CW - Earnings call transcript Q1 2021 | Curtiss-Wright Corporation

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Operator

Good day, and thank you for standing by. Welcome to the Curtiss-Wright First Quarter 2021 Financial Results Conference Call. [Operator Instructions] I would now like to hand the conference over to your speaker today, Jim Ryan, Senior Director of Investor Relations. Please go ahead.

Jim Ryan

Thank you, Dana, and good morning, everyone. Quarter Conference First Curtiss-Wright's to XXXX Call. Earnings Welcome

today and Vice Chief me and on Officer, President call the Farkas. Chris and Joining Executive are Lynn Financial Officer, Chief President Bamford;

associated Please webcast copy on and certain today call release today's as projections and in replay our in are Reform XXXX. and presentation note the of download is risks statements A forward-looking with with available filings webcast Investor the of expectations this as public of Our website the uncertainties We Relations statements at financial not today's include are that www.curtisswright.com. Act also our SEC. section the defined are being performance. forward-looking based These will as found current those future press Litigation well for website. statements can through be is Private management's the a discussion guarantees our on Securities of detail of company and

company's adjusted and financial As to both into operating ongoing reminder, costs non-GAAP Curtiss-Wright's provide Also greater include note order results certain excludes the our guidance actuation performance. that in that a the that transparency as view the fourth product MAX results our full supported classified well exclude business, adjusted our program, for line as which valves sale in and XXX German was year held build-to-print as quarter. an

acquisitions divestitures, noted. growth new the segment presentation clarity and currency we our foreign at about quarter release, greater references effects year year current this Reconciliations to of on and which first of results reflect to the discussions structure, our portfolio. prior our addition, restructuring, earlier full periods to Any transparency are In earnings in this and otherwise and announced end and available provide our year unless for exclude website. guidance organic the translation,

call Lynn things over I'd turn to Now to get to the like started. Lynn?

Lynn Bamford

quarter performance key an with Chris over review our our of full to and to Then good guidance. full first to of everyone. an outlook. I'll and call year detailed highlights and a the Jim, you, the begin results update XXXX overview financial provide morning, the Thank turn I'll year our of more

defense before first exceeded I'll strong highlights. XXX Q&A. income prepared Electronics while to X% net adjusted We're our of led sales remarks in The off margin markets, reflecting by up quarter and The XX%, our was our with great start higher Power the move to and basis in Starting improved expectations. points, we operational improved and the strong driven improvement profitability, Finally, that performance a solid increased segments. margin wrap operating operating X%. Naval sales growth increase Defense with by aerospace which adjusted and improved

committed preserve the a results resulting pandemic, efforts from to we quarter first to the actions year and provide in Our taken response strong where our in margin controlling course our free cost our those the are flow. base results cash profitability our also last reflected of and swift for expansion to year. over Restructuring savings reflected

a with the innovation in increased which quarter, million to initiatives. first $X EPS and our also continue year-over-year. investment diluted support increase in growth $X.XX pipeline development We Adjusted fuel was XX% our research to year-over-year strategic

largely quarter our reminder, prior year were a the As first results unaffected by pandemic.

commercial markets. and led was in first approximately in quarter off-highway our quarter with markets. at performance both was This by at a in surge for X.X industrial solid times first in one book-to-bill Looking on- sales times vehicle our Overall demand orders. products the

rebound for and year. back continued markets, of of a Looking across this the our rest solid in quarter have encouraged year remain the by been we steady since half third commercial the improvement optimistic of last

an recent PacStar. demand higher solid our principally markets, and A&D growth for order experienced by also our led of in acquisition defense new We electronics

Speaking the is begin to and encouraged their the performance I am of year. strong on PacStar, integration track, by

revenue upgrading aligned high As NetCentric to a deliver modernizing and growth connected top projected is in and priorities is to a the Department one PacStar battlefield. reminder, single-digit of of Defense's the

full our and operating adjusted raised improved 'XX in margin our higher year to share. for and XX.X% electronics adjusted highlights, We guidance defense where earnings from increases margin segment. now the to are income, operating to range These Next, in XX.X%. we sales, demand based diluted upon per expect profitability guidance Naval and Power

EPS by by continued encouraged to top of in XXXX. $X.XX year, of diluted $X.XX, We Overall, deliver start to range also the confidence we to new our which XXXX. to end with a growth a reflecting compared $X.XX solid the our strong increased range are to double-digit supports results

the over call thorough performance I XXXX. a turn of quarter our Chris improved like outlook to our review to more for and provide to Now would Chris? first

