Q2 2025 Curtiss-Wright Corp Earnings Call
Please stand by your program is about to begin.
And the interest of time, we ask that you limit yourself to 1 primary question and 1 follow-up. 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.
Thank you, Madison, and good morning everyone. Welcome to Curtis Wright's. Second quarter 2025 earnings conference call.
Joining me on the call today, our chair and chief executive officer Lynn Bamford and vice president and Chief Financial Officer. Chris Clark.
A copy of today's Financial presentation and the press release are available for download through the investor relations section of our website. At curtis.com, a replay of this webcast will also be available on the website.
Our discussion today, include certain projections, and forward-looking statements that are based on Management's, current expectations, and are not guarantees of future performance. We do tell those risks and uncertainties associated with our forward-looking statements, including the impacts of tariffs and our public filings with the SEC.
As a reminder, the company's results and guidance, including the adjusted non-gaap view that excludes certain costs in order to provide greater transparency, into Curtis Wright's ongoing operating and financial performance, gaap to non-gaap, reconciliations 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.
Thank you, Jim and good morning everyone. As you will hear in our discussion today regarding our second quarter performance and the increases to our 2025 guidance. We are delivering on our pivot to growth strategy, and in turn driving strong results for our shareholders. The teams continued deployment of our operational. Growth platform is benefiting Curtis Wright in many ways, from internal collaboration on R&D projects to securing positions, on meaningful programs and projects across all our end markets, all while driving operation and Commercial Excellence, initiatives throughout the Book of business. As a result. We are, well, positioned to deliver strong financial performance in 2025, and maintain line of sight on the 3-year objectives that we provided at last May's investor day.
As we look to the next 5 to 10 years and Beyond, we see numerous opportunities developing globally that we expect to provide tremendous upside to Curtis Wright's. Long-term growth later in our prepared remarks. I'll spend some time discussing our excitement and alignment with 2 of those areas of growth defense and Commercial nuclear.
With that, I'll turn to the highlights of our second quarter 2025 results.
Sales of 877 million represented an increase of 12% year-over-year exceeding. Our expectations and highlighted by strong or Grant and growth of 9%. The primary drivers behind this performance were higher sales in our Naval and power segment and continued momentum in defense Electronics.
Operating income increased 20% year-over-year exceeding, our sales growth and driving 130 basis points of overall operating margin expansion.
Diluted earnings per share increased 21% year-over-year, which slightly exceeded our expectations based on the higher A and D sales.
Free cash flow was 117 million as higher cash earnings and improved working. Capital Management, drove a year-over-year Improvement of 17% reflecting, nearly 100% cash conversion as we continue to support Capital Investments, across all 3 segments.
We also experienced strong demand in the second quarter as new orders of 1 billion dollars. Resulted in an overall book to bill in excess of 1.1 times
Starting with our A&D markets, while orders were down slightly year-over-year, mainly due to the timing of Naval Defence orders in the prior year. We experienced strong demand within our commercial Aerospace Market supporting the anticipated ramp up in OEM production as well as modestly higher demand for our embedded, Computing equipment, in defense Electronics. As a result book to Bill across our A and D markets was 1.2 times. With our commercial markets, we experienced strong demand in our commercial nuclear aftermarket supporting the plant outages and restarts. In addition to the contribution from Ultra energy overall. The second quarter growth in orders Builds on our already strong backlog, which is now up 12% year to date reaching a new record in excess of 3.8 billion dollars.
I would also like to highlight our second quarter announcements regarding Capital allocation, where the board approved a $400 million increase in, share repurchase, authorization, and a 14% increase in our quarterly dividend, which we've now grown for 9 straight years.
Performance and are dedication to returning Capital to shareholders.
Turning to our full-year guidance, based on our first half performance, the strength of our order book and our confidence in our second, half Outlook. We once again, raised our overall guidance,
We remain on track to deliver strong results while generating some of the strongest operational. Growth rates and margin expansion to date under the pivot to gross strategy, overall sales are now expected to increase 9 to 10% and our revised guide represents a 100 to 120 basis points of margin expansion. In pursuit of a record operating margin in excess of 18.5%.
The strong increases in sales and earnings are now. Expected to drive delude to DPS growth of 16 to 19% as we continue to compound our earnings at a mid teens Pace over time.
Lastly, we raised our free cash flow guidance and continued to expect strong free cash flow conversion exceeding. 105% in summary, Curtis Wright's strong year-to-date execution provides a stable foundation for our team to deliver another outstanding financial performance.
Now, I would like to turn the call over to Chris to provide a more in-depth review of our financials. Thank you Len.
I'll begin on slide 4 by reviewing the key drivers of our second quarter 2025 performance by segments starting in Aerospace and Industrial overall sales increase 3% and we're essentially in line with our expectations
Beginning with the segments, commercial Aerospace Market, we experience solid OEM sales growth, supporting increased production on both narrow body and wide body platforms.
Across the segments defense markets. We experienced modest increases in actuation equipment sales within our Aerospace, defense Market supporting various fighter jet programs and also in ground defense for the enduring Shield platform.
In the general industrial market sales, were essentially flat overall, despite the ongoing macro challenges facing Global industrial vehicle markets.
And turning to the segment's second quarter profitability, operating income and margin grew 5% and 40 basis points respectively.
These results were driven by favorable absorption on higher sales. Restructuring savings and a Tailwind from FX which were partially offset by increased investments in customer-funded development programs.
Next in the defense Electronics segment, overall sales increased 11% and were slightly ahead of our expectations.
Within the segments Aerospace defense Market, this performance was driven by increased sales of our embedded, Computing equipment on both European fighter jets, and domestic UAV programs.
And the ground defense Market our results. Reflected increased tactical Communications revenues as well as continued support for US army vehicle modernization and replenishment.
