Alexandra Mandery

Alexandra Mandery inquired about the composition and submarket breakdown of RBC Bearings' strong backlog, which saw 230% year-over-year growth, and its relationship with future revenue. She also asked for a further breakdown of the A&D backlog and questioned if any contract divestitures or changes impacted VACO's quarterly revenue run rate, previously guided at $30 million.

Answer

CFO Rob Sullivan stated that over 90% of the backlog is from the A&D market, with multi-year contracts, especially for Sargent and VACO marine products. He noted that industrial business typically doesn't remain in the backlog. Regarding VACO, he confirmed Q3 revenue was $29 million, close to the $30 million run rate, attributing any slight discrepancy to timing and ongoing integration, expressing optimism for the business's performance next year.

Alexandra Mandery asked for more details on the record-high backlog growth, specifically its composition, submarket breakdown within A&D, and its relationship with future revenue. She also questioned the slight discrepancy in VACCO's quarterly revenue run rate compared to the $30 million mentioned in fiscal 1Q 2026.

Answer

CFO Rob Sullivan explained that over 90% of the backlog is from the A&D market, with multi-year contracts for Sargent and VACCO, particularly marine products. He noted that VACCO's revenue was $29 million this quarter, close to the $30 million run rate, attributing any slight variation to timing and ongoing integration.

Alexandra Mandery asked to size the China On-Highway divestiture costs, if there would be revenue spillover into FY27, and if FY26 expectations remained around $60 million. She also inquired about additional color on defense aftermarket lagging defense OEM and potential opportunities. Lastly, she asked about the potential impact on Woodward from a hypothetical $1.5 trillion 2027 NDAA package focused on spare parts for aircraft availability.

Answer

Bill Lacey (CFO, Woodward Inc) stated that China On-Highway wind-down costs are expected to be $20 million-$25 million, primarily cash-related to people costs, with no revenue spillover into FY27, and FY26 sales expectations remain around $60 million. Chip Blankenship (Chairman and CEO, Woodward Inc) characterized defense services as relatively steady in some product lines and lumpy in others, with limited visibility into customer order patterns, but noted they are working on private-public partnership opportunities. Regarding the NDAA package, he said it's hard to predict Woodward's impact without visibility into current inventory gaps, but they would expect to be interrogated for capacity if the priority is serious.

Alexandra Mandery asked about the estimated costs for the China On-Highway divestiture, potential revenue spillover into FY2027, and if FY2026 expectations remain around $60 million. She also inquired about the defense aftermarket lagging defense OEM, seeking additional color and future opportunities. Finally, she asked about the potential impact on Woodward from a hypothetical $1.5 trillion 2027 defense package focused on spare parts.

Answer

CFO Bill Lacey estimated China On-Highway wind-down costs between $20 million and $25 million, primarily for people, with no revenue spillover into FY2027, and confirmed the $60 million sales expectation for FY2026. Chairman and CEO Chip Blankenship described defense services as steady in some product lines but lumpy in others, with limited visibility into customer order patterns, though they are working on pipeline opportunities for more stable demand. Regarding the hypothetical defense package, he stated it's hard to predict Woodward's impact without visibility into existing inventory gaps, but they would expect to be contacted for capacity if the priority is serious.

Alexandra Mandery inquired about HEICO's PMA portfolio exposure to new engine entrants like LEAP, GTF, and GE9X, and if first-time shop visits for these engines present an opportunity. She also asked for additional color on general trends in the Electronic Technologies Group (ETG), particularly regarding space and defense tech, and where bookings are headed.

Answer

Victor Mendelson explained that new engines under warranty are not a significant PMA opportunity but may offer repair opportunities as platforms age. He affirmed HEICO's technical capability for current and next-generation engines. For ETG, he reiterated optimism for various markets, including space and defense tech, emphasizing HEICO's focus on profitable opportunities and alignment with government priorities for speed and cost-effectiveness.

Alexandra Mandery asked for Karman Space & Defense's 2026 margin guidance, specifically if EBITDA margin expansion is anticipated and what range to expect. She also inquired about any impact of the government shutdown on bookings and the first quarter of 2026.

Answer

CFO Mike Willis stated that Karman targets 50 basis points of EBITDA margin expansion annually from operating leverage, and while not formal guidance, they expect to achieve this going forward. CEO Tony Koblinski confirmed no impact to 2025 and currently no impact to 2026 from the government shutdown, though meetings and solicitations are being delayed.

Alexandra Mandery asked for Karman Space & Defense's margin guidance for 2026, specifically if EBITDA margin expansion is anticipated and within what range. She also inquired about any impact of the government shutdown on bookings and the first quarter of 2026.

Answer

CFO Mike Willis stated that Karman Space & Defense targets 50 basis points of EBITDA margin expansion per year from operating leverage, though this is not formal guidance for 2026. CEO Tony Koblinski reiterated that as of now, there is no impact to 2025 or 2026 from the government shutdown, despite some meetings and solicitations being delayed.

Alexandra Manderi inquired about Curtiss-Wright's growth trajectory for end markets and expected margin expansion in 2026.

Answer

Chair and CEO Lynn Bamford expressed confidence in driving growth across all three segments in 2026, citing positive market dynamics in commercial aerospace, defense spending, and nuclear. She anticipates exceeding 2024 investor day targets and committing to faster operating margin expansion. VP and CFO Chris Barker reiterated excitement for future prospects, with specific 2026 guidance expected on the Q1 2026 call.

Alexandra Eleni Mandery of Truist Securities questioned a $3.1 million legal fee on the cash flow statement related to an unsolicited acquisition offer and asked for the company's outlook on potential Department of Defense (DOD) budget changes.

Answer

Executive Suman Mookerji explained the legal fees were for advisors responding to an unsolicited offer from Albion River, which has since divested its stake, and these costs are not expected to recur. CEO Stephen Oswald reiterated confidence in Ducommun's diversified defense portfolio, stating they feel well-positioned despite potential budget shifts, with the F-18 wind-down already factored into their baseline.