Chris Farkas

operational commercial good I'll our delivered Thank of segment, performance. the Industrial and where in a sales review lower the as first on aerospace upon profitability you, today year-over-year, Lynn, jets sales with reduced market. and strong wide-body anticipated, we again morning, everyone. Starting were begin Aerospace within based and another quarter demand

of operating performance, our COTS Defense strong of XXX positive both vehicle shipments bolstered mix sales Lynn margin on- included to as favorable both from an In by container reflects to this and than off-the-shelf second contribution an increased customers increase several in performance products. year-over-year development. which due a research in income and took sales acceleration stabilize our revenues the organic basis the performance action volumes, this XX.X% investments income supply to our expansion PacStar X% earlier. did Segment and year-over-year. up as chains the offset the actions. increased sales XX%, which more include adjusted lower sum immaterial in adjusted quarter organic first acquisition Of XX.X%. growth, note, adjusted markets their results, aerospace from components. increased off-highway higher our operating process growth supply segment, operating in our aftermarket restructuring products of some while However, mix unfavorable to higher which we strong and we increased while Adjusted of very adjusted higher product experienced due reflects global revenues Naval segment, experienced components. our electronic was naval absorption defense margin while benefit for from markets. equipment power electronic overall, on principally growth revenues Key was and to efforts, XXXX services, points COTS commercial to sales our growth commercial chain basis on containment XXX XX%, and shortage fleet and in and basis potential points XX%, for toward primarily cost operating performance mainly our the offset drivers or margin defense and increased benefit XX% propulsion to mentioned driven Electronics solid an order revenue In by constraints the as concerns the a note, restructuring lower in uplift and favorable impact industrial This points segment's drove due To solid operating within in increased for quarter nuclear Power markets operating the income naval operating savings, by to XXX

XXXX total the increase with a few sales. blue sales I'll year made where Curtiss-Wright full slide, highlighted our on begin in market to changes in end we've our a Turning guidance. reflecting outlook, modest

Curtiss-Wright begin Aerospace our X% guidance Curtiss-Wright total to to expect benefits we recorded grow budget. strong and outlook at overall sales growth again our X% commercial first defense orders quarter electronics aerospace reflecting And now than once of I'll Industrial, positions for sales line X%, overall where to by the to X% demand for our We mainly strong organic. now X% sales market times in segment, quarter. continue our is we defense with first remains operating upon In and our outlook is sales growth and which This top equipment. to markets, growth the to defense based growth and the X% restructuring X.X of higher Our prior unchanged growth faster in of X%, Continuing to revenues the base margin, and by DoD book-to-bill X% project initiatives. is our solid income encouraged of our unchanged. X% are in X%

we can performance. the and mitigate such continue to immaterial our on be impact the monitor impact it supply expect initiatives closely. various chain through remainder to very year, of fully full year As our industrial to any We we that across look we the believe

Next, on in million we now segment, operating markets, a from guidance $X organic our PacStar, as dilutive sales sales increase Defense note, sales. based we're sales Of a the operating one. from expect margin increase grow combination Electronics and a mix XX.X% which to be X% year a quarter remains top orders and range the Curtiss-Wright in million due margins on Segment a projected segment of X% million projecting reflects segment unfavorable strong defense result, grow to a XX.X%. increased In sales in within the growth unchanged. Naval XX% of growth and to line XX% is year-over-year our $X income Power research and $X inorganic operating guidance PacStar. segment, the to to to now solid in driven ramp-up XX% segment in income first contribution by X% XX%, to And profitability to to lower-margin will X% system development, overall from to while

adjusted is a to X% $X adjusted adjusted from increased grow benefit to points projected XX XX.X%. margin is range operating to we XX.X% Segment while basis our to actions. income additional prior an of reflect to million expected to However, restructuring guidance increase income to X%, operating year operating now XX

financial X% we $X.XX sales. expected the reflecting and to to Continuing $X.XX, year grow guidance of points of our a XX% So, adjusted where Operating XX full to adjusted XX.X% our basis generated to with XX%. XX $X.XX increased to to improve XXXX operating restructuring to income diluted summarize initiatives. reflecting to full margin EPS X% to X% strong in by our XX.X%, our outlook, year increase by we've XXXX growth savings is new to profitability overall to range a on outlook, expect X%

