Q1 2026 RBC Bearings Inc Earnings Call

Josh Carroll: Good morning, and thank you for joining us for RBC Bearings' fiscal first quarter 2026 earnings call. I am Josh Carroll with the Investor Relations team, and with me on today's call are Dr. Michael Hartnett, Chairman, President and Chief Executive Officer; Daniel Bergeron, Director, Vice President and Chief Operating Officer; and Rob Sullivan, Vice President and Chief Financial Officer. As a reminder, some of the statements made today may be forward-looking and are under the Private Securities Litigation Reform Act of 1995. Action results may differ materially from those projected or implied due to a variety of factors. We refer you to RBC Bearings' recent filings with the SEC for a more detailed discussion of the risk that could impact the company's future operating results and financial condition. These factors are also listed in the press release, along with reconciliation between GAAP and non-GAAP financial information.

good morning, and thank you for joining us for RBC bearings, fiscal, first quarter 2026 earnings call,

I'm Josh Carroll with the investor relations team, and with me on today's call are Dr. Hartnick, chairman president and chief executive officer. Daniel burgon, director, vice president and Chief Operating Officer and Rob Sullivan, vice president and Chief Financial Officer.

As a reminder, some of the statements made today may be before looking and are under the private Securities. Litigation Reform, Act of 1995.

Actual results May differ materially from those projected or implied due to a variety of factors. We refer you to RBC bearings recent filings with the SEC for a more detailed discussion of the risk that could impact the company's future, operating results and financial condition.

Josh Carroll: With that, I will now turn the call over to Dr. Michael Hartnett.

These factors are also listed in the press release, along with reconciliation between gaap and non-gaap. Financial information with that on that. I'll now turn the call over to Dr. Hartnett

Dr. Michael Hartnett: Thank you, Josh, and good morning. We had a great quarter, and we have some really good news to go through with you today. Thank you, all, for joining us. I am going to start today's call, as usual, with a short review of our financial results, and I will finish our outlook on the industry and fiscal 2026. Rob Sullivan will follow me with more details on the numbers. Our first quarter sales were $436 million, a 7.3% increase over last year, driven by continued strong performance in our aerospace and defense segment and solid performance from our industrial businesses. Consolidated gross margin for the quarter was 44.8% versus 45.3% for the same period last year, and adjusted diluted EPS was $2.84 versus $2.54 per share. Clearly, we are very pleased to see these strong margins and kick off our first quarter in fiscal 2026.

Uh, thank you, Josh, and good morning. And, uh,

You know, we have some uh some really we had a great quarter and we have some really good news to to to go through with you today. So, um,

Thanks, thank you. Uh, all for joining us.

So I'm going to start today's call as usual, with a short review of our financial results and I'll finish our outlook on the industry and fiscal 26 robs. Rob Sullivan will follow me with more details on the numbers.

So, our first quarter sales were 436 million.

A 7.3% increase over last year.

Driven by continued strong Pro uh performance in our Aerospace and defense segment and solid performance from our industrial businesses.

Consolidated gross margin for the quarter was 44.8% versus 45.3%.

For the same period last year.

And adjusted diluted EPS was 284 versus 254.

Um, per share.

Clearly, we're very pleased to see these strong margins in cook kick off our first quarter in fiscal 26.

Dr. Michael Hartnett: Free cash flow was another highlight of the period of $104.3 million, setting a new record for RBC Bearings Incorporated, and adjusted EPS was $2.84 per share. Total A&D sales were up 10.4% year-over-year, with 9.6% growth on the commercial aerospace side and 11.9% in defense. On the industrial side, the segment grew 5.5% year-over-year, with the distribution and aftermarket up 10%. In A&D, we continued to see broad strength across the portfolio. The aircraft aftermarket expanded 22.6%, and the defense aftermarket contributed well also, yielding a total of 10.4% for the segment in the quarter. We cheer the progress Boeing is making on aircraft production and continue to pray for their continued success. Moving to industrial, we achieved a 5.5% growth this quarter. Most of our industrial markets contributed to this performance: aggregate, metals and mining, food and beverage, forest products, warehousing, grain, to name a few.

Free cash flow, was another highlight of the period.

Of 104.3 million setting a new uh, record for RBC.

And adjusted EPS was $2.84 per share.

10.4% year-over-year.

With 9.6% growth on the commercial Aerospace side and 11.9% in defense.

And the industrial side, the segment grew 5.5% year-over-year.

With the distribution and aftermarket up 10%.

In AMD, we continue to see broad strength across the portfolio.

The aircraft aftermarket expanded 22.6%.

And the defense aftermarket contributed contributed. Well also.

Yielding, a a total.

Of 10.4% for the segment in the quarter.

We cheer the progress Boeing is making on aircraft production and continue to pray for their continued success.

Moving to Industrial.

We achieved a 5.5% growth, this quarter.

Dr. Michael Hartnett: Oil and gas, as well as semiconductor, remain weak. For RBC Bearings Incorporated, the industrial economy felt strong, and the recent print of 3% U.S. GDP expansion confirmed our impression during the period. Certainly, the tax treatment for capacity investment in the Big Beautiful Bill recently signed portends well for these sectors in the future quarters, and we expect this to be a very positive influence on demand for our products, for the balance of this year and into next. Overall, our backlog for the first time exceeded $1 billion during the period, with $100 million of that being industrial products. Our relentless drive for organic growth through product innovation and market development creates new opportunities that are identified and sorted monthly at our ops meetings. This is often where high-potential productive short and long-term options are identified and prioritized.

Most of our industrial markets contributed to this performance, including aggregate metals, mining, food and beverage, forest products, warehousing, grain, and grain, to name a few.

Oiling gas as well as semiconductor remain weak.

For RBC, the industrial economy felt strong.

In the recent print of 3%, US GDP expansion confirmed. Our impression During the period.

Certainly the tax treatment for capacity investment in the big, beautiful Bill recently signed pretends well for these sectors and in the future quarters and we expect this to be a very positive influence on demand for our products.

Um, for the balance of this year and into next.

Overall, our backlog for the first time exceeded 1 billion dollars During the period.

With a 100 million of that being Industrial Products.

Our Relentless drive for organic growth, through product Innovation, and Market development creates new opportunities that are identified and sorted monthly, at our Ops meetings.

Dr. Michael Hartnett: These can be for markets as diverse as aero engine, space, guided weapons, marine, warehousing, airframe, bridge building, to name a few examples. This has become an increasingly important feature of our business plan, adding meaningful revenues year in and year out. Demand for our defense products remains at unprecedented levels. We expect to see this sector of our business expand in the high single to low double digits for many quarters into the future. We are adding to our capacities where needed to satisfy the expanding requirements of our customers. Our marine business is a primary driver in this regard, but there are many other subordinate drivers in this expansion, such as airframe, aero engine, and aero aftermarket. Clearly, the recent acquisition of VACCO adds fuel to this fire.

