CW - NYSE

Welcome to the Curtiss-Wright Second 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. [Operator Instructions] I would now like to turn the call over to Jim Ryan, Vice President of Investor Relations.

Thank you, David, and good morning, everyone. Welcome to Curtiss-Wright's second 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 Farkas. 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 curtisswright.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 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 Curtiss-Wright'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. GAAP to 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. Today marks our first earnings call following our May 2024 Investor Day. During the event, we provided investors with an overview of our pivot-to-growth strategy, a recap of our prior three years journey and our new three year financial targets. We appreciated the opportunity to showcase some of our critical technologies and several of our key business leaders across Curtiss-Wright. The event had a great turnout and I value everyone's support and feedback. As you will see in our results today, we are off to a great start. Our performance emphasizes our focus on accelerating the pace of long-term organic growth across all of our end markets along with the team's dedication to operational excellence, future margin expansion and free cash flow generation. I am confident, we are building strong momentum to compound sustained profitable growth in the years ahead. With that, I'll turn to today's presentation. I'll begin by covering the highlights of our second quarter performance and will provide a few comments regarding 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 by discussing the recently-announced acquisition of Ultra Energy and some closing remarks before we move to Q&A. Starting with the highlights of our second quarter 2024 performance. Sales of $785 million increased 11% year-over-year, driven by better-than-expected performance in the Defense Electronics segment and the timing of revenues in the Naval & Power segment. Underscoring this performance, we achieved strong mid to high teens growth across all our Aerospace and Defense markets. Operating income increased 16% year-over-year, exceeding our sales growth and resulted in 60 basis points of overall operating margin expansion. Diluted earnings per share of $2.67 increased 24% year-over-year and also exceeded our expectations, primarily due to the higher sales. Free cash flow was strong at $100 million and in line with the prior year, reflecting nearly 100% conversion. Regarding our order book, we continue to experience strong growth, particularly within our A&D markets, driving overall new orders up 18% year-over-year to nearly $1 billion or 1.3x book-to-bill in the second quarter. This strong demand enabled us to once again reach a record level of backlog now in excess of $3.2 billion, which provides us with great visibility for the second half of 2024 and supports our long-term outlook. Within our A&D order book, we experienced robust demand in our Naval Defense businesses supporting aircraft carrier and submarine programs as well as increased aircraft handling equipment orders from both the U.S. and direct foreign military customers. We are also seeing positive order trends within our commercial markets. The most notable increases in demand were in our industrial businesses and more specifically industrial vehicles, where orders improved and have now essentially stabilized year-over-year. Next is some highlights of our full 2024 guidance. Our strong first half performance, along with our growing order book provided confidence to increase our overall guidance for the majority of our key metrics. We now expect overall sales to increase 6% to 8% and we continue to target operating margin expansion, while making significant incremental investments in both internally and externally funded research and development. This puts us on track to firmly deliver double-digits growth in diluted EPS this year. In addition, we increased our already strong free cash flow guide to reflect higher confidence in the full year outlook. Overall, we are well positioned to deliver exceptional results in 2024. Finally, we launched a corporate-wide restructuring program and several cost-saving initiatives in the second quarter to support our future growth and improve our overall operational efficiency. We expect these actions to affect all three segments, but mainly impact the A&I segment. We anticipate approximately $15 million in restructuring costs in 2024 and approximately $10 million in annualized savings through operating income in 2025. In addition, we expect to recognize a portion of these savings this year in the A&I segment, which is embedded within our updated guidance. Additionally, we completed the consolidation of our UK legal entity structure, which Chris had initially discussed at Investor Day. He'll provide some more additional color on the specific benefits of this program later in our prepared remarks. Overall, the savings generated by these two initiatives support our ongoing pursuit of operating margin expansion and EPS growth and will generate additional funding to reinvest back into the business. We also expect them to contribute to our already strong free cash flow position. In summary, Curtiss-Wright continues to build momentum through the execution of our pivot-to-growth strategy and we remain confident in our ability to deliver long-term shareholder value. Now, I'd like to turn the call over to Chris to continue with our prepared remarks.

