Q1 2024 Curtiss-Wright Corporation Earnings Call
Please standby we're about to begin.
Welcome everyone to the Curtiss Wright first quarter 2024 earnings conference call. At this time, all participants have been placed on a listen only mode and the floor will be open for your questions. Following the presentation.
Operator: Please stand by; we're about to begin. Welcome, everyone, to the Curtiss-Wright First Quarter 2024 Earnings Conference Call.
Operator: At this time, all participants have been placed in a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. To help others hear your questions clearly, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star zero. Now, at this time, I will turn the call over to Jim Ryan, Vice President of Investor Relations.
James M. Ryan: If you would like to ask a question at that time. Please press star one on your telephone keypad. If at any point. Your question has been answered you may remove yourself from the queue by pressing star two.
James M. Ryan: So others can't hear your question clearly, we ask that you pick up your handset for best sound quality.
Operator: Lastly, if you should require operator assistance. Please press star zero now at this time I will turn the call over to Jim Ryan Vice President of Investor Relations. Mr. Ryan. Please go ahead.
James M. Ryan: Thank you Paul and good morning, everyone welcome to Curtiss Wright's first quarter 2024 earnings conference call joining.
James M. Ryan: Thank you, Bo, and good morning, everyone. Welcome to Curtiss-Wright's first quarter 2024 earnings conference call. Joining me on the call today are Chair and Chief Executive Officer Lynn Bamford, and Vice President and Chief Financial Officer Chris Clark. 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 Curtiss-Wright.com. Replay of this webcast can also be found on the website.
James M. Ryan: Joining me on the call today are chairman and Chief Executive Officer, Lynn Bamford, and Vice President and Chief Financial Officer for Spark.
James M. Ryan: 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 Curtiss Wright Dot Com a replay of this webcast also can be found on the website.
James M. Ryan: Please note that today's discussion will include certain projections and statements that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are not guarantees of future performance. We do share those risks and uncertainties associated with our forward-looking statements and 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 into Curtiss-Wright's ongoing operating and financial performance.
James M. Ryan: Please note today's discussion will include certain projections and statements that are forward looking as defined in the private Securities Litigation Reform Act of 1995.
James M. Ryan: These statements are based on management's current expectations and are not guarantees of future performance.
James M. Ryan: But you can tell those risks and uncertainties associated with forward looking statements in our public filings with the FCC.
James M. Ryan: As a reminder, the company's results include an adjusted non-GAAP view that excludes certain costs in order to provide greater transparency into Curtiss Wright ongoing operating and financial performance any references to organic growth on an adjusted basis, excluding foreign currency translation acquisitions and divestitures unless otherwise noted.
James M. Ryan: Any references to organic growth are 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 on our website. Now, I'd like to turn the call over to Lynn to get things started.
Lynn: non-GAAP reconciliations for current and prior year periods are available in the earnings release and on our website.
Lynn: Like to turn the call over to Lindsay good things start.
Lynn M. Bamford: Thank you, Jim, and good morning, everyone. I'll begin by covering the highlights of our first quarter performance and a few comments about our updated 2024 financial outlook. Then I'll turn the call over to Kris to provide a more in-depth review of our financials. Finally, I'll wrap up with a focus on our recent commercial nuclear acquisition and some closing remarks before we move to Q&A. Starting with our first quarter 2024 highlights, we are off to a great start as we delivered strong overall results that exceeded our expectations.
Lynn: Thank you Jim and good morning, everyone I'll begin by covering the highlights of our first quarter performance and a few comments about our updated 2024 financial outlook, then I'll turn the call over to Chris to provide a more in depth review of our financials. Finally, I'll wrap up with a focus on our recent commercial nuclear acquisition and some closing remarks.
Kris: Before we move to Q&A.
Lynn M. Bamford: Sales of $713 million increased 13% year-over-year, driven by better-than-expected performance in the defense electronics segment, which continues to benefit from strong conversion on its healthy and growing backlog. Our performance was led by growth in all of our aerospace and defense markets, highlighted by more than 30% sales growth in both aerospace and ground defense, along with strong growth in commercial aerospace. Operating income increased 23% year-over-year, exceeding our strong sales growth and resulted in 110 basis points of overall operating margin expansion. Diluted earnings per share of $1.99 increased 30% year-over-year and exceeded our expectations, primarily due to higher sales. Adjusted free cash flow, while typically a first quarter outflow reflected a year-over-year improvement of 37%.
Lynn M. Bamford: Starting with our first quarter 2024 highlights we are off to a great start as we delivered strong overall with results that exceeded our expectations sales of $713 million increased 13% year every year driven by better than expected performance in the defense electronics segment.
Lynn M. Bamford: Which continues to benefit from strong conversion on its healthy and growing backlog.
Lynn M. Bamford: Our performance was led by growth in all of our aerospace and defense market highlighted by more than 30% sales growth in both aerospace and ground defense along with strong growth in commercial aerospace.
Lynn M. Bamford: Operating income increased 23% year over year exceeding our strong sales growth and resulted in 110 basis points of overall operating margin expansion.
Lynn M. Bamford: Diluted earnings per share of $1 99 increased 30% year every year and exceeded our expectations, primarily due to the higher sales.
Lynn M. Bamford: Adjusted free cash flow well typically.
Lynn M. Bamford: Our first quarter outflow reflected a year over year improvement of 37%.
Lynn M. Bamford: Chris will provide some additional color on the key drivers of these metrics later in our prepared remarks. New orders also demonstrated tremendous growth in the first quarter, up 26% year-over-year to more than $900 million and resulted in an overall book-to-bill of 1.26 times. Within our A&D markets, we experience strong demand globally for defense electronics, including our embedded computing and tactical communications equipment. Of note, the breadth of our tactical communications product portfolio continues to expand beyond its historically served U.S. Army and Marine Corps customers.
Lynn M. Bamford: Chris will provide some additional color on the key drivers of these metrics later in our prepared remarks.
Lynn M. Bamford: New orders also demand demonstrated tremendous growth in the first quarter up 26% year over year to more than $900 million and resulted in an overall book to bill of 1.26 times.
Lynn M. Bamford: Within our A&D markets, we experienced strong demand globally for defense electronics, including our embedded computing and tactical communications equipment.
Lynn M. Bamford: Of note the breath of our tactical communications product portfolio continues to expand beyond its historically served U S Army and Marine Corps customers. During the first quarter. This business was awarded the first win with a U S Air Force and exciting development, which we look forward to discussing in greater detail.
Lynn M. Bamford: During the first quarter, this business was awarded its first win with the U.S. Air Force, an exciting development which we look forward to discussing in greater detail at our upcoming Investor Day. We also experienced strong order growth in naval defense, supporting current and next generation submarine programs. In our commercial markets, we continue to experience increasing demand for our commercial nuclear products. Overall, we reached a record backlog of in excess of $3 billion, which provides us with great visibility and confidence in achieving our updated 2024 financial guidance.
Lynn M. Bamford: I'm, an investor day.
Lynn M. Bamford: We also experienced strong order growth in naval Defense supporting times and next generation submarine programs and.
Lynn M. Bamford: In our commercial markets, we continued to experience increasing demand for our commercial nuclear products.
Lynn M. Bamford: Overall, we reached a record backlog in excess of $3 billion, which provides us with great visibility and confidence in achieving our updated 2024 financial guidance.
Speaker Change: Wrapping up my thoughts on the quarter.
Lynn M. Bamford: Wrapping up my thoughts on the quarter, though our operational performance exceeded our overall expectations, we did face some challenges. This included an approximately $10 million headwind based on a change in estimate on a single naval contract within the naval and power segment. Additionally, we encountered some technical challenges at a key milestone in the contract.
Lynn M. Bamford: Though our operational performance exceeded our overall expectations. We did face. Some challenges. This included an approximately $10 million headwind based on a change in estimate on a single naval contract within the naval and power segment.
Lynn M. Bamford: We encountered some technical challenges at a key milestone in the contract.
Lynn M. Bamford: We now have a path to resolution and are working closely with our customer while dedicating the proper resources to its success. Finally, regarding our 2024 guidance, despite the impact of the Naval Contract Adjustment, we were encouraged by the strong start to the year and have confidence to increase our overall guidance for sales, operating income, and earnings per share. We now expect overall sales to increase 5 to 7 percent, driven by increases in all of our major end markets.
