth in two key areas.
We have solid exposure to the growing list of Westinghouse AP 1000 power plants, well, we are a critical supplier of our highly profitable reactor coolant pumps or rcp's and we're only beginning to establish our footprint to serve leading designers of next generation advanced and small modular reactors or <unk>.
Morris.
Taking a closer look at the Gen. Three AP 1000.
Firstly I'd like to extend our congratulations to those involved in the successful startup of Vogel III AP 1000 plant in Georgia, which recently began commercial operation and represents the first newly constructed nuclear power plant in the U S and more than 30 years.
In addition, we are encouraged to see westinghouse's ongoing pursuits to expand this technology by building relationships and finding M. O use throughout eastern Europe . This includes prior agreements with Poland, Ukraine, and the Czech Republic as well as more recent discussions to assist Bulgaria, Slovakia, Slovenia, Finland.
Sweden and more this strong momentum implies a potential of nearly 25 plants. Thus far several of which are expected to be on track to begin construction in the next five to 10 years.
As a result, we continue to believe there is a strong opportunity for Curtiss Wright to secure new contracts for our reactor coolant pumps within the next two to four years.
Further this excitement only builds upon our previously communicated expectations to secure more than one $5 billion and RCP orders from eastern Europe with a potential long term value well in excess of this amount should westinghouse be successful in its global negotiation.
Aside from the AP 1000, we are also working to establish relationships with all of the major advanced small.
Modular reactor designers, leveraging our long tenured stature and deep engineering knowledge to secure new and meaningful content.
Of note two manufacturers ex energy in Terrapower have received funding from the U S Department of Energy's advanced reactor demonstration program or a D. P. We have established a strong position with ex energy, where we have secured more than $100 million in content for each four packs or 320 megawatts.
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Ex energy continues to announce new partners and projects and May Dow Inc. Selected the seadrift operations manufacturing site in Texas for S. Energy's first deployment of the X 100 reactor construction work on that initial reactor is expected to begin in 2026 and targeted for.
Completion by the end of the decade.
In addition, last month ex energy and energy northwest announced their intent to build at T. 100 advance M. S M <unk> and Washington State generating up to a total of 960 megawatts or the equivalent of three four packs with the first module anticipated to be online by 2030.
More recently, we were selected by Terrapower to supply a reactor protection system for their natrium reactor or the demonstration plant in Wyoming.
Rps is a critical system for this set for safely shutting down the reactor in the event of an unusual plant condition as they advance through the initial stages under the R. E. R. D. P. It opens the door for Curtiss Wright to become a significant supplier of this and other technologies supporting Terrapower future reactor.
Aside from these two designs, we expect to developed similarly strong footholds with advanced S. M. Our designers to secure meaningful content, ranging from 10 million to more than $100 million per project as they seek to deliver safe reliable and carbon free power.
I would like to remind you that we are recognizing both orders and revenue in 2023 for advanced <unk> and this activity will continue to ramp up as we progress through the development and continue to secure New award we have a long runway ahead of us to support this arm of the commercial nuclear industry and generate meaningful rich.
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As we look over this decade and beyond there are a number of opportunities for Curtiss Wright within the commercial nuclear market that would build on the great base of business that we currently have and create some transformational and exciting changes to our future exposure in this industry as we've said before we expect to learn much more about these <unk>.
Opportunities in 2023 in early 2024, as we approach our next Investor day as you can see the activity for commercial nuclear is advancing at a relatively rapid pace. We are excited to keep you updated as we continue to establish new relationships work towards the development of these new generation.
<unk> and share in our customer success.
Our first question is coming from the line of Peter Arment with Baird. Please go ahead.
Yeah. Thanks, Good morning, one Chris Jim.
Good morning Nice results.
Lynn on the Snapback in defense Electronics, you know it sounds like the supply chain is really improved quite a bit maybe you could just talk about you know a little more color on what youre seeing there and are you also seeing share gains.