Thank you, Lynn. On Slide 4, I'll review the key drivers of our second quarter 2024 performance by segment. I'll begin in Aerospace & Industrial where overall sales growth of 3% was in line with our expectations. Within the segments commercial aerospace market, we experienced strong low teens OEM sales growth supporting the continued ramp up in production across narrow-body and wide-body platforms. Within the segments aerospace defense market, we experienced solid sales growth in both sensors and actuation equipment due to the timing of production on various programs. Those increases were partially offset by reduced sales in the general industrial market, principally due to the timing of industrial vehicle orders. And turning to the segment's profitability, our results reflect favorable absorption on higher sales as well as a small contribution from our newly launched 2024 restructuring actions. Next in the Defense Electronics segment. Strong sales growth of 16% was modestly ahead of our expectations, as this business continues to benefit from the conversion of its healthy backlog. This performance was driven by better-than-expected growth within our ground defense market, due in part to the timing of tactical communication equipment revenues and deliveries accelerated into second quarter. Across this market, we continue to benefit from an increase in demand from both domestic and direct foreign military customers. Within aerospace defense, we once again experienced strong growth in embedded computing sales across a number of C5ISR programs including the Blackhawk and Seahawk helicopter programs to name a few. Regarding the segment's operating performance, we delivered a strong 25.7% operating margin up 390 basis points year-over-year, principally reflecting absorption on higher revenues and a shift in mix towards higher margin C5ISR programs and tactical communications equipment. Turning to the Naval & Power segment. Sales growth of 15% exceeded our expectations. This is partly due to the strength and timing of naval defense revenues and production ramps on a few key platforms including the CVN-81 aircraft carrier. In addition, our results reflected higher submarine revenues including production on the Columbia class and Virginia class programs as well as development on the SSNX programs. Within the segment's aerospace defense market, our results reflected increased sales of aircraft arresting systems equipment principally supporting U.S. military bases. In the Power & Process market, our results reflected continued strong demand in the commercial nuclear market supporting the ongoing maintenance of U.S. operating reactors along with modest growth in the process market including higher subsea pump development revenues. As indicated in our recent July 29th press release, our subsea pump development efforts are proceeding well. We've recently achieved a significant development milestone with Saipem for technological readiness and we continue to pursue the path way towards commercialization. Turning to the segment's operating performance. As expected, our results reflected both unfavorable mix and an increased concentration of development programs across our naval defense, commercial nuclear and process markets. To sum up our Curtiss-Wright second quarter, overall, we generated solid absorption on stronger-than-expected top line performance resulting in 60 basis points in year-over-year operating margin expansion. Next, turning to our full year 2024 guidance. I'll begin on Slide 5 with our end market sales outlook, where we now expect organic sales to grow 5% to 7% with total sales growth of 6% to 8%, driven by an upward revision across most of our A&D markets. Starting in Aerospace Defense, we now expect full year sales growth of 7% to 9%, driven by an improved outlook for sensors and actuation equipment sales supporting various fighter jet programs including the F-35. In addition, we continue to expect strong embedded computing equipment revenue, supporting various C5ISR programs and are projecting sequential ramp in these revenues over the remainder of the year. Within ground defense, our outlook for 10% to 12% sales growth remains unchanged. In this market, we demonstrated very strong growth in the first half of the year, partly due to timing and continue to experience overall solid demand for our tactical communications equipment. In Naval Defense, we now expect full year sales to grow 5% to 7%, based on the strong volume of orders received in the second quarter. This updated guidance includes our expectation for increased sales of aircraft-handling systems mainly supporting foreign military customers, as well as higher revenues for aftermarket fleet services, as we look to the second half of this year. Turning to commercial Aerospace. A strong first half performance particularly for our surface treatment services provides us with confidence to raise our full year sales growth to a new range of 13% to 15%. We continue to expect higher OEM production on narrow-body and wide-body aircraft while maintaining a conservative view specifically as it relates to the 737 MAX program. Wrapping up our aerospace and defense markets, we now expect total sales to increase 8% to 10% in 2024. Moving on to our commercial markets. In the Power & Process market, our outlook for 4% to 6% sales growth remains unchanged. Within our commercial nuclear market, we continue to expect the high single-digits full year growth rate, principally driven by strong aftermarket revenues, while in the process market, we expect a low single-digits full year growth rate driven by higher subsea pump development revenues. In the general industrial market, based on weaker first half industrial vehicle sales serving the on and off highway markets, we've reduced our full year expectations to flat for this market. However, looking to the remainder of the year, the generally positive trends in our shorter-cycle surface treatment services along with the improved order activity that Lynn highlighted earlier, provides us with confidence for improved second half performance in this market. Wrapping up our total commercial markets, we are now targeting full year sales growth of 1% to 3%. Moving on to our full year outlook by segment on Slide 6. I'll begin in Aerospace & Industrial where we are increasing our revenue guidance to 4% to 6%. This is principally driven by the strong first half sales growth and outlook in commercial aerospace, along with improved expectations within our aerospace defense market. Regarding the segment's profitability, we now expect operating income growth of 8% to 11% and operating margin expansion of 50 to 70 basis points to a new range of 16.9% to 17.1%, which is 30 basis points above our prior expectations. For your modeling purposes, we expect third quarter sales and operating income to be largely on par with the segment's second quarter results, due to the timing of sales within our European operations. We then expect the segment to deliver SG&A finish to the year, reflecting favorable mix along with the benefits of our ongoing margin initiatives. Next, the Defense Electronics. We continue to expect sales to grow 8% to 10% driven by a stronger order book and demand across our A&D markets and anticipate the remaining sales to be evenly split over the back half of the year. Regarding the segment's profitability, we continue to project operating income growth of 11% to 13% and operating margin to increase 50 to 70 basis points in range from 24% to 24.2%. As a reminder, the segments profitability also includes an incremental $5 million or 50 basis point headwind in internally-funded R&D investments, the bulk of which are expected to impact our second half results. In Naval & Power, following the strong first half growth in revenues and robust order activity in naval defense, we have raised our expectations for revenue growth to a new range of 5% to 7%. Regarding the segment's profitability, we've raised our operating income guidance slightly to a new range of flat to down 2%. While we continue to anticipate favorable absorption on higher sales, we maintained our prior margin outlook primarily due to unfavorable mix and margin pressures associated with the accelerated ramp up in development programs across Naval & Power. Of note, and for your modeling purposes, we expect the segment's third quarter revenues to be slightly below the stronger-than-anticipated second quarter results, primarily due to the timing of naval defense revenues. However, over the course of the second half of the year, we anticipate improved profitability, as we move past the impact of the first quarter naval contract adjustment, experienced a more favorable mix and recognized the benefits of our operational excellence initiatives. So to summarize our outlook, overall we now expect total Curtiss-Wright operating income to grow 6% to 9% and continue to expect operating margin to range from 17.4% to 17.6% including a year-over-year increase of more than $20 million in total engineering spending. Continuing with our financial outlook on Slide 7, as Lynn mentioned earlier, and as I outlined in a case study in May Investor Day Curtiss-Wright has executed at targeted legal entity consolidation. This initiative have a nominal cost to facilitate efficient cash repatriation and have the added benefit of generating approximately $5 million in annual recurring savings impacting both tax expense and free cash flow. This is the main driver of our 100 basis point reduction in the effective tax rate to 22.5%. Of note, we continue to pursue opportunities to facilitate tax efficiency and are actively looking to drive additional tax savings to Curtiss-Wright in 2025 and beyond. Next to our EPS guidance, we now expect full year 2024 diluted EPS to range from $10.40 to 10.65 dollars up 11% to 14% which aligns with our Investor Day target for double digit growth. As we look ahead to the second half of this year, we expect our third quarter 2024 EPS to be relatively on par with our second quarter results followed by a strong finish to the year. And lastly, turning to free cash flow. Based on our strong year-to-date performance, our projections for improved earnings and the tax benefits from our UK consolidations project, we've raised our free cash flow outlook to a new range of $425 million to $445 million. This outlook reflects solid growth of 3% to 8% and a free cash flow conversion rate in excess of 105%, which is in line with our long-term targets. Now, I'd like to turn the call back over to Lynn.