Lynn M. Bamford: We now have a path to resolution and are working closely with our customer while dedicating the proper resources towards success.
Lynn M. Bamford: Finally regarding our 2020 for guidance.
Lynn M. Bamford: By the impact of the naval contract adjustment, we were encouraged by the strong start to the year and have confidence to increase our overall guidance for sales operating income and earnings per share.
Lynn M. Bamford: We now expect overall sales to increase 5% to 7% driven by increases in all of our major end markets.
Lynn M. Bamford: This outlook includes the contribution from our newest commercial nuclear acquisition, WSC Inc., which I'll discuss in greater detail later in our remarks. We expect continued operating margin expansion in 2024 while making incremental investments in both internally and externally funded research and development. We remain on track to deliver solid growth in diluted EPS, which we now expect to range from 8 to 11 percent, and also generate strong free cash flow. In summary, our strategy to grow the business continues to build momentum, and Curtiss-Wright remains well positioned to deliver another exceptional performance in 2024. Now, I would like to turn the call over to Chris to continue with our prepared remarks. Thank you.
Lynn M. Bamford: This outlook includes the contribution from our newest commercial nuclear acquisition of WSB, Inc.
Chris: Which I'll discuss in greater detail later in our remarks, we expect continued operating margin expansion in 2024, while making incremental investments in both internally and externally funded research and development.
Chris: We remain on track to deliver solid growth and diluted EPS, which we now expect to range from 8% to 11% and also generate strong free cash flow in summary, our strategy to grow the business continues to build momentum and Curtiss Wright remains well positioned to deliver another exceptional.
Lynn M. Bamford: Performance in 2024, now I would like to turn the call over to Chris to continue with our prepared remarks. Thank.
Chris: Thank you.
Chris Clark: On slide four, I'll review the key drivers of our first quarter 2024 performance by segment, B&N Aerospace & Industrial, where our overall sales growth of 8% was in line with our expectations. In this segment's commercial aerospace market, we experienced strong OEM sales growth in excess of 25%, supporting the continued ramp-up in production across narrow-body and wide-body platforms. In the segmented aerospace defense market, we benefited from both higher development program revenues and sales of actuation products on U.S. fighter jets. In the general industrial market, improved demand for our new power management electronics supporting the on-highway market was more than offset by reduced off-highway sales to construction markets.
Chris: On slide four I'll review the key drivers of our first quarter 2020 for performance by segment.
Chris Clark: I'll begin in aerospace and industrial where overall sales growth of 8% was in line with our expectations.
Chris Clark: Within the segments commercial aerospace market, we experienced strong OEM sales growth in excess of 25% supporting the continued ramp up in production across narrow body and wide body platforms.
Chris Clark: And the segments Aerospace defense market, we benefited from both higher development program revenues and sales of actuation products on U S fighter Jets.
Chris Clark: The general industrial market improved demand for our new power management electronics supporting the on highway market was more than offset by reduced off highway sales to construction markets.
Chris Clark: In turning to this segment's profitability, favorable absorption on higher sales was offset by unfavorable mix and timing on lower margin development programs. Next, in the defense electronics segment, sales growth of 31% exceeded our expectations as we continue to benefit from our strong increases in global demand for our products. The sales performance was principally driven by better than expected growth in our ground defense market, where we experienced record high sales for tactical communications equipment, which included growth to both domestic and direct foreign military customers. Within aerospace defense, we experienced strong growth in embedded computing sales across a number of C5ISR programs, including the Seahawk Helicopter, F-35, and Global Hawk UAV programs, to name a few.
Chris Clark: And turning to the segments profitability favorable absorption on higher sales was offset by unfavorable mix and timing on lower margin development programs.
Chris Clark: Next in the defense electronics segment sales growth of 31% exceeded our expectations as we continue to benefit from our strong increases in global demand for our products.
Chris Clark: The sales performance was principally driven by better than expected growth in our ground defense market, where we experienced record high sales for tactical communications equipment, which included growth to both domestic and direct foreign military customers.
Chris Clark: Within aerospace defense, we experienced strong growth in embedded computing sales across a number of C. Five ISR programs, including the Seahawk helicopter F 35, and global Hawk UAV programs to name a few.
Chris Clark: Regarding the segment's operating performance, we delivered a strong 22, 7% operating margin up 830 basis points year over year, reflecting favorable absorption on higher revenues and a shift in mix towards higher margin C. Five ISR programs and tactical communications equipment.
Chris Clark: Regarding the segment's operating performance, we delivered a strong 22.7% operating margin of 830 basis points year-over-year, reflecting favorable absorption on higher revenues and a shift in mix towards higher-margin C5ISR programs and tactical communications equipment. Turning to the naval and power segment, overall sales growth of 6% was essentially in line with our expectations. Starting in this segment's aerospace defense market, our results reflected continued strong global demand for our aircraft arresting system.
Chris Clark: Turning to enable and power segment overall sales growth of 6% was essentially in line with our expectations.
Chris Clark: Starting in this segments Aerospace defense market. Our results reflected continued strong global demand for our aircraft arresting systems.
Chris Clark: With an enabled defense market, our results reflected higher revenues supporting the Columbia-class submarine program, as well as higher Fleet Service Center revenues supporting the U.S. naval aftermarket. However, our results were partially offset by the timing of production revenues on the CVN-80 aircraft carrier and Virginia-class submarine programs.
Chris Clark: Within enabled defense market, our results reflected higher revenues supporting the Columbia class submarine program as well as higher Fleet Service Center revenues supporting the U S Naval aftermarket.
Chris Clark: However, our results were partially offset by the timing of production revenues on the C. D. N 80 aircraft carrier and Virginia class submarine programs.
Chris Clark: And the power and process market. Our performance was mainly driven by higher growth in the commercial nuclear market supporting existing operating reactors across North America.
Chris Clark: In the power and process market, our performance was mainly driven by higher growth in the commercial nuclear market, supporting existing operating reactors across North America. In turning to the segment's operating performance, despite favorable absorption on solid revenue growth, our results were negatively impacted by a naval contract adjustment, as Lynn mentioned earlier in her prepared remarks. To sum up Curtiss-Wright's first quarter, overall, we generated solid absorption on the stronger-than-expected top-line performance, resulting in 110 basis points of operating margin expansion, as we continue to leverage the consolidated portfolio to deliver profitable growth.
Chris Clark: And turning to the segments operating performance despite favorable absorption on solid revenue growth. Our results reflect were negatively impacted by a naval contract adjustment as Lynn mentioned earlier in her prepared remarks.
Chris Clark: To sum up Curtiss Wright's first quarter overall, we generated solid absorption on the stronger than expected topline performance, resulting in 110 basis points and operating margin expansion as we continue to leverage the consolidated portfolio to deliver profitable growth.
Speaker Change: Next turning to our full year 2024 guidance I'll begin on slide five with our end market sales outlook.
Chris Clark: Next, turning to our full year 2024 guidance, I'll begin on slide five of our end market sales outlook. We now expect total sales to grow 5-7%, reflecting strengthening demand in defense electronics and the added contribution from the WSC acquisition. Starting in aerospace defense, we now expect full-year sales growth of 6-8% based on a strong and growing order book for our embedded computing equipment on various C5ISR programs. Within ground defense, we now expect full-year sales growth of 10 to 12 percent, reflecting continued strong demand for our tactical communications equipment.
Chris Clark: We now expect total sales to grow 5% to 7%, reflecting strengthening demand in defense electronics and the added contribution from the WRC acquisition.
Chris Clark: Starting in Aerospace defense, we now expect full year sales growth of 6% to 8% based on our strong and growing order book for our embedded computing equipment on various C. Five ISR programs.
Chris Clark: With in ground defense, we now expect full year sales growth of 10% to 12%, reflecting continued strong demand for our tactical communications equipment.
Chris Clark: Enabled defense our outlook for 3% to 5% sales growth remains unchanged and is mainly driven by the ramp up in production on both the C D and in 81 aircraft carrier and Columbia class submarine programs.
