Curtiss-Wright Reports Third Quarter 2024 Financial Results and Raises Full-Year 2024 Guidance

Curtiss-Wright Corporation (NYSE:CW) reports financial results for the third quarter ended September 30, 2024.

Third Quarter 2024 Highlights:

• Reported sales of $799 million, up 10%;
• Reported operating income of $145 million, operating margin of 18.1%, and diluted earnings per share (EPS) of $2.89;
• Adjusted operating income of $149 million, up 11%;
• Adjusted operating margin of 18.7%, up 20 basis points;
• Adjusted diluted EPS of $2.97, up 17%;
• New orders of $860 million, up 2%, reflected a book-to-bill of 1.1x driven by solid demand within our Aerospace & Defense (A&D) markets;
• Backlog of $3.3 billion, up 16% year-to-date; and
• Free cash flow (FCF) of $163 million, generating 142% Adjusted FCF conversion.

Raised Full-Year 2024 Adjusted Financial Guidance:

• Sales increased to new range of 7% to 9% growth (previously 6% to 8%), principally driven by strong growth in our A&D markets;
• Operating income increased to new range of 7% to 10% growth (previously 6% to 9%);
• Maintained operating margin range of 17.4% to 17.6%, flat to up 20 basis points compared with the prior year;
• Diluted EPS increased to new range of $10.55 to $10.75, up 12% to 15% (previously $10.40 to $10.65, up 11% to 14%); and
• Free cash flow increased to new range of $430 to $450 million, up 4% to 9% (previously $425 to $445 million, up 3% to 8%), and continues to reflect greater than 105% FCF conversion.

"Curtiss-Wright achieved strong third quarter results, highlighted by mid-teens revenue growth in our A&D end markets, a better-than-expected operational performance in our Defense Electronics segment and a 17% year-over-year increase in Adjusted diluted EPS," said Lynn M. Bamford, Chair and CEO of Curtiss-Wright Corporation. "We continue to demonstrate solid order activity, yielding an overall book-to-bill of 1.1x in the quarter, highlighted by record quarterly orders within our Defense Electronics segment. We also delivered solid cash generation, resulting in an exceptional free cash flow conversion of 142%. Based on the strong year-to-date performance and our continued momentum in executing on our Pivot to Growth strategy, we once again raised our full-year 2024 outlook for sales, diluted EPS and free cash flow."

"We continue to leverage our strong balance sheet in support of our disciplined capital allocation strategy. This includes delivering on our commitment to drive solid returns to our shareholders as we completed the recently announced $100 million expansion of our 2024 share repurchase program during the quarter. Additionally, we remain focused on supplementing our organic growth with high quality, strategic acquisitions that meet our stringent financial criteria to drive long-term shareholder value."

Third Quarter 2024 Operating Results

• Sales of $799 million increased 10% compared with the prior year;
• Total A&D market sales increased 15%, as we experienced strong growth in the defense markets principally driven by increased demand for our defense electronics products and higher submarine and aircraft carrier revenues in naval defense, as well as higher OEM sales in the commercial aerospace market;
• Total Commercial market sales were flat, reflecting solid growth in the power & process market, principally driven by higher sales of our commercial nuclear products, which was offset by lower sales in the general industrial market; and
• Adjusted operating income of $149 million increased 11%, while Adjusted operating margin increased 20 basis points to 18.7%, principally driven by favorable overhead absorption on higher revenues in all three segments and partially offset by an unfavorable mix of products.

Third Quarter 2024 Segment Performance

Aerospace & Industrial

• Sales of $229 million, up $8 million, or 4%;
• Commercial aerospace market revenue increases reflected strong demand and higher OEM sales of sensors products and surface treatment services on narrowbody and widebody platforms;
• Higher revenue in the aerospace defense market reflected the timing of sales for our actuation equipment on various fighter jet programs;
• Lower general industrial market revenue was principally driven by reduced sales of industrial vehicle products to off-highway vehicle platforms and lower sales of industrial automation and services; and
• Adjusted operating income was $39 million, up 1% from the prior year, while Adjusted operating margin decreased 50 basis points to 17.2%, as favorable absorption on higher sales as well as the benefits of our restructuring initiatives were offset by unfavorable mix of products.

Defense Electronics

• Sales of $243 million, up $27 million, or 12%;
• Higher revenue in the aerospace defense market was principally driven by increased sales of our embedded computing equipment on various domestic and international helicopter programs, partially offset by the timing of flight test equipment sales;
• Strong revenue growth in the ground defense market primarily reflected higher sales of tactical battlefield communications equipment;
• Higher commercial aerospace market revenue principally reflected increased OEM sales of avionics and electronics on various platforms; and
• Adjusted operating income was $64 million, up 15% from the prior year, while Adjusted operating margin increased 50 basis points to 26.5%, primarily due to favorable absorption on higher A&D revenues.