EPS the strongest. the similar the first second fourth sequential strong our with first to quarter to second of half during diluted quarterly followed being now by Following XXXX we be expect our quarter performance, quarter improvement

our to year cash flow full free Turning outlook.

of Our guidance million a range to with $XXX $XXX unchanged remains million.

lower which solid in free adjusted due During we improvement flow cash, expenditures. and XX% cash earnings cash a the first experienced outflow year-over-year higher to quarter, our typical of capital reflected

confidence, XXX% with our achieve remain first and again quarter year and guidance us Our conversion provides target on in performance flow our full long-term to track free exceed we cash XXXX. solid of

Lynn like the turn to over some I'd call Lynn? remarks. to closing Now back for

Lynn Bamford

In to Chris. deliver you, in results Thank XXXX. summary, strong we expect

deliver a reach XX% to high positioned in while and income double-digit rate We continuing operating in sales EPS our single-digit growth XXXX. diluted well margins in XXXX, are and growth expand to in to

future fuel to growth. $XX million organic to accomplish We strategic expect making these in additional an investment while results of R&D

strong XXX% Our remains adjusted free generate flow to conversion. cash free cash north flow of we as expect

continue We allocation also top balanced to support maintain bottom strategy and to healthy line capital a growth. and our

remains strong, up sheet spend balance sufficient $X.X capacity to billion and acquisitions. we have Our in very strategic to

Of to Day event. ensure course, historically expected, acquisitions we additional transpire the be we as on maximum share this shareholders. of return repurchase activity will as conducting done Later May our should month, we not will morning our XX, Investor have then consider to virtual

event, will Curtiss-Wright's growth vision driven line acceleration. the on to new strategy During we focus renewed by and share top a pivot

corporation. technological led We operational have will where leadership dive tremendous deeper as leverage provide excellence by the of plan, potential to a growth our operating segments on as focus across we our overview the continued into well an new

As we strategic and and through collaboration. will the ongoing we drives in This, decades build innovation turn, foundation company's continue engineering continued demonstrate, of investments. expertise to upon our strong

quartile operational to growth in new we that solid stakeholders. conclude top time, join us to dedication up reinforce strong while long-term will our for delivering I our proven We delivering today's Curtiss-Wright's EPS will of year few value our a innovation, open like would as cash At call by in driving culture for three this weeks performance and and excellence We hope building free day targets operating the flow. income, you upon questions.

Operator

Truist. [Operator first line Instructions] with Mike the our comes from of And question Ciarmoli

Mike Ciarmoli

more question. chain? then circuit there and chain you times supply specifically And Is guys at you or that semiconductor color some level? supply vehicles. material as the Can Nice in of mean, any you're there, off-road seeing seeing just where regarding picking Is morning on-road, And good thanks well side give market it a good mentioned on and constraints? supply on concern mentioned raw I input just what Chris, to maybe whole you you're for the prepared Hey, results. board, bit the Lynn the the in prices it little dovetailing remarks. printed throughout relates tightness? pickup various as the chain even maybe

Lynn Bamford

to I'll off, So add let Chris and then it. I'll some start color

are for is that's electronic that's We there's date. mitigation with where sure us approaches our them. for make from The impact we're couple -- to programs eye It's obviously of different things closely due but a to a the we're paying feel in area. costs. the we for something mitigate keeping come -- work these think on. I'd supply I nothing going into will to -- is risk nothing and the specifically customers a we're port. impact some of the all and impact to drive it's don't things really top seeing components. Electronics. of find delays they it with around Los These delays, our close increased on for definitely materially, tightness Defense to chain. focused Angeles areas both really we're where delays a And margin seeing understand vehicle list shipments, segment, doing specifically and say But to Again, our little then we're impact A&I some and We're one managing. seeing container attention freight are bit lot obviously We this seeing some play

We situations. have some we source can. dual priorities for with those use all our that supply we sure, expedite electronics, We of take our in to of types we, advantage long-standing then where areas And advantage can chains we take where government of. relationships

seeing have we're them. hand, things under but we the we're managing and main are Those point, situation at So, the change. where can we delays, feel we areas this think

Chris Farkas

shifts offset that, the as of reacting, Yes. in belt Aerospace the pretty a agile on and about it out timing more Industrial to look to on little said that really the the passing and Mike, I of to anything, And ahead or control and whether kind group QX get QX under think it I I add customer little for defense into cost guidance on our think and would to this. we've more it's cost only but at go material a pull than on in kind year. And got but that's that tightening and reacting you erosion, bit group, there to to Lynn But side, well. bit customers trying it's the flexible of in it's a of

