Moog Q1 2026 Moog Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q1 2026 Moog Inc Earnings Call
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Moog Inc. First Quarter Fiscal 2026 Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. I will now hand the conference over to Aaron Astrachan, Head of Investor Relations. Aaron, please go ahead.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Moog Inc. First Quarter Fiscal 2026 Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. I will now hand the conference over to Aaron Astrachan, Head of Investor Relations. Aaron, please go ahead.
Speaker #1: Ladies and gentlemen, thank you for joining us, and welcome to the Moog Inc. first quarter fiscal 2026 earnings conference call. After today's prepared remarks, we will host a question and answer session.
Speaker #1: If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. I will now hand the conference over to Aaron Astrachan, Head of Investor Relations.
Speaker #1: Aaron, please go ahead.
Speaker #2: Good morning, and thank you for joining Moog's first quarter 2026 earnings release conference call. I am Aaron Astrachan, director of investor relations. With me today is Pat Roche, our chief executive officer, and Jennifer Walter, our chief financial officer.
Aaron Astrachan: Good morning, and thank you for joining Moog's Q1 2026 Earnings Release Conference Call. I'm Aaron Astrachan, Director of Investor Relations. With me today is Pat Roche, our Chief Executive Officer, and Jennifer Walter, our Chief Financial Officer. Earlier this morning, we released our results and our supplemental slides, both of which are available on our website. Our earnings press release, our supplemental slides, and remarks made during our call today contain adjusted non-GAAP results. Reconciliations for these adjusted results to GAAP results are contained within the provided materials. Lastly, our comments today may include statements related to expected future results and other forward-looking statements which are not guarantees.
Aaron Astrachan: Good morning, and thank you for joining Moog's Q1 2026 Earnings Release Conference Call. I'm Aaron Astrachan, Director of Investor Relations. With me today is Pat Roche, our Chief Executive Officer, and Jennifer Walter, our Chief Financial Officer. Earlier this morning, we released our results and our supplemental slides, both of which are available on our website. Our earnings press release, our supplemental slides, and remarks made during our call today contain adjusted non-GAAP results. Reconciliations for these adjusted results to GAAP results are contained within the provided materials. Lastly, our comments today may include statements related to expected future results and other forward-looking statements which are not guarantees.
Speaker #2: Earlier this morning, we released our results and our supplemental slides—both of which are available on our website. Our earnings press release, our supplemental slides, and remarks made during our call today contain adjusted non-GAAP results.
Speaker #2: Reconciliations for these adjusted results to GAAP results are contained within the provided materials. Lastly, our comments today may include statements related to expected future results and other forward-looking statements, which are not guarantees.
Speaker #2: Our actual results may differ materially from those described in our forward-looking statements and are subject to a variety of risks and uncertainties that are described in our earnings press release and in our other SEC filings.
Aaron Astrachan: Our actual results may differ materially from those described in our forward-looking statements and are subject to a variety of risks and uncertainties that are described in our earnings press release and in our other SEC filings. Now, I'm happy to turn the call over to Pat.
Our actual results may differ materially from those described in our forward-looking statements and are subject to a variety of risks and uncertainties that are described in our earnings press release and in our other SEC filings. Now, I'm happy to turn the call over to Pat.
Speaker #2: Now, I'm happy to turn the call over to
Speaker #2: Pat.
Speaker #3: Good morning, and welcome
Pat Roche: Good morning, and welcome to our earnings call. We started fiscal 2026 with an outstanding quarter. We delivered exceptional revenue growth of over 20% relative to prior year, underpinned by record quarterly sales in all segments. We increased 12-month backlog by 30%, setting another record. We also improved adjusted operating margin relative to prior year and delivered record earnings per share. Our focus is on delivering for our customers and driving ongoing continuous improvement in pursuit of excellence. Our results are reflective of continuing success in driving both operational and financial performance. Now, let's turn our attention to end markets and the macro environment, starting with defense. The defense market continues to be very strong. We are already seeing increased defense spending by governments in the US, Europe, Australia, and Japan, with further increases expected. In addition, there is an urgency to expand industrial capacity in these regions.
Patrick Roche: Good morning, and welcome to our earnings call. We started fiscal 2026 with an outstanding quarter. We delivered exceptional revenue growth of over 20% relative to prior year, underpinned by record quarterly sales in all segments. We increased 12-month backlog by 30%, setting another record. We also improved adjusted operating margin relative to prior year and delivered record earnings per share. Our focus is on delivering for our customers and driving ongoing continuous improvement in pursuit of excellence. Our results are reflective of continuing success in driving both operational and financial performance. Now, let's turn our attention to end markets and the macro environment, starting with defense. The defense market continues to be very strong. We are already seeing increased defense spending by governments in the US, Europe, Australia, and Japan, with further increases expected. In addition, there is an urgency to expand industrial capacity in these regions.
Speaker #3: Welcome to our earnings call. We started fiscal '26 with an outstanding quarter. We delivered exceptional revenue growth of over 20% relative to the prior year, underpinned by record quarterly sales in all segments.
Speaker #3: We increased 12-month backlog by 30%, setting another record. We margin relative to prior year and delivered record earnings per share. Our focus is on delivering for our customers and driving ongoing continuous improvement in pursuit of excellence.
Speaker #3: Our results are reflective of continuing success in driving both operational and financial performance. Now, let's turn our attention to end markets and the macro environment, starting with defense.
Speaker #3: The defense market continues to be very strong. We are already seeing increased defense spending by governments in the US, Europe, Australia, and Japan, with further increases expected.
Speaker #3: In addition, there is an urgency to expand industrial capacity in these regions. Recent US government announcements demonstrate strong commitment to raise production rates. These announcements make public the need which is underpinned our recent elevated levels of business investments.
Pat Roche: Recent US government announcements demonstrate strong commitment to raise production rates. These announcements make public the need, which has underpinned our recent elevated levels of business investments. This positions us very well to respond to increasing production demands. Moving to commercial aerospace, our customers have strengthened backlogs and are intent on driving increased production rates. We can see, we continue to see consistency in their production and have confidence in their growth plans. We're maintaining a production plan that supports our customers' needs. On the aftermarket side, we continue to benefit for increased airline activity and aging fleet, increased wide-body fleet utilization, and our ability to maintain a strong aftermarket position through excellent customer service. Finally, within industrial markets, we're seeing signs of recovery. This is reflected both in stronger book-to-bill and continued growth in our 12-month backlog over three successive quarters.
Recent US government announcements demonstrate strong commitment to raise production rates. These announcements make public the need, which has underpinned our recent elevated levels of business investments. This positions us very well to respond to increasing production demands. Moving to commercial aerospace, our customers have strengthened backlogs and are intent on driving increased production rates. We can see, we continue to see consistency in their production and have confidence in their growth plans. We're maintaining a production plan that supports our customers' needs. On the aftermarket side, we continue to benefit for increased airline activity and aging fleet, increased wide-body fleet utilization, and our ability to maintain a strong aftermarket position through excellent customer service. Finally, within industrial markets, we're seeing signs of recovery. This is reflected both in stronger book-to-bill and continued growth in our 12-month backlog over three successive quarters.
Speaker #3: This positions us very well to respond to increasing production demands. Moving to commercial aerospace, our customers have strengthened backlogs and are intent on driving increased production rates.
Speaker #3: We can continue to see consistency in their production and have confidence in their growth plans. We're maintaining production plan that supports our customers' needs.
Speaker #3: On the aftermarket side, we continue to benefit from increased fleet, increased wide-body fleet utilization, and our ability to maintain a strong aftermarket position through excellent customer service.
Speaker #3: Finally, within industrial markets, we're seeing signs of recovery. This is reflected both in stronger book-to-bill and continued growth in our 12-month backlog over three successive quarters.
Speaker #3: We see particular strength in demand for data center cooling pumps and medical pumps and sets. Overall, end-market conditions are very favorable for our business.
Pat Roche: We see particular strength in demand for data center cooling pumps and medical pumps and sets. Overall, end market conditions are very favorable for our business. Now, turning attention to our leadership priorities, starting with customer focus. We're pleased to have our operational performance officially recognized by another important customer. We received BAE Systems' Gold Supplier of the Year Award for 2025, recognizing 100% quality and 100% on-time delivery performance. Our pursuit of operational excellence enables us to meet our customer's requirement, which drives our organic growth. Our strong customer value proposition was further reflected in several notable bookings and contract awards. We secured over $1 billion in commercial aircraft orders across several platforms, reflecting future growth in OE production.
We see particular strength in demand for data center cooling pumps and medical pumps and sets. Overall, end market conditions are very favorable for our business. Now, turning attention to our leadership priorities, starting with customer focus. We're pleased to have our operational performance officially recognized by another important customer. We received BAE Systems' Gold Supplier of the Year Award for 2025, recognizing 100% quality and 100% on-time delivery performance. Our pursuit of operational excellence enables us to meet our customer's requirement, which drives our organic growth. Our strong customer value proposition was further reflected in several notable bookings and contract awards. We secured over $1 billion in commercial aircraft orders across several platforms, reflecting future growth in OE production.
Speaker #3: Now, turning attention to our leadership priorities, starting with customer focus. We're pleased to have our operational performance officially recognized by another important customer. We received BAE Systems' Gold Supplier of the Year award for 2025, recognizing 100% quality and 100% on-time delivery performance.
Speaker #3: Our pursuit of operational excellence enables us to meet our customers' requirement, which drives our organic growth. Our strong customer value proposition was further reflected in several notable bookings and contract awards.
Speaker #3: We secured over $1 billion in commercial aircraft orders across several platforms, reflecting future growth in OE production. We secured an additional order for over $100 million for the PAC-3 missile program and see further potential given the recent contract between Lockheed Martin and the U.S. government.
Pat Roche: We secured an additional order for over $100 million for the PAC-3 missile program and see further potential, given the recent contract between Lockheed Martin and the US government. We also received over $50 million of missile orders across PAC-2 and THAAD programs. In addition, we won a new space vehicle contract for over $100 million for our existing Meteor satellites. These orders account for close to half of what was a record space and defense segment bookings quarter. As we look to further develop our value proposition, we have strengthened our leadership team with the addition of a new C-suite role, namely that of Chief Strategy and Corporate Development Officer. This role will focus on ensuring the robustness of our business development plans and the strategic alignment of our acquisitions.
