Joshua Sullivan • Analyst

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CEO Adam Goldstein stated that while details on the Anduril partnership remain sensitive, the joint program has achieved key internal milestones and aligns with government initiatives. Regarding international defense interest, Goldstein clarified that Archer's role is manufacturing, while Anduril manages all customer relationships and sales conversations, deferring further comment to them.

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CEO Adam Goldstein confirmed the hybrid aircraft is intended for dual-use, with civilian applications offering greater range. He cited support from the Secretary of Transportation and believes the defense work elevates Archer as a national priority, which will help accelerate FAA processes. He also acknowledged being 'inundated' with interest from financial lessors since the company's early days but stated the current focus is on direct fleet sales to well-capitalized partners through the Launch Edition program.

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CEO Adam Goldstein explained that customers are focused on securing early aircraft access to learn operations, not just for revenue. The process involves non-refundable pre-delivery payments, followed by demonstration and market survey flights. On the SFAR, Goldstein expressed that the outcome was better than expected, particularly the flexibility for simulator-based training and favorable energy reserve rules, which support their commercial plans.

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CEO Carey Smith responded positively, highlighting that Parsons achieved its best employee retention since 2020. She noted that hiring has been strong, enabling the company's high organic growth, and that more cleared federal workers are becoming available in the market, which presents a hiring opportunity for the company.

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CEO Carey Smith stated that while the company has a small presence in Europe, the primary focus for expansion remains North America and the Middle East for Critical Infrastructure, and INDOPACOM for Federal Solutions. She also sees an opportunity to bring federal capabilities to the Middle East. On software, Smith emphasized it as a key differentiator, with a focus on organic development in areas like digital signal processing and AI, using an agile, DevSecOps approach, while partnering selectively for specific pursuits.

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Executive Christopher Tucker clarified that his remarks focused on the Maritime business's earnings contribution, not its specific cash flow profile yet. Executive Bryan Sayler expressed high confidence in the Maritime business, noting its programs with the U.S. and Royal Navies are on or ahead of plan. Regarding the Test segment, Bryan Sayler explained the order strength is not from a single new cycle but a broad-based recovery across EMC testing, healthcare, and industrial markets like EMP filters.

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Executive Bryan Sayler stated that the company was pleased with the Boeing strike resolution and managed Q1 effectively with strong aftermarket activity. He noted that ESCO's forecast remains modest on Boeing's build rates for the current year, anticipating a ramp-up in the second half of the calendar year and into next year. Regarding defense, Sayler described the demand pull from Navy programs as 'generally positive,' with steady progress on build rates and some expansion of ESCO's content, despite a minor short-term shift in contract timing.

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CEO Bryan Sayler highlighted a significant effort to grow the aftermarket business, citing the 787 landing gear rebuild cycle as a key driver for the Mayday business. He stated they see no impact from shipbuilder labor issues and are being urged to accelerate production. Regarding the SM&P deal, he explained the delay is due to a required review under the U.K.'s National Security Infrastructure Act, which is proceeding at a normal pace.

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President and CEO Chris Bradshaw affirmed the guidance, citing the stability of Government Services, the production-heavy nature of Offshore Energy, and geographic diversity. He noted the Sikorsky deal provides long-term price stability. CFO Jennifer Whalen added that 86% of the Irish SAR contract CapEx is funded, with the remainder for infrastructure. Bradshaw also detailed the new BETA Technologies eCTOL test project in Norway, which Bristow will operate.

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President and CEO Chris Bradshaw and CFO Jennifer Whalen addressed the questions. Whalen attributed the Q4 beat to strong performance in the OES business, particularly in Africa, and ad hoc opportunities in Brazil and the U.K. She explained that the 2025 guidance was affirmed due to it being a transition year with contract ramp-ups and persistent supply chain challenges. Bradshaw detailed the capital allocation plan, noting debt paydown would begin in Q2, buybacks would be opportunistic, and the dividend, starting in Q1 2026, is sized based on stable Government Services cash flows. He also discussed Bristow's active participation in the AAM space, including an upcoming operational exercise in Norway.

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SVP and CFO Jennifer Whalen confirmed the 2025 outlook remains consistent, with significant EBITDA growth expected in 2026 as new contracts fully operationalize, and affirmed the remaining CapEx is feasible in two quarters. President and CEO Christopher Bradshaw described the U.K. labor deal as a multiyear agreement with a one-time back-pay charge in Q3. He noted that while S-92 gearbox news is helpful, other supply chain issues persist. On the election, Bradshaw emphasized the company's international footprint (85% of revenue) and maintained a positive business outlook.

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CEO John Cuomo described the TCI capacity expansion as an evolutionary process happening in phases, involving new equipment, labor, and additional shifts, noting the business has already grown 30% since its acquisition. He emphasized that market-leading turn times are a critical part of VSE's value proposition, both for supporting engine overhaul shops and for direct end-user work, and that the company has strategically narrowed its MRO focus to areas where it can lead on both TAT and cost.

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Executive Michael Perlman and President and CEO John Cuomo expressed confidence in the market outlook for 2025 and 2026, stating VSE is uniquely positioned to pivot and take on work that OEMs may offload. They highlighted that the TCI and Kellstrom acquisitions place VSE in the fastest-growing engine segment of the aftermarket. Regarding TCI, Cuomo stated the goal is to double the facility's capacity over a multi-year plan, which is a key focus for investment in 2025.

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CEO John Cuomo stated his belief that the commercial aftermarket is growing closer to 10% and expects at least two more years of strong growth, supported by constrained new aircraft build rates. Regarding the USPS, executive Michael Perlman and Cuomo explained that while VSE is deeply embedded in the new system, the transition has created inefficiencies. They anticipate a gradual recovery, with activity likely stabilizing at a level below the pre-transition peak.

