Moog Inc. Q2 FY2024 earnings call

• Customer Focus: Construction business won innovation gold medal at Intermat, TerraTech electric ecosystem got decarbonization award, 4 Meteorite space vehicles launched, received best-in-class award from Applied Materials.
• People Community and Planet: India operations recognized with awards, donated kidney dialysis machine, solar panels installed at 3 facilities, 80/20 implementation expanded to 14 sites.
• Financial Strength: Margin enhancement through pricing and simplification, 80/20 implementation, divestitures of product lines (e.g., C-5 transport aircraft aftermarket), and facility rationalization.
• Macroeconomic and End Market Conditions: Defense demand strong, commercial aviation recovering, industrial automation slowing, other industrial subsegments (flight simulation, energy) stronger.

In the second quarter, sales reached a record $930 million. Commercial Aircraft sales were $208 million, a 26% increase year-over-year, contributing approximately 22.37% to total revenue. Space and Defense sales were $267 million, a 9% increase, contributing ~28.71% to revenue. Military Aircraft sales were $203 million, an 11% increase, contributing ~21.83% to revenue. Industrial sales were $253 million, a 4% increase, contributing ~27.20% to revenue, with Industrial Automation showing a decline.

• Increased full-year guidance for revenue, adjusted operating margin, and earnings per share. FY '24 sales projected at $3.55 billion, up $50 million from 90 days ago. Adjusted operating margin to expand by 150 basis points, adjusted EPS up 18%.
• Segment-wise: Commercial Aircraft sales to grow with wide-body production ramp, Military Aircraft sales up due to full-year FLRAA sales, Space and Defense sales up from strong defense demand, Industrial sales down due to softening industrial automation market.

• Geopolitical tensions impacting defense and commercial markets. - Potential impact of lawsuits, e.g., space vehicle program lawsuit with L3Harris. - Uncertainty in industrial automation market affecting Industrial segment.

Q: Can you provide more detail on 80/20 and margin expansion?

A: Patrick Roche discussed 80/20 influencing business decisions, e.g., decision to exit C-5 transport aircraft aftermarket was a result of 80/20 lens. Margin expansion from both pricing and simplification.

Q: Details on commercial aircraft production rates?

A: Patrick Roche said Moog is running at rate 5 on 787 and intends to ramp to 8 in FY '24 and 10 by FY '26.

Q: About free cash flow and space vehicle lawsuit?

A: Jennifer Walter talked about free cash flow pressure from working capital, Patrick Roche mentioned defending against L3Harris lawsuit but continuing space vehicle work.

Q: Update on space vehicle program lawsuit?

A: Patrick Roche said Moog is vigorously defending against the lawsuit but continues work with L3Harris on other space vehicle programs.

Q: CCA partnership and prime providers?

A: Patrick Roche stated Moog is not partnered on current CCA programs but is bidding on related opportunities.