Josh Sullivan

Josh Sullivan questioned Carpenter Technology's response to jet engine OEMs asking if their supply chains have ordered enough materials, the company's strategy on committing to long-term agreements versus maintaining spot capacity, and interest in LTA-type relationships outside of aerospace.

Answer

CEO Tony Thene stated that Carpenter Technology often tells OEMs their supply chains are 'not ordering quick enough,' indicating a need for more orders to meet build rate projections, especially as structural customers move off the sidelines. He clarified that LTAs are based on mutually beneficial relationships for surety of supply, not speculative spot pricing. Thene confirmed increasing interest in LTA-type relationships from power generation and certain non-distribution medical customers, particularly where shared assets or proprietary alloys are involved.

Josh Sullivan inquired about management's response to jet engine OEMs asking if their supply chains had ordered sufficient materials to meet projected build rates. He also asked about Carpenter Technology's strategy for committing to long-term agreements versus maintaining spot capacity, and if similar LTA interest was observed in non-aerospace markets like power generation and medical.

Answer

Tony Thene, Chairman and CEO, stated that in many cases, the answer to OEMs is that their supply chains are 'not ordering quick enough,' indicating a need for more orders to meet build rate projections, with structural customers' recent large orders signaling a significant increase. He clarified that Carpenter Technology focuses on mutually beneficial LTAs, providing surety of supply rather than spot pricing. Thene confirmed similar LTA interest from power generation customers (due to shared assets) and certain medical customers (proprietary alloys, sole supplier status).

Josh Sullivan asked about customer receptiveness to Carpenter Technology's 'bullwhip effect' messaging for aerospace orders and the optimal mix between LTA and transactional customers, particularly in relation to the Athens expansion.

Answer

Tony Thene, Chairman and CEO, indicated that aerospace customers are very receptive to the messaging, with a uniform sentiment that now is the time to increase order intake, evidenced by strong sequential aerospace bookings. He clarified that there isn't an 'optimal' percentage mix between LTA and transactional customers, as both are long-standing and strategic, commanding similar pricing for specialized materials.

Josh Sullivan inquired whether Carpenter Technology's aerospace customers are receptive to the 'bullwhip effect' messaging, urging them to place orders now, or if the industry will face a sudden rush. He also asked about the optimal mix between LTA and transactional customers and its implications for the Athens expansion.

Answer

Chairman and CEO Tony Thene confirmed that customers are highly receptive to the messaging, noting a uniform sentiment that now is the time to increase order intake, driven by Boeing's performance and Airbus's build rate targets. He highlighted strong sequential aerospace bookings growth (23% this quarter, similar last quarter) as evidence of this trend. Thene clarified that there isn't a specific 'optimal' percentage mix between LTA and transactional customers, emphasizing that transactional customers are long-standing, order specialized materials, and command similar pricing to LTA customers, dispelling the notion of random spot buyers.

Josh Sullivan of The Benchmark Company, LLC inquired about the nature of 'urgent' defense requests versus regular orders, how the company's maintenance strategy serves as a competitive advantage, and whether the power generation business is seeing a shift towards more advanced materials.

Answer

President and CEO Tony Thene explained that defense orders are expected to remain at elevated levels due to budget alignment with Carpenter's products. He described the company's data-driven, targeted maintenance approach as a key strategic advantage for ensuring asset availability. For power generation, he confirmed Carpenter supplies high-end, aerospace-like alloys, which command similar high margins and represent a significant growth area.

Josh Sullivan inquired about the number of aircraft Bristow aims to take delivery of for each segment, including timing and deployment locations. He also asked about the primary supply chain bottlenecks, the CapEx outlook for 2026, and updates on advanced air mobility trials with partners like Beta Technologies.

Answer

Chris Bradshaw (CEO) detailed two categories of deliveries: five aircraft already delivered for government services (two AW189s for Irish Coast Guard, three AW139s for UK STAR-2G) undergoing final modifications, and seven offshore-configured AW189s still under construction for Brazil, Africa, and the North Sea. He noted significant supply chain issues impacting both aftermarket parts (S-92, AW189) and new deliveries due to OEM subcontractor struggles. Chris Bradshaw projected total CapEx of approximately $100 million in 2026 ($20M maintenance, $80M growth), leading to about $140 million in free cash flow. He also highlighted the Norway sandbox project with Beta Technologies' CX-300, collecting real-world data for advanced air mobility commercialization.

Josh Sullivan inquired about the number of aircraft Bristow aims to take delivery of for each segment, including timing and deployment locations. He also asked about the primary supply chain bottlenecks currently affecting the company, the projected CapEx for 2026, and updates on advanced air mobility trials with partners like Beta Technologies.