We secured an additional order for over $100 million for the PAC-3 missile program and see further potential, given the recent contract between Lockheed Martin and the US government. We also received over $50 million of missile orders across PAC-2 and THAAD programs. In addition, we won a new space vehicle contract for over $100 million for our existing Meteor satellites. These orders account for close to half of what was a record space and defense segment bookings quarter. As we look to further develop our value proposition, we have strengthened our leadership team with the addition of a new C-suite role, namely that of Chief Strategy and Corporate Development Officer. This role will focus on ensuring the robustness of our business development plans and the strategic alignment of our acquisitions.
Speaker #3: We also received over $50 million of missile orders across PAC 2 and PAD programs. In addition, we won a new space vehicle contract for over $100 million for our existing Meteor satellites.
Speaker #3: These orders account for close to half of what was a record space and defense segment bookings quarter. As we look to further develop our value proposition, we have strengthened our leadership team with the addition of a new C-suite role, namely that of Chief Strategy and Corporate Development Officer.
Speaker #3: This role will focus on ensuring the robustness of our business development plans and the strategic alignment of our acquisitions. Our ability to proactively pursue acquisitions and to follow through with effective integration will enhance our ability to create value.
Pat Roche: Our ability to proactively pursue acquisitions and to follow through with effective integration will enhance our ability to create value. We will continue to have a balanced approach to capital allocations. Now, turning to our employees and communities. We believe that our unique culture is a critical asset. It defines our identity, supports the attraction and retention of extraordinary talent, and enhances collaboration with our customers. I'm exceptionally proud that we have been recognized by Glassdoor with a 2026 Best Places to Work award, which ranks Moog in the top 100 large employers in the US. This is testament to our focus on creating a work environment that is rewarding for our employees and empowers them to make their best contribution. In addition, we were proud to receive the inaugural Business of the Year award from the Buffalo Niagara Partnership, our regional chamber of commerce.
Our ability to proactively pursue acquisitions and to follow through with effective integration will enhance our ability to create value. We will continue to have a balanced approach to capital allocations. Now, turning to our employees and communities. We believe that our unique culture is a critical asset. It defines our identity, supports the attraction and retention of extraordinary talent, and enhances collaboration with our customers. I'm exceptionally proud that we have been recognized by Glassdoor with a 2026 Best Places to Work award, which ranks Moog in the top 100 large employers in the US. This is testament to our focus on creating a work environment that is rewarding for our employees and empowers them to make their best contribution. In addition, we were proud to receive the inaugural Business of the Year award from the Buffalo Niagara Partnership, our regional chamber of commerce.
Speaker #3: We will continue to have a balanced approach to capital allocations. Now, turning to our employees and communities. We believe that our unique culture is a critical asset.
Speaker #3: It defines our identity, supports the attraction and retention of extraordinary talent, and enhances collaboration with our customers. I'm exceptionally proud that we have been recognized by Glassdoor with a 2026 Best Places to Work award, which ranks Moog within the top 100 large employers in the U.S.
Speaker #3: This is testament to our focus on creating a work environment that is rewarding for our employees and empowers them to make their best contribution.
Speaker #3: In addition, we were proud to receive the inaugural Business of the Year award from the Buffalo Niagara Partnership, our regional chamber of commerce. We were also recognized for our impressive recovery efforts in Tewkesbury with Team of the Year award from the local business community.
Pat Roche: We were also recognized for our impressive recovery efforts in Tewksbury, with Team of the Year award from the local business community. Our financial performance continues to strengthen with solid growth and consistent focus on pricing and simplification. Our pursuit of continuous improvement is built on eighty/twenty principles. Having deployed eighty/twenty to all our significant manufacturing locations, our focus now is on further enhancing the maturity of eighty/twenty across the organization and to embed its principles into our management practices. The following practices are important exemplars. Portfolio reviews are shaping our focus on the profitable businesses that we want to invest in and grow. This is happening at site, business unit, and division levels and is informed by segmentation analysis.
We were also recognized for our impressive recovery efforts in Tewksbury, with Team of the Year award from the local business community. Our financial performance continues to strengthen with solid growth and consistent focus on pricing and simplification. Our pursuit of continuous improvement is built on eighty/twenty principles. Having deployed eighty/twenty to all our significant manufacturing locations, our focus now is on further enhancing the maturity of eighty/twenty across the organization and to embed its principles into our management practices. The following practices are important exemplars. Portfolio reviews are shaping our focus on the profitable businesses that we want to invest in and grow. This is happening at site, business unit, and division levels and is informed by segmentation analysis.
Speaker #3: Our financial performance continues to strengthen with solid growth and consistent focus on pricing and simplification. Our pursuit of continuous improvement is built on 80/20 principles.
Speaker #3: Having deployed 80/20 to all our significant manufacturing locations, our focus now is on further enhancing the maturity of 80/20 across the organization and to embed its principles into our management practices.
Speaker #3: The following practices are important exemplars. Portfolio reviews are shaping our focus on the profitable businesses that we want to invest in and grow. This is happening at site, business unit, and division levels, and is informed by segmentation analysis.
Speaker #3: Portfolio reviews drive our decisions to sell or exit products, sites, and businesses, and are an ongoing process allowing us to move resources to where they can have the most impact.
Pat Roche: Portfolio reviews drive our decisions to sell or exit products, sites, and businesses, and are an ongoing process, allowing us to move resources to where they can have the most impact. Voice of the customer feedback directs our continuous improvement actions. We want to enhance the experience of those important customers, which will drive our success and create an even more clearly differentiated offering. We are specifically responding to our customers' needs for greater agility and capacity to meet increased demand. Pricing reviews are integral to our business process and are happening at all levels in the organization. They are data-driven and informed by our simplification and segmentation analysis. Our pricing activities are ensuring that we are fairly compensated for the value that we create for our customers. Now, let me switch over to the work we're doing to optimize our balance sheet.
Portfolio reviews drive our decisions to sell or exit products, sites, and businesses, and are an ongoing process, allowing us to move resources to where they can have the most impact. Voice of the customer feedback directs our continuous improvement actions. We want to enhance the experience of those important customers, which will drive our success and create an even more clearly differentiated offering. We are specifically responding to our customers' needs for greater agility and capacity to meet increased demand. Pricing reviews are integral to our business process and are happening at all levels in the organization. They are data-driven and informed by our simplification and segmentation analysis. Our pricing activities are ensuring that we are fairly compensated for the value that we create for our customers. Now, let me switch over to the work we're doing to optimize our balance sheet.
Speaker #3: Voice of the Customer feedback directs our continuous improvement actions. We want to enhance the experience of those important customers, which will drive our success and create an even more clearly differentiated offering.
Speaker #3: We are specifically responding to our customers' needs for greater agility and capacity to meet increased demand. Pricing reviews are integral to our business process and are happening at all levels in the organization.
Speaker #3: They are data-driven and informed by our simplification and segmentation analysis. Our pricing activities are ensuring that we are fairly compensated for the value that we create for our customers.
Speaker #3: Now, let me switch over to the work we're doing to optimize our balance sheet. Last quarter, I highlighted an opportunity to reduce trade network and capital requirements in our commercial aircraft business.
Pat Roche: Last quarter, I highlighted an opportunity to reduce trade network and capital requirements in our commercial aircraft business. This structural improvement is being achieved through the simplification of our global manufacturing and supply chain network and reshaping the relationship with our suppliers. We are committed to achieving these initiatives with the same zeal that we have brought to our margin enhancement journey. I'm pleased to share that over the last quarter, we've made considerable progress. I'll share a couple of examples. We are shifting suppliers from long-term discrete purchase orders with fixed quantity and delivery dates to a more agile arrangement based on rolling forecast and short fixed commitment window. This approach allows us to respond to changes in customer demand more effectively and shares the burden of customer demand changes more equitably between us and our suppliers. This action is about two-thirds complete.
Last quarter, I highlighted an opportunity to reduce trade network and capital requirements in our commercial aircraft business. This structural improvement is being achieved through the simplification of our global manufacturing and supply chain network and reshaping the relationship with our suppliers. We are committed to achieving these initiatives with the same zeal that we have brought to our margin enhancement journey. I'm pleased to share that over the last quarter, we've made considerable progress. I'll share a couple of examples. We are shifting suppliers from long-term discrete purchase orders with fixed quantity and delivery dates to a more agile arrangement based on rolling forecast and short fixed commitment window. This approach allows us to respond to changes in customer demand more effectively and shares the burden of customer demand changes more equitably between us and our suppliers. This action is about two-thirds complete.
Speaker #3: This structural improvement is being achieved through the simplification of our global manufacturing and supply chain network, and reshaping the relationship with our suppliers. We are committed to achieving these initiatives with the same zeal that we have brought to our margin enhancement journey.
Speaker #3: I'm pleased to share that over the last quarter, we've made considerable progress. I'll share a couple of examples. We are shifting suppliers from long-term discreet purchase orders with fixed quantity and delivery dates to a more agile arrangement based on rolling forecast and short fixed commitment window.
Speaker #3: This approach allows us to respond to changes in customer demand more effectively and shares the burden of customer demand changes more equitably between us and our suppliers.
Speaker #3: This action is about two-thirds complete. We also used these strategic negotiations to optimally align material supply to production plan needs, ensuring that we're not carrying excess inventory—sorry, excess to requirement.
Pat Roche: We also used these strategic negotiations to optimally align material supply to production plan needs, ensuring that we're not carrying excess inventory materials to excess to requirement. This builds on prior work and has already reduced expected material receipts for 2026, in line with our annual plan, an impact measured in $ tens of millions. We've made progress on these structural issues and will further build on this strong focus. Now, turning to the full year. We've updated our guidance for fiscal 2026, reflecting our excellent performance in the first quarter and a more positive market outlook. We've increased sales and adjusted earnings per share and held adjusted operating margin and free cash flow conversion unchanged.
We also used these strategic negotiations to optimally align material supply to production plan needs, ensuring that we're not carrying excess inventory materials to excess to requirement. This builds on prior work and has already reduced expected material receipts for 2026, in line with our annual plan, an impact measured in $ tens of millions. We've made progress on these structural issues and will further build on this strong focus. Now, turning to the full year. We've updated our guidance for fiscal 2026, reflecting our excellent performance in the first quarter and a more positive market outlook. We've increased sales and adjusted earnings per share and held adjusted operating margin and free cash flow conversion unchanged.