This is often where high potential, productive, short, and long-term a options are identified and prioritized.

These can be for markets as diverse as zero engine space. Guided weapons Marine warehousing, airframe bridge building to name a few examples.

This has become an increasingly important feature of our business plan adding to uh meaningful revenues year in and year out.

A little on defense demand for our products. Remains at unprecedented levels.

We expect to see this sector of our business. Expand in the high single to low, double digits, for money, quarters into the future.

We are adding to our capacities where needed to set satisfy the expanding requirements of our customers.

Our marine business is a primary driver in this regard, but there are many other.

Uh, subordinate drivers in this expansion, such as the airframe Aero engine and Aero aftermarket.

clearly this recent, the recent acquisition of vco, he adds fuel to the fire

Dr. Michael Hartnett: VACCO's marine business, which has historically represented half of their revenues, demand for their products like ours is very high, again driven by the build-out of the U.S. submarine fleet. Their business, like ours, must expand to meet the needs of the Navy. The synergy between RBC Bearings Incorporated and VACCO is strong, adding critical mass in the areas of engineering, manufacturing, contract management, and supply chain. We are only weeks into our ownership of this new business, and I will wait until our next conference call to further elaborate on our plans and potential. I am highly optimistic about our future together with this unusually synergistic business. As we begin Q2 in fiscal 2026, the year is shaping up to be a very strong one for RBC Bearings Incorporated. We are well-positioned in our markets. We see unprecedented demand in several important areas of the market for our products.

A little on backhoes Marine business which is historically represented, half of their revenues demand for their products, like ours is very high.

Again, driven by the buildout of the US submarine Fleet.

Their business like ours must expand to meet the needs of the Navy.

The Synergy between our BC and vo is strong at in critical mass, in the areas of engineering, manufacturing, contract, management and supply chain.

We are only weeks into our ownership of this new business.

And I will wait until our next conference call to further elaborate on our plans and potential.

I am highly optimistic about our future together with this unusually synergistic business.

As we begin Q2 and fiscal 26.

The year is shaping up to be a very strong 1 for RBC.

We are well, positioned in our markets. We see unprecedented demand in several important areas.

Dr. Michael Hartnett: We hold a strong balance sheet and have created a well-defined business plan in most of our core businesses with a strong, button-downed five-year outlook that is executable. I will now turn the call over to Rob Sullivan.

Of the market for our products.

We hold a strong balance sheet.

And have created a well-defined business plan and most of our core businesses.

With a strong button-down 5-year outlook. That's, um, executable.

Josh Carroll: Thank you, Mike. As Dr. Hartnett indicated, this is another strong quarter for RBC Bearings Incorporated. Net sales growth of 7.3% drove gross profit growth of 6.1%, with gross margins of 44.8% for the quarter and 45.4% on an adjusted basis versus 45.3% for the same period last year. Our performance during the quarter was driven by a strong performance across our business segments, with industrial gross margins leading the way. Industrial gross margins during the quarter were 46%, and aerospace and defense margins were 42.3%. On an adjusted basis, industrial gross margins were 47.1% for the quarter. On the SG&A line, we had total costs of $73.9 million, or 16.9% of sales for the quarter. Included in that number were additional personnel and fringe costs, as well as continued investment in IT-related costs during the quarter.

I will now turn the call over to Rob Sullivan. Thank you, Mike as Dr. Hardener indicated. This is another strong quarter for RBC net sales, growth of 7.3% drove gross, profit growth of 6.1% with gross margins of 44.8% for the quarter and 45.4% on an adjusted basis versus 45.3% for the same period last year.

Was driven by a strong performance, across our business segments, with industrial gross margins, leading, the way industrial gross margins. During the quarter were 46%, and Aerospace, and defense margins for 42.3% on an adjusted basis, industrial gross margins were 47.1% for the quarter.

Josh Carroll: This ultimately resulted in an adjusted EBITDA of $141.5 million, or 32.5% for the quarter. That reflects a 5.6% increase in EBITDA dollars year over year. Interest expense in the quarter was $12.2 million. This was down 29.1% year over year, reflecting the impact of the debt payments made in fiscal 2025, further enhanced by reduced interest rates this quarter as compared to this time last year. During the quarter, we only paid off approximately $6 million of debt as we held cash in anticipation of the VACCO deal closing. The tax rate in our adjusted EPS calculation was 22.5%, consistent with last year's 22.4%. Altogether, this led to adjusted diluted EPS of $2.84, representing growth of 11.8% year over year, an impressive result given the choppiness in commercial aerospace production schedules and the macroeconomic softness in the industrial economy.

On the sgna line, we had total costs of 73.9 million or 16.9% of sales for the quarter including that number were additional personnel. And Fringe costs as well as continued investment in it related costs during the quarter,

This ultimately resulted in an adjusted EBITDA of $141.5 million, or 32.5% for the quarter. This reflects a 5% to 5.6% increase in EBITDA dollars year-over-year.

In the quarter was 12.2 million, this was down, 29.1% year-over-year reflecting the impact of the debt payments made in physical 2025 further, enhanced by reduced interest rates this quarter as compared to this time last year.

During the quarter. We only paid it off approximately 6 million of debt as we held cash and anticipation of the backward deal closing.

the tax rate in our adjusted EPS calculation was 22.5% consistent with last year's 22.4%

Josh Carroll: Free cash flow in the quarter came in at $104.3 million, with conversion of 152% in comparison to $88.4 million and 144% last year. The higher conversion rate was due to the increased earnings and working capital management during the quarter. In July, we drew down $200 million of our revolver to help finance the VACCO acquisition, with the remaining $75 million payment coming from cash on hand. Looking ahead, our capital allocation strategy will remain focused on delevering by using the cash that we are generating to pay off that $200 million we drew by the end of the fiscal year. Looking into the second quarter, we are guiding revenues of $445 million to $455 million, representing year-over-year growth of 11.8% to 14.4%.

Altogether. This led to adjusted diluted EPS of $2.84 representing growth of 11.8% year-over-year. An impressive result given the choppiness and Commercial Aerospace production schedules and the macroeconomic softness in the industrial economy.

Free cash flow in the quarter came in at 104.3% of 152% and compares to 88.44% last year, the higher conversion rate was due to the increased earnings and working Capital Management during the quarter.

In July, we drew down, 200 million of our revolver to help Finance, the backo acquisition with the remaining 75 million payment, coming from cash on hand.

Looking ahead, our Capital allocation strategy will remain focused on de-levering by using the cash that we are generating to pay off that 200 million, we drew by the end of the fiscal year.