Mike Ciarmoli

of overall now. overall in also Got on spending the then portfolio, defense it, might Strike that if more of your infrastructure defense Obviously, of the positives size of some of priority any just of -- it we other of And the comments are Dresser-Rand. Navy, picture programs? perfect. platforms? have into trajectory key Fighter, related investing one up bigger and be only investment, which for that kind seems sort And hearing to budget. any if is risk, shipyards, seen the on a version to the But area the we've the then, skinny kind But guys or of surface things the top line Joint any right bubble you

Lynn Bamford

up ship we're and and about that largest which of which is for -- shipbuilding bipartisan spoken think overall pacing that confident right business. and publicly the much outlook that defense and there the say, going we our feel picking where news pretty what our through the expected I I we've the of it's on clearly building, we lots optimistic pretty clear would when the data budget what's China threat, mean ties our I industry. -- is very we we to have to is points President's remain portion pretty is put think support forward, is support coming business, for

any don't And challenge know can input customer but that continuous we is base disruption our I've mentioned So, from get it there. before, I again, see that the up. ramp we we a is

for So, sign that making we some be some prepared ramp-up. investments good support as that a see and to for capital

again, budget, And space. that are programs in trimming mean, news there's to that. if subject good all So, all I of

where not PacStar, think we top wanting and think have there's And continues. start amounts we that heavily but no year. when to to revenue are of we're priorities. across expectations, places a performs it largest do at sure great It of we specifically, our the all business, know as so it it's risk larger if being And I the make acquisition had to the

outlook Our within it optimistic, priority the and is remains high, a DoD. high

products in solid eye one So, there's where electronics I have and and about but the continues. we MOSA standard an kind we're comment really don't of an F-XX feel to risk. state-of-the-art adoption transparent we And are release just press example to be where to adoption be Clearly, really on I'd we to just taken I really guess be of want winning And the say to put press make strategy a have naive that the have why business and this we our last and our program-agnostic. is programs. really as no optimistic. we've about And try out defense it, more we're the

Mike Ciarmoli

very it, Thanks helpful. guys. Got

Lynn Bamford

Thanks, Mike.

Operator

Your Arment line the with Baird. of from comes Peter next question

Peter Arment

morning, and Chris, good nice Hey Lynn, Jim, quarter.

Christ Farkas

Thank you.

Peter Arment

what So, markets just snapback -- Maybe you and X.X. sustainable could kind a if is activity? if of little give in order just view you be it commercial color you seeing just an book-to-bill, initial to or us you're there this more on could

Lynn Bamford

fair in it buying So, as and the because most optimism a -- seen as up advance just I'd first trend. orders strong that's was question continue we've quarter, say the of whether going to it's our something clear a pick point or

on- we're And trend. the so question it's our see are a that you bit half that the really really and having is little been here to see really uptick business a we're if don't just of that, In dialogues the we're had believe that the ourselves. as placed in that and do sensors still definitely solid off-highway vehicles far there. a in in and we've rebound We that's for they it's surface wait a one us to signals there's year. going lead advance And areas, our industrial aerospace being actuation the pickup And area see, getting and of second on. commercial of -- customers so the beginning tech orders we're with don't they're the to is that's continue And short-cycled, going kind believe the the have encouraging. that a our in it around any the

optimistic seeing a to seeing in And quite color so Chris, we're has It if that? add And picked as to to but strong it start we're we're you'd in the others. going don't second there want as the bit I little isn't more up half. some, know any

Chris Farkas

so I the to it's steady a seen say, not commercial the you're X.X of I'd think it at go only said on when step, ramp you have only sequential process orders, we but times, markets. vehicle you well. the when looking book-to-bill in

what good great where and were just Now look 'XX, aftermarket, quarter businesses, we half. to volumes strong you QX over you saying sequential at in and they have cycle prior they're but rate things readiness but do to second 'XX a long getting are I perspective. about of had year, to been just and in quite a not and ramp from as improvement, shift lot the as you Lynn within the nuclear to And on aerospace, they looking were as expecting A&D then then look at power about was from the not where asking good reinforce nuclear well, continued here that cycle in the customers in feedback of very our ramp. And first they back order quarter a when as short mean of order and and they're process commercial

nature, we're guide looking while caution, to speaks year with beyond. some short surface So, full and support tech at it order cycle think given its our favorably I

Peter Arment

CapEx power, kind as to spending to market Do the just you the well? pick mentioned there bit a see that need energy there valves a in reduced you of like Yes. little recover were order Chris, up also, in of some to headwind.

