Curtiss Wright Corp Q1 FY2026 Earnings Call

Welcome to the Curtiss-Wright First Quarter 2026 Earnings Conference Call. I would now like to turn the call over to Jim Ryan, Vice President of Investor Relations.

Thank you, Operator, and good morning, everyone. Welcome to Curtiss-Wright's First Quarter 2026 Earnings Conference Call. Joining me on the call today are Chair and Chief Executive Officer, Lynn Bamford; and Executive Vice President and Chief Financial Officer, Chris Farkas. A copy of today's financial presentation and the press release are available for download through the Investor Relations section of our website at curtisswright.com. A replay of this webcast will also be available on the website. Our discussion today includes certain projections and forward-looking statements that 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 in our public filings with the SEC. As a reminder, the company's results and guidance include an adjusted non-GAAP view that excludes certain costs in order to provide greater transparency into Curtiss-Wright's ongoing operating and financial performance. GAAP to non-GAAP reconciliations 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. We had a highly productive start to 2026. We delivered a strong first quarter performance that exceeded our expectations as we demonstrated exceptional operating results, reflecting higher growth in revenue and operating income across all 3 segments. As we continue to compound sustained profitable growth, I'm pleased with the team's steadfast focus on innovation where we are driving incremental investments in research and development to support a number of critical pursuits across our end markets. These investments, along with the continued growth in our order book, better position us to accelerate the pace of long-term organic growth. We also continue to have strong alignment with leading industry growth vectors, which has been further reinforced by improving underlying demand and industry fundamentals across our A&D, commercial nuclear and industrial markets. The momentum continues to build across Curtiss-Wright's portfolio. Based on the strong start, we raised our full year 2026 outlook, which provides us with confidence that we will exceed our overall Investor Day targets and continue to deliver strong results for our shareholders. With that, I'll turn to today's presentation. Starting with the highlights of our first quarter 2026 results. Sales of $914 million grew 13% year-over-year, while operating income once again exceeded our sales growth, resulting in 100 basis points of overall operating margin expansion. Of note, our results reflected higher year-over-year sales across all our major end markets. Diluted earnings per share grew 23% year-over-year, slightly ahead of our expectations and primarily driven by our strong growth in A&D sales. Regarding our order book, new orders increased 15%, reflecting a 1.3x book-to-bill ratio, driven by mid-teens growth in each of our 3 segments. I'll cover some of the key highlights. Starting in defense, where we're pleased to see the overall improved pace of order activity, which is a testament to Curtiss-Wright's long-standing alignment to U.S. and allied military priorities. Digging deeper and starting with Defense Electronics segment, the team delivered the best performance since the third quarter of 2024 and is making great strides to move past the delays caused by the prior continuing resolution and 2025 government shutdown. Notable wins during the quarter range from the mission computer upgrades supporting the C-17 cockpit modernization to various awards supporting next-generation helicopter platforms and programs, along with increased activity for some of our short-cycle businesses, including tactical communications. Overall, our pipeline of opportunities for these businesses remain strong. Our programs remain in good standing and the improved demand to begin the year provides us with increased confidence to deliver on our full year objectives. In the Naval and Power segment, which delivered a 1.5x book-to-bill ratio, we experienced continued strong demand for nuclear propulsion equipment supporting the U.S. Navy's current and next-generation submarine programs. We also continue to benefit from increased demand for our commercial nuclear aftermarket products. Lastly, within the A&I segment, I would like to highlight the improvement in our order book for industrial vehicles, which has now delivered 2 strong quarters in a row and is contributing to increased optimism in our general industrial market relative to our 2026 guide. Overall, based on the healthy growth in Curtiss-Wright's order book, we reached a new record of nearly $4.3 billion, which provides us with great visibility and continued confidence in our future top line growth. Regarding our full year 2026 guidance, we have raised our overall outlook for sales, operating margin, earnings per share and free cash flow and remain well positioned to deliver strong operational performance this year. Of note, we now expect overall sales to increase 7% to 8%, driven by improved outlook in our defense and commercial nuclear markets and further supported by the overall strength of our order book. We continue to expect that operating income growth will outpace sales growth and now anticipate an increase of 40 to 60 basis points in operating margin in pursuit of a record 19% to 19.2%. As a result, diluted EPS is now expected to grow 13% to 16%. In addition, we raised our free cash flow guide to reflect higher confidence in the full year outlook, and we continue to expect strong conversion in line with our long-term targets. Overall, we are pleased with the strong growth in revenues and profitability to begin the year, and we're strategically positioned to deliver another outstanding performance in 2026. Now I would like to turn the call over to Chris to provide a more in-depth review of our financials.