Speaker #3: This builds on prior work and has already reduced expected material receipts for 2026 in line with our annual plan and impact measured in tens of millions of dollars.
Speaker #3: We've made progress on these structural issues and will further build on this strong focus. Now, turning to the full year, we've updated our guidance for fiscal '26, reflecting our excellent performance in the first quarter and a more positive market outlook.
Speaker #3: We’ve increased sales and adjusted earnings per share, and held adjusted operating margin and free cash flow conversion unchanged. With this updated guidance, FY ’26 will be a year of double-digit year-over-year sales growth, further expansion in adjusted operating margin, strong growth in adjusted earnings per share, and improved free cash flow conversion.
Pat Roche: With this updated guidance, FY 2026 will be a year of double-digit year-over-year sales growth, further expansion in adjusted operating margin, strong growth in adjusted earnings per share, and improved free cash flow conversion. With that, let me hand over to Jennifer for a detailed breakdown on the quarter and our updated fiscal 2026 guidance.
With this updated guidance, FY 2026 will be a year of double-digit year-over-year sales growth, further expansion in adjusted operating margin, strong growth in adjusted earnings per share, and improved free cash flow conversion. With that, let me hand over to Jennifer for a detailed breakdown on the quarter and our updated fiscal 2026 guidance.
Speaker #3: And with that, let me hand over to Jennifer for a detailed breakdown on the quarter and our updated fiscal ’26 guidance.
Speaker #2: Thanks, Pat. Before I get into our financial performance, I'd like to remind everyone about the revisions we disclosed in our FY '25 year-end financial statements.
Jennifer Walter: Thanks, Pat. Before I get into our financial performance, I'd like to remind everyone about the revisions we disclosed in our FY 25 year-end financial statements. As previously described, we identified an error related to the accounting for a certain group of commercial aircraft aftermarket contracts. Accordingly, we revised certain prior period annual and quarterly financial statement amounts to reflect the correction of this error, as well as other previously recognized and material out-of-period items in the periods in which they originated. The comparative prior year numbers we'll discuss today are those revised amounts. Additional detail can be found in supplemental schedules posted on our website.... Now turning to our financial performance. We had another outstanding quarter. We beat our plan for sales, adjusted operating margin, adjusted earnings per share, and free cash flow.
Jennifer Walter: Thanks, Pat. Before I get into our financial performance, I'd like to remind everyone about the revisions we disclosed in our FY 25 year-end financial statements. As previously described, we identified an error related to the accounting for a certain group of commercial aircraft aftermarket contracts. Accordingly, we revised certain prior period annual and quarterly financial statement amounts to reflect the correction of this error, as well as other previously recognized and material out-of-period items in the periods in which they originated. The comparative prior year numbers we'll discuss today are those revised amounts. Additional detail can be found in supplemental schedules posted on our website.... Now turning to our financial performance. We had another outstanding quarter. We beat our plan for sales, adjusted operating margin, adjusted earnings per share, and free cash flow.
Speaker #2: As previously described, we identified an error related to the accounting for a certain group of commercial aircraft aftermarket contracts. Accordingly, we revised certain prior period annual and quarterly financial statement amounts to reflect the correction of this error, as well as other previously recognized immaterial out-of-period items in the period in which they originated.
Speaker #2: The comparative prior year numbers we'll discuss today are those revised amounts. Additional detail can be found in supplemental schedules posted on our website. Now, turning to our financial performance.
Speaker #2: We had another outstanding quarter. We beat our plan for sales, adjusted operating margin, adjusted earnings per share, and free cash flow. We took $7 million of charges in the first quarter that we've adjusted out of the operating profit numbers that we'll describe.
Jennifer Walter: We took $7 million of charges in the first quarter that we've adjusted out of the operating profit numbers that we'll describe. Over half of the charges were associated with M&A activity, with a balance related to simplification efforts and a program termination. I'll now talk through our first quarter results, excluding these charges. Sales in the first quarter of $1.1 billion were 21% higher than last year's first quarter. Each of our segments had a record level of sales and were up double-digit percentages. The largest increase in segment sales was in space and defense. Sales were a record $324 million, up 31% over the first quarter last year, reflecting broad-based defense demand. Demand was particularly strong for missile control and satellite components.
We took $7 million of charges in the first quarter that we've adjusted out of the operating profit numbers that we'll describe. Over half of the charges were associated with M&A activity, with a balance related to simplification efforts and a program termination. I'll now talk through our first quarter results, excluding these charges. Sales in the first quarter of $1.1 billion were 21% higher than last year's first quarter. Each of our segments had a record level of sales and were up double-digit percentages. The largest increase in segment sales was in space and defense. Sales were a record $324 million, up 31% over the first quarter last year, reflecting broad-based defense demand. Demand was particularly strong for missile control and satellite components.
Speaker #2: Over half of the charges were associated with M&A activity, with the balance related to simplification efforts and a program termination. I'll now talk through our first quarter results excluding these charges.
Speaker #2: Sales in the first quarter of $1.1 billion were 21% higher than last year's first quarter. Each of our segments had a record level of sales and were up double-digit percentages.
Speaker #2: The largest increase in segment sales was in space and defense. Sales were a record $324 million up 31% over the first quarter last year, reflecting broad-based defense demand.
Speaker #2: Demand was particularly strong for missile control and satellite components. Commercial aircraft sales of $268 million increased 23% over the same quarter a year ago.
Jennifer Walter: Commercial aircraft sales of $268 million increased 23% over the same quarter a year ago. The increase was driven by volume on major production programs, as well as aftermarket associated with strong fleet utilization. Pricing also contributed to the sales growth. In military aircraft, sales of $247 million were up 16% over the first quarter last year. In the first quarter, we had a significant V-22 spares order that contributed to the strong sales increase. In addition, activity on the MV-75 program continued to increase. Industrial sales were $261 million in the quarter, up 14% over the same quarter a year ago. Sales grew within the expanding data center cooling market. We also had particularly strong sales within industrial automation this quarter.
Commercial aircraft sales of $268 million increased 23% over the same quarter a year ago. The increase was driven by volume on major production programs, as well as aftermarket associated with strong fleet utilization. Pricing also contributed to the sales growth. In military aircraft, sales of $247 million were up 16% over the first quarter last year. In the first quarter, we had a significant V-22 spares order that contributed to the strong sales increase. In addition, activity on the MV-75 program continued to increase. Industrial sales were $261 million in the quarter, up 14% over the same quarter a year ago. Sales grew within the expanding data center cooling market. We also had particularly strong sales within industrial automation this quarter.
Speaker #2: The increase was driven by volume on major production programs as well as utilization. Pricing in the aftermarket, associated with a strong fleet, also contributed to the sales growth.
Speaker #2: In military aircraft, sales of $247 million were up 16% over the first quarter last year. In the first quarter, we had a significant B-22 spares order that contributed to the strong sales increase.
Speaker #2: In addition, activity on the MV-75 program continued to increase. Industrial sales were $261 million in the quarter, up 14% over the same quarter a year ago.
Speaker #2: Sales grew within the expanding data center cooling market. We also had particularly strong sales within industrial automation this quarter. In addition, sales of enteral feeding and IV sets were also strong, reflecting current demand.
Jennifer Walter: In addition, sales of enteral feeding and IV sets were also strong, reflecting current demand. We'll now shift to operating margin. Adjusted operating margin in Q1 was 13.0%, up 90 basis points from Q1 a year ago, or up 220 basis points, excluding tariff pressure. Excluding this pressure, each of our segments were up nicely, reflecting operational strength. Space and defense operating margin was 14.8% in Q1, up 280 basis points. The increase was driven by profitable sales growth, offset partially by increased business capture, product development, and operational readiness investments. Industrial operating margin was 14.1%, 100 basis points above that of the same period a year ago. Business optimization and sales growth drove our operating margin upwards, while tariffs pressured our margin.
In addition, sales of enteral feeding and IV sets were also strong, reflecting current demand. We'll now shift to operating margin. Adjusted operating margin in Q1 was 13.0%, up 90 basis points from Q1 a year ago, or up 220 basis points, excluding tariff pressure. Excluding this pressure, each of our segments were up nicely, reflecting operational strength. Space and defense operating margin was 14.8% in Q1, up 280 basis points. The increase was driven by profitable sales growth, offset partially by increased business capture, product development, and operational readiness investments. Industrial operating margin was 14.1%, 100 basis points above that of the same period a year ago. Business optimization and sales growth drove our operating margin upwards, while tariffs pressured our margin.
Speaker #2: We'll now shift to operating margins. Adjusted operating margin in the first quarter was 13.0%, up 90 basis points from the first quarter a year ago.
Speaker #2: We're up 220 basis points excluding tariff pressure. Excluding this pressure, each of our segments was up nicely, reflecting operational strength. Space and Defense operating margin was 14.8% in the first quarter, up 280 basis points.
Speaker #2: The increase was driven by profitable sales growth, offset partially by increased business capture, product development, and operational readiness investments. Industrial operating margin was 14.1%, 100 basis points above that of the same period a year ago.
Speaker #2: Business optimization and sales growth drove our operating margin upwards, while tariffs pressured our margins. Military aircraft operating margin was 11.9% in the first quarter, up 60 basis points from the first quarter last year.
Jennifer Walter: Military aircraft operating margin was 11.9% in Q1, up 60 basis points from Q1 last year. We benefited from the strong aftermarket sales, which was offset by a less favorable OE sales mix. Commercial aircraft operating margin was 10.6%, down 120 basis points from Q1 last year. The decrease was driven by tariff pressure. Operating margin benefited from increased volume and pricing benefits. Putting it all together, adjusted earnings per share came in at $2.63, up 37% compared to last year's Q1. The increase reflects the higher operating margin and sales level, offset partially by the impact of tariffs. Let's shift over to cash flow. Although we planned a slow start to the year, free cash flow came in better than expected.
Military aircraft operating margin was 11.9% in Q1, up 60 basis points from Q1 last year. We benefited from the strong aftermarket sales, which was offset by a less favorable OE sales mix. Commercial aircraft operating margin was 10.6%, down 120 basis points from Q1 last year. The decrease was driven by tariff pressure. Operating margin benefited from increased volume and pricing benefits. Putting it all together, adjusted earnings per share came in at $2.63, up 37% compared to last year's Q1. The increase reflects the higher operating margin and sales level, offset partially by the impact of tariffs. Let's shift over to cash flow. Although we planned a slow start to the year, free cash flow came in better than expected.