Answer

CEO Chris Bradshaw outlined two categories of pending aircraft deliveries: five aircraft already delivered from OEMs (two AW189s for Irish Coast Guard, three AW139s for UK Star-2G) undergoing final modifications, and seven OES-configured AW189s still under construction for deployment in Brazil, Africa, and the North Sea. Bradshaw noted significant supply chain issues impacting both aftermarket parts (S-92, AW189) and new deliveries due to OEM subcontractor challenges. He projected total CapEx for 2026 at approximately $100 million ($20M maintenance, $80M growth), still yielding about $140 million in free cash flow. Bradshaw also provided an update on the Norway sandbox project with Beta Technologies, testing the CX-300 all-electric aircraft, which is seen as a crucial step for commercializing advanced air mobility, with potential Bristow deliveries in 2027-2028.

Josh Sullivan from The Benchmark Company LLC asked if the quarter's increased subcontractor costs were transitional or persistent, inquired about the current state of supply chain dynamics for spare parts, sought an update on the advanced air mobility (AAM) sandbox project, and asked about the company's free cash flow profile and capital deployment priorities.

Answer

SVP & CFO Jennifer Whalen explained that while some subcontractor activity is normal, current costs are elevated due to the government contract transitions, particularly the fixed-wing element, and a portion of these costs will not persist post-transition. President & CEO Chris Bradshaw noted that supply chain issues are improving but remain a headwind, and shared that the first AAM sandbox flight is imminent. Jennifer Whalen then detailed capital priorities, including completing government contract CapEx, funding new AW189s, and executing on the plan to reduce gross debt to $500 million.

Josh Sullivan followed up on the ATOPS acquisition, asking about the calculus for module capacity potential, the gating factors for finding small, high-yield investments, and whether the Bauer joint venture primarily aims to improve turnaround times, insource margins, or attract new MRE customers.

Answer

Joe Adams, Chairman and CEO of FTAI Aviation, explained that opportunities exist in acquiring underutilized facilities at low prices, with the primary gating factor being the availability of skilled mechanics, which FTAI addresses through its training facility. Regarding the Bauer joint venture, he stated it achieves 'all of the above,' improving margins, enhancing expertise, and shortening turnaround times by gaining more control over the accessory repair process.

Josh Sullivan asked about the calculus behind the ATOPS acquisition's module capacity increase for a relatively small investment, the gating factors for finding similar high-yield opportunities, and whether the Bauer joint venture's $75,000 cost saving per visit primarily targets improved turnaround times, margin insourcing, or customer demand.

Answer

Joe Adams, Chairman and CEO, explained that opportunities arise from underutilized facilities with existing tooling, allowing low-cost acquisitions. The primary gating factor is skilled mechanics, addressed by FTAI's Montreal training facility. Regarding the Bauer joint venture, Joe Adams stated it achieves 'all of the above,' improving margins, enhancing expertise, and shortening turnaround times by gaining greater control over the accessory repair process.

Josh Sullivan of The Benchmark Company asked for an outlook on a potential second Strategic Capital Initiative (SCI) vehicle and inquired about the timeline for when FTAI might begin investing in assets related to newer LEAP or GTF engines.

Answer

Joseph Adams, Chairman, CEO & Director, expressed high satisfaction with the first SCI vehicle's progress and indicated a decision on SCI two would likely be made in Q3 or Q4 2025. Regarding new-generation engines, he maintained the company's timeline of 2028-2029, citing the need for platform stabilization, a sufficient number of engines coming off power-by-the-hour programs, and favorable market economics before entering that market.

Josh Sullivan from The Benchmark Company LLC inquired about the reacceleration in the MRO market, the drivers of the strong quarterly cash flow, and the progress of the company's APU strategy.

Answer

CEO & President Igal Zamir explained that MRO volatility is a recurring industry pattern where airlines defer discretionary maintenance during uncertain periods and then accelerate intake after depleting spare parts, a trend currently underway. Zamir attributed the strong cash flow to a new strategic focus on cash management, following earlier phases centered on revenue growth and profitability. He also confirmed the APU strategy is progressing as planned, gaining market share on legacy platforms while securing initial deals on newer ones.

Josh Sullivan from The Benchmark Company asked a high-level question about the defense opportunity, inquiring if the business could eventually see a 50/50 split with commercial and how defense technology fits into the long-term portfolio.