Thank you, Lynn. Turning to Slide 4. I'll begin by reviewing the key drivers of our first quarter 2026 performance by segment. Starting in Aerospace & Industrial, overall sales increased 12%, which exceeded our expectations. Beginning with the segment's defense markets, which drove the outperformance, our results reflected higher sales of actuation and sensors equipment supporting various U.S. and European fighter jet programs as well as increased demand for EM actuation equipment supporting ground-based mobile launcher systems. Within the segment's commercial aerospace market, we experienced solid OEM sales growth supporting increased production on both narrow-body and wide-body platforms. And in the general industrial market, the steady improvements in our order book, primarily attributed to increased demand for industrial vehicle products contributed to solid mid-single-digit growth in sales. Regarding the segment's first quarter operating performance, operating income and margin were ahead of expectations, growing 24% and 150 basis points, respectively, driven by favorable absorption on higher revenues, restructuring savings and favorable mix. Next, in the Defense Electronics segment, overall sales increased 5%, which was slightly ahead of our expectations. Within the segment's aerospace defense market, we experienced higher domestic sales of embedded computing equipment supporting various aircraft modernization programs as well as higher direct foreign military sales of embedded computing and flight data recorders serving NATO and allied countries. Ground defense market sales were flat as increased Turret Drive stabilization systems supporting international programs were offset by lower sales of tactical communications equipment. Regarding the segment's operating performance, we delivered a strong first quarter operating margin of 28.1%, up 60 basis points year-over-year, reflecting favorable absorption and mix on higher revenues. Moving to the Naval and Power segment. Sales growth of 21% exceeded our expectations. This was due to stronger-than-expected revenue growth in naval defense associated with the accelerated ramp-up in production on submarine programs. We also experienced a solid uplift in aftermarket revenue supporting naval shipyards through fleet services work and overhaul programs. Within the segment's aerospace defense market, our results reflected strong growth in revenues for arresting systems to international customers. In the power and process market, overall, we experienced high teens year-over-year growth in revenues. This was mainly driven by strong growth in the commercial nuclear market, supporting maintenance and life extensions at operating plants across North America in addition to increased revenue supporting advanced small modular reactors. Regarding the segment's operating performance, operating income grew 33%, generating 140 basis points in operating margin expansion, principally reflecting favorable absorption on the better-than-expected growth in sales as well as favorable mix. To sum up Curtiss-Wright's first quarter results, we generated a strong operating margin of 17.6%, driving 100 basis points in operating margin expansion on the better-than-expected top line performance. Turning to our full year 2026 guidance. I'll begin on Slide 5 with our end market sales outlook, where we now anticipate total sales to grow 7% to 8%. Starting in Aerospace Defense, we now expect full year sales growth of 11% to 13%, benefiting from increased sales of actuation and sensors equipment supporting domestic and international fighter jet programs as well as increased demand for defense electronics. Within ground defense, while we were pleased to see the overall improvement in Defense Electronics order book, we continue to take a conservative approach in tactical communications resulting from the FY '26 budget delays. And as a result, our outlook in this market remains unchanged. Aside from those timing delays, we continue to expect increased EM actuation sales supporting the U.S. Army's IFPC program and increased demand for Turret Drive stabilization systems supporting international ground vehicle programs through our relationship with Rheinmetall. In Naval Defense, following the strong first quarter results, we now expect full year sales growth of 6% to 8%, mainly due to expectations for higher production revenue on submarine programs, while we continue to project solid growth on the CVN-81 aircraft carrier program. In addition, we anticipate solid growth in aircraft handling equipment revenue supporting various international programs. Looking more broadly across all 3 defense markets, we expect direct foreign military sales to grow 10% this year and slightly ahead of our prior expectations, driven by the alignment of our technologies to global defense spending priorities. Moving to Commercial Aerospace. Our outlook for 10% to 12% sales growth remains unchanged and continues to reflect our strong backlog supporting the anticipated ramp-up in OEM production across the major narrow-body and wide-body platforms. Wrapping up