Some of your competitors out there have struggled.
So it is true we definitely you know we've been talking.
The last earnings call and thank you for that Peter.
But we will definitely beginning to see trends in the right direction and you know are you worried that it forward.
Two steps forward, one step backward, but we really haven't seen that but those trends have continued and the momentum continues we monitor a lot of statistics on our supply base from on time delivery to our lead times to Decommit I mean, you've heard us talk about them and they all continue to trend in the right direction and.
The tone of the conversations with our suppliers.
Really reveals that they are in a very different place than they were 12 months and even nine months ago and so we feel good about it they're making commitments of their working with us on Poland. I think we had started to talk about that last quarter, but we're seeing more of that and.
Really getting on top of things. So we feel good about that and we're really seeing price stabilization within the supply chain to a large degree so that's been very healthy for us and <unk>.
Support some of our confidence in raising.
The margins in that group and so we feel like we have a handle around it is not back to 2019 levels a lot of people asked that and.
I'm not sure it really of the trajectory to that most of our suppliers won't you'll say Oh by 2024 will be back to 2019 lead times I don't I think that's a little farther out, but where we're dealing with it and coming up with strategies to drive working capital improvement and scale in this environment with longer lead times. So.
It's it's good and it's quite a different feel than if I turn the clock back 12 months ago and it just seemed like every day you didn't know what you're going to find so we're really pleased and you know I don't want to just say, it's just happened easily the team has done great work put in new systems put in we've talked about some of the new strategy.
<unk> we've put in.
And approaches we've taken to managing that so you know it's.
It has been a change in the supply chain, but I'd say, it's also you know matched by a response from us as a company and how we have learned to manage it. So that's kudos to the teams that are all.
In the middle of dealing with this situation from a market share standpoint, I think.
Our order book says it all.
We have the order book is up 31% independent electronics year over year, you know theyre part of our overall strong order book and.
<unk> to accelerate and we feel great about where the team is and we're getting new products out in the market.
Turning you are spending more R&D in that business every year, you know as we're growing operating margins.
It's not coming on the backs of our IRA or customer funded R&D, which were seeing also increase in that group. So.
Really you know the team is doing a great job managing in this time and you know building for a great future for going forward.
And just add some color and just.
Just to add one more data point find that theater.
We're guiding this year to 765 at the midpoint in defense electronics.
Last 12 months orders as of June 30th or $945 million you know in the current year run rate is 927, so a very strong and healthy order book, providing us with confidence as we get deeper into the year and into 'twenty four.
That's very helpful. Thanks, Chris.
Just one last one I'll follow up on on just your kind of all your commentary around nuclear you kind of indicated that you know over the next two to four years is when you'd start to see really.
Maybe I missed it.
You hit your backlog because that's the best way to frame. It that this is the backlog story that that'll kind of emerge over the next two to four years.
We put it in three buckets I think our aftermarket business is on a steady ramp we've said, we feel comfortable saying its going to ramp at the mid single digits, you'll going forward, which is 90% of our commercial nuclear work today.
And so that that is happening here and now the work you know.
It's just under $10 million that we're anticipating this year on this gen. Four a R. D. P type of development that is going to accelerate in 'twenty four and in 25 I mean, that's early days you know what.
It's really a lot of you.
You know engineering Worksheets, we're not building things yet we're gonna be needing to build stuff for those advanced reactors you know in 'twenty five for sure and that's meaningful to two to four years is really still the anticipation of an AP 1000 order, which is just a flash point I mean, if it's you know everyone knows our 16 RC.
<unk> order was $450 million and so some of these opportunities are big opportunities and you know.
That's a that's just a lightning bolt in for the company and we're making sure we're ready for it.
I appreciate all the details I'll jump back in queue. Thanks.
Peter.
And we'll take our next question from the line of Louis Dipalma with William Blair. Please go ahead.
