Moog Inc. Q4 FY2024 earnings call

• Record sales, 12-month backlog, and improved cash flow. - Expanded adjusted operating margin by 150 basis points. - Customer focus: Completed voice of customer analysis, successful certification of ULA Vulcan Rocket, and progress on generational defense pursuits. - Impact of extreme weather: Typhoons in Japan/China, Hurricane Helena in NC, and severe flooding in Tewkesbury; Tewkesbury facility recovery expected to take months. - Sustainability: Goal to reduce Scope 1 and 2 CO2 emissions by 40% by 2030, with Taikang facility in China achieving ISO accreditations. - Financial strength: Progress on pricing and simplification initiatives, embedding pricing and driving transformative change through simplification.

In FY 2024, Moog achieved record sales of $3.6 billion, with a 9% revenue growth. Commercial Aircraft led growth due to strong market demand for current platforms. Military Aircraft grew by 13% through new programs like FLRAA. Space & Defense captured business across various domains, growing 7%, notably in Europe. Industrial was relatively flat, with industrial automation down but other submarkets offsetting. Adjusted operating margin expanded by 150 basis points to 12.4%, with 110 basis points from margin expansion initiatives. Adjusted earnings per share grew substantially, and free cash flow was better than the prior year.

• Projected FY 2025 sales of $3.7 billion, a 3% increase from FY 2024. - Adjusted operating margin projected at 13.0%, a 60 basis point increase from FY 2024. - Adjusted earnings per share projected at $8.20 plus or minus $0.20. - Free cash flow projected in the 50% to 75% range, with focus on optimizing planning and sourcing activities to improve generation.

• Extreme weather events causing interruptions to production and damage to facilities, such as the severe flooding in Tewkesbury. - Volatility in commercial OEM supply chains due to uncertainty and fragility, impacting cash flow. - Impact of Boeing's challenges and production levels at the Tewkesbury facility on commercial aircraft sales and margins.

Q: Details on generational defense wins, especially in Europe?

A: We're involved in numerous capture and development activities across defense applications in Europe, particularly focusing on armored vehicles where we've seen significant sales growth. We've secured an additional building at our campus to accommodate the expanding defense business in Europe. We're also pursuing ground-based air defense opportunities, though some activities are classified.

Q: Impact of the Boeing strike on Moog?

A: There's no direct impact from the Boeing strike on Moog. Our business is weighted towards widebody aircraft, so the effect on 737 MAX sales is minimal. Our projection for 2025 in the commercial space is a well-judged assessment considering industry uncertainties, with a wider cash flow range factoring in supply chain challenges.

Q: CapEx plans for FY 2025?

A: Capital expenditures are targeted at $180 million for FY 2025, which is 4.9% of projected sales. This is higher than historical levels due to investments in facilities and equipment to support generational defense opportunities we're capturing. We're investing now to be prepared for future long-term revenue growth opportunities.

Q: European defense trends and margin impact?

A: Increased defense spending in Europe due to geopolitical tensions has led to modernization of platforms and fleet readiness activities. Our European business has doubled in size over the past two years, positively impacting the defense segment. While mix shifts may occur, the overall trend is positive, though specific margin impacts will depend on ongoing program execution and market dynamics.