our aerospace and defense outlook, we now expect total sales in these markets to increase 6% to 8%. Moving to our commercial markets. In Power & Process, we now expect full year sales to increase 13% to 15%, mainly due to the continued underlying strength of our order book within commercial nuclear, we now expect to deliver mid- to high teens growth in sales this year. Shifting to the process market. We continue to project strong growth in sales, which we anticipate will more prominently benefit our second half results based on the higher sales of MRO valves and instrumentation solutions. And lastly, in general industrial, we continue to take a cautious approach in this market and anticipate sales to be flat in 2026. However, we're encouraged by the more recent improvements in the order book and remain cautiously optimistic that we'll see a return to growth as we approach 2027. Wrapping up our total commercial markets, we now expect total sales in these markets to increase 8% to 10%. Moving on to our updated full year 2026 financial outlook by segment on Slide 6. I'll begin in Aerospace & Industrial, where we now expect sales to grow 6% to 8%, driven by the strong first quarter performance in the segment's defense markets, continued growth in the order book and the anticipated ramp-up in commercial aerospace OEM production. Regarding the segment's profitability, operating income is now projected to grow 13% to 15% and drive operating margin expansion of 100 to 120 basis points, ranging from 18.4% to 18.6%. In addition to the improved top line guide, this outlook reflects the ongoing benefits of our operational excellence and restructuring initiatives more than offsetting higher year-over-year investments in development programs. Shifting to Defense Electronics, where we continue to expect sales to grow 4% to 6%, principally driven by strong growth in aerospace defense and partially offset by the timing of our orders and revenues in ground defense. Regarding the segment's profitability, we continue to expect operating income growth of 4% to 6%, and we remain on track to deliver record levels of operating margin at 27.3% to 27.5%. In Naval and Power, based on the continued strength of our orders and backlog in both our naval defense and commercial nuclear markets, we now expect sales to grow 9% to 11%. Regarding the segment's profitability, we now expect operating income growth of 13% to 15% and operating margin expansion of 40 to 60 basis points with this uplift mainly driven by the stronger revenue outlook. Also, as a reminder, this outlook reflects the savings generated by our restructuring actions as well as continued investments in both internal and customer-funded development programs. To summarize our 2026 outlook, overall, we now anticipate total Curtiss-Wright operating income to grow 9% to 12% and expect operating margin to range from 19% to 19.2%, up 40 to 60 basis points as we lift at the bottom end of the range to reflect our increased confidence. Next, to aid in your quarterly modeling of sales and operating margin, we expect overall second quarter 2026 sales to grow by mid-single digits while also targeting high single digits plus growth in operating income, both relative to the second quarter of 2025. Of note, within our A&I and Naval and Power segments, we anticipate strong year-over-year growth in sales, resulting in improved second quarter profitability, while we expect both sales and profitability within the Defense Electronics segment to be in line with last year's Q2 results. In summary, at the overall Curtiss-Wright level, we expect modest year-over-year improvement in profitability to result in a high teens second quarter operating margin. We expect this to be followed by strong second half operating margin expansion, keeping us on track to deliver record results this year. Continuing with our financial outlook on Slide 7 and starting with our EPS guidance. Building upon our strong first quarter performance, we now expect full year 2026 diluted EPS to range from $14.90 to $15.30, up 13% to 16%, reflecting improved sales and profitability within our A&I and Naval and Power segments. To aid in your quarterly EPS modeling, we expect second quarter 2026 EPS to grow by low double digits relative to the second quarter of 2025. We then expect modest sequential EPS growth over the remainder of the year with the fourth quarter EPS being our strongest. And lastly, turning to free cash flow. Overall, we were pleased with the strong start to the year, and that provided us with increased confidence to raise our full year free cash flow projections to a new range and record of $580 million to $600 million, up 5% to 8% over 2025. This outlook continues to reflect our expectations for strong growth in earnings and a record level of working capital below 18%, while overcoming a nearly 30% year-over-year increase in growth investments through capital expenditures. We are confidently executing while continuing to deliver a free cash flow conversion rate of approximately 105% again this year. Now I'd like to turn the call back over to Lynn.