Speaker #2: We benefited from the strong aftermarket sales, which was offset by a less favorable OE sales mix. $10.6%, down Commercial aircraft operating margin was 120 basis points from the first quarter last year.
Speaker #2: The decrease was driven by tariff pressure. Operating margin benefited from increased volume and pricing benefits. Putting it all together, adjusted earnings per share came in at $2.63, up 37% compared to last year's first quarter.
Speaker #2: The increase reflects the higher operating margin and sales level, offset partially by the impact of tariffs. Let's shift over to cash flow. Although we planned for a slow start to the year, free cash flow came in better than expected.
Speaker #2: In the first quarter, we used $79 million of free cash flow. Growth in our physical inventory consumed cash, and we were negatively impacted by the timing of payments, including the normal timing of compensation payments.
Jennifer Walter: In Q1, we used $79 million of free cash flow. Growth in our physical inventory consumed cash, and we were negatively impacted by the timing of payments, including the normal timing of compensation payments. Capital expenditures were at about the same level as the quarterly average from last year and are expected to pick up in the rest of this year. We continue to invest in our facilities to support our strong growth opportunities. Our leverage ratio was 2.0x as of the end of Q1, putting us at the low end of our target leverage of 2 to 3x. Our capital deployment priorities center around organic growth and will pursue strategic acquisitions to complement our existing portfolio, as Pat already mentioned. We strive to have a balanced capital deployment strategy over the long term.
In Q1, we used $79 million of free cash flow. Growth in our physical inventory consumed cash, and we were negatively impacted by the timing of payments, including the normal timing of compensation payments. Capital expenditures were at about the same level as the quarterly average from last year and are expected to pick up in the rest of this year. We continue to invest in our facilities to support our strong growth opportunities. Our leverage ratio was 2.0x as of the end of Q1, putting us at the low end of our target leverage of 2 to 3x. Our capital deployment priorities center around organic growth and will pursue strategic acquisitions to complement our existing portfolio, as Pat already mentioned. We strive to have a balanced capital deployment strategy over the long term.
Speaker #2: Capital expenditures were at about the same level as the quarterly average from last year, and are expected to pick up in the rest of this year.
Speaker #2: We continue to invest in our facilities to support our strong growth opportunities. Our leverage ratio was 2.0 times as of the end of the first quarter, putting us at the low end of our target leverage of 2 to 3 times.
Speaker #2: Our capital deployment priority centered around organic growth, and we'll pursue strategic acquisitions to complement our existing portfolio, as Pat already mentioned. We strive to have a balanced capital deployment strategy over the long term.
Speaker #2: We'll now shift over to our updated guidance for the year. We're increasing our 2026 guidance for sales and adjusted earnings per share from what we provided a quarter ago, and we're affirming our guidance on adjusted operating margin and free cash flow conversion.
Jennifer Walter: We'll now shift over to our updated guidance for the year. We're increasing our 2026 guidance for sales and adjusted earnings per share from what we provided a quarter ago, and we're affirming our guidance on adjusted operating margin and free cash flow conversion. We're increasing our sales guidance for three of our segments. In space and defense, we're increasing our guidance by $30 million to reflect new orders and strong first quarter sales. We're increasing guidance for commercial aircraft by $15 million to reflect production ramps on narrow-body programs, as well as strong first quarter aftermarket sales. We're also increasing guidance for industrial by $15 million, and this largely reflects strong demand for data center cooling pumps. We're holding our adjusted operating margin in FY 2026 at 13.4%, a 40 basis points increase over FY 2025.
We'll now shift over to our updated guidance for the year. We're increasing our 2026 guidance for sales and adjusted earnings per share from what we provided a quarter ago, and we're affirming our guidance on adjusted operating margin and free cash flow conversion. We're increasing our sales guidance for three of our segments. In space and defense, we're increasing our guidance by $30 million to reflect new orders and strong first quarter sales. We're increasing guidance for commercial aircraft by $15 million to reflect production ramps on narrow-body programs, as well as strong first quarter aftermarket sales. We're also increasing guidance for industrial by $15 million, and this largely reflects strong demand for data center cooling pumps. We're holding our adjusted operating margin in FY 2026 at 13.4%, a 40 basis points increase over FY 2025.
Speaker #2: We're increasing our sales guidance for three of our segments. In Space and Defense, we're increasing our guidance by $30 million to reflect new orders and strong first quarter sales.
Speaker #2: We're increasing guidance for commercial aircraft by $15 million to reflect production ramps on narrow-body programs, as well as strong first-quarter aftermarket sales. We're also increasing guidance for industrial by $15 million, and this largely reflects strong demand for data center cooling pumps.
Speaker #2: We're holding our adjusted operating margin in FY26 at 13.4%, up a 40 basis point increase over FY25. We're adjusting segment operating margins slightly in two of our segments based on first quarter performance.
Jennifer Walter: We're adjusting segment operating margins slightly in two of our segments based on first quarter performance. We're increasing our operating margin for space and defense to 13.9% and moderating our operating margin for military aircraft to 13.8%. We're increasing our FY 2026 adjusted earnings per share guidance by $0.20 to $10.20, ± $0.20. The increase, the increase reflects sales growth beyond what we had initially projected. For the second quarter, we're forecasting earnings per share to be $2.25, ± $0.10. Finally, turning to cash. We're still projecting free cash flow conversion to be about 60%, an improvement over FY 2025. Next quarter, we expect to generate free cash flow at least equal to the amount that we used in the first quarter.
We're adjusting segment operating margins slightly in two of our segments based on first quarter performance. We're increasing our operating margin for space and defense to 13.9% and moderating our operating margin for military aircraft to 13.8%. We're increasing our FY 2026 adjusted earnings per share guidance by $0.20 to $10.20, ± $0.20. The increase, the increase reflects sales growth beyond what we had initially projected. For the second quarter, we're forecasting earnings per share to be $2.25, ± $0.10. Finally, turning to cash. We're still projecting free cash flow conversion to be about 60%, an improvement over FY 2025. Next quarter, we expect to generate free cash flow at least equal to the amount that we used in the first quarter.
Speaker #2: We're increasing our operating margin for space and defense to 13.9% and moderating our operating margin for military aircraft to 13.8%. We're increasing our FY26 adjusted earnings per share guidance by 20 cents to $10.20, plus or minus 20 cents.
Speaker #2: The increase reflects sales growth beyond what we had initially projected. For the second quarter, we're forecasting earnings per share to be $2.25, plus or minus 10 cents.
Speaker #2: Finally, turning to cash. We're still projecting free cash flow conversion to be about 60%, an improvement over FY25. Next quarter, we expect to generate free cash flow at least equal to the amount that we used in the first quarter.
Speaker #2: Timing of payments, including the normal timing of compensation payments, used cash in the first quarter but won't do so in the second quarter. In addition, we'll consume less cash for physical inventories as we continue to reschedule material receipts within Commercial Aircraft.
Jennifer Walter: Timing of payments, including the normal timing of compensation payments, used cash in the first quarter, but won't do so in the second quarter. In addition, we'll consume less cash for physical inventories as we continue to reschedule material receipts within commercial aircraft. We had an incredible start to the year with our strong first quarter financial performance, and we'll continue to build on our financial strength in fiscal year 2026. We'll achieve a record level of sales, further expand our operating margin, and make meaningful progress towards generating strong free cash flow. Now I'll turn it back to Pat.
Timing of payments, including the normal timing of compensation payments, used cash in the first quarter, but won't do so in the second quarter. In addition, we'll consume less cash for physical inventories as we continue to reschedule material receipts within commercial aircraft. We had an incredible start to the year with our strong first quarter financial performance, and we'll continue to build on our financial strength in fiscal year 2026. We'll achieve a record level of sales, further expand our operating margin, and make meaningful progress towards generating strong free cash flow. Now I'll turn it back to Pat.
Speaker #2: We had an incredible start to the year with our strong first quarter financial performance, and we'll continue to build on our financial strength in fiscal year 2026.
Speaker #2: We'll achieve a record level of sales, further expand our operating margin, and make meaningful progress towards generating strong free cash flow. And now, I'll turn it back to Pat.
Speaker #2: So, we delivered an outstanding first quarter financial result. We've improved our guidance based on the continuing strong performance and the robust market. And with that, let me open the floor to
Pat Roche: So we delivered an outstanding first quarter financial results. We've improved our guidance based on the continuing strong performance and the robust market. And with that, let me open the floor to questions.
Patrick Roche: So we delivered an outstanding first quarter financial results. We've improved our guidance based on the continuing strong performance and the robust market. And with that, let me open the floor to questions.
Speaker #2: questions. We will now
Operator: We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from Jon Tanwanteng, from CJS Securities. Your line is open. Please go ahead.
Operator: We will now begin the question and answer session. If you would like to ask a question, please press star one on your telephone keypad. To withdraw your question, press star one again. Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from Jon Tanwanteng, from CJS Securities. Your line is open. Please go ahead.
Speaker #3: We will now begin the question-and-answer session. If you would like to ask a question, please press star-one on your telephone keypad. To withdraw your question, press star-one again.
Speaker #3: Please pick up your handset when asking a question. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster.
Speaker #3: Your first question comes from John Tanwatag from CJS Securities. Your line is open. Please go ahead.
Speaker #4: And then congrats on a great start to the year. I was wondering if you could comment on just the guidance increase for the year.
Jon Tanwanteng: And then congrats on a great start to the year. I was wondering if you could comment on just the guidance increase for the year. A little bit less on both the revenue and the earnings versus what you beat in Q1 by. I was wondering if you could, you know, give us any color on that, if there's any nuance that we missed, maybe some timing items that were pulled in, or maybe one-time items that weren't sustainable, just to help us understand, you know, the mismatch there.
Jonathan Tanwanteng: And then congrats on a great start to the year. I was wondering if you could comment on just the guidance increase for the year. A little bit less on both the revenue and the earnings versus what you beat in Q1 by. I was wondering if you could, you know, give us any color on that, if there's any nuance that we missed, maybe some timing items that were pulled in, or maybe one-time items that weren't sustainable, just to help us understand, you know, the mismatch there.
Speaker #4: A little bit less on both the revenue and the earnings versus what you’ve beaten Q1 by. I was wondering if you could give us any color on that—if there’s any nuance that we missed, maybe some timing items that were pulled in, or maybe one-off items that weren’t sustainable.
