Andre Madrid

Andre Madrid inquired if any recent long-term agreement (LTA) signings were with first-time customers, the expected trend in LTA mix, and whether Carpenter Technology would consider customer-funded capacity expansion. He also asked for a breakdown of order sources (jet engine vs. airframe, OEM vs. MRO).

Answer

CEO Tony Thene clarified that recent LTA signings were with longer-term customers, not new ones, and that LTA work is ongoing without a specific mix trend. He stated that Carpenter Technology has already announced and fully funded its own brownfield capacity expansion and would not comment on 'chatter' about customer-funded projects. Thene confirmed that orders are increasing across all sub-markets, including engines (up 30%), driven by broad demand from Boeing, Airbus, and MRO, without providing a specific split.

Andre Madrid asked if any of the recent LTA signings were with first-time customers and how the mix of LTAs is expected to trend. He also inquired about Carpenter Technology's stance on potentially exploring customer-funded capacity expansion, and requested a breakdown of order sources between jet engine, airframe, OEM, and MRO.

Answer

Tony Thene, Chairman and CEO, clarified that the recent LTA signings were with longer-term, existing customers, and the mix of LTAs is continuously evolving. He reiterated Carpenter Technology's clear position on its self-funded brownfield capacity expansion, providing specific details and implying that customer-funded expansion is currently 'chatter.' Thene confirmed that orders are increasing across all sub-markets, citing a significant 30% increase in engine orders, aligning with overall market demand from Boeing, Airbus, and MRO.

Andre Madrid inquired about the duration of the five new long-term agreements (LTAs) and the expected shift in LTA duration mix. He also sought more details on the drivers of strong demand within the defense market.

Answer

Tony Thene, Chairman and CEO, stated that the five new LTAs range between two and five years, indicating that contract lengths are expected to remain in this range, differing from historical 10-year contracts. He clarified that only one of the five was a pre-COVID renewal, with the others being second renewals post-COVID. Thene explained that defense demand is driven by Carpenter Technology's advanced alloys and innovations, meeting the market's need for increased performance across multiple segments.

Andre Madrid asked about the duration of the five new long-term agreements (LTAs) Carpenter Technology recently signed, how the LTA duration mix is expected to shift through the end of the decade, and the specific drivers for demand in the defense market, particularly in light of strong budget requests.

Answer

Chairman and CEO Tony Thene stated that the five new LTAs range between two and five years. He anticipates contract lengths will remain in this range, diverging from historical 10-year agreements, due to the ongoing supply-demand imbalance. Thene noted that only one of these LTAs was a pre-COVID renewal, with the others being second renewals post-COVID. For defense, Thene explained that Carpenter Technology supports various segments with advanced alloys for increased performance, leading to significant growth in their defense relationships.

Andre Madrid of BTIG asked for more detail on airframe demand and destocking, questioned if Carpenter was seeing the same medical market headwinds as a peer, and inquired about any significant changes to the company's mix of long-term agreements (LTAs) following the Paris Air Show.

Answer

President and CEO Tony Thene clarified that any destocking is isolated and not impacting overall record results or guidance. He differentiated Carpenter's high-end, innovation-focused medical business from peers, stating they are not seeing similar headwinds. He also noted that the new LTAs are primarily renewals of existing agreements, so there is no sizable change to the overall LTA mix.

Andre Madrid asked for further explanation on the year-over-year decline in the medical business, the sourcing mix of raw materials (domestic vs. international), and the potential downstream demand impact from tariffs.

Answer

CEO Tony Thene attributed the medical sales decline to a tough comparison against a near-record prior-year quarter and some possible destocking, which he believes is now largely over. He projected a 'sizable increase' for medical sales in Q4. Regarding raw materials, Thene stated the largest input, nickel, is sourced from tariff-exempt Canada and Norway, and that only a 'very low single digits' percentage of total spend would be impacted by tariffs, which would be passed through to customers. He sees limited downstream demand impact due to the highly specialized and often sole-source nature of Carpenter's products.

Andre Madrid of BTIG asked about the potential impact of tariffs under a new administration, whether SAO volumes are expected to return to pre-COVID levels, and if lead times for exotic materials are still extending over 100 weeks.

Answer

CEO Tony Thene stated that the company is well-positioned regardless of any new tariff regime, noting that previous tariffs had little impact and any new costs would be passed through to customers. He affirmed that volumes will increase as aerospace build rates ramp up. Regarding lead times, he clarified his earlier comment, specifying that improvements were mainly in engine materials due to production efficiencies, bringing them from 65+ weeks to the low 60s, while acknowledging lead times vary by product.