Josh Carroll: That guidance embeds an operating environment that's been fairly similar to what we have been seeing over the last few quarters, with an additional benefit of owning VACCO for a little more than two months. On the margin side, we are projecting gross margins of 44% to 44.25% for the quarter, and SG&A as a percentage of sales to be between 17% and 17.25% for the quarter. Embedded in all of this is an assumption that VACCO will add approximately $15 million to $20 million of revenue to our quarterly results in Q2, with gross margins between 25% and 30%, very similar to Sargent when we closed on that acquisition. Keep in mind, this deal closed in the second half of July, and therefore this does not reflect the full quarter's worth of sales activity.

Looking into the second quarter. We're guiding revenues of 445 million to 455 million representing year-over-year growth of 11.8% to 14.4%.

That guidance embeds and operating environment that's been fairly similar to what we have been seeing over the last few quarters with an additional benefit of owning backo.

For a little more than $2 million.

On the margin side, we are projecting gross. Margins of 44 to 44.25% for the quarter and sgna is a percentage of sales to be between 17 and 17.25% for the quarter.

Embedded in all, this is an assumption. That VA will add approximately 15 to 20 million of Revenue to our quarterly results in Q2 with gross margins between 25 and 30%.

Very similar to Sergeant when we closed on that acquisition.

Keep in mind, this deal closed in the second half of July. And therefore, this does not reflect the full quarter is worth of sales activity.

Josh Carroll: To wrap it up, this is another strong quarter for RBC Bearings Incorporated, which underscores the momentum we have built and the strength of our strategic execution. As Michael Hartnett notes, we're well-positioned to achieve our objectives and drive growth, driven by our core capabilities in engineering and operational excellence and innovative product development. Our focus will continue to remain on executing on our organic growth, integrating VACCO, enhancing operational efficiencies, and delivering robust free cash flow conversion to create long-term value for all of our stakeholders. With that, operator, please open the call for Q&A.

To wrap it up, this is another strong quarter for RBC, which underscores the momentum we have built and the strength of our strategic execution.

With Dr. Harton at notes. We're well, positioned to achieve our objectives and drive growth driven by our core capabilities and engineering and operational excellence and Innovative product development.

Our focus will continue to remain on executing on our organic growth, integrating back, enhancing operational efficiencies, and delivering robust free cash flow conversions.

To create long-term value for all of our stakeholders.

Speaker 6: Certainly. We will now be conducting a question and answer session. If you would like to be placed into question queue, please press star one on your telephone keypad. Once again, that is star one to be placed into question queue. A confirmation tone will indicate your line is in question queue. You may press star two if you would like to move your question from the queue. Our first question today is coming from Kristine Liwag from Morgan Stanley. Your line is now live.

With that operator, please open the call for Q&A.

Certainly we're now the conducting those question and answer session. If you'd like to be placed into question queue, please press star 1 on your telephone keypad, once again that star 1 to be placed into the question queue. A confirmation tone. Will indicate your line is in question Q.

You may press star 2 if you'd like to move your question from the queue.

Kristine Liwag: Hey, good morning, everyone.

our first question today is coming from Christine Lee from Morgan Stanley, your line is now live

Speaker 6: Morning.

Hey, good morning, everyone.

Dr. Michael Hartnett: Good morning, Kristine.

Kristine Liwag: Mike, in your prepared remarks, you kind of talked about a five-year outlook there. I was wondering, what parts of that could you share with us? How are you thinking about the next five years, and what are the key components that you are measuring?

Good morning, Christine.

So, so Mike in your prepared remarks, you kind of talked about a 5-year Outlook there. So, um, I was wondering, uh, what parts of that could you share with us? How are you thinking about the next 5 years? Um, and what are the key components that you're you're you're you're measuring

Dr. Michael Hartnett: We are going from major business to major business, and we are lining up our historical sales by account and what the outlook for those accounts are. As you know, if it is Boeing or Airbus or Embraer or Pratt or GE or one of the other big drivers of the aerospace industry, they are all customers of ours. Their business outlook is pretty well-defined and within limits. We use that and knowing our content and knowing what the expansion of our content would be over that term based upon some of the things that we are working on now and expect to convert. We boil that all into revenues by account and margins by account and expand it over a course of five years. We do that for basically all of our businesses, but obviously the big ones get the most attention.

um,

well.

We're going, we're going from uh, major business to Major business and we're lining up. Um,

You know, our historical sales by account.

and um, with the outlook for that those accounts are, um,

as, as, you know, if it's Boeing or Airbus or embryo or, you know, pre or GE or

All customers of ours.

And, uh, their business outlook is, is.

is uh, pretty well defined and um,

Within limits. And so we, we use that and knowing our content and knowing what, uh, the expansion of our content would would be over that term based upon, you know, some of the things that we're working on now and expect to convert

You know, we we boil that all into uh revenues by account.

And um, margins by account.

Dr. Michael Hartnett: That leads us to the point of planning on, do we have the right capacity to satisfy the business demands for these customers? With that, we kind of look at what our capitalization is in each one of those business units and where it needs expansion, improvement, and where likely the mix is going to be the strongest and maybe our production ability to support that mix is weak. It gives us a timeline to build out our thoughts on how to expand those businesses. We have many, several businesses that have very, very positive outlooks over the next five years given where they are positioned in their markets. I do not know if I answered all your questions, but that is our process.

And expanded over a course of 5 years and we do that for, you know, you know, basically all of our businesses, but obviously the the big ones get the most attention.

And, um, so that leads us to, um,

To the, to the point of, um,

uh planning. Uh, do we have the right?

Capacity.

To set satisfy, um, the business demands for these customers. And so, you know, with with that, uh, we kind of look at what our capitalization is in each 1 of those business units.

And um, what's you know, where it where it's um where it needs expansion?

you know, uh Improvement and uh, we're likely the, um, the mix is going to be um,

Uh uh the strongest and maybe our production ability to support that mix is weak.

so it gives us, you know, it gives us some sort of a timeline to, um, build out our, um, thoughts on how to expand those businesses and um,

You know, we have, you know, several businesses that have very, very, um, um,

uh,

positive outlooks over the next 5 years given where their positioned in their markets.

Kristine Liwag: It sounds like a pretty positive one. With the capacity that you have in place, you had built out a lot of capacity going into COVID in preparation for these new programs. Does this mean that you have to spend more money on CapEx? How should we think about the margin, if the build rates play out as the OEMs have described, or are planning for, what does that ultimately mean for potential margin expansion and revenue growth for your aerospace business?

And I don't know if I answered all your questions, but that's our process.