Answer

Chief Technology Officer Tom Muniz described the business as having three pillars: early civil commercialization (Launch Edition), global civil scale (FAA certification), and defense. He noted that defense revenue is 'chunky' and tied to programs of record. While not providing a specific split, he stated that defense has the potential to be a 'very large portion of the business over time,' especially in the early revenue-generating years.

Josh Sullivan of The Benchmark Company asked about the U.S. Air Force's drone procurement strategy and whether a need for target drones similar to the U.S. Golden Dome initiative exists in Europe.

Answer

CEO Eric DeMarco carefully noted recent public comments from the Air Force suggesting a potential shift toward more affordable, higher-quantity drones. He confirmed a significant and growing need for target drones in Europe as allies procure U.S. air defense systems, adding that these direct commercial or FMS sales would carry significantly higher margins.

Josh Sullivan of The Benchmark Company asked how the acquisition of Kinetics fits into the company's three-pillar strategy and which of the pillars is being prioritized for the company's long-term vision.

Answer

CEO Steve Altemus explained that while landing on the moon (the first pillar) was the hard part, the company's long-term focus is shifting to the "Data Services" pillar. He emphasized that this pillar represents a sustainable, long-term infrastructure service model that creates shareholder value, moving beyond the annual, high-stakes cadence of lunar landing missions.

Josh Sullivan of The Benchmark Company asked for details on the new hydraulics opportunity with Eaton, including market size, and sought perspective on the long-term industry cycle for when component demand might outpace the currently strong engine demand.

Answer

President & CEO John Cuomo estimated the hydraulics MRO market to be between $50 million and $100 million, noting VSE is a strong partner for Eaton due to its ability to drive fast turn-around times and customize solutions. On the market cycle, Cuomo stated his opinion that the engine aftermarket will continue to outpace the component side for the next three years, driven primarily by ongoing supply chain constraints and MRO capacity shortages.

Josh Sullivan from The Benchmark Company LLC questioned if the "shift in demand to the right" for aerospace was a new development and asked about demand signals for the Airwear product from the growing space market.

Answer

CEO Jean-Marc Germain clarified the aerospace demand shift is an ongoing issue of supply chain destocking due to lower-than-forecasted OEM build rates, not a new trend. He described demand for Airwear in the space market as "lumpy but growing," driven by the product's unique lightweight and cryogenic properties, for which Constellium holds strong patents.

Josh Sullivan of The Benchmark Company, LLC inquired about the location of the excess aerospace inventory (distributors vs. OEMs), how the current destock-to-restock cycle compares to past cycles, and Kaiser's exposure to specific defense programs versus general defense spending trends.

Answer

CEO Keith Harvey clarified that the excess aerospace inventory now primarily resides at the OEMs, as service centers have already adjusted their stock levels. He characterized the current environment as a strong multi-year ramp-up driven by high OEM backlogs. Regarding defense, Harvey emphasized Kaiser's diversified position across multiple new and legacy platforms (F-35, F-16, F-15), which provides stability and allows the company to offset any single program's fluctuations with demand from other strong markets.

Josh Sullivan asked for clarification on management's optimism about a 'pro-business direction' from the administration and inquired about HEICO's positioning for high-volume missile defense manufacturing.

Answer

Co-CEO Eric Mendelson explained the comment referred to optimism about reduced bureaucracy and a pro-expansion environment. Co-CEO Victor Mendelson added that as a component supplier, HEICO views new defense tech players as potential customers, not competitors, and is already supplying some.

Josh Sullivan, on for David Strauss at Barclays, asked for the annualized revenue contribution from recent acquisitions and questioned the sustainability of the high organic growth rates in both the Flight Support and Electronic Technologies groups.

Answer

Carlos Macau, EVP and CFO, declined to provide specific financial details for recent acquisitions as they were not individually material. Eric Mendelson, Co-President, stated that while the fundamentals and tailwinds should continue, HEICO does not provide guidance on revenue growth, focusing instead on earnings growth, which was 22% in the Flight Support Group.

Josh Sullivan inquired about the integration progress of the Electrochem acquisition, asking about areas ahead of schedule and remaining hurdles. He also questioned the cause of a delay in industrial sales and asked for specifics on the production ramp for the thin cell medical opportunity.

Answer

Executive Michael Manna stated that being a prior customer of Electrochem puts them ahead on using its cells in existing products, but the main hurdle is gaining full operational control from the former parent company. Executive Philip A. Fain and Manna both attributed the industrial sales delay to customer inventory management and order timing, not macroeconomic weakness. Manna also projected approximately $1 million in revenue from the thin cell medical partner in 2025, noting future growth depends on hospital adoption.