Chris Clark: In naval defense, our outlook for 3 to 5% sales growth remains unchanged and is mainly driven by the ramp-up in production on both the CVN-81 aircraft carrier and the Columbia-class submarine program. Looking more broadly across our defense markets, our updated guidance also reflects expectations for increased direct foreign military sales, where we now expect an improvement from mid to high single-digit growth, driven by the alignment of our technologies to support global defense priorities.
Chris Clark: Looking more broadly across our defense markets. Our updated guidance also reflects expectations for increased direct foreign military sales, where we now expect an improvement from mid to high single digit growth driven by the alignment of our technologies to support global defense priorities.
Chris Clark: Turning to commercial aerospace our outlook for 10% to 12% sales growth remains unchanged driven by higher OEM production rates on narrow body and wide body aircraft, while maintaining a conservative view as it relates to the 737 Max program.
Chris Clark: Turning to commercial aerospace, our outlook for 10 to 12 percent sales growth remains unchanged, driven by higher OEM production rates on narrow-body and wide-body aircraft, while maintaining a conservative view as it relates to the 737 MAX program. Wrapping up our aerospace and defense markets, we now expect total sales to increase 6% to 8% in 2024. Moving on to our commercial markets and the power and process market, we now expect full-year sales growth of four to six percent, which principally reflects the contribution from WSC.
Chris Clark: Wrapping up our aerospace and defense markets. We now expect total sales to increase 6% to 8% in 2024.
Chris Clark: Moving onto our commercial markets and the power and process market. We now expect full year sales growth of four 6%, which principally reflects the contribution from WSJ.
Chris Clark: Within our commercial nuclear market, we've raised our outlook to a high single-digit full-year growth rate, principally reflecting the contribution of WSC sales in support of both existing and small modular reactors. Elsewhere, in partially offsetting the nuclear market improvement, we now expect process valve sales to decline modestly in 2024, mainly due to the timing of large capital projects. As a result, we revised the overall process market down slightly to a low single-digit full-year growth rate.
Chris Clark: Within our commercial nuclear market, we've raised our outlook to a high single digit full year growth rate, principally reflecting the contribution of WSI sales and support with both existing and small modular reactors.
Chris Clark: Elsewhere in partially offsetting the nuclear market improvement, we now expect process valve sales to decline modestly in 2024, mainly due to the timing of large capital projects. As a result, we revise the overall process market down slightly to a low single digit full year growth rate.
Chris Clark: And lastly, in the general industrial market, our expectations of 1-3% growth remain unchanged and are driven by increased sales of our power management electronics and industrial vehicles and increased sales of surface treatment services. Wrapping up our total commercial markets, we continue to target full-year sales growth of 2 to 4 percent. Moving on to our full-year outlook by segment on slide six, I'll begin with aerospace and industrial, where we continue to expect sales to grow three to five percent, principally driven by the strength of commercial aerospace.
Chris Clark: And lastly in the general industrial market, our expectations of 1% to 3% growth remain unchanged and are driven by increased sales of our power management electronics and industrial vehicles and increased sales of surface treatment services.
Chris Clark: Wrapping up our total commercial markets, we continue to target full year sales growth of 2% to 4%.
Chris Clark: Moving onto our full year outlook by segment on slide six I'll begin in aerospace and industrial where we continue to expect sales to grow 3% to 5% principally driven by the strength in commercial aerospace.
Chris Clark: Regarding the segments profitability, we continue to expect operating income of 5% to 8% and operating margin expansion of 20 to 40 basis points to a range of 16, 6% to 16, 8%.
Chris Clark: Regarding this segment's profitability, we continue to expect operating income of 5% to 8% and operating margin expansion of 20 to 40 basis points to a range of 16.6% to 16.8%. Next, in defense electronics, we now expect sales to grow 8 to 10 percent, driven by the strong first quarter performance and continued growth in the order book, which increased more than 20 percent in the first quarter, reflecting a book-to-bill of nearly 1.4 times.
Chris Clark: Yeah.
Chris Clark: Next in defense Electronics, we now expect sales to grow 8% to 10% driven by the strong first quarter performance and continued growth in the order book, which increased more than 20% in the first quarter, reflecting a book to Bill was nearly one four times.
Chris Clark: Regarding the segments profitability and based on the improved top line guide operating income is now projected to grow 11% to 13%. While operating margin is expected to increase 50 to 70 basis points and range from 24 to 24, 2%.
Chris Clark: Regarding the segment's profitability, and based on the improved top-line guide, operating income is now projected to grow 11 to 13 percent, while operating margin is expected to increase 50 to 70 basis points and range from 24 to 24.2 percent. As a reminder, this segment's profitability also includes an incremental $5 million or 50 basis point headwind from internally funded R&D investments. And lastly, Naval Empower. We continue to expect sales to grow four to six percent, driven by solid growth in our naval defense and commercial nuclear market.
Chris Clark: As a reminder, this segment's profitability also includes an incremental $5 million or 50 basis point headwind from internally funded R&D investments.
Chris Clark: And lastly, enable and power we continue to expect sales to grow 4% to 6% driven by solid growth in our naval defense and commercial nuclear markets.
Chris Clark: Regarding the segment's profitability, while we anticipate favorable absorption on the overall increase in sales, our updated guidance reflects the impact of the first quarter naval contract adjustment. As a result, operating income is now projected to decrease 1 to 3 percent, while adjusted operating margin is expected to range from 16.1 to 16.3 percent. Of note, and as discussed on our February earnings call, our four-year outlook also reflects margin pressures associated with the notable ramp-up in development programs across Naval and Power.
Chris Clark: Regarding our segments profitability, while we anticipate favorable absorption on the overall increase in sales our updated guidance reflects the impact of the first quarter naval contract adjustment.
Chris Clark: As a result operating income is now projected to decrease 1% to 3% while adjusted operating margin is expected to range from 16, 1% to 16, 3%.
Chris Clark: Of note and as discussed on our February earnings call. Our full year outlook also reflects margin pressures associated with the notable ramp up in development programs across naval and power.
Chris Clark: For your quarterly modeling purposes, we anticipate this segment second quarter sales to grow modestly year over year in.
Chris Clark: For your quarterly modeling purposes, we anticipate this segment's second quarter sales to grow modestly year over year. In addition, in this segment, we expect sequential quarterly improvement in operating margin over the remainder of the year, with slightly more pressure in the second quarter based upon the timing of development programs. So to summarize our outlook, overall, we now expect total Curtiss-Wright operating income to grow 5% to 8% and operating margin to range from 17.4% to 17.6%, including a year-over-year increase of more than $20 million in total engineering spending.
Chris Clark: In addition in this segment, we expect sequential quarterly improvement in operating margin over the remainder of the year with slightly more pressure in the second quarter based upon the timing of development programs.
Chris Clark: So to summarize our outlook overall, we now expect total Curtiss Wright operating income to grow 5% to 8% and operating margin to range from $17 four to 17, 6%, including a year over year increase of more than $20 million in total engineering spending.
Chris Clark: Okay.
Chris Clark: Continue with our financial outlook on slide 7 and start with our EPS guidance. We expect full year 2024 diluted EPS to now range from $10.10 to $10.40, up 8 to 11%, principally reflecting improved sales and profitability within defense electronics. Building upon our solid first quarter performance, we expect sequential quarterly EPS improvement throughout 2024, and we expect to generate approximately 40% of our full-year earnings per share in the first half. And lastly, turning to pre-cash flow, in Q1, we experienced a solid year-over-year improvement, reflecting growth of 37% on an adjusted basis.
Chris Clark: Continuing with our financial outlook on slide seven and starting with our EPS guidance. We expect full year 2024 diluted EPS to now range from $10 10 to $10 40 up 8% to 11% print.
Chris Clark: Principally reflecting improved sales and profitability within defense electronics.
Chris Clark: Building upon our solid first quarter performance, we expect sequential quarterly EPS improvement throughout 2024, and we expect to generate approximately 40% of our full year earnings per share in the first half.
Chris Clark: And lastly, turning to free cash flow in Q1, we experienced a solid year over year improvement, reflecting growth of 37% on an adjusted basis.
Chris Clark: As a reminder, and included in the comparison, we also overcame the $20 million cash headwind associated with the collection of the final cap 1000 payment in the first quarter of 2023.