Thank you, Chris. And turning to Slide 8. I would like to conclude today's prepared remarks by highlighting how we are accelerating momentum across Curtiss-Wright's portfolio through our strategic initiatives and our alignment with industry growth drivers, positioning the company for long-term financial success. As we have discussed today, our strong execution to begin the year, combined with our growing order book and strength of our backlog reinforces our ability to deliver record financial results across our major metrics. This outlook is underpinned by increased sales in the majority of our end markets, while we're also targeting a record level of profitability with overall operating margin at or above 19%. The team is focused on driving margin expansion through an unwavering commitment to operational and commercial excellence while continuing to accelerate investments in R&D and infrastructure to support future organic growth. As a result, we continue to be successful under our operational growth platform as we sustain Curtiss-Wright's stature as a top quartile margin performer relative to our peers. We are also compounding earnings at a mid-teens pace over time by pairing that focused operational execution with our commitment to a balanced capital allocation strategy. In addition, Curtiss-Wright remains strategically aligned with many favorable secular growth trends across our markets. Starting in defense, Curtiss-Wright is firmly anchored across the most critical current and next-generation platforms of programs to be funded within the U.S. Department of Defense budgets. As a reminder, our technologies are trusted on over 400 platforms and 3,000 programs worldwide. Building off of a strong and funded base of approximately $1 trillion in the FY '26 NDAA, we're pleased to see the upsized levels to a historic level of $1.5 trillion issued in the President's budget request this past month. In naval defense, we remain aligned with a strong drive for accelerated production across the U.S. Navy's major platforms as well as investments in the next-generation SSN(X) submarine. Similarly, within our aerospace and ground defense businesses, we maintained strong alignment to the DoD's top strategic priorities, including tactical aircraft modernization, next-gen air superiority, radar and strategic missile defense and other priorities. All of these areas have received increased requests for funding in the FY '27 budget. Equally important, we're making focused investments in research and development to further advance our technology and ensure we maintain strong positions across our entire defense portfolio. On an international front, our NATO allies continue to strengthen their operational readiness by targeting record levels of defense spending, while we continue to solidify our positions with technologies such as Turret Drive stabilization systems, embedded and tactical computing and both ground and naval arresting systems. Turning to commercial nuclear. Curtiss-Wright's extensive portfolio of aftermarket technologies support the continued performance, safety and modernization of operating reactors worldwide, where we have content on every reactor across North America and South Korea. We remain aligned with plant operators and their incremental investments in plant extensions, power upgrades and modernization. In the U.S., we have seen an increased pace in number of plants receiving NRC approval for subsequent license renewals. Thus far, 23 reactors have been approved to extend their operating license, up from 9 reactors at the beginning of last year, with the most recent SLR completed in a record time and in less than 12 months. Similarly, in Canada, we continue to support the modernization of reactors progressing through major component replacement programs to extend the life of their plants. We are also committed to supporting the construction of new Westinghouse AP1000 reactors expected to be built in the U.S., Poland, Bulgaria, Canada and other locations globally. While not included in our current year guidance, we still anticipate an order for our reactor coolant pumps this year. In addition to large light water reactors, we continue to grow our relationships and secure content across leading 300-megawatt plus SMR designs. Our strategy ensures we will be engaged regardless of who is participating in the SMR race, which will ultimately support a number of winners. We expect SMRs to be a meaningful contributor to our revenue growth in 2026 and beyond. As we highlighted yesterday, one of those driving forces is our strong position on the X-energy Advanced Reactor where we have transitioned from design to prototype manufacturing of both the helium circulator and the reactivity control and shutdown systems as we continue to support the advancement of their next-generation reactor. Overall, we have a clear path to capturing tremendous growth in our commercial nuclear power business, and I'm confident in our ability to capitalize on the robust industry growth that lies ahead. Within commercial aerospace, we continue to build upon our strong core positions and alignment to the OEM production ramps across Boeing and Airbus platforms and support our customers' growing backlog. Over the next years, the elevated growth trajectory based on increased rates of narrow-body and wide-body production will provide us with durable opportunities for growth. At the same time, we expect that our continued investments in critical technologies and highly engineered components will bolster our ability to capture new positions and expand our portfolio across both current and next-generation platforms. Shifting to Industrial. Earlier, I spoke about the improved order momentum that continues to build in these businesses. This reflects our ability to grow our leadership positions while simultaneously investing in technologies that advance customer efficiency, performance and safety. This, in turn, together with the team's ability to successfully navigate global macroeconomic pressures, mitigate the impact of tariffs and identify opportunities to drive pricing and cost containment initiatives has enabled us to routinely overcome industry headwinds in this market. Overall, across all our end markets, we continue to take the necessary steps to ensure Curtiss-Wright remains aligned with the fastest growth vectors and that we are well positioned to capitalize on the needs of our customers, both today and well into the future. Turning to the bottom section of the slide. We are intensely focused on leveraging the full breadth of Curtiss-Wright's financial resources to maximize our returns across numerous investment opportunities. We are driving record levels of free cash flow, and we are doing so while investing in critical technologies at an accelerated pace across the portfolio. In 2026, we are ramping up our investments in people, systems and capacity to drive increased throughput across our naval businesses and also in anticipation of future commercial nuclear awards. Overall, we have and remain very focused on efficient capital deployment. Finally, Curtiss-Wright maintains a very healthy balance sheet, and we have remained extremely disciplined in our approach to capital allocation, continuing to strategically pursue acquisitions as our top priority in order to further accelerate top and bottom line growth. Beyond this, we look to further balance that allocation and sustain our strong track record and commitment to return capital to shareholders. In closing, I'm excited about Curtiss-Wright's numerous prospects for growth and we look forward to delivering another record financial performance this year as we continue to drive long-term value for our shareholders. Thank you. And at this time, I would like to open up today's conference call for questions.

