Curtiss-Wright Corporation

Good day and thank you for standing by. Welcome to the Curtis Wright First Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you will need to press star 1 on your telephone. Please be advised that today's conference may be recorded. If you require any further assistance, please press star then 0. I would now like to hand the conference over to your host today, Jim Ryan, Vice President, Investor Relations. Please go ahead.

Thank you, Michelle, and good morning, everyone. Welcome to Curtis Wright's first quarter 2022 earnings conference call. Joining me on the call today are President and Chief Executive Officer Lynn Bamford and Vice President and Chief Financial Officer Chris Barkus. Our call today is being webcast, and the press release is all the copy of today's financial presentation, It's available for download through the investor relations section of our company website at www.curtiswright.com. A replay of this webcast also can be found on the website. Please note, today's discussion will include certain projections and statements that are forward-looking, as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are not guarantees of future performance. We detail those risks and uncertainties associated with our forward-looking statements and our public filings with the SEC. As a reminder, the company's results include an adjusted non-GAAP view that excludes certain costs in order to provide greater transparency into Curtis-Rite's ongoing operating and financial performance. Any references to organic growth are on an adjusted basis and exclude foreign currency translation, acquisitions, and divestitures in what's otherwise noted. GAP to non-GAAP reconciliation current and prior year period are available in the earnings release and on our website. Now I would like to turn the call over to Lynn to get things started. Lynn?

Thank you, Jim, and good morning, everyone. I'll begin our remarks by covering the key highlights of our first quarter 2022 performance and some notable events that are influencing our business. Then I'll turn the call over to Chris to provide a more detailed review of our financial results and our 2022 guidance. Finally, I'll wrap up our prepared remarks before we move to Q&A. Starting with our first quarter 2022 performance, our results were principally driven by the timing of revenues in our defense markets, with overall sales below the prior year but in line with our expectations. This timing was influenced by the continued global supply chain disruption due to the extended lead time and delays in the receipt of electronic components. Our first quarter defense sales also reflected the impact of the continuing resolution and the delayed signing of the DOD budget. Outside of defense, we delivered a very strong performance, generating double-digit sales growth in our commercial aerospace, nuclear aftermarket, and process end markets, which truly reflects the merits and strengths of our combined portfolio. Regarding our operational performance, the team has done a commendable job of managing through the supply chain challenges along with the impacts of rising inflation and other global events. First quarter operating margin exceeded our expectations, mainly driven by better than anticipated mix in defense electronics as lower margin revenues pushed out of the first quarter. Diluted earnings per share of $1.31 also exceeded our expectations due to the better than expected profitability. New orders were strong in the first quarter, up 12% year over year, reflecting increases in naval defense and commercial aerospace within our A&D markets and strong demand across all our commercial markets. As a result, we achieved a book-to-bill of more than 1.1 times in the first quarter, which builds on our already strong backlog. While we remain cautious due to the ongoing supply chain constraints, this strong demand provides confidence in our sales outlook for the remainder of the year. Next, I would like to briefly touch upon the full year 2022 guidance. Although the year is off to a slow start, again, mainly due to timing, our full year guidance remains intact. and we continue to expect a strong performance across the board. Chris will review in detail in a few minutes, but in terms of key highlights, we are maintaining our outlook for organic sales growth of 3% to 5% driven by increases in all of our major end markets. Due to the ongoing supply chain challenges and delayed signing of the DoD budget, we continue to expect a greater than normal percentage of our total sales will be weighted to the back half of the year. While we are approaching the situation with tempered optimism, our ongoing discussions with critical suppliers indicate that delays in acquiring electronic components will begin easing in the third quarter, particularly as it relates to semiconductors. While this is encouraging, we are currently anticipating this disruption will continue throughout the remainder of 2022 and likely into 2023. Turning to our operational performance, We expect continued operating margin expansion in 2022, aided by the benefits of our ongoing operational excellence initiatives and our efforts to mitigate challenges in the supply chain. We also remain on track to achieve double-digit growth in diluted EPS and generate strong free cash flow. Next, I wanted to provide a brief overview of some recent industry events influencing our defense markets. First, we were pleased to see Congress pass the FY22 Defense Appropriations Bill in March following a prolonged continuing resolution that delayed funding on critical New START programs. The bill includes a strong 5.5% increase over the FY21 enacted budget, which Curtis Wright is well positioned to benefit from. In addition, the Biden administration released the initial FY23 budget on March 28th requesting $773 billion for the Defense Department, or 4% growth over FY22 enacted. This proposed budget includes increases across all services, with naval shipbuilding receiving the highest increase over 2022, aligned with the administration's focus on the Indo-Pacific region. Notably, this includes strong funding for two critical growth drivers for Curtis Wright, the Columbia-class submarine and Ford-class aircraft carrier programs. Both programs continue to drive strong demand for our nuclear propulsion equipment. The recently released 30-year shipbuilding plan provides further confidence in the Defense Department's commitment to build out the naval fleet and align our forces to be prepared to face the biggest global threats. In the ground defense market, the budget targeted the continued funding for the Army's top modernization priorities, while in the aerospace defense, there was support for various helicopter and unmanned platforms. I'll also remind you that Curtis Wright has one of the broadest portfolios of defense electronics products. Our alignment to and technical leadership in the open standard aspects of MOSA enables us to help modernize military platforms rapidly and cost-effectively. Turning to the international front, The war in Ukraine has further increased the focus on defense spending around the world, as well as energy independence for Ukraine and many neighboring countries in Europe. Since the conflict began, we have witnessed many NATO countries proposing or ramping up defense spending to 2% or greater of GDP. An overall increase in global defense spending provides Kurdish rights with improved visibility and support for our long-term growth outlook across our defense and markets. Now, I would like to turn the call over to Chris to provide a more thorough review of our first quarter 22 performance and our outlook for the remainder of the year.