I mean it sounds like a pretty positive 1. Um, so with the capacity that you have in place and you know, you had built out a lot of capacity, kind of going into Co in preparation for these new programs, does this mean that you have to spend more money on capex? Um, and how should we think about the margin? You know, if if the build rates play out as, uh, the oems have described, um, or are planning for what does that ultimately mean for potential margin expansion and revenue growth for your Aerospace business?

Dr. Michael Hartnett: Well, certainly for the aerospace business, it is very positive. Actually, right now, we are airfreighting manufacturing equipment from Europe into some of the plants to expand the capacity on an accelerated business because business is a little bit stronger in certain areas than we had anticipated. I think in terms of how much CapEx we will employ over that period of time, I think we are like between our depreciation is like 3% or 3% to 4% of our revenues. I think we are going to kind of stay in that range. We have some real estate that we will probably end up liquidating and consolidating a couple of businesses over time, which sort of will net us back to that 3% to 4% kind of range.

Well, certainly for the aerospace business, it's very positive. And, you know, actually, right now we, um,

and we're actually air freighting. Um,

um, manufacturing equipment from Europe, into some of the plants to expand the capacity on an accelerated business because

Um, business is a little bit stronger in certain areas than we had anticipated. So,

um,

I think in terms of how much CapEx will,

Will employ over that period of time. Um, you know, I I I think we're like between our depreciation is like 3 or 3 to 4% of our our revenues and I I think we're going to kind of stay in that range. Um,

we have, uh,

We have some real estate.

That, uh, will probably end up liquidating and, uh, consolidating.

A couple of businesses over time. Which, uh,

Which uh, sort of will, will will net us back to that 3 to 4% kind of um, a range.

Kristine Liwag: Great. Thank you. If I could follow up on the Big Beautiful Bill comment that you mentioned, you guys are core to U.S. infrastructure build. When you think about the opportunities that are outlined in that bill, can you just, with the portfolio today, give us a reminder of where you are in the cycle? Are you going to be earlier cycle on those builds, mid, and how quickly, ultimately, for your business, could you see how orders materialize? Is that what kind of drove that $100 million backlog for industrial that you called out earlier?

Great, thank you. And if I could follow up on the big, beautiful Bill, comment, that you mentioned. I mean you guys are core to us infrastructure build. Um when you think about the opportunity that that's outlined in that bill. Can you just, you know, with the portfolio today? Can you give us a reminder of where you are in the cycle? Are you going to be earlier cycle on those builds mid and um, how quickly?

Ultimately for your business, could you see how orders materialized and is that, you know what kind of drove that 100 million dollar backlog? For industrial that you called out earlier?

Dr. Michael Hartnett: Well, I think a lot of our industrial customers are small. Not all of them are small, but a lot of them are small. I think the tax treatment in that bill, allowing them to expense their industrial equipment and minimize their tax bill in any given year, is catnip. We would expect to see a lot of expansion of demand from those smaller customers. That is probably how it is going to affect our industrial business the most. I am not sure on the aircraft and aerospace and defense side. Everybody is a pretty large customer, and they probably do not pay taxes now anyway. I am not sure how impactful that bill will be, but we are expecting it to be more favorable on the industrial side than the aerospace side.

Um, yeah. Well

I think a lot of our a lot of our industrial customers are, um, are small.

Um, not all of them are small but a lot of them are small.

And so I think the the tax treatment in that bill allowing them to expense their industrial equipment and minimize their tax bill.

In any given year, it is, um, catnip.

and um, and so we we would expect

We would expect to see, um,

a smaller customers and, uh,

And so that's that's probably how it's going to affect our industrial business. The most

um,

I'm not sure on the aircraft and Aerospace and defense side. Everybody's a, a pretty large customer and uh, they probably don't pay pay taxes now, anyway, so, um, I don't not not sure how how impactful that bill will be but um, we're expecting it to be more favorable on the industrial side than the Aerospace side.

Kristine Liwag: Great. Thank you very much.

Dr. Michael Hartnett: Yep.

Great, thank you very much.

Yeah.

Speaker 6: Thank you. Our next question today is coming in from Michael Tramolli from True Securities. Your line is now live.

Thank you. Our next question. Today is coming from Michael Troy from truist Securities. Your line is now live.

Speaker 9: Thanks for taking the, the question. Nice results, as always. Rob, hey, can you maybe help us with just more of the, the modeling details for VACCO? I mean, should we be, I think we had the full-year run rate revenue for March. Should we be thinking they're getting similar growth tailwinds from other naval exposed companies? So, you know, maybe 10 to 11 million monthly revenue contribution to, to work with our models. And does all of this revenue go into, the A&D segment, specifically in defense? And I guess just thinking about margins, you know, it, it, it seems like if we use that midpoint of, of what you gave, you know, maybe it's the 150 basis points of dilution this year, but anything else you can share with us?

Thanks for taking the, uh, the question. Nice results as always. Um, Rob. Can you maybe help us with just more of the, um, the modeling details for vo. I mean, should we be? I think we had the full year, run rate revenue for March. Should we be thinking they're getting similar growth Tailwinds from other Naval exposed companies? So, you know, maybe 10 to 11 million monthly Revenue contribution.

Josh Carroll: You know, it's, it's early days, right? We've really had them under our, our tent for about two weeks now. so, you know, I think we'll have a lot more to share on where it's all gonna go for the, for the broader year by, by next quarter. I kind of laid out what I thought the impact is gonna be for, for this coming quarter. but, you know, I think generally speaking, you know, where our, our margins are running, if you look at our, our, despite, you know, any dilutive impact, if you look at our gross margins for Q2 and, and the range that we provided, it's still exhibiting year-over-year expansion from where we were at this time last year. So it's not overall as meaningfully impactful, as a result.

To to work with our models and does all of this Revenue go into, uh, the A and D segments, specifically in defense. And I guess just thinking about margins, you know, it, it seems like, if we use that midpoint of of what you gave, you know? Maybe it's the 150 basis points of dilution this year, but anything else you can share with us

Josh Carroll: And just about, you know, any acquisitions we were going to, to put under our tent, you know, would have some measure of impact in the short term, but that's, that's our playbook, right? And that's what we've done with Sargent. That's what we've done with Dodge. so that's, that's kind of how we're looking at this thing. So, you know, I think they're, they're running at a 30 million a quarter run rate on sales over the last 12 months, and that's, that's kind of the barometer that, that we were using. and so more to come, certainly in the future. We.