Thank you, Chris. And turning to Slide 8, I'd like to spend the next few minutes reviewing the recently-announced acquisition of Ultra Energy, which is a leading supplier of neutron and radiation monitoring systems, temperature and pressure sensors as well as complementary reactor protection and control systems. This business has a long legacy dating back to the 1950s and today maintains three, facilities two in the UK and one in Texas. They're led by an experienced management team backed by more than 90 engineers and strong customer relations, all of which make it a great fit for Curtiss-Wright. Ultra Energy is a diversified business that principally provides critical support to commercial nuclear operating reactors and other power generation plants across the globe, focused on the safe operation of the reactor from the core to the control room. In the commercial nuclear aftermarket, it will add products and services to further advance Curtiss-Wright's support of plant life extensions and modernization projects for aging plants. In addition, the acquisition will extend our presence with the leading designers of small modular reactors both domestically and in Europe. Ultra also serves the defense markets by providing support to the legacy UK nuclear submarine fleet as well as current and next generation designs. Regarding the key financials, we paid approximately $200 million for Ultra at less than 12x next 12 months EBITDA. We expect the deal to be dilutive to overall Curtiss-Wright operating margin in the first year of ownership, but have line of sight for this business to contribute to our overall profitability and long-term operating margin expansion. The business very much aligns with Curtiss-Wright's long-term acquisition criteria both as a strategic and a financial fit, giving its strong market position and opportunities for profitable growth. We expect this transaction to close in the third quarter and therefore are not including Ultra Energy within our guidance at this time. Overall, this is another example of the strength of Curtiss-Wright's balance sheet and an exciting acquisition that expands our global presence across our key end markets. Turning to Slide 9, and to summarize our prepared remarks today, we are well-positioned to deliver a strong result in 2024. We are confident in our ability to generate 6% to 8% total sales growth this year, and we anticipate a strong second half performance. We remain committed to delivering incremental operating margin expansion, while maintaining strategic investments in research and development, as we continue to accelerate our long-term organic growth. We expect to generate double-digits EPS growth yet again in 2024 and strong free cash flow with a solid conversion rate in excess of 105%. Regarding our 2024 restructuring program, we have positioned ourselves for future growth across the business, and we'll continue to do what has been ingrained within our culture that is improving the overall efficiency of Curtiss-Wright operations. Finally, I'd like to reemphasize some of the most important takeaways from our Investor Day that are driving our confidence in achieving our long-term organic growth targets. Throughout the course of today's call, we discussed a number of exciting growth opportunities and strategic investments that underpinned our second quarter and year-to-date results. Many of these will remain key drivers of our future growth and support our outlook to grow organic sales at a greater than 5% CAGR through 2026. For example, and starting in defense technologies, we are well aligned to support the U.S. and the allies in this elevated threat environment. Of note, this includes the importance of our C5ISR and tactical communications equipment as well as our support of the U.S. Navy's most critical shipbuilding programs. Beyond that, the current state of the naval ship construction and the need to shore up the overall industrial base affords us the opportunity to grow our aftermarket capabilities and further support our customers. Outside of the U.S., we have experienced strong international growth, driving increased direct foreign military sales that have and should continue to benefit each of our defense end markets. In commercial aerospace, we remain ideally situated to leverage our strong and growing backlog and support the anticipated ramp up in narrow-body and wide-body production. Overall, I'm pleased to note that these markets which represent more than two-thirds of Curtiss-Wright's overall business are well supported by strong demand that will enable us to deliver on our Investor Day targets of mid to high single digit A&D sales growth. Within our commercial markets, the momentum continues in commercial nuclear with new developments such as the recent signing of the Advanced stack driving continued support for the industry at large, particularly next generation reactors. The act which received strong bipartisan support was the first significant piece of commercial nuclear legislation passed in almost two decades. Of note, it streamlines the regulatory approval process for new advanced reactor designs. This is one of many ongoing developments that are expected to help strengthen the nation's efforts to restore its competitive nuclear energy advantage and further support Curtiss-Wright's growth in this end market. We are also intently-focused on managing Curtiss-Wright's consolidated portfolio, as we navigate the changing market dynamics impacting some of our industrial and process businesses. In addition to addressing the opportunities that are driving our business today, we're also investing for Curtiss-Wright's future to proactively capture the medium and long-term secular growth trends that we discussed at Investor Day. We are committed to spending more than $20 million in incremental R&D this year to support critical initiatives such as subsea pumps, small modular reactors or the future SSNX submarine. They represent, but a few of the many development projects underway with the potential to drive hundred of millions of dollars in additional growth through the end of this decade and well into the future. Lastly, we are an agile and flexible business with a strong track record of proactively addressing business efficiency and successfully navigating challenging market conditions. This has enabled us to drive continued margin expansion and returns for our shareholders. In closing, we're off to a great start and the momentum continues. Our technologies, expertise and portfolio of solutions are incredibly well-aligned with our customer and industry needs as well as the growth trends in our core markets. We are well-positioned to deliver strong profitable growth in 2024 and we remain confident in our ability to deliver on our long-term guidance. Thank you. And at this time, I would like to open up today's conference call for questions.