Andre Madrid questioned if strength in markets like power generation could offset potential long-term aerospace weakness and asked about the growth cadence beyond FY25. He also asked if recent additive charges were related to the prior quarter's facility closure.

Answer

Tony Thene, President and CEO, characterized the current aerospace issues as a 'near-term phenomenon' and expressed confidence in long-term demand. He projected that FY26 would be another 'meaningful step up' from FY25, driven by productivity, mix, and pricing, rather than a tough comparison. He also confirmed the minor additive charge was a final inventory write-off related to the previously announced actions.

Andre Madrid asked about the international book-to-bill for the quarter and year, the demand outlook for 2026, and whether international growth will outpace the broader business. He also inquired about the market for Unmanned Ground Vehicles (UGVs), their potential tangibility, and any performance benchmarks.

Answer

President Danny Deep clarified that European Land Systems had a book-to-bill of over 4:1 in Q4, expecting it to be the fastest grower within Combat Systems, with significant acceleration in 2027 and beyond. Chairman and CEO Phebe Novakovic described the US Army's modernization efforts, including unmanned systems, and stated the company is well-positioned to support this transition without specific benchmarks for smaller investment areas.

Andre Madrid asked about the international book-to-bill ratio for the quarter and year, demand moving into 2026, and whether international growth is expected to outpace the broader business, focusing on Combat Systems. He also inquired about the market for Unmanned Ground Vehicles (UGVs), their potential for tangible growth, and any benchmarks the company is setting.

Answer

Danny Deep, President, stated that European Land Systems had a book-to-bill over 4 to 1 in Q4, and is expected to be the fastest grower within Combat Systems, with real acceleration in 2027 and beyond. Phebe Novakovic, Chairman and CEO, noted that the U.S. Army is in a period of transition towards advanced systems, including unmanned systems, and the company is well-positioned to support this modernization, though no specific benchmarks are set for smaller investment areas.

Andre Madrid asked if recent trade tensions could create reluctance among allies to work with U.S. contractors, citing a European vehicle purchase. He also asked if GD saw a slower pace of contract awards in Q1, similar to peers.

Answer

Phebe Novakovic, Chairman and CEO, explained that GD's Combat Systems business in Europe is largely a European entity, run by Europeans with local manufacturing, making it different. She noted strong Q1 demand for these products. Jason Aiken, EVP, added that while there's a 'sluggishness' in the award cadence for Technologies, it's not new and the Q1 order book was still very encouraging.

Andre Madrid with BTIG delved into the nearly $900 million Army IDIQ contract, asking about the international opportunity for Titan counter-UAS and potential for Locust directed energy solutions, as well as the margin distinction between domestic and international CUAS sales. He also sought clarification on the increased Switchblade production capacity, now stated at over $2 billion compared to a previous $1 billion figure.

Answer

Chairman, President, and CEO Wahid Nawabi confirmed the IDIQ contract includes Titan and potentially Locust, marking a significant milestone for international sales. He noted that international sales generally have slightly more favorable margins, especially for Direct Commercial Sales (DCS). Regarding Switchblade capacity, Wahid Nawabi explained that the new Salt Lake City facility, coming online late next calendar year, has the potential to exceed $2 billion in production with multiple shifts and improved automation, and is flexible for other products.

Andre Madrid sought an update on the decision timeline for the Long-Range Reconnaissance (LRR) program, previously estimated at three to six months. He also asked about the international opportunity size for the P550 and any updates on potential first P550 orders.

Answer

Chairman, President, and CEO Wahid Nawabi confirmed that the LRR decision is still on track within the three-to-six-month timeframe, with the U.S. Army likely to down-select to two vendors. He expressed optimism for P550 international adoption, anticipating it will become a global franchise similar to Puma and Switchblade, with orders expected in the coming quarters.

Andre Madrid asked for an update on the decision timing for the Long Range Reconnaissance (LRR) program, inquiring if a decision is still expected within the previously mentioned three to six months or if it's imminent. He also followed up on the international opportunity size for the P550 and any updates on the first P550 order.

Answer

Chairman, President, and CEO Wahid Nawabi confirmed that the LRR decision is still expected soon, within the three to six-month timeframe, and that the U.S. Army is highly satisfied with AeroVironment's P550 solution. He anticipates the Army will likely down-select to two vendors. Mr. Nawabi expressed confidence that the P550's success with the U.S. Army will lead to it becoming a global product franchise, similar to Puma and Switchblade, with multiple international countries already engaged and manufacturing ramping up for anticipated orders.

Andre Madrid asked for an update on the Long Range Reconnaissance (LRR) program decision timeline, previously estimated at three to six months, and the international market opportunity for the P550 UAS.