You know it's it's early days, right? We've really had them under our our 10 for about 2 weeks now. Um, so you know, I think we'll have a lot more to share on where it's all going to go for the for the broader Year. Bye. Bye. Next quarter. I kind of laid out what I thought the impact is going to be for, for this coming quarter. Um, but you know, I think generally speaking, you know, where our our margins are running, if you look at our our despite, you know, any dilutive impact, if you look at our gross margins for Q2 and and the range that we provided, it's still exhibiting year-over-year expansion from where we were at this time last year, so it's not overall as meaningfully impactful. Um, as a result and just about, you know, any Acquisitions from, we were going to to put under our tent, uh, you know, would have some measure of impact in the short term but that's that's our Playbook, right? And that's what we've done with Sergeant. That's what we've done with Dodge. Um, so that's that's kind of how we're looking at this thing. So, you know, I think they they're running at a 30 million

Speaker 9: Okay. Okay. That, that's helpful. Yeah, I was saying 150 basis points dilution. I was actually looking at my 26 exit rate. Yeah, you'll, you should still get year-over-year expansion. Are, are we putting all these revenues in the A&D sector, or is anything going into industrial just so we can have.

And a quarter run rate on sales over the last 12 months. And that's that's kind of the barometer that that we were using. Um, and so more to come, certainly in the future. We

Josh Carroll: Yeah, no, it's, it's.

Speaker 9: Models calibrated?

Josh Carroll: It's A&D.

Speaker 9: Okay. Okay. Helpful. and then maybe, separately, Mike, what do, what are you seeing, in commercial aerospace? We've, we've seen some, some different trends, maybe some destocking on the airframe side. Engine continues to be strong. I think your, your year-over-year growth, I, I think if I've got it right, in the OE side, maybe showed some deceleration with a big pickup in aftermarket. But any, anything else you can talk to, build rates, you know, color order trends?

Okay. Okay. That that that's helpful. Yeah, I would say 150 basis, points solution. I was actually looking at my 26 exit rate. Yeah. You you should still get year-over-year. Expansion. Are are we putting all these revenues in the AMD sector? Or is there anything going into industrial, just so we could have. Yeah, no models Sandy.

Okay, okay, helpful. Um, and then maybe, um, separately. Um, Mike, what? What are you seeing? Uh, in commercial Aerospace. We've, we've seen some some different Trends, maybe some D stocking on the airframe side engine continues to be strong. I think your your year-over-year growth. I think if I've got it right in the OE side, maybe showed some deceleration with the big pickup in aftermarket. But any anything else you can talk to build rates, you know, color order trends.

uh,

Josh Carroll: Well, I mean, I think the build rates are pretty public news, right? Our content for build rate is pretty well-defined. We do expect to, in a measured way, expand our content on some of these ships over the next 6 to 12 months. I think that's probably the biggest positive we're seeing right now. Currently, we're negotiating contracts with all of these OEMs on expanding our statement of work and the term of the statement of work over the next five years. The discussions are very positive. So I think it's looking good for us.

well, I mean I think the the build rates are

our, um, you know,

Pretty public news, right? And uh, and so our our content for build rate is uh is pretty well defined. Um the you know the the um,

We, we do expect to, um, sub.

in in a, in a measured way, expand our content on some of these ships over the next

6 to 12 months.

Um,

And um, I think that's uh, that's probably the biggest the biggest positive we're seeing right now. Um,

And uh currently we're we're negotiating contracts with all of these oems on expanding uh.

Expanding. And um, our our

Statement of work and the term of the statement of work over the next 5 years. So, um, and the discussions are very positive. So I think it's

Uh, it's looking. It's looking good for us.

Speaker 9: Okay. Okay. Thanks. I'll, I'll jump back in the queue. Thanks, guys.

Okay.

thanks, I'll

Josh Carroll: Thanks.

Speaker 6: Thank you. Next question is coming from Steve Barger from KeyBank Capital Markets. Your line is now live.

the question is,

Larger from keybanc Capital markets, your line is now live.

Josh Carroll: Hey, thanks. Good morning.

Dr. Michael Hartnett: Morning, Steve.

Hey, thanks. Good morning.

Josh Carroll: Mike, you, you talked about some of the impacts from the one Big Beautiful Bill on smaller customers, but we've been hearing a few industrial companies talk a little more positively about the back half and, and even 2026 before seeing that benefit. So to the extent you can pull stimulus apart from general demand, does it feel like we've turned the corner into a sustainable industrial expansion?

Morning, Steve, Mike. You

You talked about some of the impacts from the 1, big beautiful, bill on smaller customers, but we've been hearing a few industrial companies. Talk a little more positively about the back half and, and even 2026 before seeing that benefit. So, to the extent, you can pull stimulus apart from General demand. Does it feel like we've turned the corner into a sustainable industrial expansion?

Dr. Michael Hartnett: It certainly felt that way in the first quarter. I mean, our, our industrial distribution business in the first quarter was up 10%. that's pretty good for an industrial distribution business to be up 10% in a quarter. So, it, it, you know, our, our metrics are telling us that, yes, things, things have, things are getting stronger. my own metric is the number of tractor-trailers on the, on the highways that are between me and my exit, seem to be, seem to be exponentially larger this year than they were last year. and, everybody that comes to work complains about the traffic now. So to me, that's a very good sign that the economy is, is really being stimulated.

It's certainly felt that way in the first quarter.

Um, I mean, our our, our industrial distribution business and the first quarter was up. 10%

Um, that's pretty good for an industrial distribution business to be up 10% in the quarter.

So, um, it, it, you know,

Our our metrics are telling us that uh yes things. Things have things are getting stronger.

um,

my own metric is the number of tractor trailers on the, on the highways

that are between me and my exit.

Um,

seemed to be, uh, seem to be exponentially larger this year than they were last year.

Uh, and uh, everybody that comes to work complains about the traffic now.

Josh Carroll: Yeah. Makes sense. it's great to see you hit the $1 billion backlog milestone. You said most of that is aero and defense. What's the duration of that backlog? Is, is that multiple years?

So to me, that's a very good sign that the economy is, is really being stimulated.

Yeah.

Makes sense.

It's the 1 billion dollar backlog Milestone, you said most of that is Arrow and dispense. What's the duration of that backlog is is that multiple years?

Dr. Michael Hartnett: It is multi, it is multiple years. And, and, you know, we're, we're, we think we have a, a, an honest-to-goodness chance of doubling that over the next 12 months.

It is multi; it is multiple years, and uh,

and uh, you know, we're we're

we think we have a an honest to goodness chance of doubling that over the next 12 months.

Josh Carroll: Wow. just from all the, the defense programs primarily, or, or does that include commercial?

Wow.

Dr. Michael Hartnett: Yeah.

Josh Carroll: What, what would drive that?

Dr. Michael Hartnett: mainly defense.

um, just from all the, the defense programs primarily or or is that include commercial what what would drive that

Uh, mainly defense.

Josh Carroll: Got it. Okay. And, and when you talk about doubling that over the next 12 months, would that, you know, would that push the backlog to end of decade, or how would we think about the monetization schedule of that?