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Kim Fields, President and CEO, acknowledged the situation is evolving but stressed that fundamental demand for new aircraft remains strong and ATI has seen no order cancellations or pushouts from its OEM customers. Regarding inventory, she stated the destocking is still in the 'early' innings, with OEMs working to rightsize levels. A faster production ramp by OEMs would pull forward demand into 2026.

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CEO Joseph Adams reported that the company is 'very close' to receiving approval on its next PMA part. He explained that customer adoption grows as the parts demonstrate strong in-service performance. Adams emphasized that FTAI's ability to use PMAs within its own leased fleet and the SCI partnership helps overcome historical lessor resistance, creating a more favorable market for adoption.

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COO David Moreno explained that the Rome facility is strategic due to its geography (serving the 40% of customers in Europe and accessing the Middle East/China), its capabilities (CFM56 focus, test cell, piece-part repair), and the opportunity to bring volume to an underutilized site. CEO Joe Adams addressed the PMA update, stating the previously approved part is performing exceptionally well with nearly 100,000 flight hours. While noting substantial progress on the next approval, he did not provide a specific timeline.

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CEO Joe Adams viewed the FAA's approval as a positive sign for the industry and for FTAI's own future PMA parts for the CFM56, stating it shows the rigorous approval process is working post-COVID. As a lessor themselves, Adams confirmed FTAI uses data to make decisions and would use parts that demonstrate strong performance and cost savings.

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CEO Jean-Marc Germain and CFO Jack Guo responded that their outlook for a challenging aerospace supply chain this year has not changed, with shipments stable sequentially but down year-over-year. Mr. Germain confirmed that an Airbus production increase would be a "net positive" due to their requirements-driven contract. He also noted "good signs" in European defense demand, with customers ramping up for higher production levels, which is positively impacting Constellium's order book.

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CEO Jean-Marc Germain responded that while issues exist with both major OEMs, Constellium's greater exposure is to Airbus. He stated that contracts are requirement-based and volumes are currently 'reasonably close to the minimum,' noting that current shipments are much lower than pre-COVID levels. Regarding the industrial market, he explained that significant inventory stocking had occurred, and the sharp decline is partly a correction as material continues to flow into a supply chain where end-market demand has slowed.

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CEO Tony Thene stated that lead times for aerospace engines remain unchanged at up to 60 weeks and are effectively capped. He asserted that short-term disruptions have '0% impact' on LTA negotiations, as customers focus on long-term supply security. Thene confirmed no material impact from the SPS fire. He clarified that while the additive business is solid, Dynamet is 'by far the major player' driving the PEP segment's performance and profitability.

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CEO Tony Thene responded that he expects defense-related demand to remain strong for years, viewing it as a broader rebuilding of the military rather than being tied solely to current conflicts. Regarding customer conversations, he emphasized that despite near-term caution from some Boeing-tied suppliers, the overall demand picture is robust. Thene noted Carpenter's ability to shift production to other high-demand areas like power generation, maintaining high operational levels, and expects a rapid snap-back in demand.

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Tony Thene, President and CEO, explained that historical seasonality is less relevant as the company is effectively sold-out, with quarterly performance now primarily driven by operating days and planned maintenance. For capacity, Thene highlighted a focus on unlocking 'hidden capacity' through productivity gains in primary melting and reducing rework. He also confirmed the company is actively evaluating organic capital projects to add capacity and further accelerate profitability.

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CEO John Holmes noted increasing lessor openness to PMA parts but highlighted that the market is broad, including many end-users. For government sales, he clarified the focus remains on USM over PMA due to a more straightforward approval process. Regarding Trax, he stated that turning it into a parts sales channel is a significant investment focus, with more updates expected later in the calendar year.

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Executive John Holmes confirmed that PMA parts could be part of the conversation, but a much larger impact would come from increased government utilization of used parts. He highlighted the sale of two used C-40 aircraft to the Marines, which saved the government approximately $60 million, as a prime example of how AAR's commercial solutions can drive significant cost savings for government customers.

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CEO Igal Zamir explained that the inventory buildup was a strategic decision to counter long lead times and unpredictability for OEM parts, while the raw material supply chain is stabilizing. For new APUs, he noted strong demand and stated the company will initially target small to medium-sized airline RFPs. Zamir confirmed the landing gear cycle began its ramp-up in Q4 2024, with substantial growth expected in 2025 and a peak in 2026-2028. He also affirmed that MRO market demand remains very strong as the industry continues its recovery.

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CFO Ashley Whitfield Johnson explained that the decline in customer count is an expected outcome of their strategy to focus direct sales on larger accounts, which is successfully increasing the average customer ACV. CEO William Marshall added that the Planet Insights platform is designed to cost-efficiently serve the long tail of smaller customers, which remains a large potential market.

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President and CEO Eric DeMarco confirmed that the merchant supplier strategy is a key driver for margin expansion expected in 2026 and 2027. He also noted that margins will benefit from the repricing of long-term fixed-price contracts to recover past inflation-driven costs. Regarding MACH-TB, DeMarco affirmed the potential for it to transition into a tactical product.

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Executive Austin Willis opined that these engines have a long operational life ahead, noting that slightly less than half have not yet had their first shop visit. He stressed the importance of maintaining a balanced portfolio with both current and new-generation assets. While acknowledging it is a seller's market, Willis stated that the company's programmatic business model enables it to achieve premium returns and provides long-term resilience.

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