Elsewhere in the segments commercial airspace Market. We experienced the modest increase in sales for our flight data recorders supporting Boeing aircraft under the new 25 hour, safety mandate and this activity is expected to accelerate going forward.
Regarding the segment's operating performance, we delivered strong operating margin of 26.8% up. 110 basis points, mainly reflecting absorption on higher revenues as well as the benefits of our ongoing operational excellence initiatives.
Turning to the naval and power. Segment sales growth of 19% exceeded our expectations, once again driven by higher enabled defense revenues, most notably on the Columbia class submarine based upon the timing and acceleration of material receipts as our production continues to ramp on the US, Navy's top acquisition priority
And the powered process Market our results reflected in another solid contribution, from the ultra energy acquisition, which benefited both our commercial nuclear and process markets.
On an organic basis. We experienced strong low, teens Revenue, growth in commercial nuclear supporting the ramp up in Development Across several SMR designs including the X energy and Tara power Advanced reactors as well as increased. Aftermarket revenues based upon the Strong Spring outage season for us operating reactors.
Regarding the segments of operating performance, favorable absorption on higher organic revenues and favorable mix particularly in commercial nuclear. We're partially offset by increased investment in research and development.
To sum up purpose rights, second quarter results overall we generated a strong operating margin of 18.3% driving 130 basis points in operating margin expansion on the strong Topline performance.
Turning to our full year 2025 guidance.
For organic growth. In both our Aerospace and Naval defense markets.
Starting in Aerospace defense, a strong first half performance, particularly for our embedded Computing, equipment on c5isr programs provides us with confidence to raise our full year. Sales guidance to a new range of 7 to 9%
Additionally, we continue to expect higher sales of aircraft arresting systems equipment. Principally supporting International customers, and we remain on track to demonstrate strong growth in the second half of the year.
Within ground defense, our Outlook of 6 to 8% sales. Growth remains unchanged and continues to reflect higher full year sales of tactical Communications equipment, as well as electromechanical, actuation, equipment on ground-based missile, defense systems
Of note. We now anticipate sales in this market to decline, sequentially in Q3 based upon the timing of your to date orders, resulting from the full year. Continuing resolution
However, we expect the surge in third quarter orders as we approach the US government September 30th at fiscal year end which in turn will drive strong, fourth quarter revenues in this market.
Enabled defense. We now expect fully your sales to grow 7 to 9% mainly driven by the better than expected first. Half performance.
No sales on the Columbia class submarine programme, which ramped up considerably to begin the year. Based upon the timing of material receipts are expected to decline and stabilize in production over the remainder of the year.
Beyond that we continue to expect higher aftermarket Revenue supporting overhauls and retrofits on prior generation carriers. In addition to the contribution from all try energy on UK submarines.
looking more broadly across all 3 defense markets are improved Outlook reflects approximately 20% growth in direct form military sales in 2025 based on accelerating demand from NATO and Allied countries,
Turning to commercial Aerospace, our outlook for 13 to 15%, sales. Growth is unchanged, and we remain on track to deliver strong second. Half growth based on the planned ramp up in OEM production and the timing of avionics and instrumentation equipment within our defense electronic segment.
Wrapping up our Aerospace and defense Outlook. We now project total sales in these markets to increase, 8 to 10%,
moving to our commercial markets and power and process. We maintained our outlook for 16 to 18% sales growth, which continues to reflect the combination of mid to high single-digit, organic Revenue growth, as well as the contribution from Ultra energy.
Within our commercial nuclear market, continued strength in our order book provides us with increased confidence regarding our full-year outlook for higher aftermarket sales, supporting the maintenance of U.S., UK, and South Korea reactors, as well as a ramp-up in development revenues across several SMR and advanced reactor designs.
Next within the process Market we continue to expect solid organic growth, mainly reflecting higher, subsidy pump development revenues.
And lastly, in the general industrial Market, we mean a cautious Outlook. Looking continue to expect flat sales in 2025, despite the macro challenges facing Global industrial, vehicle markets, and our expectations, for modest sales increases in Industrial Automation and surface Treatment Services.
wrapping up, our total commercial markets, we continue to Target fully your sales growth of 9 to 11%,
moving on to our full year 2025 Outlook by segment on slide 6, I'll begin in Aerospace and Industrial where we are, increasing our Revenue guidance to a new range of 4 to 5%.
This is principally driven by our overall strong Outlook in commercial Aerospace, along with improved expectations across a number of our defense markets.
Regarding the segment's profitability. We now expect operating income growth of 6 to 9% and operating margin expansion of 30, to 60 basis points, to a new range of 17.3 to 17.6%, as we raise. The low end of the guidance range due to expectations for a lesser net, tariff impact, as well as a more favorable absorption on higher sales.
For your modeling purposes. We expect third quarter sales and operating income to improve sequentially over the segment. Second quarter results, benefiting from higher sales volumes, various pricing, and operational excellence initiatives in a more favorable mix of business.
Next, in defense Electronics, we continue to expect sales to grow 9 to 11% overall, reflecting the strength of this business's record backlog. It's forward Pipeline and solid growth projections across all A and D markets.
Regarding the segment's profitability, our continued efforts to drive margin improvement through commercial excellence and improved manufacturing throughput are now expected to promote further margin expansion.
Margin expansion of 190 to 210 basis points to a new all-time high range of 26.8 to 27%.
Again, for your modeling purposes, and based on the timing of revenues in the ground defense Market. We now anticipate the segments third quarter results to reflect similar margins to Q2. But on lower sales, we then expect the Strong finish to the year.
And enable Empower. We now expect sales to grow 12 to 13%, reflecting the increased enabled defense Market Outlook following the strong first half performance and overall solid growth across the segments defense and Commercial markets.
Regarding the segments profitability, we now project operating income to grow 15 to 18% on the higher sales.