Got it, okay? And, and when you talk about doubling that over the next 12 months would that, you know, would that push the backlog to end of decade or how would we think about the monetization schedule of that?

Dr. Michael Hartnett: Well, a lot of, a lot of the, center of mass on that is our build-outs that, of, of equipment between now and 2030, 2031, 2032. So that's sort of how these contracts are coming together.

well, a lot of, a lot of the, um, uh, Center of Mass on that is our build outs that, uh,

Of of equipment between now and 2030 2031 2032.

So that's sort of how these contracts are coming together.

Josh Carroll: Got it. And last one for me. We know you and your team make detailed plans, just like how you talked about the five-year process. I know it's really early in owning VACCO, but can you talk about first steps of integration? Can you take a shot at margin progression in coming quarters and years and how you see that playing out, just based on your experience from other deals?

Got it and and last 1 for me, you know, we know you and your team make detailed plans. Just like how you talked about the, the 5 year process. I know it's really early in owning vo but just

You talk about first steps of integration? Can you take a shot at margin progression and coming? Quarters and years and how you see that playing out um

Just based on your experience from other deals.

Dr. Michael Hartnett: Yeah. Well, you know, on, on, Sargent, you know, VACCO is kind of Sargent's little brother, for, for half of their revenues, you know, particularly the marine half. And it's, it's, RBC's aerospace little brother for the other half, for the, for the space half. So, we have it, we have it well covered. when we, when we did Sargent, we expanded over time, their margins by about 1,000 basis points, right? I'm not sure exactly what the historical timeframe was that we did that, but it was probably between we acquired S-Sargent in 2015, and, you know, the wheels came off of the, you know, with, with the pandemic, early 2020. So I think it was probably in that period of time that, that we expanded it. I don't think VACCO's gonna take that long, and I think they're gonna see this a similar ramp.

Yeah. Well, you know, on on, uh, sergeant

um,

You know, VA VO is kind of Sergeant's little brother.

Um, for half of their revenues, you know, particularly the Marine half.

and it it's, uh,

RBC's aerospace little brother for the other, half for the space app.

So um, we have a we have a well covered uh, when we, when we did Sergeant we expanded.

Over time. Um,

Their margins by about a thousand basis points, right? I'm not sure exactly what the historical time frame was that we did that, but it was probably between when we acquired Sergeant in 2015.

And um, you know, the wheels came off.

Of the, you know, with, uh, with the

Dr. Michael Hartnett: and we're thinking 18 to 24 months just, would be a good, a good bogey. nothing is hard. Nothing is, nothing is, is unknown. As Rumsfeld says, we're, it's all known knowns to us. And, it's a matter of, you know, sort of execution. And, and, you know, we have, we literally have teams of people on the West Coast there, every day, sort of, you know, sorting through, and creating, creating a, a roadmap. And, you know, VACCO's in an area, geographic area where, you know, we have over an employment base of over 1,000 people and, and seven or eight plants, and, and very highly synergistic to what they do and, and how they do it and what skill sets they have and, and, and what they have for supply chain and what we have for supply chain. they're very, very similar, businesses.

The pandemic really hit in 2020, so it was probably in that period of time that we expanded it. I don't think that was going to take that long, and I think they're going to see a similar ramp.

um, and we're thinking

18 to 24 months.

Just, uh, would be a good. Um,

A good bogey. Um,

and nothing is hard.

Nothing is nothing is unknown.

says, uh, we're, it's all known knowns to us and, uh, it's a matter of um,

You know, sort of execution and um,

And, uh, you know, we literally have...

Teams of people on the West Coast there, um, every day.

So sort of, you know, sorting through, um, and creating creating the, um, a road map.

And, uh, you know, that goes in an area, um, geographic area.

where, um,

you know, we have over an employment base of over a thousand people in in 7 or 8 plants.

And and very highly synergistic to what they do and and how they do it and what skill sets they have. And and and what they have for supply chain. And what we have for supply chain,

Dr. Michael Hartnett: So, I think it's gonna be, much easier, to get our, to get our, to accelerate the, the improvement of that business than it was for, Sargent, and, maybe not as easy as Dodge.

Um, they're very, very similar, um, businesses. So, um, I think it's going to be.

Uh, much easier. Um,

To get our to get our, um, to accelerate the the Improvement of that business than it was for, uh, sergeant.

and um,

Maybe not as easy as Dodge.

Josh Carroll: That's great detail. looking forward to seeing how that progresses. So, drive safe out there.

Dr. Michael Hartnett: Yeah. Thanks.

It's a great detail. Um, looking forward to seeing how that progresses, so um, drive safe out there.

Speaker 6: Thank you. Next question is coming from Scott Deuscholl from Deutsche Bank. Your line is now live.

Yeah, thanks.

Speaker 9: Hey, good morning. Dr. Hartnett.

Thank you. Next question is coming from Scott Deo from Deutsche Bank. Your line is now live.

Dr. Michael Hartnett: Good morning.

Speaker 9: Does the upgrade of the GTF engine to the GTF Advantage create an opportunity for RBC to potentially increase its, its share position on the program? Meaning just do the changes in the engineering of the engine and the upgrades for certain parts create some openings for y'all to come in and increase your content?

Dr. Michael Hartnett: Yes. Yes, yes, and yes. We're gonna increase our content.

Hey, good morning, Dr. Hartnett is the upgrade to of the gtf engine to the gtf advantage, create an opportunity for RBC to potentially increase. Its its share position on the program. Meaning just the changes in the engineering of the engine and the upgrades for certain parts, creates some openings for you, all to come in and increase your content.

Yes.

Yes, yes, yes. And yes.

Josh Carroll: Any more specifics, or?

We're going to increase our account. Any more specifics?

Dr. Michael Hartnett: I hesitate to talk more about it, but we're going to increase our content substantially on that engine.

uh, I hesitate to, um,

To talk more about it. Um but um it's we're going to increase our constant substantially on that engine.

Speaker 9: Okay. Do you have a sense for when that begins to ramp up for you all? Do you see it a little bit in the second half of this year and more 2026 in terms of when we see those gains?

Okay. And do you have a sense for when that begins to ramp up for you all? Do you see a little bit in the second half of this year and more 2026 in terms of when we see those gains?

Dr. Michael Hartnett: I think it's gonna start slowly in calendar '26 and ramp through 2030.

I think it's going to start.

Slowly.

In calendar, 26.

And ramp through 2030.

Speaker 9: Okay. And then, Dr. Hartnett, it sounds like we'll hear more on, on VACCO in the future, but can you maybe just spend a few moments with respect to the revenue synergy strategy with VACCO, particularly as it relates to space?

Okay. And then Dr. Hartnett it sounds like we'll hear more on on backo in the future. But can you maybe just spend a few moments with respect to the revenue, Synergy strategy with Falco, particularly as it relates to space.