Speaker #4: Just help us understand the mismatch there.
Speaker #5: Yes, John, I'll take that. Yes, we did increase our guidance for EPS by $0.20 for the year. And while we beat our Q1 guidance by about twice that, we did have a very strong first quarter performance, as we've described, and we've reflected that in our guidance.
Jennifer Walter: Yes, John, I'll take that. Yes, we did increase our guidance for EPS by $0.20 for the year. And while we beat our Q1 guidance by about twice that, we did have a very strong first quarter performance, as we've described, and we've reflected that in our guidance. In particular, it came in strong sales. We had strong sales in space and defense, overall strength of that business in commercial aircraft, related to production and aftermarket activity, and in industrial, certain areas within industrial automation. So that part has been carried forward and part reflected in our guidance for the year. But we also had some pull-ins from later in the year, and these are largely defense-related things, and I'd attribute it to military readiness.
Jennifer Walter: Yes, John, I'll take that. Yes, we did increase our guidance for EPS by $0.20 for the year. And while we beat our Q1 guidance by about twice that, we did have a very strong first quarter performance, as we've described, and we've reflected that in our guidance. In particular, it came in strong sales. We had strong sales in space and defense, overall strength of that business in commercial aircraft, related to production and aftermarket activity, and in industrial, certain areas within industrial automation. So that part has been carried forward and part reflected in our guidance for the year. But we also had some pull-ins from later in the year, and these are largely defense-related things, and I'd attribute it to military readiness.
Speaker #5: In particular, it came in strong sales. We had strong sales in space and defense overall strength of that business and commercial aircraft, related to production, and aftermarket activity, and an industrial certain areas within industrial automation.
Speaker #5: So that part has been carried forward, and year. But we also had some pull-ins reflected in our guidance for the from later in the year.
Speaker #5: And these are largely defense-related things. And I'd attribute it to military readiness. For instance, the V-22 Spares order that is something that reflects basically a year's worth of orders that came in in just the first quarter.
Jennifer Walter: For instance, the V-22 spares order, that is something that reflects basically a year's worth of orders that came in, in just the first quarter. And we saw similar types of things within our space and defense business as well. So these latter examples for military readiness are largely pull-ins from later in the year and just reflect timing. So we have reflected the true increases for the year in that we achieved in Q1 for the full year.
For instance, the V-22 spares order, that is something that reflects basically a year's worth of orders that came in, in just the first quarter. And we saw similar types of things within our space and defense business as well. So these latter examples for military readiness are largely pull-ins from later in the year and just reflect timing. So we have reflected the true increases for the year in that we achieved in Q1 for the full year.
Speaker #5: And we saw similar types of things within our space and defense business as well. So these latter examples for military readiness are largely pull-ins from later in the year and just reflect timing.
Speaker #5: So we have reflected the true increases for the year that we achieved in Q1 for the full.
Speaker #5: year. Okay,
Jon Tanwanteng: Okay, great. That's really helpful. Thank you. And then second, could you just talk about the decrease in the military aircraft margin outlook? What's going on there? I'm not sure if you went into that.
Jonathan Tanwanteng: Okay, great. That's really helpful. Thank you. And then second, could you just talk about the decrease in the military aircraft margin outlook? What's going on there? I'm not sure if you went into that.
Speaker #4: Great, that's really helpful. Thank you. And then, second, could you just talk about the decrease in the military aircraft margin outlook—what's going on there?
Speaker #4: I'm not sure if you went into
Speaker #4: that. Yeah, what we did
Jennifer Walter: Yeah. What we did is we just reflected our Q1 performance and made sure that we took that into consideration as we were going forward for the full year. So previously we had it at 14.3%. We decreased it to 13.8% as we achieved 11.9% in the year. So basically, it's just fine-tuning it to based on our results for the first quarter. And that's offset by some of the increase that we saw in our space and defense business. So we are holding our operating margin for the company at the 13.4 that we had previously guided to.
Jennifer Walter: Yeah. What we did is we just reflected our Q1 performance and made sure that we took that into consideration as we were going forward for the full year. So previously we had it at 14.3%. We decreased it to 13.8% as we achieved 11.9% in the year. So basically, it's just fine-tuning it to based on our results for the first quarter. And that's offset by some of the increase that we saw in our space and defense business. So we are holding our operating margin for the company at the 13.4 that we had previously guided to.
Speaker #5: We just reflected on our Q1 performance and made sure that we took that into consideration as we were going for the full year. So, previously, we had it at 14.3%.
Speaker #5: We decreased it to 13.8%, as we achieved 11.9% in the year. So basically, it's just fine-tuning it quarter to quarter. And that's offset by some of the increase that we saw in our space and defense business.
Speaker #5: So we are holding our operating margin for the company at the 13.4 that we had previously guided to.
Speaker #4: Okay, thank you. And then finally, just on the better cash flow in the quarter—was that a result of your better net working capital initiatives or maybe lower CapEx, or was that just a function of higher...
Jon Tanwanteng: Okay, thank you. And then finally, just on the better cash flow in the quarter, was that a result of your better, you know, net working capital initiative, or maybe lower CapEx, or was that just a function of the higher earnings?
Jonathan Tanwanteng: Okay, thank you. And then finally, just on the better cash flow in the quarter, was that a result of your better, you know, net working capital initiative, or maybe lower CapEx, or was that just a function of the higher earnings?
Speaker #4: earnings? It was, I would
Jennifer Walter: It was, I would say, it is attributable to our physical inventories. We had slowed down the material receipts that we had talked about this quarter and last quarter. We had done a nice job on that, and we saw that come through in our results this quarter, and we look forward to continuing those efforts and building upon those as we move throughout the year as well.
Jennifer Walter: It was, I would say, it is attributable to our physical inventories. We had slowed down the material receipts that we had talked about this quarter and last quarter. We had done a nice job on that, and we saw that come through in our results this quarter, and we look forward to continuing those efforts and building upon those as we move throughout the year as well.
Speaker #5: Say, it's attributable to our physical inventories. We had slowed down the material receipts that we had talked about this quarter and last quarter. We had done a nice job on that, and we saw that come through in our results this quarter.
Speaker #5: And we look forward to continuing those efforts and building upon those as we move throughout the year as
Speaker #5: well. Got it.
Jon Tanwanteng: Got it. Thank you.
Jonathan Tanwanteng: Got it. Thank you.
Speaker #4: Thank you.
Speaker #2: Thanks,
Pat Roche: Thanks, John.
Patrick Roche: Thanks, Jon.
Speaker #2: John. Your next question comes
Operator: Your next question comes from Michael Ciarmoli, from Truist Securities. Your line is open.
Operator: Your next question comes from Michael Ciarmoli, from Truist Securities. Your line is open.
Speaker #3: from Michael Trimoli from Truist
Speaker #3: Securities. Your line is open. Please go ahead.
Michael Ciarmoli: Hey, um-
Michael Ciarmoli: Hey, um-
Operator: Please go ahead.
Operator: Please go ahead.
Michael Ciarmoli: Hey, morning, guys. Nice results. Thanks for taking the question. Jennifer, Pat, just on the commercial aircraft margins, I know you called out tariff pressure, but is there any other headwind there? I mean, you guys are making really good progress across the portfolio, and, you know, I know the aircraft side seems to be the one that's got more of the tariff-related pressure. We saw, you know, a year-over-year decline there, and I think that it's probably more than a couple of quarters that it's been down to 10.6%. Anything else going on in that segment that's giving you sort of a challenge in driving those margins higher? Or is it really just all tariffs and some mix?
Michael Ciarmoli: Hey, morning, guys. Nice results. Thanks for taking the question. Jennifer, Pat, just on the commercial aircraft margins, I know you called out tariff pressure, but is there any other headwind there? I mean, you guys are making really good progress across the portfolio, and, you know, I know the aircraft side seems to be the one that's got more of the tariff-related pressure. We saw, you know, a year-over-year decline there, and I think that it's probably more than a couple of quarters that it's been down to 10.6%. Anything else going on in that segment that's giving you sort of a challenge in driving those margins higher? Or is it really just all tariffs and some mix?
Speaker #4: Hey, morning, guys. Nice results. Thanks for taking the question. Jennifer or Pat, just on the commercial aircraft margins, I know you called out tariff pressure, but is there any other headwind there?
Speaker #4: I mean, you guys are making really good progress across the portfolio, and I know the aircraft side seems to be the one that's got more of the tariff-related pressure.
Speaker #4: We saw a year-over-year decline there, and I think that it's probably a couple of quarters since it or a couple of more than a couple of quarters that it's been down to 10.6%.
Speaker #4: Anything else going on in that segment that's giving you sort of a challenge in driving those margins higher? Is it really just all tariffs and some—
Speaker #4: mix? Tariffs is about 300
Jennifer Walter: ... tariff is about 300 basis points of the impact on this quarter compared to a quarter ago when we didn't have the tariff impact.
Jennifer Walter: Tariff is about 300 basis points of the impact on this quarter compared to a quarter ago when we didn't have the tariff impact.
Speaker #5: Basis points of the impact on this quarter compared to a quarter ago, when we didn't have the tariff impact. So without that, that business is up very nicely.
Michael Ciarmoli: Okay.
Michael Ciarmoli: Okay.
Jennifer Walter: So without that, that business is up very nicely. So operationally-wise, we're seeing the increased sales volume and pricing benefits come through really nicely. So that business overall is performing great. The tariff pressure is why we're seeing that downtick there.
Jennifer Walter: So without that, that business is up very nicely. So operationally-wise, we're seeing the increased sales volume and pricing benefits come through really nicely. So that business overall is performing great. The tariff pressure is why we're seeing that downtick there.
Speaker #5: So, operationally, we're seeing the increased sales volume and pricing benefits come through really nicely. So that business overall is performing great. The tariff pressure is what's—why we're seeing that downtick there.
Speaker #2: And that tariff pressure, that tariff pressure was particularly high in quarter one. We have, as you know, aftermarket repairs coming back from airlines around the world, and some of the costs associated with tariffs on that were higher than we had anticipated within the quarter.
Michael Ciarmoli: Okay.
Michael Ciarmoli: Okay.