For your modeling purposes. We expect this segment's third quarter sales and operating income to be in line with our second quarter results. While the fourth quarter should reflect a shift in mixed towards more profitable and market sales. So to summarize, our 2025 Outlook overall, we now anticipate total purchase, right? Operating income growth of 15 to 18% in operating margin to range from 18.5 to 18.7% up 100 to 120 basis points.
And we expect to generate these strong returns while maintaining greater than 20 million in incremental investments, in total research and development across the portfolio.
For your modeling purposes at the overall Curtis Wright level. We expect total sales to be fairly evenly distributed between the third and fourth quarters while the fourth quarter, reflects a benefit of favorable mix on more profitable and market sales resulting in a strong operating margin to conclude the year.
Continuing with our financial outlook on slide 7.
Building upon our first half performance, and expectations for continued strong growth, we have increased our full year, adjusted diluted EPS, guidance, to a new range of 12.70 cents to $13, or up to 16, to 19 percent.
And based on the timing of sales as previously discussed. We expect our third quarter, 2025 EPS to be relatively on par sequentially with our second quarter 2025 results, followed by a strong, finish to the year.
And lastly, turning to free cash flow. Our full year guidance. Now reflects an increase of 20 to 25 million based upon both higher cash, earnings and an approximate 15 million cash benefit from the administration's recent changes in tax legislation.
As a reminder, our outlook for Capital expenditures, continues to reflect an increase of nearly 20 million dollars year-over-year associated with ongoing growth Investments.
overall, our free cash flow Outlook now ranges from 520 to 500 million of 8 to 11%, which implies an improved free cash flow conversion rate of approximately 108%
Now, I'd like to turn the call back over to Lynn.
And turning to slide 8, I would like to spend the next few minutes. Discussing Curtis Wright's potential.
For near medium and long-term.
Growth in defense and Commercial nuclear driven by the tremendous Global demand that continues to build across these markets.
Starting in defense, we are well positioned to capitalize on the continued acceleration in global defense spending in the U.S. We are aligned to the strategic priorities outlined within the combined FY 26 DOD budget and Reconciliation Bill, including shipbuilding, the Golden Dome program, aircraft modernization, and next-generation air superiority, to name a few.
Our proven capabilities as an industry-leading supplier of embedded Computing, technology and mosa based Solutions, as well as our long-standing presence on the highest priority US Naval platforms ensures. The Kurdish, right? Will continue to play an important role supporting both current and Next Generation Pursuits. In addition
We strengthen our alignment with strategic military priorities by consistently investing in R&D while ensuring that we fully. We are fully equipped to support our customers throughout the entire program life cycle across all of our defense markets.
Delivered over the past few years as militaries across the globe, continue to improve their operational readiness.
In addition, the recently announced expectations for NATO countries to expand the previous defense spending target of 2% of GDP to potentially 5% should provide continued growth opportunities for Curtiss-Wright.
Lastly, as a high-value partner to our military customers, we remain focused on leveraging, the most exciting and Cutting Edge Technologies in the high-tech commercial markets, and bringing these capabilities to the Tactical Edge.
The adoption and influence of modern advancements, such as Ai and machine learning and autonomous systems when tailored to defense applications should come to open new doors for Kurdish. Right to support these increased technological demands and provide additional opportunities for Revenue growth and margin expansion.
overall, our
assignment to the numerous critical Pursuits driving Global Defence spending will provide continued opportunities for growth across all Curtis rates defense businesses. Well, into the next decade,
Next, turning to the right hand side of the slide nuclear power continues to undergo a strategic shift with several critical imperatives that are converging driving nuclear power to a major inflection point. The need for Reliable energy, energy Independence, and decarbonization,
In 2023, we observed the cop 28 commitments by 22 Nations to Triple Global energy capacity by 2050, which reflected the broad and growing consensus. That nuclear power must be part of a global solution. In more recent news, we've witnessed the US administration's focus on reinvigorating. The commercial nuclear industrial Base by signing 4 critical executive orders that are expected to quadruple. The country's current nuclear output to 400 gigawatts by 2050 to reform modernization regulations to promote faster and more cost-effective practical licensing for new and existing reactors.
To accelerate the deployment of advanced reactor Technologies including peaceful nuclear cooperation or 123 agreements. As a matter of National Security and to promote the construction of 10 new large reactors in the US by 2030.
Curtis Wright remains in a prime position to leverage. Its deep commercial, nuclear experience to serve This Global Resurgence in demand with technology supporting the entire life cycle. From new bill to the aftermarket
Next, I would like to highlight Curtis Wright's, tremendous long-term opportunity to support the construction of Westin houses, ap1000 reactors where we are aligned as a supplier of reactor coolant pumps and other critical Technologies.
As we discussed it last year's investor day, we see the potential to generate more than 1.5 billion dollars of growth in Europe alone. Likely beginning with the wards to support the ap1000 plans in Bulgaria and Poland with an order still anticipated to come in 2026.
Of note, we can Surly excluded this benefit from our 3-year investor day targets.
Ap1000, optionality. Sitting on top of our strong core continues to grow.
Elsewhere, the recent Pennsylvania, energy and Innovation, Summit hosted by Senator McCormick and attended by President trump top Administration, officials and Westinghouse Executives with. Certainly, in sign for this industry, it signaled, a strong us commitment to new large reactor construction that follows the vision set forth in the administration's executive orders, given their advanced technology and strong government backing. Westinghouse is expressed their plans to begin construction of 10 new large reactors in the US by 2030, which would provide an incremental, opportunity of greater than 1 billion dollars for Curtis Wright.
Next, the growth of small, modular and advanced reactors is expected to be transformative to the nuclear industry. We continue to grow our presence across the leading reactor designers, with our expected content, ranging from 20 million to more than 120 million dollars. And with the potential for further upside as we continue to secure additional content,
Last Friday, we are excited to announce our newest. Partnership was Rolls-Royce SMR to support their Global SMR Fleet.
