Moog Inc.

Good morning, ladies and gentlemen, and welcome to Moog Bank First Quarter Fiscal 2025 Earnings Conference Call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question and answer session. Instructions will be provided at that time for you to queue up for a question. If anyone has any difficulties hearing the conference, Please press star zero for operator assistance at any time. I would now like to turn the conference over to Aaron Astrakhan, Director of Investor Relations. Please go ahead.

Good morning, and thank you for joining Moog's first quarter 2025 earnings release conference call. I'm Aaron Astrakhan. With me today is Pat Roach, 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. 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.

Good morning and welcome to the call. Today we will share an update on the first quarter financial and operational performance and an updated outlook the year we've delivered a great quarter with strong sales growth impressive bookings and solid margin enhancement we're delivering value for our customers and we're being rewarded with significant program wins our operational initiatives will deliver continued margin enhancement and strong free cash flow in the second half of fiscal 25. now Let me provide further detail on our operational initiatives that are driving this strong performance. Firstly, our customer focus. Our performance in delivering for our customers has put us in a great position to pursue and capture significant opportunities arising from broad-based defense demand. We secured record quarterly bookings of over $450 million in our space and defense segment. These wins cover a range of applications and leverage our technical leadership and our operational performance. Close to half of the bookings were within our missiles business, with the largest single award being a production order for over $100 million from Lockheed for the control actuation system on the PAC-3 program. We also captured initial bookings on collaborative combat aircraft platforms demonstrating the relevance of our technology in this fast-moving segment. Bookings were also very impressive in commercial aircraft with close to $400 million in orders with almost 60% aftermarket content. We continue to grow our customer base for Moog total support with additional long-term agreements with airlines around the world. In December, the German government delivered to the Ukrainian Armed Forces, the first of 54 self-propelled RCH-155 howitzers produced by KNDS. In support of our growing defense business in Europe, we've recently added manufacturing space to our Bugglinges site in Germany. Next, turning to people, community, and planet. I want to return to the impact of extreme weather with an update on Tewkesbury, As you may recall, we experienced severe damage to our Tewkesbury commercial aircraft facility in September. I'm pleased to report that we have regained production capacity within eight weeks of the event. This is a remarkable achievement. It's a credit to the dedication of our staff who continue to drive the recovery so that we can deliver on our customers commitments. Reinstatement of our production facility will continue through fiscal 25. It is heartbreaking to see the loss of life and the destruction wrought by the wildfires in Los Angeles. We are concerned for all those impacted, including our staff at our Torrance and Chatsworth operations. To date, there has been no impact on our facilities. We published a second sustainability report in December 2024. In its broadest sense, sustainability is about adapting to the evolving needs of our stakeholders. And we've made significant strides. Some highlights include CO2 emission reduction through HVAC upgrades and the deployment of solar arrays. Installation of water purification projects in our communities in India and the Philippines and progress in tackling hazardous wastes. In addition, we made a commitment to cut water consumption by 20% relative to an fiscal 22 baseline in areas that are designated water and to better manage our water resources across our footprint. In relation to supporting sustainable aviation industry, we are pleased to be collaborating with Jet Zero on their blended wing body demonstrator, which promises to have fuel burn and emissions as a step towards net zero carbon emissions by 2050. MOGIT's providing the flight control actuation on this aircraft. Finally, turning to financial strength. We continue to make excellent progress on driving margin enhancement through pricing and simplification. Our execution is in line with our investor day commitments. We continue to simplify our operations. The transfer of all production from our Radford Virginia Motors manufacturing site is complete and we will soon exit that facility. This completes the consolidation of our industrial electric motors in the US to our focused factory in Murphy, North Carolina. In addition, in November, we entered a collective consultation process with staff on the proposed closure of our Slippering manufacturing site in Reading in the United Kingdom. The consultation process will conclude by end January. We expanded 8020 deployment to cover 75% of our business by sales and trained more than 60 leaders, bringing the total to over 900. We're on a plan to deploy to all manufacturing locations by the end of fiscal 26. We continue to develop our capabilities and are using insights gained to drive productivity and reduce complexity in the business. We're building momentum by using our own success stories to educate the wider organization and to show what is possible through 8020. As part of 8020, we've continued to expand voice of the customer interviews, and we're using that feedback to drive improvement further building customer loyalty. Finally, during a recent visit to our German industrial manufacturing facilities, I saw firsthand the strong commitment to driving production efficiency achieved through innovation within our manufacturing process and the integration of robotics and automation. Now turning to the macroeconomic and end market conditions. With a change of administration in Washington this week, let me start with a few comments on our defense business. The geopolitical environment remains extremely challenging. Whilst the recent ceasefire in Gaza is an extremely welcome development, there is still an ongoing war in Ukraine and tensions over Taiwan. The threat from growing military capability of near peers is undiminished. Consequently, there is no lessening of the need to replenish arsenals over the next few years, to modernize and upgrade existing platforms, and to develop new strategic capabilities. For these reasons, we believe that our FY25 guidance is solid, and we foresee continued expansion in our defense business based on our significant bookings. Whilst the new administration will certainly define its own Department of Defense priorities, we believe that our broad-based exposure across all defense domains positions us well. In addition, we expect to see continuing growth in international demand. The new administration will likely introduce tariffs, although it is not clear how widely they will be applied, nor at what level. We've experienced the impact of tariffs in the past, and we will work with our customers and suppliers to mitigate any impact. On the commercial side, we remain optimistic that wide-body platforms will ramp in fiscal 26, given the feedback received from our customers and their actions. The fact that Boeing recently announced a $1 billion investment into its Charleston facility is strong commitment to the 787 ramp plan. Airbus also reaffirmed their A350 ramp plan. We're well positioned to support this and we look forward to that increased demand flowing through our business. Finally, the industrial business is stabilized despite the soft market conditions. In fact, our book to bill ratio was greater than one for the first time in two years. Now let's turn to the guidance for fiscal 25. We had a good start to the fiscal year and we're maintaining our full year guidance. This means solid revenue growth, strong adjusted operating margin improvement in line with our investor plan, and a significant improvement in free cash flow relative to fiscal 24. Our revenue guide is unchanged with just minor updates by segment to reflect what was achieved in quarter one, and the impact of unfavorable exchange rates within the industrial business. Our margin guide also remains unchanged. Finally, our free cash flow is unchanged for the year. Whilst our use of cash in the quarter was high, we have a clear line of sight to its improvement in quarter three and strong cash flows for the back half of the year. Now, let me hand over to Jennifer with a more detailed breakdown on the quarter and our guidance.