Answer

Wahid Nawabi, Chairman, President, and CEO, confirmed the LRR decision timeframe, noting regular talks with the U.S. Army and confidence in the P550's ability to meet requirements. He expects a down-select to two vendors and an announcement soon. He also expressed optimism for P550 international orders, believing it will become a global franchise like Puma and Switchblade, with manufacturing ramping up to meet demand from multiple countries.

Andre Madrid of BTIG asked about the potential impact of a NATO 5% GDP spending pledge on international sales and requested more detail on the total addressable market and exportability of the new Red Dragon system.

Answer

CEO Wahid Nawabi described a potential NATO spending increase as a 'seismic shift' in demand, noting AeroVironment is uniquely positioned to capitalize due to its proven, scalable solutions. He estimated the one-way attack drone market is over $1 billion and confirmed the base Red Dragon system is not subject to ITAR restrictions, allowing for easier export and international integration.

Andre Madrid requested an update on the international sales pipeline, specifically regarding the six nations mentioned last quarter that were in the acquisition process. He also asked for a quantification of the financial impact from the Southern California wildfires on Q3 results.

Answer

Wahid Nawabi, Chairman, President and CEO, stated that firm orders have been received from approximately six of those nations and are now in the backlog, with an additional 20 countries in active engagement for Switchblade systems. He declined to quantify the wildfire impact but explained it caused extended, forced power outages at multiple facilities and for suppliers late in the quarter, which disrupted manufacturing and logistics with little time for recovery.

Andre Madrid asked for the sales contribution from Ukraine in the past quarter and requested an update on the number of international customers in the final stages of procuring Switchblade systems.

Answer

Wahid Nawabi, Chairman, President, and CEO, did not provide a specific sales percentage for Ukraine but stressed that the company has successfully diversified its revenue and that global demand is strong and sustainable beyond any single conflict. Regarding the international pipeline, he noted that three new allies (Lithuania, Romania, Sweden) recently placed initial orders, Taiwan and Greece have active requests, and another half-dozen-plus countries remain in various phases of the acquisition process, signaling a robust and growing international customer base.

Andre Madrid from BTIG inquired about the growth in the FMS pipeline for Switchblade, specifically the number of countries involved, and asked if the new U.S. Army IDIQ could be used as a vehicle for sales to other foreign nations.

Answer

CEO Wahid Nawabi confirmed the pipeline of actively engaged countries is growing from the 'half a dozen plus' figure and that the list of approved countries to engage with is over 50. He also confirmed that the new IDIQ contract is indeed designed to accommodate FMS sales, which could help streamline and speed up the procurement process for international allies.

Andre Madrid asked for updates on the MV250 military variant, including key milestones and recent developments, and BETA's perspective on the international defense opportunity as an emergent supplier.

Answer

Kyle Clark, CEO of BETA Technologies, described the MV250 as an autonomous, unmanned hybrid aircraft offering significantly greater range and speed than existing VTOLs, primarily due to the weight savings from removing the pilot. He confirmed active engagement with foreign allies for international defense opportunities, noting the increasing global focus on drone warfare and troop support.

Andre Madrid asked for clarification on the 1% headwind for FY26, specifically if the earlier-than-expected end of DOGE (Defense of Government Employees) policy changes shifted to become the government shutdown headwind, or if both impacts should be layered. He also inquired about the pace of debt paydown through the year and if a sizable portion of free cash flow would still be allocated to it, and which organic investment areas are poised for the most growth.

Answer

COO Steve Arnette clarified that the approximate 1% impact from DOGE in FY25 (with some noise in Q1/Q2 FY26) is separate and independent from the 1% headwind in FY26 due to the government shutdown's disruptions to spending and procurement delays. He reaffirmed the underlying business trajectory of 4% revenue growth, mid-single-digit EBITDA, and double-digit EPS and free cash flow despite these dynamics. Steve Arnette stated that the predominance of cash flow for debt paydown will be generated in the second half of FY26, leading to below 3 times net leverage then. CEO John Heller reiterated that organic investments would focus on both core markets and the three accelerating growth markets: space systems and technologies, critical digital infrastructure, and global nuclear energy.

Andre Madrid asked about the earlier-than-expected end of the GOG program and whether the previously anticipated 1% headwind from policy changes was now shifting to a 1% headwind from the government shutdown, seeking clarity on these moving pieces. He also inquired about the pace of debt paydown through the year, whether it would consume a sizable portion of free cash flow, and if the company plans to go beyond the less than three turns net leverage target. Finally, he asked which areas are poised for the most organic investments.