Ization of the UK Supply base Rolls-Royce SMR was recently selected by Great British energy to provide the UK's first 3 fmrs. And we look forward to supporting these and other commitments across Europe.
Overall, while smrs only represent a small portion of Curtis Wright's, commercial nuclear revenues today, current design and development will begin to transition into prototypes over the next few years. Driving accelerated growth in this market.
Lastly is demand for commercial nuclear. Power continues to accelerate Curtis rate is well positioned to strengthen its leadership position in all these areas to win significant new business today. And well, into the next decade, this continued momentum provides us with increased confidence in our ability to generate more than 1 and a half billion dollars in annual commercial nuclear revenues by the middle of next decade and nearly quadruples our current base of approximately 400 million dollars.
Turning to slide 9 where I'll wrap up today's prepared remarks, the team's consistent execution along, with our strong and growing backlog provides confidence in our expectations to generate record financial performance across all major metrics in 2025.
As a result, we remain on track to achieve or exceed our 3 year objectives provided at last May's investor day.
In addition, our efficient balance sheet supports our discipline Capital, allocation strategy, which includes Acquisitions and operational Investments ensures. Consistent returns to our shareholders.
We have also focused on our ability to consistently generate strong Returns on our investments including R&D systems and infrastructure to support our future growth.
Based on our success, we have expanded our return on invested capital by more than 400 basis points over the past four years while staying steadily above the rising cost of capital.
Adding to that we anticipate more than 100 basis points of growth in Roy this year while in integrating our most recent nuclear Acquisitions this serves. As yet, another proof point that our pivot to growth strategy is working.
In summary, there are a number of exciting things taking place across Curtis Wright that build on our strong core of a and d and Commercial businesses and the position of to capture the fastest underlying growth factors. In our markets, we are driving strong financial performance compounding earnings at a mid teens pace and delivering, strong and consistent pre- cash flow generation for our shareholders. Thank you. And at this time, I would like to open up. Today's conference call for questions.
The floor is now open for questions at this time. If you have a question or comment, please press *1 on your telephone keypad. If at any point your question is answered, you may remove yourself from the queue by pressing *2. We ask that you pick up your handset when pausing your questions to provide optimal sound quality. Again, we ask that you please limit yourself to 1 question and 1 follow-up, and then queue again with additional questions. Thank you. Our first question is coming from Scott Dishell with Deutsche Bank. Please go ahead.
Hey, good morning Chris, quite a few commercial aerospace companies saw um, this quarter. They're they're their growth decelerate and some D stocking head ones and so their commercial OEM Revenue in many cases declined. Um you know Curtis Wright seems to be seeing the opposite Trend with growth accelerating. So can you speak a bit more as to what's driving that growth acceleration and Commercial Aerospace?
Sure. Yeah. So I I think first it's important to note that we took a fairly conservative position on Commercial Arrow coming into the year. Um, there's certainly been more than a fair share of uh challenges in the industry over the past you know, 18 months or so. So um, I think it was important that we recognize that um these stockings is really not an easy answer for us. I mean, given the breadth of our portfolio and our position is a tier 23 supplier. Um, and I think as you look out across, you know, our customers and and upward to Boeing and Airbus you know, it's a fairly mixed bag, you know, depending on the platform.
Ahead, uh, for commercial Arrow manufacturers, we feel really well positioned with our guidance.
Okay. And then Lynn if I go to the defense Solutions website I can find quite a few accelerated accelerated Computing solutions that Curtis right now has in the market, including these GPU chips that have
Nvidia, Blackwell chips on them. Um, so just with that, as a context, can you speak a bit as to what kind of product applications? These GPU cards are finding use cases for and also what types of customers are are using them today.
yeah, it's um, definitely
You know, an exciting new area. And I love the fact that you went to the defense Solutions website and looked at some of our products. So that's pretty pretty good. Um,
In modernization is about taking sensor data processing it and acting. You know, whether that's defensive moves or offensive moves to counter that the data that's coming in that sensor. And this is really opening up the ability to deploy those kinds of applications. You know, broadly across the, you know, the battle space where, you know, quick decisions is essential. So that's like a high, you know, definitely a high level. So that comes in to, you know, defensive systems on ground vehicles that sends an incoming missile and shoot a, you know, something to counter that missile to, you know, a lot of other applications like that. But then also,
You know, uh you know, merging data from many many sensors on a more holistic approach across the battlefield, to be able to provide a greater picture of the entire Battlefield to command and control type of applications for um you know making planning steps. And so there's a lot throughout, you know, the Tactical Edge and back into the command and control is just a couple examples.
Thank you.
Thank you. Thanks Scott.
Thank you. And our. Next question is coming from Peter Armen with beard, please go ahead.
Yeah. Hey, good morning Lynn, Chris, Jim a nice results. Um, hey, Chris on, on the defense, Electronics margin performance, you know? And it continues to be really, really robust. You know, when we think about, you know, I guess it's like 40% incremental. Like how do you think about the sustainability there? And and and is, is there opportunities for further expansion? Just given how how strong the performance already is. Thanks
Yeah, the team is doing an absolutely great job this year. Peter, you know, we've talked a little bit about the, um,
the restructuring for growth, that's been going on within the Defence Electronics, uh,
Segment this year and particularly focus on throughput and, you know, 1 of the great things about, you know, moving product through your shops faster is, you know, some of the the improved absorption that you get in that way. But there's also been a lot going on, uh, across that team this year in both commercial excellence, and operational excellence. Um, and just, you know, taking a look at at at certain parts of the business that have further opportunities, bringing them up the best practices. You know, when it comes to, I'll call it the operational excellence. But then, you know, there's even been some pricing successes and a few areas of that business. So it's really, uh, a good collection of effort, you know, through our operational growth platform to get to drive that uh Improvement. And yes, I do think that there's further opportunity that lies ahead for that team. Um, but we're certainly balancing it, you know, against a couple a couple things here as we move deeper into the year. I mean we still are, you know, going through that restructuring, we're still moving.