Thank you. [Operator Instructions] Our first question is coming from Kristine Liwag with Morgan Stanley. Please go ahead. Your line is open.

Hi. Good morning. Lynn and Chris, supply chain has been a headwind for Defense Electronics, in the past few quarters, but with the acceleration of sales that we're seeing now, it seems like supply chain constraints have been easing. Can you provide more color on where you are now on material receipts, and where you are in shortages, and when you'd expect catch up deliveries to level set?

Sure. It is true that, I would say, we haven't taken our eye off of supply chain, but largely the major disruptions are definitely behind us and we see good stability across our supply chain. And some of the best practices we put in place back in 2022 around various tools to manage our supply chain and different ways of engaging with the supply base continue on. So where there are little pockets of issues, we've improved our processes and how we engage, and those continue to prove to be successful. I would say that, broadly lead times have come down across a variety of components. But older components, which we build a lot of legacy products specifically in the Defense Electronics, those lead times seem to have come down from the over 52 weeks to maybe more in the lines of 40 weeks. And that seems to be just where they're stuck and we don't really anticipate any real notable change in that area going forward. And I think that is just the new norm for those. I will say, I'm pleased to say, prices have been very stable in the supply chain. We really started seeing that the end of '22, but for sure in '23 and that continues. It doesn't mean there was no price increases, but they're just traditional incremental -- minor incremental price increases. So, that's very good. As we look at destocking, I guess, the two places we are most conscious of this is across our industrial businesses, where we think we're level set and producing with our customers at this point in time. And we watch it, we work very closely with our customers, but we -- things are broadly good there. The other place where people tend to ask about that is around commercial aerospace. We can talk a lot about our orders. Chris added some color to what we're watching and taking some caution around how we view things, specifically tied with the 737 MAX. Boeing is producing a 25 per month, which I think is broadly known. We think our content range is anywhere from 25 to 35 a month, given the wide variety of things we do. But something that we've done that we use as one of the litmus test for how we analyze this, as we don't just look in the current quarter or even the past 12 months, but we look over a several year period and track our production rates compared to Boeing and Airbus and they're largely in line slightly behind those multi-year production rates, which leads us to believe, we're not really in an overstocking situation. If you really also layer in some price increases and some spares type of work that gets mixed in with that, it makes us feel comfortable with where we are and how we're producing in those markets. Hopefully that answers the things you were wondering about.