Our first question is coming from Kristine Liwag with Morgan Stanley.

Your pivot to growth has been very successful, and you're seeing that with your strong book-to-bill of 1.3x in the quarter, and we're seeing very strong demand signals from customers. I guess when we look at the industry as a whole, U.S. defense primes have a record backlog of over $500 billion, but their ability has been gated by the supply chain. You guys have been executing fairly flawlessly the past few years. And Lynn, you highlighted that you're interested in also doing more deals. So are there specific areas when you look at that broader ecosystem where you see gating factors that are pretty high ROI? And is that an area that you would be interested in doing more M&A? And so any color you could provide here would be really helpful.

A great question, Kristine, and thank you for joining us today. We are positioned very broadly across all three branches of the U.S. Department of Defense and have a strong footprint in NATO, so I feel like we're very well positioned. From an ROI standpoint, our Defense Electronics team continues to deliver very strong results for our shareholders. When we talk about M&A and targets we’re interested in pursuing, those businesses usually remain at the top of the list. We know how to buy and integrate businesses there. Even if their profitability is below the segment's margins, as we were open about with PacStar, we’ve had outstanding performance with that team and it continues to grow and expand its footprint both in the U.S. and early on internationally, which is exciting to see. That is always a focus. We appreciate the tone coming from the Department of Defense around wanting more commercial acquisition and being more willing to have second sources and dual sourcing of equipment. First and foremost, that’s a reminder that we need to be a great supplier to our customers, and that is a big focus for us. We don’t take that for granted and we’re not perfect, so there are always areas to improve. We’re making it clear to the Navy that we’re open to being considered as a second source in some areas. When you look at our naval scaling, our MIB funding going from $15 million three years ago to $60 million now is indicative of where the Navy wants us to go and our ability to be a vital part of their supply chain. We’re also looking more broadly across aerospace and defense at critical aerospace technologies that we can take to both commercial and military markets. One of our strategies that drives ROIC is investing in technologies for one end market and then leveraging our breadth of end markets to spread those core investments across others. Aerospace is a great place to do that and is definitely an area of interest. Our last two acquisitions were in commercial nuclear; we continue to look there as well. There are fewer targets in that space, but we found two and there may be more. Overall, we consider things carefully and have KPIs we’re very focused on, and you have to view opportunities in balance. Chris, would you add anything from a financial perspective on how we think about that?

Sure. Yes. I would just kind of note in the current environment, I mean, there's a good amount of competition for acquisition targets that are out there right now. There's a scarcity of high-quality strategic assets. And that, in turn, is driving some elevated multiples. But we are very stringently applying our strategic and financial filters as we're looking at books in the process. We're generating a significant amount of free cash flow. We're continuing to invest in our organic growth. But you can see from the health of our balance sheet, I mean we've deployed $2.5 billion towards acquisitions since we began the pivot to growth. Despite this, our leverage is approaching record lows. We've got a fully untapped revolver, $3 billion of borrowing capacity today. So as we look at acquisition targets from a financial lens, we're looking for businesses that can really be accretive to our core KPI growth rates over time: revenue, operating margin, EPS, free cash flow and ROIC. I think in combination with the market environment, it's just important to note that not every asset is going to be immediately accretive to all KPIs, but we'll balance those strengths and opportunities in various ways against the full portfolio and generate improvement over time as we've done successfully for many years.

Great. Super helpful color. And if I could follow up on margins. The company, you guys have done a lot of restructuring, and we see that benefit with your record margins here. I guess as the Department of Defense wants to shift more towards more commercial terms, I mean, I presume, is that more margin accretive for you in the long run? And also, I guess, it's a broader margin question as we think about demand from international customers also coming in. I would also presume that would be higher margin. And it'd be great to get your views on those long-term drivers. But then also within the defense ecosystem, you're seeing more players like Anduril, like nontraditional players come into the industry. How does that shift the margin opportunity for a supplier like you where you've got pretty core capabilities that could be used by the incumbents and the new and you've got these new shifts in contracting approach. Is this good for margins in the long run?

We feel confident and comfortable with where we are. We won't speak beyond this year, but we will continue to expand margins this year across our portfolio, including some uplift in our defense businesses. As a team, we like to think of our role as delivering value. We spend over half of our internal IR&D in our Defense Electronics portfolio and have brought outstanding capabilities to the market that are unique to Curtiss-Wright, including a variety of NVIDIA-based products from those that use the Blackwell 5000 to products that leverage the 4 and are much more size-, weight- and power-oriented. We also have our Fabric100 capability, which is unique to Curtiss-Wright, and the Microsoft Azure offering that we provide. From our perspective, we are very targeted at delivering technology excellence to our customer base, and that aligns with the value those products command. We keep our eye on solving the hardest, most critical problems our customers have and believe we will be successful. We work with nontraditional primes and have active engagements with many of them. There are places our products fit and places they do not, so we do not have applicable products for all of them. The things we build are complicated and hard and require substantial investment and long timeframes, especially around defense electronics, not to mention all the submarine work. It's a foot race, and being able to supply product to them fits hand-in-hand with their value proposition. I think we're in a very solid place regarding margins and our ability to continue to grow.