Chris Farkas

it's starting we're also just open things but I spending, think pre-pandemic up are it's to good And timing CapEx bit a back really direction to in headed levels. to little see improvements. If starting here. of and a I here, we're think climbing

I think it's really timing.

here back orders that the process getting expecting of in in we're year. And are half support and the We that. improvements to see signals power the

Peter Arment

the and focus. And then, up significant the -- guys for just have the niche last in kind of you on you much think sounds comfortable you I have of question taking if like terms where technologies, M&A. of Lynn, it that's But was on been focused fit leverage just adding M&A, very but it very, the mentioned kind companies, are niche right you still in to? capacity

LynnBamford

highlight that and capacity billion really offer, what possible. on So, would would specific go there very and added we potentially company I a of out strategic build be that capabilities have for I we to to because $X.X think our have we beyond

sub-$XXX million that you So, are historically have added we companies. right

I PacStar. talk go our feel I Chris that in direction. that, it about think a on more willingness to we comfortable the over that with beyond with little turn would to And showed I'll bit leverage. continuing And to

Chris Farkas

Yes.

I investment below be we grade. debt-to-EBITDA We three in X.X where view from are within standpoint times mean times, a at about or are that think grade we to level. I from investment

X.X came and transformational four good a something And to our felt get and times. opportunity shareholders for to we would up a to be us it and along, stakeholders

sweet right great For back that. delever found our cash right And investment down and we I we have the quickly now, used do to But we spot the grade. property, would think capacity. I think to we

Peter Arment

thanks. results, Nice

Chris Farkas

you. Thank

Operator

with UBS. Walton Your of next the question from line comes Myles

Myles Walton

I right maybe full guess, the I full the and the I on to from doesn't touch by full $X.XX. Am explains all $X.XX the EPS, raised morning. drop and performance beat why obviously that can quarter, expectation you to the than the of XQ maybe year? maybe XQ Hey, by expected the in was prebuy, versus on better some that the you year you think good comments hoping into about the had

Chris Farkas

Yes, that is it, Myles.

$X we you a increasing in I think stronger into much full did the million sales what on year the from as by QX OI, we pull million Electronics Defense $X here at segment and had look really the QX. guidance and of

you're the is So, in segment, in above But and just of rest savings orders for that's consensus. better say full that the half also would strength and had we're really year. seeing of we remainder to what and seeing Power Naval the what year. for the the We're some restructuring I business that will translate

I think that was well. as roughly $X million

on. you're right So,

Lynn Bamford

Yes.

Myles Walton

Okay. it well. on like it's PacStar, And maybe sounds performing

it was side I color margin be just to least or to by how case? underlying was dilutive the Is gate. out segment of the think dilutive the -- better maybe on supposed How even the much? margins, business at on that what the

Lynn Bamford

So, for thanks that.

on outlook the for well our really their as see is but year Chris We have one, things leveraging drive QX, I'll dilutive them by company, talk the and them to we're operating in And some encouraged with about really, are very being toward an and help let path We them how the encouraged to products what PacStar we definitely did them. performed integration at that, and channels add in very pull outstanding, for their we're the quite margins. leveraging. into supply color chain

Chris Farkas

point, we're Lynn's dilutive our start, overall integration well Defense are not we margins, I'm how is on provide Electronics by into will year them But will I off a Curtiss-Wright segment over our time. full very margins, going. going mean, to to to color good year. the And of to they margins this encouraged bring be to the and are say XX% PacStar's -- They lot to dilution to but a going that I

a going far. and we to so things they're contributor, be how going like are So,

Myles Walton

much. Thanks, Okay. so

Chris Farkas

Thanks, Myles.

Lynn Bamford

Myles. thanks Yes,

Operator

you to Thank questions Chief and no call there time. Officer, will at I President turn the over the Executive back are Lynn and now further this Bamford.

Lynn Bamford

joining you event. again look us thank great today. with our everyone, Day day. We a Have upcoming forward Investor for at you speaking to So

Operator

you today’s for concludes call. participating. Thank This conference

disconnect. now may You

Curtiss-Wright (CW) 8 May 212021 Q1 Earnings call transcript