Answer

CFO Travis Johnson clarified that the GOG program's impact and the 1% headwind from the government shutdown are separate and independent. He noted that while some noise from the administration change and DOGE would continue into FY26, the 1% shutdown impact relates to disruptions in spending and procurement delays. He reaffirmed confidence in the underlying business's trajectory, with 4% revenue growth and double-digit EPS and free cash flow growth. Regarding debt paydown, he stated that the predominance of cash flow would be generated in the second half of FY26, leading to achieving the sub-three times net leverage target then. CEO John Heller confirmed that organic investments would be focused on both core markets and the three accelerating growth markets (space systems, critical digital infrastructure, and global nuclear energy), as these represent priority areas and real strengths to the business.

Andre Madrid asked for Amentum's perspective on the award environment, which some competitors have described as slowing, and inquired if the company is considering further portfolio divestitures following the Rapid Solutions sale.

Answer

CFO Travis Johnson acknowledged some award timing shifts but pointed to a strong 1.0x year-to-date book-to-bill ratio and a $29 billion pending pipeline as signs of health. CEO John Heller added that the company will continue to evaluate its portfolio annually against strategic priorities, suggesting further optimization is possible.

Andre Madrid inquired about the pace of the contract award environment, noting competitor commentary on a slowdown, and asked if Amentum is assessing its portfolio for further divestitures.

Answer

CFO Travis Johnson acknowledged some timing impacts on awards but emphasized that the year-to-date book-to-bill of 1.0x and $29 billion in pending awards demonstrate portfolio strength, viewing delays as a timing issue. CEO John Heller added that work is being added to existing contracts, supporting performance. On portfolio strategy, Heller confirmed that the company conducts an annual strategic review to ensure all business segments align with priorities, a process that led to the Rapid Solutions divestiture and will continue in the future.

Andre Madrid sought clarification on the reasons for the delayed Blue UAS certification timeline, questioning why it was pushed back despite favorable rulings and commentary from the Pentagon. He also asked for details on the current monthly production of RQ-35 drones following the expansion of the Danish facility and the percentage increase this expansion provides.

Answer

CEO Joe Burns attributed the Blue UAS certification delay to multiple factors, including a significant government shutdown that halted progress and the undefined process for Blue UAS changes, noting that requirements are now starting to emerge. He expressed confidence in the path forward as they work with industry trade groups. Regarding the Danish facility expansion, Mariya Pylypiv, CFO, stated that the expansion will allow them to deliver current bookings of over $190 million through 2026 on time.

Andre Madrid circled back to the Blue UAS certification, asking for clarification on the hurdles that caused a delay despite favorable Pentagon commentary. He also inquired about the monthly production of RQ-35 drones at the Danish facility following its expansion and the percentage increase this provides.

Answer

CEO Joe Burns attributed the delay in Blue UAS certification to multiple factors, including a significant government shutdown that halted progress and the previously undefined process for Blue UAS changes. He noted that requirements are now being defined, and AIRO is working with a large industry trade group, expressing confidence in their path forward for certification in the first half of 2026. CFO Mariya Pylypiv stated that the expansion of the Danish facility will enable AIRO to deliver its current bookings of over $190 million through 2026 on time and without issues, but did not provide specific monthly production numbers or percentage increases.

Andre Madrid from BTIG asked about the financial outlook for the remainder of the year, the production capacity and certification timeline for the new US drone facility, and for an update on the number of nations AIRO is currently selling its products to.

Answer

CFO Mariya Pylypiv stated that AIRO is not providing formal financial guidance. CEO Captain Joseph Burns outlined near-term CapEx priorities, including the new US facility and training aircraft, and expressed optimism that the Blue UAS certification could be expedited. Executive Chairman Dr. Chiranjeev Kathuria highlighted the strong geopolitical macro environment. Regarding customer reach, Burns confirmed sales to multiple NATO countries, while Pylypiv added a focus on Asia Pacific and North America.

Andre Madrid asked about the potential impact of the SDA's funding reallocation to troop payments and the government shutdown on Rocket Lab's internal 2026 outlook and beyond, especially if the shutdown is not resolved soon.

Answer

Adam Spice, CFO, Rocket Lab, stated that the government shutdown has not dramatically affected the company, noting only slightly slower cash receipts but still receiving large payments from SDA. Peter Beck, Founder and CEO, Rocket Lab, emphasized that the requirement for SDA programs is expanding, not diminishing, highlighting the continued need for the program.

Andre Madrid requested an update on the SolAero business, specifically on working through its lower-margin backlog. He also asked about Mynaric's supply chain issues and the status of the Electron reusability program.