Chris Clark: As a reminder, and included in the comparison, we also overcame the $20 million cash headwind associated with the collection of the final CAP 1000 payment in the first quarter of 2023. Overall, we had a good start to the year, and that provides us with increased confidence in our full-year free cash flow guidance, ranging from $415 to $435 million, and our ability to deliver a free cash flow conversion rate well in excess of 100%. Now, I'd like to turn the call back over to Lynn.
Chris Clark: Overall, we had a good start to the year and that provides us with increased confidence in our full year free cash flow guidance, ranging from $415 million to $435 million and our ability to deliver a free cash flow conversion rate well in excess of 100%.
Chris Clark: Now I'd like to turn the call back over to Lynn.
Lynn M. Bamford: And turning to slide 8, today we discussed how the strength of our backlog and our alignment to the industry growth drivers will accelerate organic growth in all of our major markets in 2024. Added to that, we have remained extremely disciplined in our approach to capital allocation and have strategically pursued acquisitions as an accelerator of our top line growth. In April, we announced the acquisition of WSC, which is a leading supplier of state-of-the-art power plant control room simulation technology.
Lynn: Thank you, Chris and turning to slide eight today, we have discussed how the strength of our backlog and our alignment to the industry growth drivers will accelerate organic growth in all of our major markets in 2024.
Lynn M. Bamford: Adding to that we have remained extremely disciplined in our approach to capital allocation and have strategically pursued acquisitions as an accelerator of our topline growth in April we announced the acquisition of WSB, which is a leading supplier of state of the art power plant control room simulation technology.
Lynn M. Bamford: Established nearly 30 years ago, WSC's product lines range from plant simulators, as you see pictured on the slide, to simulation-assisted engineering, which is the starting point in major plant upgrades and new plant design. Today, the business enjoys a strong installed base of over 225 plant simulators and provides critical support to both existing commercial nuclear operating factors and other power generation plants across the globe. Furthermore, as nuclear operators conduct maintenance and plant life extensions, simulation-assisted engineering is used in major upgrades, providing an additional opportunity for Curtiss-Wright's broad suite of products to help solve our customers' needs.
Lynn M. Bamford: <unk> nearly 30 years ago Wsb's product lines ranged from plant simulators as you see pictured on this slide to simulation assisted engineering, which is the starting point and major plant upgrades and new plant design.
Lynn M. Bamford: Today, the business enjoys a strong installed base of over 225 plant simulators and provides critical support to both existing commercial nuclear operating Iraq or factors and other power generation plants across the globe.
Lynn M. Bamford: Further as nuclear operators conduct maintenance and plant life extension stimulation assisted engineering.
Lynn M. Bamford: Used in major upgrades, providing an additional opportunity for Curtiss Wright's broad suite of products to help solve our customers' needs the acquisition advances Curtiss Wright's position as a strategic partner, providing us with early visibility and influence into the design of leading small modular reactors.
Lynn M. Bamford: The acquisition advances Curtiss-Wright's position as a strategic partner, providing us with early visibility and influence into the design of leading small modular reactors, including WSC's established positions with Terrapower, GE Hitachi, and Oltec. Beyond that, the acquisition closely aligns with our strategic and financial goals and our focus on expanding our commercial nuclear presence. In terms of key financials, WSC aligns with our long-term acquisition criteria and financial objectives of top-line growth, margin expansion, and pre-cash flow generation. WSC generated about $15 million in revenue in 2023, and we are projecting that it will grow at a high single-digit annualized pace for the foreseeable future.
Lynn M. Bamford: Including Ws sees established positions with Terrapower GE talk okay.
Lynn M. Bamford: And that the acquisition closely aligns with our strategic and financial filters and our focus on expanding our commercial nuclear president and.
Lynn M. Bamford: In terms of key financials, WMC aligns with our long term acquisition criteria and financial objectives of top line growth margin expansion and free cash flow generation.
Lynn M. Bamford: <unk> generated about $15 million in revenue in 2023, and we are projecting that it will grow at high single digit annualized pace for the foreseeable future.
Lynn M. Bamford: This is an exciting business with a long legacy, an experienced management team, and strong customer relationships, and it is a great fit with Curtiss-Wright. In closing, Curtiss-Wright is well-positioned to demonstrate strong, profitable growth, and we're building momentum on our pivot to growth strategy. We are confident in our ability to generate 5 to 7 percent sales growth this year and to deliver incremental operating margin expansion while making strategic investments in our research and development to accelerate our long-term organic growth.
Lynn M. Bamford: This is an exciting business with a long legacy experienced management team and strong customer relationships and it is a great fit with Curtiss Wright.
Lynn M. Bamford: In closing Curtiss Wright is well positioned to demonstrate strong profitable growth and we're building momentum on our pivot to growth strategy. We are confident in our ability to generate 5% to 7% sales growth this year and to deliver incremental operating margin expansion, while making strategic.
Lynn M. Bamford: Investments in our research and development to accelerate our long term organic growth. This.
Lynn M. Bamford: This performance puts us on the path to reach double-digit EPS growth yet again while steadily achieving in excess of 100% pre-cash flow conversion. Curtiss-Wright maintains a very healthy balance sheet, allowing for continued investment as we position the company for future organic growth and drive tremendous long-term value for our stakeholders. Looking ahead, our upcoming May 21 Investor Day is only a few weeks away. We look forward to connecting in person in New York City or via webcast to recap the successful execution of our Pivot to Growth strategy throughout the past three years and to share the many exciting avenues for growth across Curtiss-Wright's portfolio.
Lynn M. Bamford: This performance puts us on path to reach double digit EPS growth, yet again, while steadily achieving in excess of 100% free cash flow conversion.
Lynn M. Bamford: Curtiss Wright maintains a very healthy balance sheet, allowing for continued investment as we position the company for future organic growth and drive tremendous long term value for our stakeholders.
Lynn M. Bamford: Looking ahead, our upcoming May 21, Investor day is only a few weeks away. We look forward to connecting in person in New York city or be a webcast to recap this.
Lynn M. Bamford: Successful execution of our pivot to growth strategy throughout the past three years and to share the many exciting avenues for growth across Curtiss Wright's portfolio.
Lynn M. Bamford: We'll focus on how we have the right people, systems, and infrastructure in place to enable organic growth and how we're investing in critical technologies across our end markets to ensure Curtiss-Wright remains well positioned to meet the needs of our customers, both today and well into the future. We'll also introduce new financial targets, demonstrating our continued drive for long-term profitable growth. As a reminder, we'll be hosting a commercial nuclear panel comprised of leading industry experts from the Nuclear Energy Institute, Wessinghouse, and Energy Northwest to share their perspectives on the industry at large and the tremendous global support for the advancement of clean energy. We hope that you will join us. Thank you, and at this time, I would like to open up today's conference call to questions.
Lynn M. Bamford: We'll focus on how we have the right people systems and infrastructure in place to enable organic growth and how we're investing in critical technologies across our end markets to ensure Curtiss Wright remains well positioned to meet the needs of our customers both today and well into the future. We will also introduce new financial targets.
Lynn M. Bamford: Demonstrating our continued drive for long term profitable growth.
Lynn M. Bamford: As a reminder, we'll be hosting our commercial nuclear panel comprised of leading industry experts from the nuclear Energy Institute, Westinghouse and energy northwest to share their perspective on the industry at large and the tremendous global support for the advancement of clean energy, We hope that you will join us.
Speaker Change: Thank you and at this time I would like to open up today's conference call for questions.
Operator: Thank you, Ms. Bamford. Ladies and gentlemen, the floor is now open to questions. At this time, if you do have a question or comment, please press star 1 on your telephone keypad. If at any point your question is answered, you may remove yourself from the queue by pressing star 2. Again, we ask that you pick up your handset when asking your questions to provide optimal sound quality. Thank you. We'll take our first question this morning from Nathan Jones.
Speaker Change: Thank you Ms Banford, ladies and gentlemen, the floor is now open for questions. At this time. If you do have a question or comment. Please press star one on your telephone keypad. If any point. Your question is answered you may remove yourself from the queue by pressing star two.
Operator: Can we ask that you pick up your handset when posing your questions to provide optimal sound quality. Thank you.
Operator: We'll take our first question this morning from Nathan Jones of Stifel.