Yes. That's really great color in the supply chain. Thank you. Switching gears to margins, I mean, margins are at record levels. It's a testament to the strong operating performance of the team. Can you talk about the rationale to implement restructuring plans now? And can you provide more details on exactly what your initiatives entail and where margins could potentially peak, because it seems like you're not done?

Obviously, we committed to growing OI faster than sales again in our 2024 Investor Day. So, we don't believe we're done. We're a broad diverse business, and as much as we're proud of the overall performance and we are really proud and the teams are doing a great job to achieve that. It doesn't mean that we doesn't continue to analyze and look inside the businesses to see the areas where we can drive efficiency in the business. We'll tackle those regardless of how we're performing at the current time. But I'd also note that some of the restructuring that we're doing is to support volume increases and it's to better align ourselves and have our businesses prepared for that long term profitable growth. So we tend to think of restructuring as taking out cost structures, but I'm very pleased to say some of this restructuring is also to support the volume increases. So it's just I think part of how we manage the business. We don't look at just the overall numbers, we look down through all the business units within and order trends in those businesses and try to be proactive in those. I think the chatter of a recession surely increased this week, heighten back up a bit. We feel good that, we were proactive and have addressed this. Really it's across all three segments, but really not we're not prepared to give any real specifics about this action or that action.

Great. Thank you very much.

We'll take our next question from Michael Ciarmoli with Truist Securities. Please go ahead. Your line is open.

Good morning, guys. Thank you for taking questions. Nice results. Lynn, you may have just answered this, but no more kind of meat or substance. You can't give us anything kind of on that restructuring. Are you bringing footprint, are you cutting heads or trimming product lines, or I know you said it was across all segments, but any detail? And is this -- I know you didn't give a specific margin bogey at the Investor Day, but is this ongoing restructuring necessary to kind of be in that top quartile or is this kind of additive?

I'll have Chris take a shot at that and see if he can put a little more color on it.

I definitely can. I appreciate the question Mike. And I'll answer your last question first, and I think the way that we're looking at this is just to echo what Lynn had said. It's really about positioning ourselves for future growth across the business. But, as we've emphasized many times and spent a lot of time talking about it in Investor Day. We are constantly looking to optimize our operations. We have done all of the things that you mentioned in the past, whether it's footprint rationalization, labor efficiency moves across the organization, product line, separations and we continue to look at that constantly across the organization. So in this case, the majority of the restructuring spend and benefit is going to be across the A&I segment and we are heavily focused on areas of both growth and achieving efficiency. I think as you look across the other segments in Defense Electronics and Naval & Power. You're looking at a little bit more of movements that might be focused towards footprint rationalization and those activities that are set up to support future growth. But, it is certainly growth focused across each one of the segments. So as we look at the total spend, I mean, it's important to note that, it's about $12 million to $13 million of that is going to be in cash. It's expense, but it's cash and about $2 million to $3 million of that is non-cash. And that's just when you're moving your footprint around, you do have impairments and things like that that affected. But we're happy that we could raise our cash flow guidance here and not remove that from the results. So it really speaks to the health of the organization, what's happening in cash.

Got it. And then, you had a really strong quarter here, especially on earnings. I know you had kind of previously called out the 40/60 split. But just anything unusual? I mean, if I look at, the cadence of this year, you grew first half revenues 12%. You raised, but you're really going to see a step down in growth, probably like 3% even at the high end. And I guess, specifically honing in just on defense, the low end of your market guidance there for just your defense would assume revenues are down second half versus first half? Is there anything and I don't think you've ever done that before, where we see revenues be down? Is there any kind of nuance or anything kind of unusual this year?

Yes. I would say across aerospace and defense, Mike, we are relatively flat. I mean, we are seeing very slight increase in the back half of the year. You are right, this is somewhat unusual. I think Lynn and Christine kind of hit upon it some of this a little bit earlier in that the health and improvement of the supply chain has had a pretty dramatic effect particularly on the businesses that we have within our ground defense market. So as we look at ground defense, it was our very strong first half of the year based on the timing and recovery of that supply chain and also some conservatism that we're taking in that market relative to some of the product, the movement and things that we're doing to support our restructuring, we're taking a little bit of a conservative view in that regard. I mentioned on the call that, the aerospace defense market is still expecting a good sequential ramp. But, some of the revenue here in Naval & Power and this is really helped to contribute to our beat on the quarter was timing. So you saw that slide from Q3, Q4 into the second quarter. And we'll see how things go across the remaining half of the year. Within commercial aerospace, we had a very, very strong first half of the year, but we continue to approach that cautiously. So, I'm hopeful that, as we look at these projected ramps that both Boeing and Airbus have for 2025 that there's opportunity that lies ahead. But at this point in time, we felt it was prudent to take a conservative approach.

Okay. And then just the last one again nuance with the guidance. I mean, I don't know, where we are in the broader macro. But, it sounded, you had tougher growth in industrial, but you've got a really big 12% sequential step-up in the second half to get to flat. I think you called out the uptick in orders, on the vehicle. So presumably you've got line of sight there and it sounds like some of those challenges, you called out stabilization and it looks like you've got pretty good visibility there?