Answer

CFO Adam Spice reported that the SolAero business has successfully improved its gross margin to the target model, calling it a strategic addition to the portfolio. CEO Peter Beck stated that Mynaric's supply chain issues were partly due to its financial distress, which will be resolved under Rocket Lab's ownership. Beck also explained that the Electron reusability program has been paused to prioritize resources and engineering talent for the higher-impact Neutron program.

Andre Madrid of BTIG asked when the space applications business might materially contribute to results and requested an estimate of the 'true' backlog mix between commercial and defense end-users.

Answer

CEO Sir Peter Beck explained that Neutron is the critical enabler for the space applications strategy, making its successful deployment a prerequisite for that segment's growth. Both he and CFO Adam Spice estimated the 'true' government end-user exposure in the backlog is significantly higher than the 50-50 direct split, likely closer to 70-80% or more.

Andre Madrid asked for the specific Q3 spending on Neutron development, whether the total program budget was on track, and for more detail on the backlog and business mix of the non-Photon Space Systems components businesses.

Answer

CFO Adam Spice reported that net spend on Neutron in Q3 was just under $44 million and affirmed the company remains within its original $250-$300 million total program budget. He noted that the components businesses are growing well, with Sinclair showing particular strength, but did not provide a precise breakdown of the internal versus merchant supply mix, stating it varies significantly by product line.

Andre Madrid asked about the timeline for Kratos' hypersonics franchise to reach the billion-dollar range, the factors influencing this growth, and which business units or programs would be most affected by the CapEx push-out into 2026.

Answer

Eric DeMarco, Kratos' President and CEO, believes the hypersonics franchise will be a billion-dollar-plus business by calendar 2028, contingent on consistent government funding rather than global peace. Deanna Lund, Kratos' EVP and CFO, specified that the CapEx push-out primarily affects the KGS business, including the integration payload facility in Indiana and the advanced manufacturing facility in Birmingham, with the GEK facility in Oklahoma already scheduled for 2026.

Andre Madrid asked about the timeline for Kratos's hypersonics franchise to reach the billion-dollar range and the factors influencing that growth, as well as the CapEx push-out into 2026 and the affected business units/programs.

Answer

Eric DeMarco, President and CEO of Kratos, projected the hypersonics franchise to be a $1+ billion business by calendar 2028, with government shutdowns and budget issues as primary risks for delays. Deanna Lund, EVP and CFO, clarified that the CapEx push-out into 2026 primarily affects the KGS business, specifically the integration payload facility in Indiana and the advanced manufacturing facility in Birmingham.

Andre Madrid of BTIG asked about the margin impact of the direct commercial sale of Valkyrie to Germany, the future trend of the fixed-price contract mix, and the strategic rationale for the Norden Millimeter acquisition.

Answer

CEO Eric DeMarco expects the German Valkyrie sale to have a higher margin profile, similar to international target drone sales. CFO Deanna Lund anticipates the contract mix will remain predominantly fixed-price. Mr. DeMarco explained that the Norden acquisition is part of a strategic, partner-encouraged re-entry into the high-margin U.S. microwave electronics market.

Andre Madrid from BTIG asked about the assumptions in the full-year outlook following the CR resolution, the booking split between tactical and target drones, and the recovery status of the commercial space business.

Answer

CEO Eric DeMarco stated the 2025 appropriations bill provides "incredible clarity" and boosts confidence in the forecast. CFO Deanna Lund confirmed the "lion's share" of Q1 unmanned bookings were for target drones. Eric DeMarco reiterated that while tactical drones could be a "step function inflection point," the company is not forecasting it until contracts are in hand. He also noted the commercial space business has "bottomed out" for Kratos.

Andre Madrid asked about the impact of the full-year CR on the outlook, the split of bookings between tactical and target drones, and the commercial space side.

Answer

CEO Eric DeMarco discussed the positive impact of the CR. CFO Deanna Lund noted target drones dominated bookings. Eric DeMarco discussed commercial space issues.

Andre Madrid of BTIG asked for updates on the Apollo, Athena, and international Valkyrie tactical drone programs, their cadence, and the current and future business mix between government and commercial in the Space & SAT business.

Answer

CEO Eric DeMarco confirmed Apollo and Athena are under contract and contributing to 2025 revenue growth, and that an international Valkyrie program has been won but is cautiously factored into forecasts pending State Department processes. He stated the Space business mix is roughly 2/3 government and 1/3 commercial, expecting it to shift towards 80/20 as the government segment grows while commercial remains flat awaiting satellite deployments.

Andre Madrid of BTIG inquired about progress in recruiting and retaining talent for the propulsion business and asked about opportunities within the Space, Training & Cyber segment to offset the ongoing weakness in commercial space.