Nathan Hardie Jones: Good morning, everyone.
Nathan Hardie Jones: Good morning. Good morning.
Nathan Hardie Jones: Good morning, good morning.
Nathan Hardie Jones: I just wanted to start off on Naval and Power and this $10 million, I don't know what to call it, charge, or penalty. I mean, you took the naval and power operating income forecast down by $10 million, and you said there was $10 million attached to this one single contract. Firstly, do you have a path to recovering that that you're just not baking into the guidance at the moment? And secondly, should we really be thinking about this as a one-time item, and the core underlying run rate for margins here is in that $17, $17.2 range rather than just the $17?
Nathan Hardie Jones: Just wanted to start off on unable and power.
Nathan Hardie Jones: $10 million.
Nathan Hardie Jones: I don't know what to call it charge penalty.
Nathan Hardie Jones: Yeah.
Nathan Hardie Jones: I mean, you took the naval and power operating income forecast.
Nathan Hardie Jones: Costs down by 10 million Bucks and you said, there's 10 million box attached to this one single contract.
Nathan Hardie Jones: Yeah.
Nathan Hardie Jones: Firstly do you have a path to recovering that you're just not baking into the guidance at the moment.
Nathan Hardie Jones: And secondly, should we really be thinking about this as a one time item in the core underlying run rate for margins here is in that seven Jane 17, two range rather than just obviously extended to sandridge.
Speaker Change: So thank you for the question Nathan and I do want to just take effect and then put discharge in perspective of our business overall as you know we make complex equipment, they must not fail and work across a wide range of naval platforms and our content is on the current fleet and the tech.
Lynn M. Bamford: So, thank you for the question, Nathan. And I do want to just take a second and put this charge in perspective of our business overall. As you know, we make complex equipment that must not fail and work across a wide range of naval platforms. And our focus is on the current fleet, and the technologies we're providing to that current fleet continue to evolve and are not static. And we're also working, as I mentioned in the prepared remarks, to ramp orders on next-generation platforms.
Lynn M. Bamford: Apologies, we provide into that current fleet continue to evolve and are not static and we're also working as I mentioned in the prepared remark to ramp orders on next generation platforms. So with all that said, we do work on a wide variety of platforms. Now you did not ask when you know we can't tell you the specifics of what the.
Lynn M. Bamford: So, with all that said, we do work on a wide variety of platforms. Now, you did not ask, and we can't say the specifics of what this program is, but it was a technical challenge at a key stage in the contract. And we work, we have a lot of things we do as a company to avoid being in this situation, and those range from the ways we manage technical risk to the way we financially oversee contracts.
Lynn M. Bamford: Our program is but it was a technical challenge at a key stage in the contract and we work we have a lot of things, we do as a company to avoid.
Lynn M. Bamford: Being in this situation and those you know right.
Lynn M. Bamford: <unk> from the ways, we manage technical risks to the way, we financially oversee contracts and with that I do not see this as a regularly occurring event as to recovery, we absolutely will work to do that but we felt it was prudent at this time to take the charge.
Lynn M. Bamford: And with that, I do not see this as a regularly occurring event. As to recovery, we absolutely will work to do that, but we felt it was prudent at this time to take the charge across the naval and power segment in our guidance. But that doesn't mean we've taken our eye off the ball of trying to recover some of the costs.
Lynn M. Bamford: Across the naval and power segments in our in our guidance.
Lynn M. Bamford: But that doesn't mean, we've taken our eye off the ball of trying to recover some of the car.
Lynn M. Bamford: And maybe I'll, just kind of that makes sense.
Chris Clark: And maybe I'll just cut it at ten. Maybe I'll just pick up from here, Nathan. I think, you know, when you think about the charge, I mean, it's certainly a one-time catch-up on the contract. We expect to complete this contract closer to year end. And, you know, as you look at that, the naval and power margin into the future, I think you've got the right mindset that this is something that, you know, will be maybe a tailwind for us or will return to more normalized margins as So
Speaker Change: Maybe I'll just pick up from there Nathan I think when you think about the charge I mean it certainly.
Chris Clark: A one time.
Chris Clark: Catch up on the contract and we expect to complete this contract closer to year end and you know as you look at that are enabling power margin into the future I think you've got the right mindset that this is something that will be.
Chris Clark: Maybe a tailwind for several months, we will return to more normalized margins.
Chris Clark: We enter into 2025 so.
Speaker Change: Makes sense. Thanks, I guess a follow up question for me is going to be on the.
Lynn M. Bamford: Makes sense, thanks. I guess the follow-up question for me is going to be about the defense electronics market. Obviously, very strong growth there and an improvement in the outlook. Can you just comment on the differences between, you know, supply chain improvement, your ability to deliver on some backlog that was already sitting there versus core improvement in demand and the key drivers to the core improvement in demand? Thanks. Thank you for that. So we're really, honestly, quite happy.
Lynn M. Bamford: Vince electronics market.
Lynn M. Bamford: Obviously very strong growth there and an improvement in the outlook can you just comment on the differences between supply chain improvement your ability to deliver on some backlog that was already sitting there buses car improvement in demand.
Lynn M. Bamford: Obviously, the car improvement on demand thanks.
Lynn M. Bamford: Thank you for that. We're really, honestly, quite pleased with the growth of this business. And we really started saying the supply chain had stabilized back in, you know, really at the beginning of 2023. It doesn't mean it's the same as it was in 2019, but at a stable position. So at this point, you know, we've put different systems in place and things you've heard us talk about in the past that we are performing well with how our supply chain is performing for us.
Lynn M. Bamford: Thank you for that so we're really honestly quite pleased.
Lynn M. Bamford: With the growth in this business and we really started seeing the supply chain had stabilized back in really in the beginning of 2023, we were at a you know it doesn't mean, it's the same as it was in 2019, but at a stable position. So.
Lynn M. Bamford: So it's not had a dramatic impact on the business as it stands today. We continue to watch it and be very observant of trends within the supply chain. So it's not something we've taken our eye off of, but it is not, you know, driving business today in any negative way. Foreign military sales remain strong across the board. They're up, you know, 20%, we're anticipating in the year from year over year.
Lynn M. Bamford: At this point you know, we put different systems in place and things you've heard us talk about in the past that we are performing well with how our supply chain is performing for us. So it's not a dramatic impact on the business as it stands today, we continue to watch it and be.
Lynn M. Bamford: Very observant of trends within the supply chain. So it's not something we've taken our eye off of but it is.
Lynn M. Bamford: Not driving.
Lynn M. Bamford: With today in any negative way there the demand across its business is just really healthy and great. Yeah, we talked about our order book last year being $936 million or up 12% and we're off to a strong start this year, we're seeing you know.
Lynn M. Bamford: Really strong orders across the business the tactical communications.
Lynn M. Bamford: Equipment is still stays and very steady demand both here in the U S and a cross.
Lynn M. Bamford: Foreign allies and is mentioned in the prepared remarks, we have now.
Lynn M. Bamford: Entered into our first order to supply equipment into the Air Force, which is really exciting to open up another branch of the military.
Lynn M. Bamford: So that continues to be, you know, a real tailwind as, you know, maybe US defense budgets are expected to slow. By, by, you know, bringing new technologies to market and winning new content within the DOD and then growing foreign military sales.
Lynn M. Bamford: Foreign military sales remain strong across the board they're up 20%.
Lynn M. Bamford: Yeah, we're anticipating in the year from year over year. So that continues to be a real tailwind as you know maybe U S. Defense budgets are expected to slowly in the budget. This year is up 3%. So it was still up and that's always on the back of 10% last year, we can never take our eye off of that but.
Lynn M. Bamford: But is that is you know is that maybe slows a bit going forward 25, and beyond that our foreign military sales just continue to afford us an opportunity for you know really outgrowing the D. O D budget well we are proud that we've done for 20 years. At this point has really been able to outgrow the D O D budgets.
Lynn M. Bamford: Bye bye, bringing new technologies to market and winning new content within the D. O D and then growing with foreign military sales.
Lynn M. Bamford: And Mr. Jones did you have anything further sir.
Operator: and Mr. Jones, did you have anything further?
Nathan Hardie Jones: Now, thanks for taking my question.