Naval & Power

• Sales of $327 million, up $39 million, or 14%;
• Strong revenue growth in the naval defense market principally reflected higher demand on the Virginia-class submarine, Columbia-class submarine and CVN-81 aircraft carrier programs, as well as higher growth on various next-generation submarine development programs;
• Higher power & process market revenues mainly reflected increased commercial nuclear aftermarket sales supporting the maintenance of U.S. operating reactors; and
• Adjusted operating income was $54 million, up 10% from the prior year, while Adjusted operating margin decreased 60 basis points to 16.4%, as favorable absorption on higher revenues was partially offset by an unfavorable mix of products and the timing of development programs.

Free Cash Flow

• Reported free cash flow of $163 million increased $26 million year over year, primarily driven by higher cash earnings and lower working capital;
• Adjusted free cash flow of $163 million; and
• Capital expenditures increased $5 million compared with the prior year period, due to growth investments within the Aerospace & Industrial and Defense Electronics segments.

New Orders and Backlog

• New orders of $860 million increased 2% compared with the prior year and generated an overall book-to-bill of approximately 1.1x, principally driven by continued strong demand for defense electronics products within our A&D markets; and
• Backlog of $3.3 billion, up 16% from December 31, 2023, reflecting higher demand in both our A&D and Commercial markets.

Share Repurchase and Dividends

• During the third quarter, the Company repurchased 355,578 shares of its common stock for approximately $113 million and remains on track to repurchase a total of $150 million in shares in 2024; and
• The Company declared a quarterly dividend of $0.21 a share.

Full-Year 2024 Guidance

The Company is updating its full-year 2024 Adjusted financial guidance⁽¹⁾ as follows:

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A more detailed breakdown of the Company's 2024 financial guidance by segment and by market, as well as all reconciliations of Reported GAAP amounts to Adjusted Non-GAAP amounts, can be found in the accompanying schedules. Historical financial results are available in the Investor Relations section of Curtiss-Wright's website.

Conference Call & Webcast Information

The Company will host a conference call to discuss its third quarter 2024 financial results and updates to 2024 guidance at 10:00 a.m. ET on Thursday, October 31, 2024. A live webcast of the call and the accompanying financial presentation, as well as a webcast replay of the call, will be made available on the internet by visiting the Investor Relations section of the Company's website at www.curtisswright.com.

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Use and Definitions of Non-GAAP Financial Information (Unaudited)

The Corporation supplements its financial information determined under U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial information. Curtiss-Wright believes that these Adjusted (non-GAAP) measures provide investors with improved transparency in order to better measure Curtiss-Wright's ongoing operating and financial performance and better comparisons of our key financial metrics to our peers. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. Curtiss-Wright encourages investors to review its financial statements and publicly filed reports in their entirety and not to rely on any single financial measure. Reconciliations of "Reported" GAAP amounts to "Adjusted" non-GAAP amounts are furnished within this release.

The following definitions are provided:

Adjusted Operating Income, Operating Margin, Net Earnings and Diluted EPS

These Adjusted financials are defined as Reported Operating Income, Operating Margin, Net Earnings and Diluted Earnings per Share under GAAP excluding: (i) the impact of first year purchase accounting costs associated with acquisitions, specifically one-time inventory step-up, backlog amortization, deferred revenue adjustments and transaction costs; (ii) costs associated with the Company's 2024 Restructuring Program; and (iii) the sale or divestiture of a business or product line, as applicable.

Organic Sales and Organic Operating Income

The Corporation discloses organic sales and organic operating income because the Corporation believes it provides investors with insight as to the Company's ongoing business performance. Organic sales and organic operating income are defined as sales and operating income, excluding contributions from acquisitions and results of operations from divested businesses or product lines during the last twelve months, costs associated with the Company's 2024 Restructuring Program, and foreign currency fluctuations.

Free Cash Flow and Free Cash Flow Conversion

The Corporation discloses free cash flow because it measures cash flow available for investing and financing activities. Free cash flow represents cash available to repay outstanding debt, invest in the business, acquire businesses, return capital to shareholders and make other strategic investments. Free cash flow is defined as net cash provided by operating activities less capital expenditures. Adjusted free cash flow excludes payments associated with the Westinghouse legal settlement in the prior year period. The Corporation discloses adjusted free cash flow conversion because it measures the proportion of net earnings converted into free cash flow and is defined as adjusted free cash flow divided by adjusted net earnings.