Answer

CEO Eric DeMarco acknowledged that hiring skilled labor, especially in turbo machinery, remains a significant and costly challenge. To offset commercial space headwinds, he highlighted the training systems business, where demand is the strongest in a decade. He noted that several large bids are outstanding that could 'literally double' the size of the training business, making it a major future contributor.

Andre Madrid requested a status update on the Draco program and asked if the weaker microreactor volumes in the quarter were attributable to its changes. He also inquired about the potential gains and how to assess the opportunity from the recently announced $80 billion nuclear partnership.

Answer

Rex Geveden, BWX Technologies' President and CEO, confirmed that the Draco program devolved into NASA's Sentry program, leading to lower revenue due to less meaningful funding, and that NASA is currently focused on lunar efficient surface power. He believes nuclear thermal propulsion will proceed in some form in the future. Chase Jacobson, Vice President of Investor Relations, stated no specific guidance on the $80 billion partnership's size. Rex Geveden added that the opportunity lies in component manufacturing (e.g., steam generators, reactor pressure vessels), which is interesting but not yet specific.

Andre Madrid requested a status update on the Draco program, asking if it continues through NASA and if weaker microreactor volumes were attributable to its changes.

Answer

Rex Geveden, President and CEO, confirmed that the Draco program devolved into a NASA nuclear thermal propulsion program called Sentry, resulting in lower funding and revenue, which contributed to weaker microreactor volumes. He noted NASA's current focus on lunar efficient surface power and the uncertain future form of the nuclear thermal propulsion program. Andre Madrid also asked about the potential gains and how to assess the recently announced $80 billion nuclear partnership. Mike Fitzgerald, Senior Vice President and CFO, stated no specific guidance on the opportunity size. Rex Geveden added that the opportunity lies in component manufacturing (e.g., steam generators, reactor pressure vessels), which is a core competency for BWXT, making it an interesting but not yet specific prospect.

Andre Madrid of BTIG asked about the outlook for the microreactor market, BWXT's interest in taking on more shipyard work, and the ongoing impact of zirconium supply issues.

Answer

President, CEO & Director Rex Geveden expressed optimism for microreactors, citing a path for Pele production and continued NASA funding for the DRACO program. He stated there is low interest in taking on non-nuclear work from shipyards. Regarding zirconium, he noted the price has stabilized and reiterated that the risk is passed to the customer, with the previous impact being a timing issue for accounting.

Andre Madrid from BTIG asked for more detail on the zirconium cost impact in the commercial business and how it's being managed amid tariff concerns. He also inquired about the timeline for gaining clarity on BWXT's specific component role in the AUKUS submarine program.

Answer

EVP and CFO Robb LeMasters explained that the zirconium cost issue in the Canadian commercial business is being managed through contractual pass-through mechanisms with customers. CEO Rex Geveden stated that while BWXT anticipates scope on the AUKUS submarines, specific details cannot be disclosed yet but will be shared when possible.

Andre Madrid of BTIG asked about the potential impact on BWXT from the shifting regulatory environment at the NNSA and the risk of a full-year Continuing Resolution (CR).

Answer

President & CEO Rex Geveden expressed confidence, stating BWXT's high-value-add work and highly scrutinized contracts make it resilient. EVP & CFO Robb LeMasters added that 80% of government work is already on fixed-price type contracts. Regarding a CR, Geveden noted that BWXT's major programs are programs of record and would continue to receive funding, minimizing the potential disruption.

Andre Madrid asked if BWXT bid on the recent DOE award for domestic HALEU production and inquired about the company's strategy for international opportunities, particularly in decommissioning.

Answer

CEO Rex Geveden clarified that BWXT did not bid on the large-scale commercial fuel enrichment opportunity, as it is outside their strategic focus, though they do play in niches like deconversion. Regarding international work, Geveden stated they are not pursuing high-risk, fixed-price decommissioning projects abroad, preferring to focus on the DOE space. However, he noted that international commercial nuclear power development, especially related to CANDU technology in countries like Romania, is an intriguing and important growth area.

Andre Madrid asked if the Hoverfly investment fits into DRS's previously outlined M&A criteria. He also inquired about the margin profile of Counter-UAS work and whether it is generally accretive or dilutive to IMS.

Answer

CFO Michael Dippold confirmed that the Hoverfly investment aligns with DRS's M&A criteria, which includes joint ventures, partnerships, and minority investments, as it strategically assists in elevated sensing and network capabilities. He stated that the margin profile for Counter-UAS programs is in line with the rest of the portfolio and does not present anomalies from a drag or tailwind perspective.

Andre Madrid asked if the Hoverfly investment fits into DRS's previously outlined M&A criteria. He also inquired about the margin profile of Counter-UAS work and whether it is generally accretive or dilutive to IMS.