We'll move on now to Myles Walton with Wolfe Research.

This is Greg Dahlberg on for Myles. I was just hoping to follow up on the X-energy announcement, shifting from design to prototyping work. Can you just give us a context of how much of the announced content this allows you to recognize or maybe frame how large SMR revenue is in 2026?

So it's not really our place to talk about what exactly the content is we're prototyping with X-energy. We've been very open and said our content is $120 million per reactor. We only mentioned 2 of the 3 major subsystems that have moved to prototyping. So it's obviously below that. And we're not prototyping the full complement of what an end reactor would be, but it's still great and meaningful revenue for Curtiss-Wright. And we're underway with that. And there's also some things we need to do from an infrastructure and test fixtures and stuff to be able to prepare to be able to do that testing. So it's a good revenue driver for this year, but I'll let Chris talk about any specifics he'd be comfortable giving.

Sure. I would just say embedded within that mid- to high-teens organic growth guide that we're giving for commercial nuclear, you've got aftermarket coming in at approximately low double digits. I mean we're seeing a lot of global strength related to that business. But also, there's a very strong ramp-up in SMR revenues for the development transition to the initial prototyping phase. Last year, it was roughly 10% of our commercial nuclear revenues. This year, with the guidance, we're targeting 12% of our commercial nuclear revenue. So a pretty sizable and growing improvement for a smaller part of our overall commercial nuclear portfolio today.

Great. And then I just wanted to touch on Defense Electronics bookings real quick because it sounded like things were good in 1Q based on your commentary and the short-cycle tactical comms work was accelerating. So can you share your expectations for 2Q book-to-bill maybe just given the context of the ground defense end market reiterated for the full year?

Yes. Maybe I'll just back up a little bit before I dive into Q2. Lynn mentioned in her comments, some of the changing government structure and budget delays we faced this last year. On the last call, we said once that was resolved, we expected we'd see a normal flow in approximately 60 to 90 days, which would put most of that into the April and May timeframe. And I think broadly, across Defense Electronics, that held true. We had the best order quarter for that business dating back to Q3 of '24 and also in Q1, Lynn mentioned, we received several of those orders that we had expected in 2025, including the C-17 and tactical comms and strategic returns. The Q1 order book was up 18% year-over-year. We had a book-to-bill that was near 1.1x. As we're looking at the April order update right now, we're seeing an improvement of 46% year-over-year for that month. So we're really off to a great start here in the second quarter, and we're expecting another good order quarter here in Q2. I will say that you heard in our prepared remarks that there will be some pressure on the second quarter revenue. I think we forecasted that and discussed that a little bit on the last call as well. But what's fortunate for us with some of these delays is many of the businesses here that are impacted are shorter cycle in nature and we've been taking steps to ensure that we can convert those orders into revenue as quickly as possible, and that gives us confidence in the full year guidance.

We'll move on now to Nathan Jones with Stifel.

I guess I'll start with a question on industrial vehicles. It's not one we talk about too much, and it's obviously been a tough market over the last few years for industrial vehicles. But it does seem like that market overall has kind of troughed out here and you're starting to see some growth. Some of the end customers there are starting to talk about increased production. I guess maybe a little bit more color on the order book, the growth in that. I know you kept the revenue outlook for general industrial flat for this year. Is that one of the areas that we might see some upside in the second half if things continue to progress on the same trajectory they are now?

Yes. We've had two good quarters of bookings, which is really nice to see. I definitely want to give a shout-out to the team. It's been a couple to three years that have had industry headwinds. We do feel optimistic that 2027 will return to some growth in this end market and the trends continue to indicate that. You can see the reports out of our customer base of what's being built. The team continues to do a good job bringing new products to market and winning new content, so we're very well positioned as that growth comes back in this market segment. We focused our content across the European markets where growth is predicted to be a bit more accelerated, so we feel good about what we've done there. It's still a watch item, so we're being cautious. We're not going to meet our three-year Investor Day targets of low single digits in this market, but we feel good that 2027 and 2028 will be a better position.

I guess just a follow-up on some of the delayed spending you've seen out of some of the stuff that's going on with budget approvals and continuing resolutions and stuff like that. The current administration has shown a real propensity to want to spend in these areas. How would you handicap the potential for that spending to get accelerated in the back half of the fiscal year, your 2Q, 3Q for the government and perhaps see some upside relative to some of the forecasts that you've put out there for continuing headwinds in those areas?