Yes. It's definitely an area where when we talked to you last in the first quarter on the call, we talked about general industrial orders being down. But that we were encouraged and starting to see signs that things were stabilizing and through the communication that we have with our customers and the awards that we saw ahead of us. Here in the second quarter, we have actually flattened out year-to-date and that's actually a very big achievement for this business, because since both highs of 2021, we have been -- we've had strong orders, but they've been decreasing quarter-after-quarter. So the stabilization that we had here is very encouraging. And then I will say, as we're monitoring this very closely and one month doesn't make a year by any stretch, but, we had our highest order month in general industrial in the past 16 months. So we saw signs of strength and some of that will convert here very late in the year. So good question.

Okay. Yes, that's great color. Thanks guys. I'll come back in the queue.

We'll take our next question from Nathan Jones with Stifel. Please go ahead. Your line is open.

Good morning, Nathan.

Hi, Nathan, we're not hearing you if you're talking.

Nathan, you may need to check the mute function on your phone. We have you opened on our end.

My apologies. I was on mute. So good morning, everyone. Maybe I'll start with a couple of questions around the subsea pump announcement. Still in the process of commercializing it, I know you guys had that on display at the Analyst Day and the folks there involved with that project were pretty excited about it. I think you've sized that, as a pretty material opportunity over the next 10 years. There may be any commentary on the timeframe for commercializing that product and any discussion around the opportunity that you see over the next 5 to 10 years from that business?

Yes. So it is an area that we're definitely as the visibility in the market becomes clear of what we have. We can definitely see that, there's strong demand for the reliability that we can bring to this market that is just dependent on much more commercial kind of grades of products. And so, we feel great about the products we're building and proud that it's another example of our crossover technology, where we take core investment and continue to take it to first enable the commercial nuclear and now this market, and who knows what the future holds for us. There's some other things we're even exploring. But with that, I think, we mentioned that there's a potential of $250 million in orders by the end of this decade. And I'm sure you know, we've talked about the three major customers that we have had press releases on our engagements with. Petrobras was announced back in February 24th. We signed a contract with them to develop and deploy a pump. That project is off to a great start. We've talked about our Shell development for quite some time. It goes back a while and we're on track to be able to deliver and be ready for deployment, our first subsea pumping system by the end of this year. And so, we're really pleased with that. And then, there was obviously the press release on Saipan about completion of the qualification process, which is very major and we know for sure that, some potential customers, Petrobras and Total is to the name publicly. We're really waiting for that milestone to figure out how they're going to work it into their operation. Just a lot of great things going on in that market. We see that $250 million, by the end of this decade, doubling to over $500 million in orders by the middle of next decade. And I think as we continue to open the doors with more customers, with the technology that number will only stand to grow as we go forward.

Great. A question on the orders. I know, you can have some lumpiness in some of the business on order rates, but the first and second quarter order rates were up significantly and very high book-to-bill. And maybe a little bit more color on, where you're seeing the strength in those order rates, how much, that's increasing your confidence about the revenue profile and revenue growth, as we head into 2025?

Sure. I'll take that one on, Nathan. We had another very strong quarter for sales and I think that's always relevant when you start talking about book-to-bill. But our book-to-bill overall for the second quarter was about 1.3x. And we had a 1.4x book-to-bill across our aerospace and defense businesses and certainly heavier weighted towards the defense side of things and we had a one-time book-to-bill across our commercial businesses. As you break down the orders, we did have a large amount of orders come through this quarter and we know it can be lumpy, but it's still a good time for the business and what we're looking outward towards in naval defense and we saw a good slug of orders just kind of continuing to support, what we have as that existing business and key content on the carrier and sub-platforms. But I was also really encouraged to see here in the quarter, we had a number of wins across our naval handling systems businesses to direct foreign military customers and that's good business. So some signs of life. We talked a little bit about that at Investor Day, that things are growing. And then beyond that, we have received some orders to support fleet services in the aftermarket, another thing that we talked about at Investor Day. So, starting to see some more activity in those areas and it's encouraging.

Great. Thanks for taking my questions.

We'll take our next question from Peter Arment with Baird. Please go ahead. Your line is open.

Thanks. Good morning, Lynn be Chris. Nice results. Lynn, maybe just to talk about it or maybe follow-up on Nathan's question about orders. Just when we look at like particularly like Defense Electronics, your growth for the year 8% to 10%, you obviously just had a really strong quarter 16% growth. Maybe you could talk a little bit about the differences you're seeing whether it's domestic versus FMS and kind of how sustainable it is? I know FMS is notoriously lumpy, but, is there are we still like in the early innings for the build out of what they need internationally? Maybe just talk about those differences. Thanks.