Pat Roche: That tariff pressure, that tariff pressure was particularly high in Q1. We have, as you know, aftermarket repairs coming back from airlines around the world, and some of the costs associated with tariffs on that were higher than we had anticipated within the quarter. Not all of those airlines were completing the paperwork in the necessary manner for us in order to bring them into a bonded area, avoiding the tariff, and we're tightening up on that process and helping our customers make sure that they are compliant. So that should go down in subsequent quarters, but it was a relatively significant hit in this quarter.
Patrick Roche: That tariff pressure, that tariff pressure was particularly high in Q1. We have, as you know, aftermarket repairs coming back from airlines around the world, and some of the costs associated with tariffs on that were higher than we had anticipated within the quarter. Not all of those airlines were completing the paperwork in the necessary manner for us in order to bring them into a bonded area, avoiding the tariff, and we're tightening up on that process and helping our customers make sure that they are compliant. So that should go down in subsequent quarters, but it was a relatively significant hit in this quarter.
Speaker #2: Not all of those airlines were completing the paperwork and the necessary manner for us in order to bring them into a bonded area avoiding the tariff, and we're tightening up on that process and helping our customers make sure that they're compliant.
Speaker #2: So that should go down in subsequent quarters, but it was a relatively significant hit in this
Speaker #2: quarter. Okay.
Michael Ciarmoli: Okay. And that was my next question. What else could you do to mitigate this tariff? So it sounds like you just mentioned the paperwork, getting them into some bonded areas. Is there anything else? I mean, is it as simple as just pricing, or are there other levers you can pull to offset that headwind?
Michael Ciarmoli: Okay. And that was my next question. What else could you do to mitigate this tariff? So it sounds like you just mentioned the paperwork, getting them into some bonded areas. Is there anything else? I mean, is it as simple as just pricing, or are there other levers you can pull to offset that headwind?
Speaker #4: And that was my next question. What else could you do to mitigate this tariff? So it sounds like you just mentioned the paperwork, getting them into some bonded areas.
Speaker #4: Is there anything else? I mean, is it as simple as just pricing, or are there other levers you can pull to offset that headwind?
Speaker #4: Is there anything else? I mean, is it as simple as just pricing, or are there other levers you can pull to offset that headwind?
Speaker #2: Well, we're actually doing quite a number of things. We have some supply chain routes around the world, which end up bringing product, I would say, unnecessarily into the US and back out to our customer who is outside of the US.
Pat Roche: Well, we're actually doing quite a number of things. We have some supply chain routes around the world, which end up bringing product, I would say, unnecessarily into the US and back out to our customer who is outside of the US. So we've changed around-
Patrick Roche: Well, we're actually doing quite a number of things. We have some supply chain routes around the world, which end up bringing product, I would say, unnecessarily into the US and back out to our customer who is outside of the US. So we've changed around-
Speaker #2: So we've changed around some of our supply chain. We're now using one of our facilities in the UK with a Belgian supplier, and then the product gets delivered to France.
Michael Ciarmoli: Okay
Michael Ciarmoli: Okay
Pat Roche: some of our supply chain. We're now using one of our facilities in the UK with a Belgian supplier, and then the product gets delivered to France, and so it never comes into the US. That actually is single-digit million-dollar saving for us in tariff costs, and so we're pursuing all of those avenues, Michael.
Patrick Roche: some of our supply chain. We're now using one of our facilities in the UK with a Belgian supplier, and then the product gets delivered to France, and so it never comes into the US. That actually is single-digit million-dollar saving for us in tariff costs, and so we're pursuing all of those avenues, Michael.
Speaker #2: And so it never comes into the U.S. That actually is a single-digit million saving for us in tariff costs. And so we're pursuing all of those avenues,
Speaker #2: Michael.
Speaker #4: Okay.
Michael Ciarmoli: Okay. Okay. And then, just moving on, I guess, I can't recall a bookings quarter this strong for you guys. I know you called out some of those major defense programs, but then I noticed that the 12-month backlog, you know, didn't really go up nearly as much as the total bookings. So how much of those $2.3 billion are beyond 12 months? I know you mentioned PAC-3, presumably, you know, that- that's gonna spread over a couple years, but maybe if you could just give a little bit more color on the bookings and kind of the backlog trends.
Michael Ciarmoli: Okay. Okay. And then, just moving on, I guess, I can't recall a bookings quarter this strong for you guys. I know you called out some of those major defense programs, but then I noticed that the 12-month backlog, you know, didn't really go up nearly as much as the total bookings. So how much of those $2.3 billion are beyond 12 months? I know you mentioned PAC-3, presumably, you know, that- that's gonna spread over a couple years, but maybe if you could just give a little bit more color on the bookings and kind of the backlog trends.
Speaker #4: Okay, and then just moving on, I guess—I can't recall a bookings quarter this strong for you guys. I know you called out some of those major defense programs.
Speaker #4: But then I noticed that the 12-month backlog didn't really go up nearly as much as the total bookings. So, how much of those $2.3 billion are beyond 12 months?
Speaker #4: I know you mentioned PAC 3, presumably that's going to spread over a couple of years, but maybe if you could just give a little bit more color on the bookings and kind of the backlog trends.
Speaker #4: I know you mentioned PAC-3—presumably that's going to spread over a couple of years—but maybe if you could just give a little bit more color on the bookings and kind of the backlog trends.
Speaker #2: Yeah, I mean, we're really pleased with the bookings, Michael, because I think they reflect that we're doing the right things for the customer, and it's building a solid book of business for us.
Pat Roche: Yeah, I mean, we're really pleased with the bookings, Michael, because I think they reflect that we're doing the right things for the customer, and it's building a solid book of business for us. And so, yeah, they're at an exceptionally high level. If I characterize that $2.3 billion, about half of that was the commercial aircraft business, and that was a C919 order that stretches out for a number of years.
Patrick Roche: Yeah, I mean, we're really pleased with the bookings, Michael, because I think they reflect that we're doing the right things for the customer, and it's building a solid book of business for us. And so, yeah, they're at an exceptionally high level. If I characterize that $2.3 billion, about half of that was the commercial aircraft business, and that was a C919 order that stretches out for a number of years and some increased engine valve orders that were in there as well, and also reflecting the progression of our wide-body OE sales going forward as well.
Speaker #2: And so, yeah, they're at an exceptionally high level. If I characterize that $2.3 billion, about half of that was the commercial aircraft business, and that was the C919 order that stretches out for a number of years.
Speaker #2: And some increased engine valve orders that were in there as well, and also reflecting the progression of our wide-body OE sales going forward as well.
Michael Ciarmoli: Okay.
Pat Roche: -and some increased engine valve orders that were in there as well, and also reflecting the progression of our wide-body OE sales going forward as well. So those. It was reflecting that whole increase in both narrow-body, wide-body, and engines on the commercial side. About a quarter of the orders were Space and Defense Group related, and those orders, that brought orders in Space and Defense Group to a record level. And what was driving that was, or a lot of it was PAC-3, over $100 million order for PAC-3, adding to the $100 million plus order we had a year ago on PAC-3, plus a space vehicle order ordering Meteor satellites. You know about those from our previous calls, so that was good to get a-
Speaker #2: So it was reflecting that whole increase in both narrow-body wide-body and engines on the commercial side. About a quarter of the orders were space and defense group related, and those orders, that brought orders in space and defense group to a record level.
So those. It was reflecting that whole increase in both narrow-body, wide-body, and engines on the commercial side. About a quarter of the orders were Space and Defense Group related, and those orders, that brought orders in Space and Defense Group to a record level. And what was driving that was, or a lot of it was PAC-3, over $100 million order for PAC-3, adding to the $100 million plus order we had a year ago on PAC-3, plus a space vehicle order ordering Meteor satellites. You know about those from our previous calls, so that was good to get a follow on order on those. And then about 1/6 of it was the military aircraft group, and that was reflecting both current platform programs that we're working on and new aircraft, or new developments that are moving into production.
Speaker #2: And what was driving that was a lot of it was PAC 3, over 100 million dollars order for PAC 3, adding to the 100 million dollar plus order we had a year ago on PAC 3, plus a space vehicle order ordering Meteor satellites you know about those from our previous calls.
Speaker #2: So that was good to get a follow-on order on those. And then about a sixth of it was Military Aircraft Group, and that was reflecting both current platform programs that we're working on and new aircraft or new developments that are moving into production.
Michael Ciarmoli: Sure
Pat Roche: -follow-on order on those. And then about 1/6 of it was the military aircraft group, and that was reflecting both current platform programs that we're working on and new aircraft, or new developments that are moving into production.
Speaker #4: Got it. That's helpful. And just the last one, Jennifer, what's sort of the expectation for working capital and maybe physical inventory for the remainder of the
Speaker #4: Got it. That's helpful. And just the last one, Jennifer, what's sort of the expectation for working capital and maybe physical inventory for the remainder of the year?
Michael Ciarmoli: Got it. That's helpful. And just the last one, Jennifer, what's sort of the expectation for working capital and maybe physical inventory for the remainder of the year?
Michael Ciarmoli: Got it. That's helpful. And just the last one, Jennifer, what's sort of the expectation for working capital and maybe physical inventory for the remainder of the year?
Speaker #5: Yeah, so as we look into '26, some of the things that we'll see within working capital is we are going to see positive advances.
Jennifer Walter: Yeah, so as we look into 2026, some of the things that we'll see within working capital is we are going to see positive advances. So that'll be,
Jennifer Walter: Yeah, so as we look into 2026, some of the things that we'll see within working capital is we are going to see positive advances. So that'll be a positive for us. We will see some growth in receivables and physical inventories associated with business growth, but we are mitigating that with the activities that Pat has described there.
Speaker #5: So that'll be a positive for us. We will see some growth in receivables and physical inventories associated with business growth, but we are mitigating that with the activities that Pat has described there.
Michael Ciarmoli: Sure
Jennifer Walter: ... a positive for us. We will see some growth in receivables and physical inventories associated with business growth, but we are mitigating that with the activities that Pat has described there.
Speaker #4: Perfect. Thanks, guys. I'll jump back in the
Michael Ciarmoli: Perfect. Thanks, guys. I'll jump back in the queue.
Michael Ciarmoli: Perfect. Thanks, guys. I'll jump back in the queue.
Speaker #4: queue. Thank
Speaker #4: queue. Thank
Speaker #2: you. Your next
Pat Roche: Thank you.
Patrick Roche: Thank you.
Operator: Your next question comes from Gautam Khanna from TD Cowen. Your line is open.