Dr. Michael Hartnett: yeah. I mean, well, sure. I think, I think the space business, is probably the hardest part for us to sort through. RBC has, a pretty good, business in space with a completely different customer base than VACCO has, with completely different products than VACCO has. VACCO has a, a really, a nice core space business, and then, some business in space that, that, needs to be, rethought. And so we're, we're sort of working our way through that. net-net, some of the VACCO customers have always been target customers for RBC on the space side. So we're gonna have, good, introductions there, and we'll be able to ride VACCO's coattails into those customers. on the other hand, VACCO can ride RBC's coattails into customers in the space business that they don't have. So, I think that's, that's what we see as the benefit right now.

Um, yeah. I mean well,

Sure.

Um,

I think, I think the space business um is probably the hardest part for us to sort through. Um RBC has a pretty good

Uh, business in space with a completely different customer base.

Than backo has with completely different products than backo has.

Um, backo has a, a really a nice core space business.

Um, and then, um,

some business in space that, um,

That needs to be, um, rethought.

And so we're we're sort of working our way through that, um, net net.

Um some of the vo, customers are have always been Target customers for RBC on the space side.

So we're going to have, um, good.

Uh, introductions there. We'll be able to ride backhoes coattails into those customers.

Um, on the other hand backo can ride, rbc's coattails into customers in the space business, that they don't have.

So, um,

Dr. Michael Hartnett: and, I think, I think VACCO's, you know, engineering strength in, in, in what they, what they do and what they produce for products is, is, if not unique, very, very limited, design engineering test skills available at that level in the country. And, so they, really have some unique, very unique talents and tools, which we hope to be able to, employ with, going forward for, in, in RBC's space business benefit.

I think that's what we see as the benefit right now.

And, uh, I think that goes.

You know, engineering strength.

In Q1 2026, RBC Bearings Inc. discussed in detail what they do and what they produce for products.

Is if not unique very, um, very limited, um, design engineering.

Tests skills available at that level in the country.

and um, so they really have

Some unique, very unique talents and tools.

Able to employ.

Um, going forward for RBC's space business benefit.

Speaker 9: That's great. And last question, if I can, just on the aerospace and defense ramp, do you foresee any, any supply chain constraints on your end over the next few years, particularly as it relates to your ability to obtain sufficient volumes of specialty alloys, or do you already have firm delivery commitment growth lined up with suppliers of those alloys?

That's great. And last question, if I can just on the Aerospace and defense ramp, do you foresee any any supply chain constraints on your end over the next few years? Particularly, as it relates to your ability, to obtain sufficient volumes of specialty Alloys or already have firm delivery commitment growth lined up with suppliers of those allies.

Dr. Michael Hartnett: well, you know, that's kind of a, I, I think I, I on the supply chain side, non-alloy, I think we're fine. you know, where, where VACCO is on the supply chain chain side is something that we're trying to sort through. but we have so much production capacity ourselves in LA, that I don't, I don't think, I don't think it's going to be a big issue. so we're very vertically integrated, from the, you know, once the, we receive the material. Now, receiving material, that's another issue. there are some materials that are not a problem, and, that are, you know, semi-exotic. They're stainless steels, and, we use them in, you know, pretty, pretty good quantities. and they're a little bit on the commodity side in terms of, in terms of the ability to, to, you know, procure these. So that's all, that's all fine.

Um,

well.

You know, that's kind of a I I I think I I on the supply chain side non alloy. I think we're fine.

Um, you know we're we're vo is on the supply chain side is something that we're trying to sort through. Um but we have so much production capacity ourselves in LA

Um, that I don't I don't think I don't think it's going to be a big issue.

Um, so we're very vertically integrated from the

You know, once we we received the material now receiving the material, that's another issue.

Um, there are some materials that are not a problem.

Um,

and, um, that are, you know, semi-exotic. They're stainless steels and, uh,

We use them in, you know, pretty pretty good quantities. Um, and they're a little bit on the commodity side in terms of

in terms of the ability to

You know, Pro procure. These so

that's all.

Dr. Michael Hartnett: On, on some of the more exotics, you know, we've, we've, we've been, we've been tested for years on, on, on how to, how to secure and procure some of these exotic materials and, and have actually, bought, you know, extensive, inventories of the exotics to protect our production base. those, those, at one point in time, were impossible to get. And, and that seems to have improved that, and it's, it's more normalized, but nevertheless, it's still, you know, you can't get some of this stuff for 60 weeks. So your planning cycle needs to be way out there in order to, to make sure that your, your customer deliveries don't get affected by somebody that can't get your material. So that's a little bit of a challenge, but it's on an 80/20 basis. It's in, it's definitely in the 20 category, not, not the 80 category.

That's all fine on on some of the more Exotics.

um,

you know, we've we've, um,

We've been we've been tested.

for years on on, um,

on how to secure and procure some of these exotic materials and, um, have actually

um, uh,

Bought.

You know, extensive, um, inventories of the Exotics.

To protect our production base.

Um, those those at 1 point in time were impossible to get.

And that seems to have improved that, uh,

And it's, it's more normalized. But nevertheless, it's still, you know, you can't get some of this stuff for 60 weeks, so, you're planting cycle. Needs to be way out there in, in order to, to make sure that you're

You're a customer. Deliveries don't get affected by somebody that can't get you material.

So, that's a little bit of a challenge, but it's on an 8020 basis. It's in, it's definitely in the 20 categories, the 80 category,

Speaker 9: Thank you very much and great results.

Dr. Michael Hartnett: Thank you.

Thank you very much and great results.

Speaker 6: Thank you. Next question is coming from Pete Skubicki from Olympic Global. Your line is now live.

Thank you.

Dr. Michael Hartnett: Yeah, nice guys. Nice quarter.

Thank you. Next question is coming from Pete, SCY, from Olympic Global. Your line is now live.

Dr. Michael Hartnett: Thanks.

Dr. Michael Hartnett: Mike, I want to circle back to industrial one more time. PMIs have stayed below 50, but revenue has really kind of accelerated here in the last couple of quarters. You mentioned GDP and the tax changes. We are a month here into the second quarter. Do you have some degree of confidence that industrial is now kind of a mid-single-digit grower versus maybe more tepid growth if we, the way we were thinking about it six months ago?

Yeah, thanks guys. Nice Corner. Um thanks Mike. I want to Circle back to uh industrial 1. More time. Just um you know pmis have stayed below 50.

But you know, revenue is really kind of accelerated here in the last couple of quarters. You mentioned GDP and the tax changes.

Were a month here into the second quarter to do, you have some degree of confidence that industrial is now kind of a mid single digit grower versus maybe, you know, more tepid growth. If we, you know, the way we're thinking about it 6 months ago.