Moving product, uh, you know, across the various business units. And, you know, beyond that, we have a lot of, you know, I'll call it, uh, Focus disruption this year as the team readies itself for, uh, that full-scale Erp implementation. That's currently going on. So that'll kind of consume more management attention units as we get deeper into the year. So those are some of the things that we're just kind of being a little bit more cautious for, you know, with as we as we look at the margins. Um,
But then you know also as you kind of look at the strong start to the year, you know, it's important to note that we we did have some favorable mix and c5isr programs in the first half we had some FF FX uplift. We expect the dollar is going to, you know, weaken as we get a little bit further into the year, and that's going to that's going to flip that around. And we do have a strong ir&d ramp, uh, that's planned for that organization in the back, half of the year. So really pleased with the continued raises
and the margin performance. The record-breaking margin performance for that segment. Um, we're optimistic as we go forward but we're we're continuing to be cautious in a few areas.
Yep.
No, that's okay. So, you know, the, you know, the other side of that story is our alignment with where the dod budget's going. And, you know, the direct foreign military sales is, you know, we have such strong incremental in the team that our ability to destroy, you know, the work doing things to accelerate Topline growth. And, you know, that's, you know, everything from the Nvidia Partnerships. We just talked about to this Honeywell flight data recorders to our alignment on on golden, dome and doors. That's going to open to us and then, you know, our position, you know, are good strong position that we've had for years, you know, across Europe and you know the NATO allies of you know, the buildout that's really just you know, beginning there. Um that you know is is broadly very good margin business to us. So, you know, that's you know, that, you know, we got to keep the top line going too. And we've got good line of sight on that.
Yeah, Lynn. Just as a quick follow-up to the, um, voice of the flight data recorders. Do you see the retrofitting being kind of at a steady cadence between what the mandate is between now and 2030? Or is there an accelerant around that? Thanks.
Um, I think it will accelerate. I mean, we're just getting going with people.
Reconciling, they have to do this. You know, we've been working for people with production with Boeing for that's, you know, been What's um, you know, been the underpinning of what was part of our guide. And you know, but I would say the majority of the Rays we did. Last quarter is us getting clearer line of sight, you know, with our partner, Honeywell on how the fleets are going to go about doing these retrofits, you know. And then you know, I mean we're still, you know, it's early days but the Mandate you know really goes across a good portion of the regional Jets and that's a big area of focus for us and there's a lot more Regional Jets than there are, you know, even 737. So, you know, a big, big area of growth there and you know, we've been pretty open that we're working to be qualified on Airbus and you know, that's, you know, anticipated you know in the first half of 2026. Um so a lot of things coming that are going to make that area growth. It's it's 1 of our you know as we talk about deep diving, our our capacity planning across nuclear. It's another area or really making sure we're fully anal.
Analyzing our capacity planning for what's coming.
Thanks Lynn.
Thank you, Peter.
Thank you. And our next question is coming from Miles. Walton with wolf research? Please go ahead.
Great. Thanks. Good morning, Lynn. I was hoping you could touch on the m&a pipeline. Perhaps, um, what you're seeing there, I know Ultra was was the last deal, um, in that space, but obviously you're going to end the year here. Probably with a pretty unlevered balance sheet, excess cash. And just curious on the overall Capital deployment and m&a pipeline.
Okay, so
thank you for that. Um,
I think when you know, you probably took note that when we talked on this topic at the end of q1, um, you know, we indicated that we had a couple things we were looking at and we are not going to act on those things that we were in process of looking at a q1 that they really just didn't meet our strategic and financial, um, requirements. And as much as we clearly State, this is the top our top intended, use for our Capital. It is not with compromising, you know, our standards and so we're, you know, there's the pipeline is not empty, so I'm not applying that. But, you know, there was, um, I think a little bit more, you know, line of sight for something coming in the back half of this year and, um, those, we've dismissed. So with that, the teams are active, we're out looking, there's, you know, you know, always, we're prioritizing companies that are, you know, privately held that we can convince to go, you know, exclusively with Kurdish, right? But we're very active in the financial community.
Also, but we will return, um, Capital to shareholders, you know, we talked about, um, you know, raising our dividend and increased, um, share buyback um, authorization from our board. And maybe I'd ask Chris to speak a little bit to our thinking around the share buyback, um, as our second priority for our Capital. Yeah, we, we certainly believe that share BuyBacks the most effective way to return Capital to shareholders the board. Increased our authorization, by 400 million in may, we now have 534 million in authorization, you know, we still believe that, uh, there's a lot in the windshield, uh, ahead for us and, uh, and we're excited to meet with the board again here in September and have some discussions about the best way to deploy that cash. But, you know, we're certainly not intending to sit on, uh, our hands and we're excited about what we can do with that money.