Answer

CFO Michael Dippold confirmed that the Hoverfly investment aligns with DRS's M&A criteria, which includes joint ventures, partnerships, and minority investments, as it strategically assists in elevated sensing and network capabilities. He stated that the margin profile for Counter-UAS programs is in line with the rest of the portfolio and does not present anomalies from a drag or tailwind perspective.

Andre Madrid from BTIG asked if new NATO spending commitments could create upside to DRS's international sales outlook. He also inquired about the company's interest in European acquisitions and its attitude toward partnerships with defense tech firms.

Answer

Chairman & CEO William Lynn stated that the international market remains a growth engine due to NATO and global conflicts, with demand for 'ReadyNow' capabilities being a key tailwind. He confirmed that DRS has a global M&A focus, including Europe, and is also open to partnerships with other companies to enhance mutual competitiveness, noting that such discussions have occurred.

Andre Madrid of BTIG inquired about the M&A environment and its priority in capital deployment, and also questioned the potential for the germanium-related supplier issue to resurface beyond the current quarter.

Answer

CEO William Lynn affirmed that M&A remains the top priority for capital allocation, with a robust pipeline under active diligence. CFO Michael Dippold addressed the supply issue, explaining that the Q1 adjustment reset the backlog for the affected program. To mitigate future risk, he stated DRS is proactively including economic price adjustment clauses in new and existing contracts to handle potential price volatility.

Andre Madrid of BTIG asked if the Navy's DDG(X) program is factored into the 2025 outlook, requested an update on the KDDX program, and inquired about any raw material supply concerns beyond germanium.

Answer

CEO William Lynn clarified that DDG(X) is a longer-term opportunity for the 2030s and not in the 2025 outlook, though design decisions are expected in the next few years. He stated the KDDX status is unchanged, with no decision yet from the Korean customer. On materials, management confirmed germanium remains the primary focus for which they have safety stock, and the broader supply chain has stabilized with predictable, though still elongated, lead times.

Andre Madrid requested an update on the Naval Nuclear segment, focusing on the zirconium supply chain and its stability concerning China. He also asked about the duration of demand reflected by ATI's stockpiles and the historical (pre-COVID) percentage of MRO in total engine sales.

Answer

Kim Fields (President and CEO, ATI) reported that the zirconium supply chain remains stable with no concerning impacts, and ATI maintains significant stockpiles of raw materials (over a year) and finished products (almost two years) to mitigate potential trade disruptions. She expects positive momentum in Q4 for Naval Nuclear, supported by recent equipment upgrades and solid demand. Regarding MRO, Ms. Fields stated that pre-COVID, MRO typically represented 20-25% of total engine sales, a figure that has rapidly accelerated to 50% due to older planes staying in service longer and next-gen engines requiring upgrades and scheduled maintenance.

Andre Madrid asked for an update on the Naval Nuclear market and the zirconium supply chain, particularly concerning China. He also inquired about the historical percentage of MRO in engine sales pre-COVID.

Answer

Kim Fields, President and CEO, ATI, reported that the zirconium supply chain has been stable with no concerning impacts, and ATI maintains significant stockpiles of raw materials and finished products. She expects positive momentum in Q4 and 2026 due to equipment upgrades and solid demand. Regarding MRO, Ms. Fields stated that pre-COVID, it typically represented 20-25% of engine sales, a figure that has since accelerated rapidly due to factors like older planes remaining in service and next-generation engine upgrades.

Andre Madrid asked for an update on the long-term agreement (LTA) mix following the new contracts and inquired about the drivers of weakness in the medical end market.

Answer

President & CEO Kimberly Fields stated the LTA mix is now 60-65% for ATI overall and 70-75% for the HPMC segment. She explained that contracts include volume maximums, allowing ATI to capture market pricing on emergent demand. Regarding the medical market, Fields described it as a 'tough story' due to elevated inventories, destocking, and pricing pressure, noting that the company is shifting fungible assets to serve the stronger jet engine market.

Andre Madrid inquired about the potential impact of the recent U.S.-Ukraine mineral deal on ATI's titanium feedstock sourcing and supply chain.

Answer

Kim Fields, President and CEO, responded that while not a near-term factor, the deal is a positive long-term development for diversifying the titanium sponge supply. She noted that Ukraine was a historical partner and that any new supply would first need to undergo extensive qualification for aerospace applications once the region stabilizes.

Andre Madrid asked about the potential impact of tariffs on zirconium sourced from China and the extent to which ATI utilizes recycled materials in its operations.