Dr. Michael Hartnett: I, I think it's, it's sector-dependent, you know. you know, you look at, you look at certain sectors, and it's, it's, it's off. but our, our major sectors are, have, have performed very well, and, you know, up year to year. And, and so, I guess, I guess if, if I'm in Texas, I'm not feeling great about life, in the oil, oil patch. On the other hand, if I'm, if I'm doing grain or aggregate in various parts of the country, I'm, I'm doing fine. Forest products seem to be doing great. Food and beverage seems to be doing great. So the, the consumable side of the world is, is okay. the larger OEM side of the world is definitely slow. We haven't seen the turn at the larger OEMs. you know, the, but on the, on the, on the consumable side, it's, it's definitely turned.

I think it's sector-dependent. You know, um,

You know, you look at you. Look at certain sectors and it's it's uh, it's off.

um, but our, our major sectors are um,

have have performed very well and, you know, up year to year and uh,

and so, um,

Uh, I guess, I guess if if I'm in Texas, I'm not feeling great about life.

Uh in the oil oil patch on the other hand. If I'm if I'm doing grain or aggregate

In various parts of the country, I'm doing fine. Forest products seem to be doing great. Food and beverage seem to be doing great.

so the um, the consumable side of the world is, uh,

Is okay. Um,

The larger OEM side of the world is definitely slow.

We haven't seen the turn into larger OEMs.

Um, you know, the

Butt.

Dr. Michael Hartnett: Okay. So maybe we shouldn't get too carried away with our, our assumptions there yet.

On the, on the, on the consumable side it's it's definitely turned.

There. Yeah.

Dr. Michael Hartnett: Well, you know, I, I think, I think the impact of this bill is, is yet to be seen. And, you know, it's only weeks old, right? And, I, I think that's gonna have a, a, a real positive effect. Will, will, will farmers buy more combines because, they can, they can expense them in a given year? some might. It might help people like deer.

Well, you know, I I think, I think the impact of this bill is, is yet to be seen and, you know, it's only weeks old right?

And, uh, I I think that's going to have a, a real positive effect will will, will farmers buy more combines because, uh, they can, they can expense them in a given year.

Um, some might

That might help people, like deer.

Dr. Michael Hartnett: Yeah. Yeah. Okay. Fair enough. and just last one for me. In, in the first quarter, and maybe, you know, quarter to date and second quarter, have you seen any impacts at all, positive or negative, from, from tariffs?

Yeah, yeah. Okay, fair enough. Um, and just last 1 for me in the first quarter and maybe you know, quarter of a day and second quarter, have you seen any impacts at all positive or negative from from tariffs?

Dr. Michael Hartnett: you know, tariffs, so first of all, you know, we're very, very, USA-oriented, and USA-organized. And, and so our production and, and, and sales, sales is, is, is mainly influenced by what, what happens in the country. but there, you know, we, we are impacted by tariffs. And, and to the extent, to the extent that we needed to, we've sort of, neutralized the, the impact of our tariff exposure, to our P&L with, price adjustments or adjustments in our contracts and supply agreements. and we have some customers who say, "Okay, you know, we understand there's a tariff. that's on us. We're the importer of record and just, pass it through." So we're happy to do that. others are more argumentative about it. And so we try to, work with them as, as cooperatively as possible. and, how that's gonna turn out remains to be seen.

um,

you know, tariffs.

First of all, we're very, very um, USA or oriented

uh, and USA organized and and so our production and

and and and sales sales sales is, uh, is

Is mainly influenced by what happens in the country. Um, but there, you know, we are impacted by tariffs and, um,

And to the extent.

To the extent that we needed to, um, we've sort of...

um, um,

Neutralized. The the impact of our tariff exposure.

Um,

To our P&L with price adjustments.

Or adjustments in our contracts.

Supply agreements, um, and we have some customers who say, okay, you know, we understand this is a tariff um,

That's on us. We're the Importer of record and just um, pass it through.

So we're happy to do that. Um others are more argumentative about it.

And so we try to um work with them as as cooperatively as possible.

Dr. Michael Hartnett: And, others, we've just adjusted the price.

Dr. Michael Hartnett: Yeah, fair enough. Thanks for the caller.

Um and how that's going to turn out remains to be seen and uh others, we've just adjusted the price.

Dr. Michael Hartnett: Okay.

Fair enough. Thanks for the caller.

Okay.

Speaker 6: Thank you. The next question is coming from Jordan Lyonnais from Bank of America. Your line is now live.

Josh Carroll: Hey, good morning. On aero, just given that, it looks like production is stabilizing, how should we think about contract renewals that you guys have coming up and pricing power going forward? I mean, I think we've developed a really strong reputation with our customers, and it was really done through execution. And that starts with quality, starts with our on-time delivery. And so we're thrilled with the news as demonstrated or illustrated in terms of the production rates and the stabilization in some of the large OEMs. but I, I think it's more just the reputation that we've earned through our performance over the years that gives us the ability to successfully develop the long-term agreements that we've been able to, to do in the past and the ones we're looking forward to in, in the future in '26.

Thank you. Next question, is coming from Jordan Leon from Bank of America. Your line is now live.

Hey, good morning.

On Arrow, just give him that, uh, it looks like production is stabilizing. How should we think about contractor renewals that you guys have coming up in pricing power going forward?

I mean, I think we've developed a really strong reputation with our customers and it was really done through execution and that starts with quality starts with our on-time delivery. And so, we're thrilled with with the news is demonstrated or Illustrated in terms of the production rates and the stabilization and some of the large oems. Um, but I think it's more just the reputation that we've earned through our performance over the years that gives us the ability to successfully develop the long-term agreements that we've been able to to do in the past and the ones we're looking forward to in the future in 26.

Speaker 6: Got it. Thank you.

Got it. Thank you.

Dr. Michael Hartnett: Thank you. We've reached the end of our question and answer session. I'd like to turn the floor back over to Dr. Hartnett for any further closing comments.

Thank you. We've reached the end of our question-and-answer session. I'd like to turn the floor back over to Dr. Hardtner for any further closing comments.

Dr. Michael Hartnett: Okay. Well, I think that's, that, that concludes our, conference call for the, for the day. And I appreciate everybody's questions and participation and look forward to talking to you again. I guess it's, mid-fall. So good day.

Okay, well, I think that's, uh, that that concludes our um, conference call for the, for the day and I appreciate everybody's questions and participation and look forward to talking to you again. I guess it's, uh, mid-fall.

Speaker 6: Thank you. That does conclude today's teleconference. Let me just connect the line at this time and have a wonderful day. We thank you for your participation today.

So, good day.

Thank you. That does conclude today's teleconference. Let me disconnect your line at this time, and have a wonderful day. We thank you for your participation today.