Operator: Your next question comes from Gautam Khanna from TD Cowen. Your line is open.
Speaker #1: question comes from Gautam Kana from TD
Speaker #1: Your line is open. Yeah, good morning.
Gautam Khanna: Yeah, good morning.
Gautam Khanna: Yeah, good morning.
Operator: Please go ahead.
Operator: Please go ahead.
Gautam Khanna: Thank you. Yeah, good morning. Thanks, guys.
Gautam Khanna: Thank you. Yeah, good morning. Thanks, guys.
Speaker #4: Thank you. Yeah, good
Speaker #4: morning. Thanks, guys. Good
Pat Roche: Good morning.
Patrick Roche: Good morning.
Gautam Khanna: I was curious on the, you know, the V-22 order and, and just in general, are you seeing an uptick in defense orders in the, in the current quarter? And just curious, like, you know, as... Was that a surprise that you got that order all at once? Is there any change in kind of customer activity that's worth noting, one way or the other?
Gautam Khanna: I was curious on the, you know, the V-22 order and, and just in general, are you seeing an uptick in defense orders in the, in the current quarter? And just curious, like, you know, as... Was that a surprise that you got that order all at once? Is there any change in kind of customer activity that's worth noting, one way or the other?
Speaker #4: I was curious on the morning V-22 order, and just in general, are you seeing an uptick in defense orders in the current quarter? And just curious, was that a surprise that you got that order all at once?
Speaker #4: Is there any change in the kind of customer activity that's worth noting, one way or the other?
Speaker #5: I'm not sure that there's too much of a change. This one did happen to be basically what we had expected—to have orders for the year get accelerated into the quarter.
Jennifer Walter: I'm not sure that there's too much of a change. This one did happen to be basically what we had expected to have in orders for the year get accelerated into the quarter. So it is an acceleration. On the military side, we are seeing a little bit of acceleration in moving things to the left. We're positioned well so that we can accommodate these orders and take care of that. I don't know that it's too much of a change, but we are seeing that really in the defense side. As I mentioned earlier, I think it's really just determined by military need for readiness and just making sure that suppliers like us are positioned well, and we are positioned well to meet those needs.
Jennifer Walter: I'm not sure that there's too much of a change. This one did happen to be basically what we had expected to have in orders for the year get accelerated into the quarter. So it is an acceleration. On the military side, we are seeing a little bit of acceleration in moving things to the left. We're positioned well so that we can accommodate these orders and take care of that. I don't know that it's too much of a change, but we are seeing that really in the defense side. As I mentioned earlier, I think it's really just determined by military need for readiness and just making sure that suppliers like us are positioned well, and we are positioned well to meet those needs.
Speaker #5: So it is an acceleration. On the military side, we are seeing a little bit of acceleration in moving things to the left. We're positioned well so that we can accommodate these orders and take care of that.
Speaker #5: I don't know that it's too much of a change, but we are seeing that really on the defense side. As I mentioned earlier, I think it's really just determined by military need for readiness and just making sure that suppliers like us are positioned well.
Speaker #5: And we are positioned well to meet those needs.
Pat Roche: ... And if I step back from just that specific case, I mean, there is a sense of urgency in the defense side of the business to actually accelerate capacity for missile programs, specifically replenishing an arsenal that was heavily depleted, and as Jennifer has said, on readiness, making sure that all the assets that you have are able to be deployed. I think that's a general trend pulling things into the, to the left.
Speaker #2: And if I step back from just that specific case, I mean, there is a sense of urgency in the defense side of the business to actually accelerate capacity for missile programs specifically, replenishing an arsenal that was heavily depleted and, as Jennifer has said, unreadiness.
Patrick Roche: And if I step back from just that specific case, I mean, there is a sense of urgency in the defense side of the business to actually accelerate capacity for missile programs, specifically replenishing an arsenal that was heavily depleted, and as Jennifer has said, on readiness, making sure that all the assets that you have are able to be deployed. I think that's a general trend pulling things into the, to the left.
Speaker #2: Making sure that all the assets that you have are able to be deployed.
Speaker #2: I think that's a general trend. Yeah.
Speaker #4: And.
Speaker #2: Pulling things into the
Speaker #2: left. Yeah.
Gautam Khanna: Yeah, to follow up on that point, Pat, I was just curious, like, we are seeing these contracts or framework agreements anyway, negotiated with some of the defense prime contractors. I'm curious, how advanced are your conversations with those primes to kind of get capacity up and perhaps, you know, that flow down to you guys? I'm just curious, how far advanced are those talks?
Gautam Khanna: Yeah, to follow up on that point, Pat, I was just curious, like, we are seeing these contracts or framework agreements anyway, negotiated with some of the defense prime contractors. I'm curious, how advanced are your conversations with those primes to kind of get capacity up and perhaps, you know, that flow down to you guys? I'm just curious, how far advanced are those talks?
Speaker #4: To follow up on that point, Pat, I'm just curious—we are seeing these contracts, or framework agreements anyway, being negotiated with some of the defense prime contractors.
Speaker #4: I'm curious, how advanced are your conversations with those primes to kind of, perhaps, has that slowed down to you guys? And to get capacity up, I'm just curious how far advanced are those talks?
Speaker #2: So how I would characterize it is, this need to build capacity has been apparent for at least 18 to 24 months. And when we've been bidding on missile programs over that period, we've been asked the question again and again, "What would you need to do to double your capacity or to quadruple your capacity?" So it has been well flagged through the industry.
Pat Roche: So I, how I would characterize it is this, this need to build capacity has been apparent for at least 18 to 24 months. And when we've been bidding on missile programs, over that period, we've been asked the question again and again: "What would you need to do to double your capacity or to quadruple your capacity?" So it has been well flagged through the industry. I think the announcement of the seven-year frame agreement with Lockheed Martin makes it really public that there's this government imperative to increase those production volumes. And so we've been, we've been planning through that, and we've been making investments in our business that are supportive. You know, if we think about the PAC-3 program, we run that through our Salt Lake City facility.
Patrick Roche: So I, how I would characterize it is this, this need to build capacity has been apparent for at least 18 to 24 months. And when we've been bidding on missile programs, over that period, we've been asked the question again and again: "What would you need to do to double your capacity or to quadruple your capacity?" So it has been well flagged through the industry. I think the announcement of the seven-year frame agreement with Lockheed Martin makes it really public that there's this government imperative to increase those production volumes. And so we've been, we've been planning through that, and we've been making investments in our business that are supportive. You know, if we think about the PAC-3 program, we run that through our Salt Lake City facility.
Speaker #2: I think the announcement of the seven-year frame agreement with Lockheed Martin makes it really public that there's this government imperative to increase those production volumes.
Speaker #2: And so we've been planning through that, and we've been making investments in our business that are supportive once we think about the PAC-3 program.
Speaker #2: We run that through our Salt Lake City facility. Over the course of the last couple of years, we've freed up space in that facility by selling an as-age business a few years back. As you remember, that space is now completely free and available for new work to be unloaded into that facility.
Pat Roche: Over the course of the last couple of years, we've freed up space in that facility by selling an AV business a few years back. As you remember, that space is now completely free and available for new work to be loaded into that facility. That will be the PAC-3 activity. We've decided to invest in a circuit card assembly line in that plant as well, in support of programs like PAC-3 and other missile programs. And those capital investments are all within our current planning. So we're looking forward to seeing these levels of volume coming on those programs, Gautam.
Over the course of the last couple of years, we've freed up space in that facility by selling an AV business a few years back. As you remember, that space is now completely free and available for new work to be loaded into that facility. That will be the PAC-3 activity. We've decided to invest in a circuit card assembly line in that plant as well, in support of programs like PAC-3 and other missile programs. And those capital investments are all within our current planning. So we're looking forward to seeing these levels of volume coming on those programs, Gautam.
Speaker #2: That will be the PAC-3 activity. We've decided to invest in a circuit card assembly line in that plant as well, in support of programs like PAC-3 and other missile programs.
Speaker #2: And those capital investments are all within our current planning. So we're looking forward to seeing these levels of volume coming on those programs, Gautam.
Speaker #4: That makes a lot of sense. And just last one, Jennifer, what was the total company price realization year over year in the—
Gautam Khanna: That makes a lot of sense. And just last one, Jennifer, what was the total company price realization year-over-year in the quarter?
Gautam Khanna: That makes a lot of sense. And just last one, Jennifer, what was the total company price realization year-over-year in the quarter?
Speaker #4: Quarter? Did you say for pricing?
Jennifer Walter: Did you say for pricing benefit?
Jennifer Walter: Did you say for pricing benefit?
Speaker #5: benefit?
Gautam Khanna: Yes.
Gautam Khanna: Yes.
Jennifer Walter: Yeah, we haven't given out the pricing benefit year-over-year, but as we look to it, it does contribute nicely. It's not half of the amount that we're doing. It's definitely volume and demand as being the biggest part. And then I would say it's complemented by price increases that we're securing throughout our book of business.
Speaker #5: Yeah. We haven't given out the Yes. pricing benefit year over year, but as we look to it, it does contribute nicely. It's not half of the amount that we're doing.
Jennifer Walter: Yeah, we haven't given out the pricing benefit year-over-year, but as we look to it, it does contribute nicely. It's not half of the amount that we're doing. It's definitely volume and demand as being the biggest part. And then I would say it's complemented by price increases that we're securing throughout our book of business.
Speaker #5: It's definitely volume and demand; it's been the biggest part. And then I would say it's complemented by price increases that we're securing throughout our book of business.
Speaker #4: Great. Thank you, guys.
Gautam Khanna: Great. Thank you, guys.
Gautam Khanna: Great. Thank you, guys.
Speaker #2: You're welcome. Thank you.
Pat Roche: You're welcome. Thank you.
Patrick Roche: You're welcome. Thank you.
Speaker #1: As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Your next question comes from Christine Lewegg from Morgan.
Operator: As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Your next question comes from Kristine Liwag from Morgan Stanley.
Operator: As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. Your next question comes from Kristine Liwag from Morgan Stanley.
Speaker #1: Stanley. Hey, good morning,
Kristine Liwag: Hey there. Good morning, everyone. It's wonderful to see, you know, some of these strong sales signals converting to orders. I was wondering, on PAC-3, can you just let us know how much this is as a percent of company sales, or if not PAC-3, how we think about overall missiles as a size for Moog?