Thanks for that question. And it is something that we're I would say, I very actively engage with the team to try and understand that, this is a bubble or a pull forward or something that's not going to be sustained. And when we go through all the metrics that we look at across the board with the pipeline to total opportunities, the bidding activity, a whole variety of things, it does not feel -- it feels like we're on a steady straight growth rate. Now whether it holds at the exact same levels, we gave some guidance about this at Investor Day, but not really getting into '25 or '26 specific targets. But we very much do think, it is sustainable and what we're doing in. The drivers specifically to foreign military sales feel like they are at early days. I think we're starting to see actually even some of the ground vehicle programs across Europe finally start to take form and move in that scenario that, I think we anticipated in 2022 we would start seeing demand from in '23, given the war activity over in Europe. It's taking a lot longer than we would have anticipated, but I think that's very early days. A lot of pull across the NATO countries for our tactical communications equipment and I think, there's a lot of tailwinds still with that. And then as Chris mentioned, our aircraft handling equipment and the arresting systems that we have through the recent ESCO acquisition that we just have ongoing engagement around those activities. So I think things just are really solid across broadly in Defense Electronics specifically than even our form of military sales that's obviously outside of Defense Electronics.

Appreciate that color. And then just, for the follow-up and just switching gears on your nuclear aftermarket business. Is that -- how does that get impacted by the Advanced Act, or I know there's we've been tracking all the plant life extensions and the permitting that's been going on. Does that allow for any pull forward or is it just kind of in line what you were thinking what you laid out Investor Day where this business is going to grow substantially?

So the Advance Act is more for new build. It's interesting there's both the Advance Act and something else has happened since our Investor Day is DOE. The DOE is put forward a notice of an intent to fund $900 million for Gen 3 plus at small modular reactors where the Advance Act is broad, but it's more geared as the Gen 4 advanced reactors. And so, Advanced Act actually had been moving through Congress for quite some time, so we were well aware of it, but it's nice to see it get signed into law. That's definitely a great development. I would say, broadly in our aftermarket business of the 94 operating reactors in the U.S., now over three, four, some of them just barely over, but over three, four, some of them have declared that they are intending to do a plant life extension. Those numbers continue to inch up and we feel good about the low double-digits growth in our total nuclear business guide that we put forth at the Investor Day that things continue on our development, with the small modular reactors and the aftermarket continues to grow. And then, early days, but we really are exploring some ways of broadening our footprint and we're really excited that, Ultra acquisition, the WSC acquisitions both give us reach to different to new and different customers and a European footprint where a lot of the spend for Europe they want to do inside of Europe. So I feel really, really great about the two recent acquisitions in bringing both the simulation capability that gives us a global reach that we didn't have and a European reach that we didn't have. And so, I feel great about our nuclear business overall and the aftermarket business in the U.S. bringing Ultra gives us more capability. They have some unique customer relationships doing things that we don't necessarily have until everything is just building on itself.

Great to hear. I'll jump back in queue. Nice results. Thank you, Peter.

We'll take our next question from Myles Walton with Wolfe Research. Please go ahead. Your line is open.

Hi, good morning, everyone. This is Greg Dahlberg on for Myles Walton. Kind of continuing on Nathan's line of questioning. I was just wondering if you'd go into more details on new orders. I guess, what are you seeing for pricing of the new orders? And as a follow-up to that, are there any LTAs that you still need to be worked through on the renegotiation side?

So I'll maybe just talk a little bit about the LTAs and then see if Chris can provide a little more color on the orders. We still do have LTAs that we are negotiating. This is an ongoing activity that can be just topics we have to work with our customers. There's LTAs that expire at the end of this year that we're very much engaged in working with our customers to find win, win solutions. But yes, it is very much an ongoing activity. I'll let Chris talk about pricing and any more color on the orders.

Yes. I think you captured it well. I mean, we saw some opportunities that we're chasing on the LPAs and we'll do that and pricing is a constant exercise for us. Maybe just to touch upon a couple of the areas in orders that I didn't talk about. I think as you look across the Defense Electronics business for the second quarter, I mean, they were at a 1x book to bill, but again the sales for the second quarter were up 16%. So very strong volume of order activity. Year-over-year, we did see some impact to the Defense Electronics orders from just timing of naval orders. I mean, they have a lot of content across these naval platforms as well and sometimes that can be a little bit lumpy. But I think as you look for the second half of the year, with that business, we're encouraged with the continued trajectory and improvement that we're seeing in the month of July alone. Again, one month doesn't make a year. We saw a 24% increase in Defense Electronics orders in the month. So good things are happening. As you step back and you look across our Power & Process markets, we were again at about a 1x book-to-bill. We are expecting a bigger second half of the year for both of those businesses not dramatically, but a lot of that just has to do with the timing of turnarounds and outages and the work that's being performed within those businesses. Overall, no real signs of weakness in the order book or anything that has us concerned in the second quarter.

Great. Thank you. I'll keep it at one.

[Operator Instructions] We'll take our next question from Tony Bancroft with Gabelli Funds. Please go ahead. Your line is open.