Based on the backlog. Um, how much of that is conversations with customers and maybe if you can give us the book to bill that you had in defense electronics and the second quarter,
Sure. Yeah, maybe what I'll do is I'll just start with the book to build that we had within Defence Electronics in the second quarter overall. Uh, which was about a 0.9 uh book to Bill. I will say that our orders were up 5% year-over-year and our backlog has increased, you know, 3%, uh, year-over-year, you know, but it's been kind of an unusual year. Um, you know, we are used to starting off as we have, you know, several times over the past 4 or 5 years under a crescent. Uh, and then, uh, we had that, you know, resolved or what we felt was effectively resolved in the first quarter, um, but the CR has a little bit more Nuance to it, you know? It was a 1% increase over the prior year funding levels, but it also provided, um, the government, you know, with opportunities to kind of redeploy funding to the, what they considered to be the highest priorities. And you know, we think we're very well aligned with those priorities, um, but it has created some uncertainty and delay in the
Way that those decisions are being made and and the orders are being placed and the most sensitive business for us, as we've mentioned in the past, given the direct connectivity to the government. Customer is in tactical Communications. So, um, we've seen a little bit more delay in that order book here in the second quarter, uh, Lynn and, uh, the rest of the management team, uh, have frequent discussions to kind of evaluate the pipeline, the status, of where we are, uh, within our order book. And we do see a very strong pipeline in front of us, uh, but there will be some timing issues here. We think some of those will be resolved here, uh, prior to the end of the government's fiscal year end and, uh, given the, uh, you know, the, uh, uh,
Uh, uh, ship ship ship and Bill nature of that business, you know, we will probably see those, uh, sales increase here in the, in the fourth quarter. That's our current expectations. So, uh, we do have a strong backlog across this business. We're very, very confident in our overall sales guidance, uh, for the year. But it's going to put a little bit more pressure on Q3. Um, we will maintain our profit margins. Uh, but Q4 is going to be a strong finish to the year from a, from a sales perspective.
All right, thanks for the caller.
You're welcome.
Thank you. And our next question comes from Louie. De Palma with William Blair, please go ahead
Memphis and Jim good morning and great quarter. Um, you mentioned golden dome as a potential opportunity, but speaking of of large programs,
Do you expect to play a role with the the Army's Next Generation command and control program with your Edge Products as there's been over 3 billion dollars in funding? Um, we know that pallante and andhero received an initial prototype contract but
their likely will be many vendors involved in that 1, similar to golden dome. So what are you
Seeing in the pipeline with that program and just in general, where are you seeing the most demand for your encryption tactical Communications and Edge Computing products?
Yeah, so we've we have been involved with that in, you know, in that area with that program for several years and definitely see ourselves, um, ramping with it. You know. And and, you know, you said golden dome, but you know, stepping back broadly. You know, there's a handful of new starts, you know, going on, you know, across, you know, next Generation, you know, fighter jets. Next Generation rotor wings. Um, the
CCA program. And I I feel very good about our our penetration across those various platforms to be prepared. And, you know, some, you know, a winner has been selected, um, some are still in competition with 2 winners. And, you know, that's even the XM 30 program is another example, that doesn't seem to make it to the headlines. Quite, as much, we have solid content across the 2 players that are, um, you know, competing for final down, select on that. So, our, our tactical Communications with, you know, some really Advanced encryption take Technologies is, um, being very well, uh,
With our product.
Great. And um, did you estimate earlier in the call that the ap1000 reactor opportunity in in North America, is over a billion dollars.
Yes, we just put that out as a reference, and you know it will be, you know. But again, you know, we're.
We're cautious. You know, we are a supplier to Westinghouse, we're working to, you know, we fully anticipate will be their partner on that program but you know we don't like to get ahead of ourselves of you know, saying exactly, you know what content and how things will shake out that, you know, we need to work hard to be a good supplier to them and that's the position we're in. But yes, it's a very significant opportunity for us.
And Jim.
And our next question comes from Peter Skipsey with Olympics Global. Please go ahead.
Hey, good morning, guys. Nice quarter. Um, yep. Hey, Litter Chris, I think your DCS sales or your direct FMS sales were about 9% of your total revenue last year. I'm just wondering, is that levered more to one segment than another? And I was wondering which of the three segments you expect to grow DCS sales the fastest this year.
So maybe I'll just talk about it, broadly and I don't think we've given much color on how it breaks out across the segments, but if you hear the product families that kind of tells you where it is. So, um, um, you know, it it's
you know, we've had a long position, you know, with defense, Electronics, equipment of various types, you know, being, you know, sold directly into the, the the
Defense, markets across, NATO, and Allied countries. And so that's probably the, the top area I would call out, um, our turret Drive stabilization capabilities in Mission packages. Um, you know, which is part of Defense Electronics is, is definitely poised for some amazing growth that, you know, there was an announcement out of Germany a couple weeks ago about spending 25 billion dollars on military vehicles and 1 of the vehicles, they called out, was the boxer tank which we had just announced a few months ago, our partnership. You know what Ryan Mattel selecting us for, um, the stabilization equipment and some other equipment on those tanks and they're going to build somewhere between 2500 to 3500 tanks. So, um, you know, that's a good place, you know, we do a lot of equipment on uh European built rotorcraft. You know, the it's just a really a broad coverage European built um fighter jets so just broad coverage there. Um, are arresting system equipment.
Which is, you know, in the naval and power segment um, is is definitely well adopted across, you know, around the globe and, you know, when we bought those, we bought the team, you know, um, as a carve out from saffron, you know, we were very open to 75% of their sales were outside of the US. So that's a great place where we, you know, have a, a great International footprint and it's continuing to grow. And the other area I would call out, is our, um, aircraft, our aircraft Landing equipment, from our team, that does, you know, a lot of specialized equipment that's integrated onto the decks of ships to allowed, um, helicopters to land in higher, Seaside safely for the Airmen. And so, um, there's there's a couple of the areas. So, it, it's, it's a very good portion of our business. And, you know, we are saying that now, um, I appreciate you referencing the 9% that this year, we anticipate our direct foreign military sales will be up to 10% of um Curtis Wright's overall revenues, you know,
relating, you know, these areas of growth
great. Thanks so much for caller.
Thank you.
Thank you. And our next question comes from Nathan Jones with fifo. Please go ahead.
Morning, everyone.
Good morning, Nathan.
Just a just a couple questions, uh, you guys have had, um, you know, really great success investing for, uh, for growth over the last few years, pivot to growth. Definitely, you know, has clearly been a success.