Jones: Thanks for taking my questions.
Speaker Change: Thank you Nathan Jones.
Nathan Hardie Jones: We'll go next now to Myles Walton with Wolfe research.
Operator: We'll go next to Myles Walton with Wolf Research.
Operator: Hi, Good morning, Glenn and Chris This is Greg Dahlberg on for Myles Walton.
Greg Dalbergon: Hi, good morning, Lynn and Kris. This is Greg Dalbergon on behalf of Myles Walton.
Greg Dalbergon: I was hoping to start with the ground defense guidance, so I saw that it got increased. Although I think it would imply that 1Q is the high point or maybe some declines from here. Although, you know, commentary seems pretty positive on comms equipment and enduring shield. So I was just wondering, is there any reason or perhaps a kind of dig into the cadence from here?
Gregory James Dahlberg: I was hoping to start with the ground defense guidance. So I saw that gotten increased.
Greg Dalbergon: Although I think it would imply that <unk> is the high point or maybe some declines from here. Although you know commentary seems pretty positive on comms equipment and an enduring shield. So I was just wondering is there any reason or perhaps kind of dig into the kind of cadence from here.
Speaker Change: Yeah. So our Q1 performance was mainly driven by the higher tactical communications equipment, and that's a relatively short cycle business.
Greg Dalbergon: And.
Chris Clark: Most of that is ship and bill. It's nearly 100% ship and bill. So you're going to definitely see in ground defense, periodic spikes or movements down just based upon, you know, the timing of deliveries and where we are. So it's not smoothed out for POC Accounting.
Greg Dalbergon: Most of that is ship and bill it's nearly a 100% ship and bill so youre going to definitely see in ground defense.
Chris Clark: Periodic spikes or movements down just based upon the timing of deliveries and where we are so its not smooth out for the.
Chris Clark: But then, I think as you look forward, you know, we're going to expect a sequential ramp-up in tactical communications as we get deeper into the year. So there's no slowing down as far as that's concerned. But if you take a look back to where we were in 2023, we had a very strong sequential ramp up in both international turret drive servo systems and then also U.S. ground vehicles, the Stryker in particular. So I think as you're comparing kind of a year-over-year, you know, first half to second half, you're going to see that, you know, maybe the growth rates aren But, you know, I think we're still expecting a bigger second half of the year in ground defense as it is, but it will be a little bit lumpy.
Chris Clark: For a POC accounting.
Chris Clark: But then I think as you look forward.
Chris Clark: We're going to expect a sequential ramp in tactical communications as we get deeper into the year. So there's no <unk>.
Chris Clark: Slowing down as far as that's concerned, but if you take a look back to where we were in 2023.
Chris Clark: We had a very strong sequential ramp in both international turret drive service systems, and then also our U S ground vehicles, the Stryker and particularly so I think as youre, comparing kind of a year over year.
Chris Clark: First half the second half youre going to see that maybe the growth rates aren't as strong in the first and in the back half of this year for that reason.
Chris Clark: But you know.
Chris Clark: I think we're still expecting a bigger second half of the year in ground defense as it is but it will be a little bit lumpy.
Speaker Change: Great and then one quick one on commercial are all with the guidance reiterated at 12%.
Greg Dalbergon: Great, and then one quick one on Commercial Aero, with the guidance reiterated at 12%. I know you mentioned conservatism on the Boeing-Mac side, but are there any platforms calling out for positive, I guess, puts and takes there? I think we're, you know, at
Greg Dalbergon: I know you mentioned conservatism on the Boeing Max side, I guess are there any platforms, calling out for a positive I guess puts and takes there.
Greg Dalbergon: I think where we are.
Chris Clark: I think we're, you know, our expectations are really moving in line with Boeing and Airbus production rates, largely. You know, right now, I think when you look at the 737 MAX, and we provide a number of products across that platform, you know, I'd put us at about 35 per month. So I think we're kind of in line with what Boeing's expectations are for production. Now, that's not always the case because we are a Tier 2 and, you know, we're usually like 6 to 12 months ahead on the cycle. But yeah, we're seeing some positives certainly across Airbus and, you know, wide body platforms. Great, thank you so much. Thank you. We go next to Louie DiPalma of
Greg Dalbergon: Our expectations are really moving in line with the with Boeing and Airbus production rates largely you.
Chris Clark: You know right now I think when you look at the 737, Max and we provide a number of products across that platform and I'd put us at about 35 per month. So I think we're kind of in line with what boeing's expectations are for production now.
Chris Clark: Now that's not always the case, because we aren't here to them and you know we're usually like six to 12 months I had on the cycle.
Chris Clark: But yeah, we're seeing some positive certainly across Airbus and wide body platforms.
Michael Louie D DiPalma: Great. Thank you so much.
Michael Louie D DiPalma: Thank you we go next to Louie Dipalma of William Blair.
Michael Louie D DiPalma: Lynn, Chris, and Jim, good morning. Good morning. Hey, Lewis.
Michael Louie D DiPalma: When Chris and Jim Good morning.
Michael Louie D DiPalma: Good morning, Hey, Louie.
Michael Louie D DiPalma: You discussed strength for your PACSTAR tactical communications unit and the expansion to the Air Force. Tactical communications seems to be a central focus for the DoD's JADC2 program to connect sensors and shooters across the military into a unified network. In April, they announced that JADC2 was deployed in the Middle East. Is PACSTAR playing a role in that program, and is the ramp associated with JADC2?
Michael Louie D DiPalma: You discussed strength for your ear pack Star Tactical Communications unit and the expansion to the Air Force.
Michael Louie D DiPalma: Tactical communications seems to be a central focus for the D. O DS Chad C. Two program to connect sensors and shooters.
Michael Louie D DiPalma: Cross the military into a unified network and then in April Dana Chad C. T was appointed in the Middle East is taxed are playing a role in.
Michael Louie D DiPalma: That program and there's a ramp associated with Chad C too.
Speaker Change: Well your question is very insightful and the framing of sensor to shoot our.
Lynn M. Bamford: Well, your question is very insightful, and the framing of sensor to shooter broadly is a big focus across the DoD, you know, broadly, and, you know, I'm cautious to say whether specifically we're involved with JADC2. I don't think we've had any release to say specifically which programs.
Lynn M. Bamford: Broadly is a big focus across all of them.
Lynn M. Bamford: The D M D broadly and yeah.
Lynn M. Bamford: We talked broadly that we're in the, you know, across various modernization, you know, tactical communications programs. And we do play in most of the major programs, but I'll leave without comment specifically on that program. But, you know, that trend that you're talking about is, you know, a very real driver of where the DOD is spending money. And we are super well positioned to be able to provide content to solve those problems.
Lynn M. Bamford: I'm cautious to say, whether specifically were involved with John T. Two I don't think we've had any.
Lynn M. Bamford: Or at least say, specifically, which programs are we talk broadly to work in the you know across various modernization tactical communications programs and.
Lynn M. Bamford: We do play in most of the major programs that I'll leave without comment specifically on that program, but that trend that you're talking about is a.
Lynn M. Bamford: A very real driver of where the D. O D is spending money and we are super well positioned to be able to provide content to solve those problems and very you know the thing I think that you know.
Lynn M. Bamford: And very, you know, the thing I think that, you know, shout out to the PACSTAR team if anybody is listening to the call, that they have an unbelievable relationship with their customers and are so in tune to the needs and the direction the DOD wants to take the technology and add features and enhance capabilities and is always continuously rapidly turning the capabilities that we deliver to the warfighter. And we are really excited to expand that out from the Army and the Marines and to now be able to work with the Air Force as a customer. And I think, you know, it's early days to see what we'll realize in that area. Great Thanks.
Lynn M. Bamford: Shout out to the Baxter team if anybody is listening to the call, but they had an unbelievable relationship with their customers and are so in tuned to the needs and the direction of the D. O D wants to take the technology and add features and enhanced capabilities and is always continuously rapidly.
Lynn M. Bamford: Turning the capabilities that we deliver to the war fighter and we are really excited to expand that out from the army and the Marines and to now be able to work with the air forces a customer and I think it's early days, what will realize for that area.
Speaker Change: Great. Thanks, that's it for me.
Michael Louie D DiPalma: Great. Thanks, Lynn. That's it for me. Thank you.
