Moog Inc. Q1 FY2025 earnings call

Management Statement and Operational Highlights:

• Customer Focus: Secured record bookings in Space and Defense, including a $100 million Lockheed order and initial bookings on collaborative combat aircraft. Strong bookings in Commercial Aircraft with high aftermarket content.
• People, Community, Planet: Regained production capacity at Tewkesbury facility within 8 weeks of damage. Published sustainability report with CO2 reductions, water projects, and collaboration with JetZero on blended wing body demonstrator.
• Financial Strength: Drove margin enhancement through pricing and simplification. Completed production transfer from Radford, Virginia, and entered consultation for Reading site closure. Expanded 80/20 deployment to 75% of business.
• Macroeconomic Conditions: Defense business benefits from broad-based demand, while Commercial Aircraft expects growth with Boeing and Airbus ramp plans. Industrial business stabilized with book-to-bill ratio >1.

Segment Performance:

• Space and Defense: Record quarterly bookings over $450 million, with sales of $248 million in Q1, up 8% year-over-year. Includes a $100 million production order from Lockheed for PAC-3 and initial bookings on collaborative combat aircraft platforms. Revenue contribution from this segment was significant.
• Military Aircraft: Sales of $213 million, up 15% year-over-year. Growth driven by FLRAA program ramp and other production ramp-ups.
• Commercial Aircraft: Bookings close to $400 million with almost 60% aftermarket content. Sales of $221 million, up 14% year-over-year. Strong aftermarket and spares provisioning contributed.
• Industrial: Sales of $228 million, down 7% year-over-year due to simplification efforts. Medical pumps business reached record high, offsetting some decline.

Guidance:

• Fiscal 2025 revenue projected at $3.7 billion, a 3% increase from 2024.
• Adjusted operating margin held at 13.0%.
• Adjusted EPS guidance at $8.20 ± $0.20.
• Second quarter EPS guidance midpoint at $1.75.
• Free cash flow conversion expected in 50%-75% range for FY '25.

Risks:

• Geopolitical challenges in Defense markets, including ongoing conflicts in Ukraine and Taiwan.
• Potential impact of new tariffs from the new US administration.
• Competitor challenges affecting Industrial business, though medical pumps business benefited temporarily.

Q: Jon Tanwanteng asked about CCA involvement and Boeing's 787 investment.

A: Patrick Roche said CCA work is in early stages with relevant technologies, and Boeing is working to achieve 787 production rate of 10 by fiscal '26.

Q: Michael Ciarmoli inquired about warranty expense and Industrial book-to-bill.

A: Patrick Roche said aftermarket strength was a driver, and Industrial book-to-bill >1 is a positive sign with stable Industrial automation activity.

Q: Jack Ayers asked about Commercial OE assumptions.

A: Jennifer Walter explained OE growth was due to order timing normalization after short-term delays last year.

Q: Jon Tanwanteng asked about medical device business sustainability.

A: Patrick Roche said the window for competitor challenges is 6-9 months, with potential for stabilization as competitors work through issues.