Kristine Liwag: Hey there. Good morning, everyone. It's wonderful to see, you know, some of these strong sales signals converting to orders. I was wondering, on PAC-3, can you just let us know how much this is as a percent of company sales, or if not PAC-3, how we think about overall missiles as a size for Moog?
Speaker #6: Everyone, it's wonderful to see some of these strong sales signals converting into orders. I was wondering, on PAC-3, can you just let us know how much this is as a percent of company sales?
Speaker #6: Or, if not PAC-3, how should we think about overall missiles as a size for Moog?
Speaker #2: Yeah. Christine, good morning. Welcome. So if I think about our missiles business in '25, it's growing at about—it was over $200 million, and it was 20% a year.
Pat Roche: Yeah. Kristine, good morning. Welcome. So if I think about our missiles business, in 2025, it was over $200 million, and it was growing at about 20% a year. In 2026, we expect it to be more than a quarter billion-dollar business for us within that space and defense group.
Patrick Roche: Yeah. Kristine, good morning. Welcome. So if I think about our missiles business, in 2025, it was over $200 million, and it was growing at about 20% a year. In 2026, we expect it to be more than a quarter billion-dollar business for us within that space and defense group.
Speaker #2: In '26, we expect it to be more than a quarter-billion-dollar business for us within that space in defense.
Speaker #2: group. Great.
Kristine Liwag: Great. And, you know, that's a helpful color, Pat. So I was wondering, with the record, or I guess, novel, contracts that Lockheed signed with the U.S. Department of Defense for the PAC-3 and the THAAD, I mean, it seems like we're in the beginning stages of this new acquisition reform that's providing multiyear outlook and capacities growing 300%, 400%, 500%. I was wondering how you should- how we think about, you know, what these could mean for, for your business, and is that the growth trajectory that you could potentially see as we get more of these deals signed?
Kristine Liwag: Great. And, you know, that's a helpful color, Pat. So I was wondering, with the record, or I guess, novel, contracts that Lockheed signed with the U.S. Department of Defense for the PAC-3 and the THAAD, I mean, it seems like we're in the beginning stages of this new acquisition reform that's providing multiyear outlook and capacities growing 300%, 400%, 500%. I was wondering how you should- how we think about, you know, what these could mean for, for your business, and is that the growth trajectory that you could potentially see as we get more of these deals signed?
Speaker #6: And that's a helpful color, Pat. So I was wondering, with the record, I guess, novel contracts that Lockheed signed with the Department of War for the PAC-3 and the FAD, I mean, it seems like we're in the beginning stages of this new acquisition reform that's providing multi-year outlook and capacity is growing 300 percent.
Speaker #6: I was wondering how we should think about what these could mean for your business, and is that the growth trajectory that you could potentially see as we get more of these deals signed?
Pat Roche: We're very optimistic about it, Christine. We feel that we have been demonstrating over the last couple of years, a really strong commitment to this business. We're delivering really well operationally. As you know, from the last quarter, we got an award from Lockheed Martin for 100% on time, 100% quality. In this quarter, we announced that BAE Systems have given us an award. Also, that was on a missile program. So we are really effective at delivering, and if people are looking for increased capacity and throughput, no better place to go than some place that's delivering 100% on time. So I think we're well set up to meet the needs of our customers in these programs. In terms of our capacity to accommodate it, I just mentioned the Salt Lake City factory.
Speaker #2: We're very optimistic about it. Christine, we feel that we have been demonstrating, over the last couple of years, a really strong commitment to this business.
Patrick Roche: We're very optimistic about it, Kristine. We feel that we have been demonstrating over the last couple of years, a really strong commitment to this business. We're delivering really well operationally. As you know, from the last quarter, we got an award from Lockheed Martin for 100% on time, 100% quality. In this quarter, we announced that BAE Systems have given us an award. Also, that was on a missile program. So we are really effective at delivering, and if people are looking for increased capacity and throughput, no better place to go than some place that's delivering 100% on time. So I think we're well set up to meet the needs of our customers in these programs. In terms of our capacity to accommodate it, I just mentioned the Salt Lake City factory.
Speaker #2: We're delivering really well operationally. As you know from the last quarter, we got an award from Lockheed Martin for 100% on-time, 100% quality in this quarter.
Speaker #2: We announced that BAE Systems had given us an award. Also, that was on a missile program. So we are really effective at delivering. And if people are looking for increased capacity and throughput, there's no better place to go than someplace that's delivering 100% on time.
Speaker #2: So I think we're well set up to meet the needs of our customers in these programs. In terms of our capacity to accommodate it, I just mentioned the Salt Lake City factory.
Speaker #2: We have the floor, the square footage available there to meet the expanded needs that we see coming, even if it is two or four times current levels on those programs.
Pat Roche: We have the floor, the square footage available there to meet the expanded needs that we see coming, even if it is, 2 or 4 times current levels on those programs. Our exposure across missile programs is really broad, so we're all focused on PAC-3 here, but THAAD is also a program that is experiencing significant growth. We have content on that and hope to increase scope on that, plus Standard Missile two, Standard Missile three, Standard Missile six, PrSM, Tomahawk, to name just a few. It is a really positive upside for us, Kristine.
We have the floor, the square footage available there to meet the expanded needs that we see coming, even if it is, 2 or 4 times current levels on those programs. Our exposure across missile programs is really broad, so we're all focused on PAC-3 here, but THAAD is also a program that is experiencing significant growth. We have content on that and hope to increase scope on that, plus Standard Missile two, Standard Missile three, Standard Missile six, PrSM, Tomahawk, to name just a few. It is a really positive upside for us, Kristine.
Speaker #2: And our exposure across missile programs is really broad. So we're all focused on PAC-3 here, but THAAD is also a program that is experiencing significant growth.
Speaker #2: We have content on that and hope to increase scope on that, plus Standard Missile 2, Standard Missile 3, Standard Missile 6, PRSM, Tomahawk, to name just a few.
Speaker #2: So, it is a really positive upside for us, Christine.
Speaker #6: Wow, super exciting. And if I could squeeze a third question about data center cooling, can you talk about what exactly you're supplying? How big could this business be for you?
Kristine Liwag: Wow! Super exciting. And if I could squeeze a third question about data center cooling. Can you talk about what exactly you're supplying? How big could this business be for you, and what's the margin profile?
Kristine Liwag: Wow! Super exciting. And if I could squeeze a third question about data center cooling. Can you talk about what exactly you're supplying? How big could this business be for you, and what's the margin profile of data center cooling?
Speaker #6: And what's the margin profile of data center?
Gautam Khanna: ... of data center cooling?
Speaker #6: cooling?
Speaker #2: So in
Pat Roche: So, in 2025, it was about $25 million of sales. We expect that to double in 2026. In terms of what we manufacture, it is a pump that is used to circulate the cooling fluids through the long rack of processors and servers that are used in these data centers. So it's a critical component within the cooling system. It goes into what's called a cooling distribution unit, which is at the end of the server line. We have multiple pumps within that for redundancy reasons. Our pump has some highly differentiated features associated with it, which improve its reliability and maintainability in the environment.
Patrick Roche: So, in 2025, it was about $25 million of sales. We expect that to double in 2026. In terms of what we manufacture, it is a pump that is used to circulate the cooling fluids through the long rack of processors and servers that are used in these data centers. So it's a critical component within the cooling system. It goes into what's called a cooling distribution unit, which is at the end of the server line. We have multiple pumps within that for redundancy reasons. Our pump has some highly differentiated features associated with it, which improve its reliability and maintainability in the environment.
Speaker #2: In 2025, it was about $25 million of sales. We expect that to double in 2026. In terms of what we manufacture, it is a pump that is used to circulate the cooling fluids through the long rack of processors and servers that are used in these data centers.
Speaker #2: So, it's a critical component within the cooling system. It goes into what's called a cooling distribution unit, which is at the end of the server line.
Speaker #2: We have multiple pumps within that for redundancy reasons. Our pump has some highly differentiated features associated with it, which improve its reliability and maintainability in the environment.
Speaker #2: We've gone from producing at a rate of about 200 a week of these pumps at the beginning of '25 to over 500 a week by the end of '25.
Pat Roche: We've gone from producing at a rate of about 200 a week of these pumps at the beginning of 25 to over 500 a week by the end of 25, and our customers would like us to double the volume on those pumps. And so we're standing up a second production line and boosting capacity in our existing facility.
Patrick Roche: We've gone from producing at a rate of about 200 a week of these pumps at the beginning of 25 to over 500 a week by the end of 25, and our customers would like us to double the volume on those pumps. And so we're standing up a second production line and boosting capacity in our existing facility.
Speaker #2: And our customers would like us to double the volume on those pumps. And so we're standing up a second production line and boosting capacity in our existing facility.
Speaker #2: And our customers would like us to double the volume on those pumps. And so we're standing up a second production line and boosting capacity in our existing.
Speaker #6: Great. Thank you very much.
Gautam Khanna: Great. Thank you very much.
Kristine Liwag: Great. Thank you very much.
Speaker #2: You're welcome. Thank you, Christine.
Pat Roche: You're welcome. Thank you, Kristine.
Patrick Roche: You're welcome. Thank you, Kristine.
Operator: There are no further questions at this time. I will now turn the call back to CEO, Pat Roche, for closing remarks.
Operator: There are no further questions at this time. I will now turn the call back to CEO, Pat Roche, for closing remarks.
Speaker #1: There are no further questions at this time. I will now turn the call back to CEO Patrick Roche for closing remarks.
Speaker #2: So that concludes our earnings call. I appreciate you taking the time to listen to our update on the business, and I look forward to providing an update again next quarter.
Pat Roche: So that concludes our earnings call. I appreciate you taking the time to listen to our update on the business, and I look forward to providing an update again next quarter. Thank you.
Patrick Roche: So that concludes our earnings call. I appreciate you taking the time to listen to our update on the business, and I look forward to providing an update again next quarter. Thank you.
Speaker #2: Thank
Speaker #2: you. This concludes today's
Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Speaker #1: Thank you for attending. You may now disconnect.
Pat Roche: Yeah, well done. Thank you.
Patrick Roche: Yeah, well done. Thank you.
Speaker #2: Yeah. Hold on. Thank
Speaker #2: You. We're a $10 billion company. Or—
Aaron Astrachan: We're a $10 billion-dollar company now.
Aaron Astrachan: We're a $10 billion-dollar company now.