Answer

President and CEO Kimberly Fields stated that ATI is mitigating zirconium supply risk through diversification to second sources and placing physical hedges. She also noted that recycled material usage is significant and varies by product, ranging from 50-75% for titanium to a high percentage for nickel, with a general range of 30-75% across the portfolio.

Andre Madrid of BTIG asked if strong MRO demand could sufficiently offset airframe market pressure, questioned the margin differential between the two, and sought clarification on whether defense shipment issues were operationally driven.

Answer

President and CEO Kim Fields confirmed that engine MRO demand is very high but noted that engine business is generally more margin-accretive than airframe. EVP and CFO Don Newman clarified that since jet engine revenue is about twice that of airframe, it provides a significant but not a one-for-one offset. Fields explained that defense shipment delays were due to timing and a supply chain bottleneck at a government testing facility, not internal operational failures.

Andre Madrid of BTIG asked if Eve Holding might pursue partnerships with defense contractors to develop defense applications for its eVTOL, following a trend seen with other industry players.

Answer

CEO Johann Bordais clarified that Eve's primary focus remains on the Urban Air Mobility (UAM) market. However, he acknowledged that the company is exploring other possibilities, including a hybrid solution for specific markets like defense, and pointed to the existing LOI with BAE Systems as an example of engagement with a partner that has a significant defense presence.

Andre Madrid of BTIG asked for more detail on the market opportunity in China through the Rome facility and inquired about the expected margin progression for the Aerospace Products segment through 2025 and into 2026.

Answer

David Moreno, COO, highlighted the China opportunity, noting that Chinese airlines will operate their current-generation fleets longer, creating more maintenance demand that FTAI can now serve via its licensed Rome facility. Joseph Adams, Chairman, CEO & Director, added that while it's too early to precisely size the market, it is significant. He reiterated that Aerospace Products margins are expected to remain in the 34-38% range for the rest of 2025 before expanding to 40%+ in 2026.

Andre Madrid requested an update on the company's plans for shareholder-friendly capital deployment.

Answer

CEO Joseph Adams reiterated the company's capital allocation priorities: first, growth CapEx; second, debt repayment; and third, shareholder returns. He projected that FTAI would reach its target of approximately 3x debt-to-total EBITDA by the end of the year, at which point the company would be in a position to consider shareholder repayments like dividends or stock buybacks.

Andre Madrid asked about the company's accounting, questioning if there are plans to pivot to a more traditional industrial COGS model as leasing becomes a smaller part of the business. He also inquired about the expected cadence of EBITDA through 2025 and any potential seasonality.

Answer

CFO Eun Nam confirmed that the company is actively working to shift its accounting and disclosures toward an industrial model as the business mix evolves. CEO Joe Adams added the goal is a full conversion once the Aerospace Products business constitutes more than half of total EBITDA. Regarding cadence, Adams stated they do not see seasonality in the business, as their just-in-time engine solutions are needed year-round. COO David Moreno noted the primary focus is on ramping production to a target of 100 modules per quarter at the Montreal facility.

Andre Madrid of BTIG asked about the margin profile of the growing field services business, the deployment priorities for maintenance CapEx, and sought more specific timing on the expected approval of FTAI's own PMA parts.

Answer

COO David Moreno described field service not as a margin play, but as a distribution channel to increase module velocity, enhancing the customer experience. CEO Joe Adams clarified that the $60-$80 million in maintenance CapEx is spent annually to keep engines in their own leasing portfolio in service. Regarding PMA parts, Moreno declined to provide a specific forecast for approval timing, stating only that they are pleased with the progress.

Andre Madrid inquired about V2X's international book-to-bill ratio, capital deployment priorities beyond deleveraging, and the current M&A environment.

Answer

SVP and CFO Shawn Mural stated that V2X does not disclose book-to-bill by region but expects more fixed-price awards in the second half. Regarding capital allocation, both Mural and President and CEO Jeremy Wensinger emphasized a patient approach focused on shareholder value, consistently evaluating M&A for complementary capabilities in core areas like training and modernization, but without immediate urgency.

Andre Madrid inquired about the drivers of the 27% growth in the Indo-Pacific region, asking for clarification if it includes INDOPACOM and what other major programs are active. He also asked for the reasons behind the lower implied EBITDA margin in the 2025 guidance.

Answer

CFO Shawn Mural confirmed that Indo-Pacific results include INDOPACOM and noted that biennial exercises present future opportunities. President and CEO Jeremy Wensinger added that V2X's established footprint is a key advantage. Regarding margins, Mural explained the decline is predominantly due to the conclusion of mature, high-margin programs (KC-10, T-1A), with new contract wins starting at lower margins that are expected to ramp up through the year.