Lynn, Chris and Jim Good morning.
Good morning, good morning.
Your your Navy business continues to do well last week, you announced how you received a a $215 million add on contract from electric boat and Bechtel for additional propulsion valves and control systems.
Should this further increased the revenue run rate that you had been generating for your navy platforms are or.
Some of the decline is due to the supply chain recovery and customers, reducing their order rates for inventory and improve lead time.
But we believe that this specific issue is starting to level out and expect improving orders in the second half of this year now that'll be supplemented.
By our new power management electronics that we've talked a little bit about and so we expect some uplift in the back half of the year as you can take a little bit deeper on surface tax.
Surface Tech provides technologies to Arrow Dev commercial aerospace to general industrial their order output in the Gi space, which is more representative of kind of the current production outputs that were seeing from our customers is in a mid single digit growth rate. So I think that speaks well to.
For the full year guide that we now have in general industrial which is that 3% to 5% there was a little bit of a minimum minimum duration of the FX headwind that we're facing there but.
As you look at what's happening with them with an industrial vehicles, it's mainly on highway.
Mid single digit growth, mostly North America.
Off highway it's been kind of flat.
The yes, we're seeing some positives in AG, but those are being offset by construction and that's mainly kind of a lower global construction space and then in industrial automation and services. We just had a big quarter, you know that a lot of lot of M actuation sales.
But we expect that to be more in the low single digits across the full year for revenue purposes, just slightly outpacing GDP. So.
Got it got it that's helpful. And then maybe Glenn you kind of mentioned pricing a bit and maybe even tie into what Myles was asking about organic growth being so good here can you maybe talk to you know I don't know if you can get specific on how much pricing is helping to contribute to the organic growth.
Ruth.
What youre seeing in terms of your ability to get price on the newest orders that are coming in and flow into the backlog you know anything else you could share there.
Yeah, I'll, maybe try and expand on that a little bit. So I mean, you definitely know we've been talking about pricing for two and a half years and really start to type talked about pricing before the realities of the inflationary situation or so evident and so I feel good as a company that we were really well ahead of it and as part of our OTT that we rolled out.
In may of 2021, and the teams have taken it very seriously and we monitor tore it every month and our monthly financial reviews with the teams as to what Theyre getting I'd say roughly 1% of our growth rate is due to pricing it's not.
An exact science and measuring it so I wouldn't make 1.00 in your.
In your models.
That's a fair estimate to say that whats coming from pricing and I will say.
We're having some more sticky discussions with some of our customers that still have ongoing LTA square and we really need to get them to open up and change Otas and that's getting a little bit more challenging we don't see it as a roadblock, but some of that is.
The things that we don't think we're going to get done to affect pricing. In this current year is reflected a little bit of some of the margin pressures and Eni segment as some of those lta's.
And anticipating those not getting renegotiated until later in this year and so you know, it's it's continual work, but even with that you know mentioning the eni and some delays in some of the LTA negotiations.
Chris and I were just talking this morning, reflecting that.
Since the 2020 baseline we've increased over 100 basis points in margin in that group every year. So you know.
Clearly pricing is a big part of that and it really reflects the success. The team has had and then you'll elsewhere unable and power groups a little different from what they do with their long term contracts and such but in defense electronics, we've maintained very dynamic in and looking at our cost basis and <unk>.
<unk> prices, who can then I think you know it is contributing to the steady increase in our ability to raise margins.
Very good perfect. Thanks for that detail I'll jump back in the queue.
Once again, if you do have a question you May press star one on your telephone keypad at this time.
Yeah.
So I guess with that I would say.
I'm sorry.
Sorry, I was just going to say thank you everyone for joining us today and we look forward to speaking with you again during our third quarter 2023 earnings conference call and have a great day.
Thank you. This concludes today's Curtiss Wright second quarter 2023 earnings Conference call. Please disconnect. Your lines at this time and have a wonderful day.
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