Curtiss-Wright Corporation

Welcome, everyone, to the Curtis Wright first quarter 2024 earnings conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for your questions following the presentation. If you would like to ask a question at that time, please press star 1 on your telephone keypad. If at any point your question has been answered, you may remove yourself from the queue by pressing star 2. So others can hear your questions clearly, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, please press star zero. Now at this time, I will turn the call over to Jim Ryan, Vice President of Investor Relations. Mr. Ryan, please go ahead.

Thank you, Beau, and good morning, everyone. Welcome to Curtis Wright's first quarter 2024 earnings conference call. Joining me on the call today are Chair and Chief Executive Officer Lynn Bamford and Vice President and Chief Financial Officer Chris Parkes. Our call today is being webcast and the press release, as well as a copy of today's financial presentation, is available for download through the investor relations section of our company website at curtiswright.com. 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 guaranteed of future performance. We detail those risks and uncertainties associated with our forward-looking statements in 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 White's ongoing operating and financial performance. Any references to organic growth are on an adjusted basis and exclude foreign currency translation, acquisitions, and divestitures unless otherwise noted. Non-GAAP reconciliations for current and prior year periods are available in the earnings release and on our website. Now I'd like to turn the call over to Lynn to get things started.

Thank you, Jim, and good morning, everyone. I'll begin by covering the highlights of our first quarter performance and a few comments about our updated 2024 financial outlook. Then I'll turn the call over to Chris to provide a more in-depth review of our financials. Finally, I'll wrap up with a focus on our recent commercial nuclear acquisition and some closing remarks before we move to Q&A. Starting with our first quarter 2024 highlights, we are off to a great start as we delivered strong overall results that exceeded our expectations. Sales of $713 million increased 13% year over year, driven by better-than-expected performance in the defense electronics segment, which continues to benefit from strong conversion on its healthy and growing backlog. Our performance was led by growth in all of our aerospace and defense markets, highlighted by more than 30% sales growth in both aerospace and ground defense, along with strong growth in commercial aerospace. Operating income increased 23% year-over-year, exceeding our strong sales growth, and resulted in 110 basis points of overall operating margin expansion. Diluted earnings per share of $1.99 increased 30% year-over-year and exceeded our expectations, primarily due to the higher sales. Adjusted free cash flow, while typically a first quarter outflow reflected a year-over-year improvement of 37%. Chris will provide some additional color on the key drivers of these metrics later in our prepared remarks. New orders also demonstrated tremendous growth in the first quarter, up 26% year-over-year to more than $900 million and resulted in an overall book-to-bill of 1.26 times. Within our A&D markets, we experience strong demand globally for defense electronics, including our embedded computing and tactical communications equipment. Of note, the breadth of our tactical communications product portfolio continues to expand beyond its historically served U.S. Army and Marine Corps customers. During the first quarter, this business was awarded their first win with the U.S. Air Force, and exciting development, which we look forward to discussing in greater detail at our upcoming Investor Day. We also experienced strong order growth in naval defense supporting current and next generation submarine programs. In our commercial markets, we continue to experience increasing demand for our commercial nuclear products, Overall, we reached a record backlog in excess of $3 billion, which provides us with great visibility and confidence in achieving our updated 2024 financial guidance. Wrapping up my thoughts on the quarter, though our operational performance exceeded our overall expectations, we did face some challenges. This included an approximately $10 million headwind based on a change in estimate on a single naval contract within the naval and power segment. We encountered some technical challenges at a key milestone in the contract. We now have a path to resolution and are working closely with our customer while dedicating the proper resources towards the success. Finally, regarding our 2024 guidance, Despite the impact of the naval contract adjustment, we were encouraged by the strong start to the year and have confidence to increase our overall guidance for sales, operating income, and earnings per share. We now expect overall sales to increase 5% to 7% driven by increases in all of our major end markets. This outlook includes the contribution from our newest commercial nuclear acquisition of WSC Inc., which I'll discuss in greater detail later in our remarks. We expect continued operating margin expansion in 2024 while making incremental investments in both internally and externally funded research and development. We remain on track to deliver solid growth in diluted EPS, which we now expect to range from 8% to 11% and also generate strong free cash flow. In summary, our strategy to grow the business continues to build momentum, and Curtis Wright remains well-positioned to deliver another exceptional performance in 2024. Now I would like to turn the call over to Chris to continue with our prepared remarks.