And you do have plenty of good Tailwind to revenue over the next few years. I know you said you're in investing in incremental 20 million dollars in R&D this year, are there, do you see opportunities to further accelerate? Um, you know, some of the internal Investments uh targeting some of these areas that have have come to the front in terms of growth over the next few years.
We are very transparent with the partners we have in this space as to how they see their their ramp going. And then there therefore their need of our product. And so, we're modeling that out, but that's definitely going to drive. Um, some incremental Investments and that's not just in capacity planning, there will be some investments in some, you know, building out some products to be have the right products to supply into some of these suppliers. And, you know, we talk with, you know, the various major um, players in the space of where we're quite willing to make investments as the opportunity base becomes more clear. So that's you know what? That's 1 area. That's top of mind. I mentioned the flight data recorder ramp that we see coming. I mean that's going to require some of investment. There's no major Capital, you know, with it that is, you know, as significant as you know, really across some of the nuclear equipment but um there's a lot of areas that we can continue to invest in R&D across our businesses that you know there's an Ever growing capability. You know if I
Take our subk area that, you know, we've been investing in, you know, really for you know you know over 5 years at this point it's just taking off and you know we're getting ready to deliver the first pump to Shell. We've been uh down in Brazil. There's a lot of incremental um opportunities and they'll be Investments required to be able to ramp in that area. And you know I'm not saying it's limited to those, those are sort of the ones that come to top of mind. But um we we very much look, you know, when we
Think of our Capital Investments, you know, we've typically always said that around 2% seems to be the right level for us to invest in capital, back into the company that may take up a little above 2%, in the back of this decade. But it'll be a great situation for everyone that we need to do those Investments because we'll have line of sight on the revenues that they're going to be tied to
I return capital. I don't think you'll get any push back on investing in that. Uh here's a high level question over the last several years. You guys have talked about being a line to the dod budget and and expect to outgrow the dod budget each year. It's like a 13% increase in the dod budget. Uh, for fiscal 26, why shouldn't we expect you to outgrow that budget for your US military business?
So,
At the end of our, um, making that point, we're very proud of what we've done over the past years. You know, we've had good growth and down budgets and up budgets. This is definitely an up budget with, you know, the combination of the base budget and the continuing, or in the um,
Reconciling reconciliation. Thank you very much Chris. Um, I don't think, I don't think we're going to quite uh get ahead and talk about what we will anticipate coming in 26 yet. Um, but you know we are very well aligned to where those monies are being spent and whether that's, you know, the ship building and funding for the industrial base, which we are very aggressively pursuing.
Going to the communications equipment to Tactical aircraft, where, you know, we have very strong historical footings and whether that is, you know, the f47 or the mb7 or the F-15, you know, we really were in good position across all those as doing retrofit on the existing Fleet. So I, I know we're aligned to the right places and you know, that's you added to, you know, our continued accelerant of um, the direct foreign military sales contributing to our overall defense growth. Um, I I definitely think it's, you know, definitely in the possibilities so we'll wait till we get a little further through the end of this year. That, you know, we see really do need to get some more color on the 26th budget. And there hasn't been an fydp um, published yet. So some of those things will play into our ability to characterize where our revenues will come. And, you know, you'll hear that guidance in due time as we round out this year,
Thanks for taking my questions.
Thank you, Nathan.
Thank you. Our next question comes from Michael Chimole with Truist Securities. Please go ahead.
Hey, good morning, guys. Um, nice results. Thanks for taking the question. Um, then can you, I think our lender Chris, just an update on the Columbia. I think you said the profile stabilizes, you know, then it's down. Can you just give us a general update, maybe where you are on that, what ships that you're working on and, you know, does does...
That picked back up in Q2.
Labor. If not necessarily indicative of what's Happening, uh, with the ship. But we continue to increase the Cadence to meet that desired 1 per year Pace that the customer has called out for and, um, you know, as you kind of look at, you know, where we are, you know, from a ship perspective. You know, we certainly, you know, had been working on 1, uh, and, you know, as you look at at 1 that that that peaked out in Prior years, you know, this year we're working on sub 2. Uh, we'll probably reach the peak there and, you know, set the, the production on sub 1. Uh, we're moving towards that. And again, we're, we're ramping up to a desired, nice 1 per year pace. And I think, you know, more importantly, as you take a look at our total Naval business, and Lynn talked about the strong support for ship building, Etc. And we, we've got a very strong backlog in that business. And, you know, overall a great growth trajectory wise, uh, ahead.
For Naval defense at at Curtis Wright.
Got it, that's helpful. And then Lynn, this might just be um semantics or mincing words, but I I think you said you fully expect to be a partner for Westinghouse. I mean is is there a chance you wouldn't be supplying the reactor cooling pumps and then just thinking about the reactor cool and pump opportunity, when do you really start kind of priming that supply chain in it? Yeah, I know you're thinking of getting that order in 26, but is that Supply
Actually, I'm ready to go.
Yeah, so again, it it probably is more semantics because you know, we, I don't, I just don't like to speak to it in a presumptive manner when, um, you know, when we're, you know, working the details out with them. We're absolutely, you know, working with them to plan these, you know, not just the overseas reactors, but the, um, you know, the 10 new reactors that are to be built here in the US. And I think it's just, you know, if you listen to some of the things that, you know, they're saying publicly 1 of the real strengths that they believe they have in winning business, is not changing the design. And, you know, having a consistent design, uh, you know that has a very good proven track record that, then they can move into, you know, a sequential ramp by, you know, repeated production is very much publicly part of their strategy and obviously we're the only ones to deliver to reactor coolant pumps to them. So that, you know, is obviously indicative of, you know,
Good business signs for Curtis, right? But, you know, we just hold back in our cautiousness and say, you know, anything is a given.
Got it, got it. And then just a quick follow-up. I mean, if they do actually start construction by 2030, what what's kind of your lead time on that?
