Moog Inc. Reports Record Sales and Continued Margin Expansion for Second Quarter 2024

Moog Inc. (NYSE:MOG), a worldwide designer, manufacturer and systems integrator of high-performance precision motion and fluid controls and controls systems, today reported fiscal second quarter 2024 diluted earnings per share of $1.86 and adjusted diluted earnings per share of $2.19.

"The second quarter of 2024 was an exceptional quarter from a sales and earnings perspective," said Pat Roche, CEO. "Our margin enhancement efforts continue to drive financial performance improvements across our businesses and we look forward to continued strength through the year."

Quarter Highlights

• Net sales of $930 million increased 11% compared to the prior year's quarter, with increases in all four segments, including a 26% increase in Commercial Aircraft.

• Operating margin of 12.0% increased 200 basis points. Business performance across all segments contributed an incremental 165 basis points. Also, the current quarter included a 150 basis point benefit from the Employee Retention Credit associated with the CARES Act. The current quarter also included 115 basis points of higher impairments and restructuring.

• Adjusted operating margin of 13.6% increased 320 basis points, driven by the underlying business performance, as well as the Employee Retention Credit.

• Diluted earnings per share of $1.86 increased 39% due to the higher operating profit and the Employee Retention Credit, partially offset by the current quarter's restructuring and impairment charges.

• Adjusted diluted earnings per share of $2.19 increased 54%, reflecting earnings associated from higher sales across all of our segments and the Employee Retention Credit.

• Free cash flow improved by $17 million as compared to last year due to lower capital expenditures.

Quarter Results

Sales in the second quarter of 2024 increased across all segments compared to the second quarter of 2023. Commercial Aircraft sales increased 26% to $208 million due to the growth in widebody aircraft. Space and Defense sales increased 9% to $267 million, driven by strong demand for programs supporting emerging defense priorities. Sales in Military Aircraft increased 11% to $203 million due to the ramp-up of the FLRAA program and the sale of a mature product line. Sales in Industrial increased 4% to $253 million due to higher demand for flight simulation systems and energy products, and were partially offset by a slowdown in orders for industrial automation applications.

Operating margin increased 200 basis points to 12.0% in the second quarter of 2024 compared to the second quarter of 2023. Space and Defense operating margin increased 460 basis points to 15.8% due to improved performance on space vehicle programs and the benefit associated with the Employee Retention Credit. Commercial Aircraft operating margin increased 250 basis points to 12.0% due to pricing and higher sales volumes across our entire book of business. Industrial operating margin increased 110 basis points to 11.1%, as the Employee Retention Credit and benefits from pricing initiatives were partially offset by higher amounts of restructuring charges. Military Aircraft operating margin decreased 60 basis points to 8.3%, as impairment and restructuring charges more than offset the gain from the sale of a mature product line.

The current quarter includes $14 million of restructuring, impairment and other charges, primarily in Military Aircraft and Industrial. The second quarter of 2023 included $3 million of restructuring and other charges. Excluding charges in both periods, adjusted operating margin increased 320 basis points to 13.6% driven largely by the factors previously described. Space and Defense adjusted operating margin increased 420 basis points to 15.9%. Military Aircraft adjusted operating margin increased 400 basis points to 13.4%. Commercial Aircraft adjusted operating margin increased 250 basis points to 12.0%, and Industrial adjusted operating margin increased 210 basis points to 12.5%.

Twelve-month backlog increased 9% to a record level of $2.5 billion due to growth across our aerospace and defense businesses.

Free cash flow in the second quarter was a use of cash of $84 million. Unfavorable timing in accounts receivable and the work-down of milestones in customer advances pressured working capital. Also, growth in physical inventories, driven by the strong level of sales, pressured working capital. Capital expenditures in the second quarter of 2024 were $40 million.

2024 Financial Guidance

"Fiscal year 2024 is shaping up to be another great year of financial performance, and we're on track to achieve our long-term financial targets," said Jennifer Walter, CFO. "This year, our sales will grow by 7%, our adjusted operating margin will expand by 150 basis points and our adjusted earnings per share will increase by 18%."

When the company provides adjusted, non-GAAP figures on a forward-looking basis, a reconciliation of the differences between the non-GAAP expectations and the corresponding GAAP measures generally is not available without unreasonable effort.

Conference call information

In conjunction with today's release, Pat Roche, CEO, and Jennifer Walter, CFO, will host a conference call today beginning at 10:00 a.m. ET, which will be simultaneously broadcast live online. Listeners can access the call live, or in replay mode, at www.moog.com/investors/communications. Supplemental financial data will be available on the website approximately 90 minutes prior to the conference call.

Cautionary Statement

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which can be identified by words such as: "may," "will," "should," "believes," "expects," "expected," "intends," "plans," "projects," "approximate," "estimates," "predicts," "potential," "outlook," "forecast," "anticipates," "presume," "assume" and other words and terms of similar meaning (including their negative counterparts or other various or comparable terminology). These forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995, are neither historical facts nor guarantees of future performance and are subject to several factors, risks and uncertainties, the impact or occurrence of which could cause actual results to differ materially from the expected results described in the forward-looking statements.

Although it is not possible to create a comprehensive list of all factors that may cause our actual results to differ from the results expressed or implied by our forward-looking statements or that may affect our future results, some of these factors and other risks and uncertainties are described in Item 1A "Risk Factors" of our Annual Report on Form 10-K and in our other periodic filings with the Securities and Exchange Commission ("SEC") and include, but are not limited to, risks relating to: (i) our operation in highly competitive markets with competitors who may have greater resources than we possess; (ii) our operation in cyclical markets that are sensitive to domestic and foreign economic conditions and events; (iii) our heavy dependence on government contracts that may not be fully funded or may be terminated; (iv) supply chain constraints and inflationary impacts on prices for raw materials and components used in our products; (v) failure of our subcontractors or suppliers to perform their contractual obligations; and (vi) our accounting estimations for over-time contracts and any changes we need to make thereto. You should evaluate all forward-looking statements made in this press release in the context of these risks and uncertainties.

While we believe we have identified and discussed in our SEC filings the material risks affecting our business, there may be additional factors, risks and uncertainties not currently known to us or that we currently consider immaterial that may affect the forward-looking statements we make herein. Given these factors, risks and uncertainties, investors should not place undue reliance on forward-looking statements as predictive of future results. Any forward-looking statement speaks only as of the date on which it is made, and we disclaim any obligation to update any forward-looking statement made in this press release, except as required by applicable law.

Results shown above have been adjusted to exclude impacts associated with the sale of buildings, asset impairments due to program termination and the devaluation of an investment, as well as restructuring and other charges related to continued portfolio shaping activities and the derecognition of revenue from the write-off of an unbilled receivable due to a program cancellation ($665). While management believes that these adjusted financial measures may be useful in evaluating the financial condition and results of operations of the Company, this information should be considered supplemental and is not a substitute for financial information prepared in accordance with GAAP.

While management believes that these adjusted financial measures may be useful in evaluating the financial condition and results of operations of the Company, this information should be considered supplemental and is not a substitute for financial information prepared in accordance with GAAP.

Free cash flow is defined as net cash provided (used) by operating activities less purchase of property, plant and equipment. Free cash flow is not a measure determined in accordance with GAAP and may not be comparable with the measures as used by other companies. However, management believes this adjusted financial measure may be useful in evaluating the liquidity, financial condition and results of operations of the Company. This information should be considered supplemental and is not a substitute for financial information prepared in accordance with GAAP.

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