Thank you, Lynn and Chris. Great job to your team, I know, it's happened this quarter. You've done some acquisitions that are maybe like not specifically your core companies, but you guys ended up building these sort of other core competencies now. Where do we look to next? Anything transformational more on the nuclear side, more on the aerospace side or ground defense? If you could just sort of just give us your sort of view going forward on where you're going to grow?

Sure. Thank you for that and thanks for joining us. I would say, a bit unusual that we had two back-to-back nuclear acquisitions. There's just not a lot of potential properties out there. So we were very purposeful in these and we did not overpay. I would like to definitely emphasize that. And so, we feel great about bringing them into the portfolio of products and just broadening out our capabilities. And we do have a lot of software modeling and content within the group doesn't get talked about quite as much. WSC was really nice as a software product expansion of what we do and very complementary to what we do. We always ask for priorities. We always list Defense Electronics as the top of mind priority that we have such a great business that is well integrated that we know we can bring properties into that team and they can leverage many of the strengths that are within that group, whether it's their channel to market, the ruggedization expertise, their supply chain efficiencies, manufacturing footprint. There's just so many ways that, really we can bring businesses in and make them better as being part of Curtiss-Wright. So that's an area we're always looking. Our naval footprint is very important to us. Again, not as many properties available to look at, but where we can have major safety and propulsion systems to build out our portfolio, that's an area where we always are looking. And so, I mean we looked across all our end markets, so I don't want to say, we would not. There's no hard stop. So we would never consider something in any of our end markets. Across our defense markets and specifically Defense Electronics is probably the top priorities. We always keep a keen eye for things we can continue to build out our nuclear footprint.

That's great. Thank you so much. Great job.

Yes. I did really just add one more thing. I didn't really specifically address the transformational aspect of your question. And so, we are open to larger transactions. I think, when money is expensive, the financial win with those, the dynamics change with that. It's not something we're targeting, but we're open to it and we'll always have an eye to the art of the possible of what we can do with the business. We're on such a great growth trajectory. We have so many tailwinds coming with us across our end markets and the technologies that we're building. I would say, we are mostly focused on really doing the right thing and preparing for the growth that is before us and you have the momentum to keep growing double-digits EPS and delivering value to our shareholders with the portfolio we have.

Thank you. I appreciate it.

We will take our next question from Louie DiPalma with William Blair. Please go ahead. Your line is open.

Hi, Louie.

Good morning, Lynn, Chris and Jim. You've made significant investments from the R&D side in MOSA for your Defense Electronics, which has seemingly led to market share gains. And it seems that, the armed services are still in the early innings of this modular MOSA transition. I think the Army last week announced a $500 million contract to implement Mazda for future vertical lift. Do you see more market share gains associated with the migration to MOSA? And also some of your competitors in Defense Electronics have struggled. Do you see market share gains associated with that as well? Thanks.

So we're really pleased with our positions of our product portfolio and actually a handful of products will be coming to market even yet in the back half of this year that have been in development for well over a year, that are going to yet again up our breadth and the sophistication of the products we bring to market. So we believe we are very well-positioned. We believe, we have taken some market share over the past 12, 24 months due to various dynamics across the industry. But I think that trend, I've been cautious to say that, it's hard for our customers to change. So they cannot just change on a dime and one day be buying from supplier x and three months later be shipping product with supplier y. And so, there is definitely engagements going on to make transitions. We are focused on it and targeting it, but that still has potential to be a tailwind for us and allow future growth. Those things that's out there is a dynamic and we've talked about this off and on over the years, but it's very much as true today as it has been for a long time. We're coming into a period in the U.S. of potentially some relatively flat defense budget. We have strategies to make that be a growth opportunity for us and some of that through our lifecycle maintenance programs that we touched on in the Investor Day and being able to continue to support maintaining the same product configuration for our customers, where they're trying to control costs. It also has the ability if you have the right products to drive outsourcing, as they do not have the engineering funding to do custom solutions for products. And so, we look to assure we're doing the right things that we latch on to growth drivers in the industry and where budgets are growing, but making sure we're doing the right things to grow when budgets are a little compressed. So the future is really great for that team.

Okay. And so you see it as a very slow transition to this modular or consistent approach, but it does still benefit here, right?

100%, and maybe I misspoke in some way. The transition to MOSA, we've tried to do press releases over since 2021, 2022 of where we have been designed in based on our MOSA compliant product offering. There's a handful of them out there that you can find on our website. We win a lot of things based on having the MOSA offering. Just most frequently we cannot talk about those wins, but it's endemic in the industry now and how customers, the primes, or the government itself are looking to acquire and it is being viewed as a requirement, not a nice to have, but got to have. We are really well positioned for that and winning business based on that.

Awesome. Thanks, Lynn. Thanks, Chris and Jim as well.

There are no further questions on the line at this time. I'll now turn the floor over to Lynn Bamford, Chair and Chief Executive Officer for any additional or closing remarks.

I just want to say thank you to everybody for joining us today. We'll be on the road at some public events in Q3, that if you have the chance to join that would be great, and if not, we'll talk to you at our Q3 earnings call. Thank you.