Thank you, Nathan. We're definitely seeing our book-to-bill across Naval and Power at 1.5x. We're seeing the aggression and the desire to spend and to get things moving. If I gauge it, the chance for upside by our order activity, our analysis of the pipeline across our defense business, it's very strong. You see what shipbuilding is doing. Our defense electronics is across so many platforms that it's not driven by any one target. But even within our A&I segment, Chris mentioned in his prepared remarks, the IFPC program. The number of IFPCs procured this year has more than doubled from last year, and it's expected to almost double in '27. There are lots of examples like that which are really dramatic upticks that are going to drive revenue for Curtiss-Wright. It's too early to count on anything. The President's budget request at $1.5 trillion, there's a lot of debate on that. I was up on the Hill a couple of weeks ago, and lots of people have lots of opinions on it. But universally, many think there's going to be a much larger than $1 trillion defense budget this year or next year. And so between that and NATO countries ramping their spending, our prospects are very good.

We'll move on now to John Godyn with Citi.

So I wanted to circle back on the defense aerospace side that you called out earlier in your prepared remarks. So you highlighted strong trends for the quarter that benefited both aerospace and industrial as well as defense electronics. And this has been a common theme we've heard across this earnings season. So I was hoping you could talk a little bit more about what demand signals you're seeing here in the military aviation side looking ahead for the year and how things are shaping up relative to your expectations even from a few months ago. Are there any platforms or platform types such as fixed-wing versus rotorcraft growing faster than the other? I appreciate any color that you can give here.

It's definitely an area of great growth. Whether it's modernization programs, things like the C-17 that we were able to announce in Q1, there's a lot of aircraft modernization programs going on, the F-15EX, the KC-46 to just name a couple others. We're very active and participating in those early days, and as some of the next-generation air dominance programs are being selected, whether that's an F-47 or other programs, we're well positioned with that. The CCAs, there's just heavy demand. The current situation in the Middle East is driving a lot of sparing activity type of work that we're already beginning to see. So it's not any one platform per se, but good steady content and growth. Another example is with the President's budget in '27, the number of F-35s in the U.S. alone is expected to increase materially. So we'll see where that takes us.

Got it. I appreciate the color. And then I want to circle up on the commercial nuclear side, specifically on the AP1000. I'm just trying to get a sense of when a customer or country finalizes an order or a deal, what's the timeline for when you guys could complete the product for these reactor coolant pumps and start recognizing revenue? I'm just trying to get a sense how the timing flows through these deals.

It's a changing landscape. If you go back to our '24 Investor Day, we laid out the traditional approach to how the contractual situation has moved and how EPC contracts were led and how that led to us getting orders. In the current environment, specifically in the U.S., with some government funding available, it's less clear whether we'll follow the traditional trajectory. We take our cues from Westinghouse; regardless of who's buying the plants, our customer is Westinghouse. We work with them to understand when we can expect an order. As I said in the prepared remarks, we do still expect that order this calendar year and are planning with Westinghouse to be ready to ramp and meet their needs. We recognize revenue over a 4- or 5-year bell curve. It will start a little slow at first as there's work to be done to drive revenue, including securing long lead material. That's why we felt it was prudent not to include AP1000 revenue in our guide for this year's revenue because the exact timing of the order is uncertain and whether it will be in time to produce meaningful revenue is to be determined.

We'll now move on to Louie DiPalma with William Blair.

Lynn, you mentioned F-47 and CCA. How are you positioned to potentially be involved for those next-gen platforms? Or have you already secured a spot in terms of content supplier relationships for those platforms?

It's a little bit of both. There is content we have secured across those platforms, but there's absolutely content that we're still pursuing and there are still opportunities for us. I think they will both provide solid revenue streams for us going forward. We're on both the winners of the CCA. We have nice content with both. We'll see how that goes, whether they both wind up producing planes or just one of them. When Boeing won certain next-gen awards, we were pleased with content we secured and some things are still under work.

Great. And for the Navy, has the strength been broad-based across the nuclear pumps and valves that you provide in addition to electronics and R&D and perhaps overhaul? Or has anything stood out in terms of how you've been able to maintain the double-digit growth for the Navy for so long?

I would say the vast majority of the Navy order book and backlog is really focused within the Naval and Power segment where we are embedded across the key naval nuclear platforms. That's a very steady stream of work that continues to come on in. It gives us a very long-term view of where that market is headed. It's very durable revenues, and it's great cash flow. In the first quarter, while it was an outflow for us in cash, it was better than what we had seen in prior years and even beat our expectations a little bit. That was really based upon the very strong orders that we had received across the submarine programs in Q1 and the related advances that come on into that. We are seeing some uplift in other areas of the business for technologies such as EM actuation and various things that we do on the ships. As you look across the Defense Electronics group, while it's not as significant a portion of their overall portfolio as, say, defense aero or ground defense, there's a lot of work that goes into the subs and surface combat ships for that business. But the vast majority of what's happening in the order book is really the core of naval defense across key platforms. Also don't forget what's happening with FMS. We are seeing a lot of naval aircraft handling system growth looking outward. And we're seeing good work with fleet overhauls and repair work. Those categories can be accretive to the overall margin profile of the naval defense work.