Speaker Change: Thank you.
Michael Louie D DiPalma: Yeah.
Sam Sicker: We'll go next now to Sam's through sicker at tourists.
Operator: We'll go next to Sam Strusaker at Truist.
Operator: Yeah.
Sam Strusaker: Hi, guys.
Sam Strusaker: Good morning, guys. Good morning. I'm Michael Ciarmoli.
Sam Strusaker: Good morning, all and much more.
Sam Strusaker:
Sam Strusaker: First of all I know you guys just mentioned you're at about 35 on the Max and you said, you're seeing some positive trends within wide body could you guys, maybe give any more color kind of where you're at more specifically with like the 787.
Sam Strusaker: Yeah, So I would put us at about five per month and ramping I mean, you know we're excited that the that that program is going to be moving towards 10.
Michael Frank Ciarmoli: First of all, I know you guys just mentioned you're at about 35 on the max, and you said you've seen some positive trends within wide body. Could you guys maybe give any more color, kind of where you're at, more specifically with the 787?
Chris Clark: Yeah, so I would put us at about five per month in ramping. I mean, you know, we're excited that that program is going to be moving towards, you know, 10, 10 per month. And, you know, that 26 time frame. But yeah, it's, it's been, it's been a good pickup for us.
Chris Clark: 10, 10 per month and now.
Chris Clark: Of that 26 timeframe, but yeah.
Chris Clark: Yeah, it's a it's been it's been a good pickup for us.
Chris Clark: <unk>.
Speaker Change: Great and then I was you guys raised your margin guide for defense electronics, but it looks like for the second half, but margins are still going to be down a little bit year over year. I was curious if there's any details you can provide around that.
Chris Clark: Great. And then I was wondering, you guys raised your margin guide for defensive electronics, but it looks like for the second half, the margin is still going to be down a little bit year over year. I was curious if there were any details you could provide around that.
Speaker Change: Well so margins are are definitely going to be.
Chris Clark: Well, so margins are definitely going to be stronger in the second half of the year. They'll be up 150 basis points compared to the first half of the year. And, you know, a lot of what we experienced here in the first quarter, I mean, very, very strong margins, but a lot of it has to do with timing and mix. I mean, so our shorter cycle C5ISR products and tactical communications equipment are very, it's a very profitable product.
Chris Clark:
Chris Clark: Stronger in the second half of the year and there'll be up 150 basis points compared to the first half of the year.
Chris Clark: And you know a lot of what we experienced here in the first quarter. It means very very strong margins, but a lot of it has to do with timing and mix I mean, so our shorter cycle five ISR products in tactical communications equipment.
Chris Clark: That's very profitable product.
Chris Clark: And you're going to see, you know, some movement, quarter to quarter based upon timing of deliveries and where we are in this program. So in the back half of the year, I think we're encouraged, and we're going to see a strong surge in narrow defense. C5ISR is going to be a healthy contributor to that, and also ground defense as well.
Chris Clark: Youre going to see.
Chris Clark: You have some movement quarter to quarter based upon the timing of deliveries in and where we are in those programs. So on the back half of the year I think.
Chris Clark: We're encouraged and we're going to see a strong surge in Aero Defense C. Five ISR is going to be a healthy contributor to that and also ground defense is walk.
Speaker Change: Great and then if I could just sneak one more in I'm looking at overall revenue growth for the year, how should we think about that between kind of organic versus the acquisition in terms of driving both for the full year.
Michael Frank Ciarmoli: Great. And then if I could just sneak one more in,
Michael Frank Ciarmoli: Looking at overall revenue growth for the year, how should we think about that between kinds of organic versus acquisition in terms of driving for the full year?
Michael Frank Ciarmoli: Well currently within our guidance yeah. The the WMC acquisition is really only about you know.
Chris Clark: Well, currently, within our guidance, the WSC acquisition is really only about, you know, 10 to $15 million. So, it's not a significant portion of the overall 5 to 7% growth rate that we've put forward.
Chris Clark: $10 million to $15 million. So you know it is.
Chris Clark: Not a significant portion of the the overall, 5% to 7% growth rate that we've put forward.
Speaker Change: Got it great. Thank you very much.
Michael Frank Ciarmoli: Got it. Great. Thank you very much.
Speaker Change: Thank you. Thank you.
Operator: We'll go next to Tony Bancroft with Gabelli Funds.
Michael Frank Ciarmoli: Well go next now to Tony Bancroft with Gabelli funds.
Tony Bancroft: Thanks for taking my question. Lynn, Chris, and the team, you guys have done a great job since we met a few years ago.
George Anthony Bancroft: Thanks for taking my question.
George Anthony Bancroft: Chris and team you guys have done a great job.
Tony Bancroft: I just want to think, you know, longer-term, sort of maybe like a sort of five-year plus time frame, how do you see the company growing? You know, you have a couple of different types of businesses or maybe evolving. Is there something that you could do transformational? Obviously, with all that's going on right now, with M&A, or does it make sense to do something more like financial engineering, like spinning off a business to unlock value? Maybe you could just sort of give us a reminder of it. I know you'll probably talk about it in a couple weeks, but maybe give us a taste of it.
Tony Bancroft: Since we met a few years ago I just wanted to think longer term sort of maybe like a sort of five year plus timeframe. How do you see the company growing you know you have a couple of different types of businesses or maybe evolving.
Tony Bancroft: That you can do transformational obviously with all this going on right now.
Tony Bancroft: M&A or is it does it makes sense to do something more like a financial engineering like spinning off a business to them.
Tony Bancroft: Maybe you could just sort of maybe a reminder, on I know, you'll probably talk about it in a couple of weeks, but maybe give us a taste of it.
Lynn M. Bamford: I do actually really appreciate that question because when we think about how we plan for the future, we do think of the near term, the midterm, maybe five to seven years, and then beyond that. And really work hard to ensure that we're making investments and setting the stage for the company to continue to grow through those timeframes. And you're right, you'll hear a lot about that at our investor day here in a couple weeks on May 21, and so I hope you'll be able to join us either live or via webcast, and we'll have a lot more time to lay out our strategies for that.
Speaker Change: Yeah, So ill I do actually really appreciate that question because we think about how we plan for the future. We do think of the kind of the near term the midterm, maybe five to seven years and then beyond that didn't really work hard to do to ensure we're making investments in setting the stage.
Lynn M. Bamford: For the company to continue to grow through this timeframe and you're right. This will you'll hear a lot about that at our Investor day here in a couple of weeks on May 21 until I hope, you'll be able to join us either live or via webcast and you'll have a lot more time to lay out our strategies for that but you know.
Lynn M. Bamford: But, you know, broadly speaking, we remain open to considering a lot of different avenues around the company. And I remember at our investor day three years ago, we were asked whether we would consider a transformational acquisition, and we said yes. And we are still open to that. Those things don't.
Lynn M. Bamford: Broadly speaking we remain open.
Lynn M. Bamford: Open to consider a lot of different avenues around the company and I remember at our Investor Day three years ago. We were asked whether we would consider a transformational acquisition and we said yes.
Lynn M. Bamford: And we are still open to that those things don't I mean, that's that's a rarity that it would be something that could really be accretive to Curtiss Wright and <unk>.
Lynn M. Bamford: I mean, that's a rarity that it would be something that could really be accreted to Curtis Wright. And you know, you remain open to it, but you don't look to it to drive your success. And the thing that's great is, across our end markets and our technologies, we have within our own capabilities and vision the ability to drive great growth and great profitability out of Curtis Wright through the rest of this decade and into the 2030s.
Lynn M. Bamford: We remain open to it but you don't look to it to drive their success and the thing that's great is across our end markets and our technologies, we have within our own capabilities and.
Lynn M. Bamford: <unk> vision, the ability to drive great growth and great profitability out of Curtiss Wright.
Lynn M. Bamford: Through the back of this decade and into the 2030, and that's where you set your management attention units is making sure we're doing those things to drive that growth and you can.
Lynn M. Bamford: And that's where you set your management attention units, making sure we're doing those things to drive that growth. And, you know, commercial nuclear is one that, you know, obviously it's our panel at our investor day. So, you know, it is a big focus for us and has some pretty explosive growth potential for Curtis Wright. But really, we want to make sure we present a balanced approach to the company that we're not all, you know, riding the commercial nuclear option, you know, that there is great potential across all of our end markets.