Yeah, I don't know. That's something, you know, we have to work with Westinghouse on it'll we've given our lead time but you know it, we do still think the, you know, Poland somewhere in Eastern Europe. Most likely Poland will be the first orders that we will get, you know, and we've been pretty consistent and saying sometime in 2026 and we still see that, but obviously, they've got to be ordering pumps.
Sooner than later, if they're going to be in construction in 2030. So, um,
You know, we're we're definitely working on our capacity plan as you know, indicative of when we see these orders coming.
Got it. Perfect. Thanks guys. Appreciate it.
Thank you. Our next question comes from Justin Lange with Morgan Stanley. Please go ahead.
Yeah. Hi, I'm on for Christine today. Uh, thanks for taking the questions. Um, just just sticking with the the large reactor opportunity in the US with Westinghouse, obviously, appreciate its its early stages, but should we think about the economics around domestic efforts looking similar to maybe some of the near-term opportunities ahead of you in Eastern Europe or are there any material differences to note at the outset?
I think they'll be similar, you know? Again, the details are not fully worked out, but yes, I mean, we will provide product to Westinghouse at a negotiated contractual rate. And, you know, I think that will be relatively, if not exactly, consistent.
Okay, great. And then, um, I think you called out higher embedded, Computing Revenue, in the quarter, in part related to domestic UAV programs. So when I think back to the uh 24 investor day, there was some discussion of Runway with with unmanned systems building off your role in Triton. So I was just hoping you could elaborate a little bit on the Drone Market opportunities. Ahead of you, just giving some of the momentum we've seen in in that specific area. Thanks.
and, you know, understand that, you know,
The size of what a global hawk was and what people promote now is what the size of many of the uavs are. And there there is a a level at a smaller level, that would not be an area of Kurdish, right? Would play Little Things. You see, people holding in their hands and such like that. That's not an area that I um, see any fit for Kurdish, right? And but there is a lot in between there and you know, our product portfolio is you know includes quite a range of size, weight and power, um, compute options that you know, can find applicability across a very large portion of Platforms in this and so there's a lot of things we're engaged in. Not all of them are public knowledge yet, but it's definitely an area where where where very active and then the flip of that is, you know, the buildout of counter. Uas technology is definitely a focus. You know, knowing that
You know, the quantities of these smaller cheaper drones that can be levered, you know, in the war space and so that is also an area, you know, not the UA, you know, uavs themselves. But the the defenses against them is a very, um, area where we have very relevant technology. And you know that's, you know, as the earlier about some of the applications for, you know, the Nvidia products that's um,
You know, also, you know, a a good use case for it and so a lot of a lot of things and then um, you know, there's all unmanned is there's you know, unmanned ground vehicles and unmanned water vehicles. And you know, we're we're exploring where our product pit is across all of those.
Perfect. Thanks.
Thank you.
Thank you. And our next question comes from Tony Brofft with Gabelli Funds. Please go ahead.
Good morning team. Uh, congratulations on all your successes. Um, you know, you mentioned earlier about, uh, uh, talked a little bit about, uh, m&a, uh, maybe just to get a little more into that, you know, you have a, a large, um, uh, group of, uh, great. You know, businesses that you've either acquired or or grown from submarines, to resting gear, you know, tactical communication equipment planes. You know, could you maybe just give us some maybe broad stroke, uh, priority on if you were to continue doing m&a, I know it sounds like the beginning of this year. It didn't work out. But uh going forward you maybe how do you sort of align those or how do you? Um, uh, how do you work, uh, how do you prioritize those sort of those different businesses? Or is there something new that we're not that we're not thinking about?
Yeah, so, um, you know, we I definitely wanted to be open about, you know, pulling some things out that we had alluded to in Q1, but that does not mean there are not items in the pipeline. So I do want to just be cautious to make sure I don't send some tone, and M&A is absolutely going to be part of our future going forward. And, you know, we've been pretty open over the past couple years, you know, defense.
Wire, you know, and we, you know, we have such good.
Such a great track record and you know, our Global reach of that team really the, you know, some of these, you know, more bold on types of Acquisitions, you know, we can bring so much power to how, you know, they can sell their products. Um, based on the reach of our team that you know, it's usually can be a great a great fit and so that's an area you know, where we can push out the walls on the types of products we do and bring that expertise of ruggedized, you know, to help, you know, broaden the product offering. And so that's, you know, and there's a lot of properties in that space. So um, that's probably the highest area where we see potential Acquisitions. And so what we definitely continue to look there, you know, major Naval and aircraft Safety Systems is definitely also, you know, fits our Mandate of who, you know, where we drive our product strategies to safety critical types of applications. And so,
Intellectual property on and, you know, was a continual margin Challenge and so you know, we're very careful that we want to grow our businesses and places that really have differentiated technology, that's 1 of our strategic fits. And so, who knows, maybe someday we'll find something there. You know, probably right now in the industrial markets with you know some of the you know, challenges in those markets it wouldn't be a top priority. But again, select technology, that really would give us the differentiator that, you know, we could talk into that team. It's would not be off the table. So I think it's 1 of the powers for our acquisition strategy. That we have as a company because we are Diversified
we can look at a broad range of books in different and end markets, and be very selective where if you're very narrow In the End Market for your business,
You might feel more of a push. You have to take what becomes available in that market, and curse rights? Just never going to do that?
That's a great overview. Thank you, Lynn. Great job, thanks. Thank you.
Thank you. And I'm showing no further questions at this time. I will turn the floor, back to Lynn, Bamford chair and chief executive officer for additional or closing remarks.
Thank you everybody for joining this and we look forward to either seeing you out on the road or at our next earnings call. Thank you.
Thank you.
Thank you. This concludes today's Curtis Wright earnings conference call. Please disconnect your line at this time and have a wonderful day.