How significant is the overhaul work for the broader Navy segment?

When you look at the RCOH as an example, we do approximately $50 million in work every time one of those carriers comes in. We'll recognize that revenue over kind of a 4- to 5-year timeframe as they're doing the work on the ships. Beyond that, there's growth embedded across the Virginia-class submarine programs more recently, initial spares provisioning that's happening there. We haven't given exact values, but with some of that work and the service centers that we have on the East and West Coast, it's really opening us up to other opportunities to help get the fleet repaired and back onto the water. So it's good business for Curtiss-Wright.

We'll move on to Jan Engelbrecht with Baird.

Congrats on another strong set of results. I think I'll start off with if you can give us sort of the puts and takes over the next couple of years for the commercial nuclear franchise, how you're thinking about margins as you're sort of progressing through this decade? And just how we should think about sort of operating leverage on double-digit growth in the aftermarket and then SMR development ramping up, the impact of large reactors, AP1000 and then just the South Korean design, which I think you have around $20 million of content today. But if there could be a domestic build of that as well, I would assume that you'd be in a great position as having the domestic facilities.

Important question. Starting in the SMR space, we've been doing paid design work for about 4 years now. That's often lower-margin business. As we begin to move into prototyping phases, like the announcement with X-energy, that will be better margin business than the earlier design work. We're still working on how we will move into early production quantities later this decade. There should be natural margin uplift as we get volume and move through that work tied to the SMRs. On the aftermarket side, we make healthy margins on that business and it's more about growing our content. I don't see major margin changes coming in aftermarket work. With AP1000, we need to support Westinghouse and it's an active situation right now, and it's not appropriate for us to provide more specifics beyond that.

To add on revenue growth perspective: at our last Investor Day in May 2024, we outlined that it was possible to double our organic commercial nuclear footprint by 2028, taking roughly $300 million to $600 million of revenue and then layering on acquisitions. Some industry developments since then have increased our confidence that the possible is looking really good. So as you look outward, we feel much better today about what's possible than we did back then.

That's very helpful. And just a quick follow-up, if I may. If you guys can just give us an update on the cockpit voice recorders franchise, sort of updates on the Airbus certification timeline? And then just how is it tracking the North American fleet sort of upgrading from 2 hours to 25 hours? I know there is a 2030 deadline, but what are you seeing so far?

The work continues with Airbus, and we think we will achieve certification in the back half of this year, so that's encouraging. Our deliveries remain steady with Honeywell for new market builds for Boeing. The aftermarket uptick for retrofitting the existing fleet has been a little slower than expected. The regulation was signed into law in February of this year, so it's taking some time for airlines to figure out how to execute. Overall, that business is relatively flat year-over-year for us, but it should be a good growth driver for the Defense Electronics segment through the back end of this decade. No concerns; healthy growth expected next year.

We'll move on now to Scott Deuschle with Deutsche Bank.

Lynn, there's obviously a lot of talk in the semiconductor industry about supply constraints and things like printed circuit boards and memory. I think this is something you've been pretty active about getting in front of and managing, but just curious for an update as to how you're thinking about managing those potential constraints and whether you see any impact to the business there?

There is definitely demand, and I want to give a shout out to the team for their ability to manage through it. Memory and storage chips have been a big focus, and they've done a great job working with our suppliers to secure supply. We take many approaches: working with customers to fund the supply base where appropriate, leveraging government high-priority ratings where applicable, and better monitoring lead times and doing advanced buys. From COVID-era practices to now, our supplier management is much more sophisticated. The team feels good about the needs for '26 and are focused on 2027 to keep things in line. Another area we watch is rare earth minerals, more across our surface tech and industrial businesses; teams are qualifying alternatives, seeking second sources, and taking creative approaches. There is no single silver bullet, but the teams do a great job.

Got it. Maybe this is overreaching, but have you seen competitors have maybe greater issues with the semiconductor constraints such that your ability to secure these supplies actually creates a market share opportunity relative to competitors that maybe haven't managed these input constraints as well as you have?

Not anything meaningful I would comment on specifically. We are always after market share and are doing things to take market share through product capabilities and technology leadership. For example, our Fabric100 capability is unique to Curtiss-Wright and we're leveraging that to take share. If competitors stumble, that can create opportunities, but our primary focus remains on delivering unique value to customers.

There are no further questions at this time. I'm happy to return the call to Lynn Bamford, Chair and Chief Executive Officer, for additional or closing remarks.

Simply, thank you all for joining us today, and we look forward to speaking with you again on the road or following the release of our second quarter results. Have a good day.

Thank you. This concludes today's Curtiss-Wright earnings conference call. Please disconnect your line at this time, and have a wonderful day.