Lynn M. Bamford: Nuclear was willing to go you know obviously, it's our panel at our Investor day. So.
Lynn M. Bamford: It is a big focus for us and has some pretty explosive growth potentials for Curtiss Wright's, but really we want to make sure. We present a balanced approach to the company that were not all you know riding the commercial nuclear option there.
Lynn M. Bamford: That there is there is great potential across all of our end markets and we make sure we keep an eye on all of them and are doing the right thing.
Lynn M. Bamford: And we make sure we keep an eye on all of them and are doing the right things, you know, to assure that we're positioning ourselves for the future in that. There are no transformative plans with the portfolio of product lines and companies that we have today that we really see great potential in each one of them. We do also, just as we remain open to a transformational acquisition, we remain open to continuing to evaluate the portfolio as it is and, you know, don't take anything off of the table, but there's nothing planned currently. Great answer, thank you.
Lynn M. Bamford: To serve or your positioning ourselves for the future in that Theres nothing transformative plans with the portfolio.
Lynn M. Bamford: Our product lines and companies that we have today that we really see great potential out of each one of them, but we do also just as we remain open to a transformational acquisition, we remain open to continually to evaluate the portfolio as it is.
Lynn M. Bamford: And.
Lynn M. Bamford: You know, we don't take anything off the table, but there's nothing planned currently.
Tony Bancroft: Great answer, thank you, and a really great job on everything, Michele.
Speaker Change: Great answer thank you and really a great job on everything so well thank you.
Michele: Thanks, Tony.
Tony Bancroft: And ladies and gentlemen, just a quick reminder, star one please for any further questions. Today. We will go next now to Jan Eagle breath of Baird.
Operator: And ladies and gentlemen, just a quick reminder, star 1 please for any further questions today. We'll go next to Jan Engelbrecht of Baird.
Jan Engelbrecht: Good morning, Lynn, Chris, and Jim. I'll start with just the commercial nuclear off-the-market piece. Could you just give us a sense of your content on the different plant designs in the U.S.? I think there are about 94 reactors. Are there specific designs like the GE Boiling Water Reactor or Westinghouse or Babcock and Wilcox, any of those plant designs that you are more content with as opposed to some of the other ones, just given all the life extensions that are sort of kind of under review and coming down the pipeline?
Jan Engelbrecht: Good morning, Jim.
Jan Engelbrecht: Well I'll start with just on the commercial nuclear aftermarket piece.
Jan Engelbrecht: Could you just give us a sense on your content on the different plan designs in the U S. I think it was about 94 reactors.
Jan Engelbrecht: Are there specific designs like the G boiling water reactor Westinghouse or Babcock and Wilcox any of those plan designs that you have more content.
Jan Engelbrecht: As opposed to some of the other ones just given all the life.
Jan Engelbrecht: Life extensions that are sort of kind of under review and are coming down the pipeline.
Jan Engelbrecht: There's not any great variability I would say we have content on all 94 of those reactors and actively work with all 94 of those reactors as they move through regular maintenance and many of them are early in the days of this plant life extension and our products are relevant across all of all 94.
Lynn M. Bamford: There's not any great... I would say we have content on all 94 of those reactors and actively work with all 94 of those reactors as they move through regular maintenance. Many of them are early in the days of this plant life extension, and our products are relevant across all 94 of those reactors and reactors in Canada and reactors in South Korea. It's a big market for us, and it's a stable market, which is great to see.
Lynn M. Bamford: Of those reactors and reactors in Canada and reactors in South Korea.
Lynn M. Bamford: So.
Lynn M. Bamford: It's a big market for us, it's a stable market, which is great to see I think we said last year was the first year that a reactor was not shut down.
Lynn M. Bamford: Like we said, last year was the first year that a reactor was not shut down. I think, turning to our WSC acquisition, one of the things that's really exciting is that they have the simulation package and work across these reactors. We work with them, and we can see how we can use simulated assisted engineering as they need to do upgrades, whether it's normal maintenance or plant life extension across those plants to really understand how our products can serve those upgrade activities.
Lynn M. Bamford: I think.
Lynn M. Bamford: Turning to our WMC Act was acquisition one of the things Thats really exciting as you know they have the stimulation package and work across these reactors, we hadn't we work with them and we can see how we can use to stimulate that assisted engineering as they need to do upgrades, whether its normal maintenance or a plant life extension.
Lynn M. Bamford: And the process plants really understand how our products can.
Lynn M. Bamford: <unk> serve serve those upgrade activity so it.
Lynn M. Bamford: Maybe you know relatively small in revenue the doors. It opens for Curtiss Wright to really deepen our relationships across those 94 reactors is something that we think is going to be pretty dramatic as you know we already are well on the journey in just a month of integrating them into Curtiss Wright and figuring out how we take that capability deploy.
Lynn M. Bamford: It may be relatively small in revenue, but the doors it opens for Curtiss-Wright to really deepen our relationships across those 94 reactors are something that we think is going to be pretty dramatic. We are already well on the journey of integrating them into Curtiss-Wright and figuring out how we take that capability to point us to where we can win work across
Lynn M. Bamford: As to where we can win work across those 94 reactors.
Jan Engelbrecht: Perfect, great, that's really helpful. And just a quick follow-up. On the naval front, I mean, we saw the 45 day review the Navy performed and some of the delays that they're seeing across the platforms, but is there an opportunity for Curtiss-Wright to take sort of additional content out of the shipyards to just alleviate some of the capacity constraints that the shipyards are seeing, sort of the longer term view?
Speaker Change: Perfect. That's really helpful and just a quick follow up on the Naval front I mean, we sold a 45 day review the Navy performed some of the delays that they're seeing across the platforms, but is there an opportunity for Curtiss Wright.
Jan Engelbrecht: Sort of additional content out of the shipyards to just alleviate some of the capacity constraints.
Jan Engelbrecht: Shipyards are seeing sort of the longer term view.
Lynn M. Bamford: That is definitely a focus for us, and you know we have three service centers, two on the East Coast and one on the West Coast, and a great capability and, for sure, we can do work that is critical to having more of our fleet of broadly subsea and sea-based vehicles be up in maintenance, maintenance-free, and ready to perform their mission. So yes, that is definitely an area we are focused on growing. Perfect, great.
Speaker Change: That is definitely a focus for us and you May know, we have three service centers on the East coast, one on the West coast and a great capability and for sure. We can do work that is critical to having more of our fleet of <unk>.
Lynn M. Bamford: Broadly subsea and <unk>.
Lynn M. Bamford: C based.
Lynn M. Bamford: Up in maintenance maintenance free and ready to perform their mission and so yes that is definitely an area we're focused on growing.
Jan Engelbrecht: Great, thank you. Thanks a lot. I'll jump back in the queue.
Speaker Change: Perfect Great. Thank you, thanks, a lot and I'll jump back in the queue.
Operator: And ladies and gentlemen, just a final reminder, Star 1 please for any further questions today. And ladies and gentlemen, it appears we have no further questions. Ms. Bamford, I'd like to turn things back to you for any closing comments.
Speaker Change: And ladies and gentlemen, just a final reminder, star one please for any further questions today.
Operator: Yeah.
Lynn M. Bamford: And ladies and gentlemen, it appears we have no further questions. Mr. Bamford I'd like to turn things back to you for any closing comments.
Lynn M. Bamford: I simply want to say thank you for joining us today, and we look forward to speaking with you and possibly seeing you at our upcoming Investor Day on May 21. Have a great day.
Lynn M. Bamford: I simply want to say, thank you for joining us today, and we look forward to speaking with you and possibly seeing you at our upcoming Investor day on May 21, and have a great day.
Lynn M. Bamford: Thank you. Thank you Mr. Danforth, ladies and gentlemen, this does conclude today's Curtiss Wright earnings Conference call. Please disconnect. Your lines at this time and have a wonderful day.
Operator: Thank you. Thank you, Ms. Bamford. Ladies and gentlemen, this does conclude today's Curtiss-Wright Earnings Conference call. Please disconnect your line at this time and have a wonderful day.
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