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CEO & President Igal Zamir clarified that APU deferrals are a global trend, particularly among cargo carriers concerned about tariffs, who use their spare parts inventory to delay overhauls. Regarding M&A, Zamir stated the company will be disciplined, seeking to expand into related mechanical systems to become a more valuable vendor for customers. He also noted that MRO intake has seen a significant increase in the last month and a half, signaling a positive trend.

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CFO Deanna Lund clarified that the second-half guidance reflects the pull-forward of a hypersonic mission into Q2. She also detailed the revenue recognition process for pre-built Valkyries upon contract award. CEO Eric DeMarco affirmed strong confidence in the MachTB program and the broader hypersonic franchise, citing significant funding in the recent reconciliation bill.

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CEO Eric DeMarco clarified that the primary engine opportunity is on "greenfield" new programs where Kratos's engines are designed in from the start. He identified the hypersonic franchise as the #1 growth driver, followed by engines and microwave electronics, noting that tactical drones represent a significant "call option" if major contracts are awarded.

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CEO Eric DeMarco described the Boom partnership as progressing well but not a major near-term growth driver. For Prometheus, he stated the primary focus is servicing anchor customer RAFAEL, followed by pursuing new 'white-field' opportunities by leveraging its pre-qualified status, rather than directly targeting market share from incumbents.

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CEO Eric DeMarco explained the Q4 guidance range is due to unpredictable year-end government data purchases from Kratos's space domain awareness network. For 2025, he identified air defense systems, the solid rocket motor business (catalyzed by Zeus), and propulsion systems as key growth drivers. DeMarco views a potential shift in government spending towards affordability as a significant benefit for non-traditional defense companies like Kratos, aligning with their core strategy.

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VP & CFO K. Christopher Farkas clarified the Columbia profile in H2 reflects a shift from material to labor as production cadence increases. President, CEO & Chair Lynn Bamford explained her cautious language on Westinghouse was not to be presumptive, but noted that as the sole supplier for the proven AP1000 design, the signs for future business are good.

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CFO Chris Farkas clarified that the 2025 outlook accounts for the multiyear nature of recent large orders and ongoing capacity management initiatives, particularly in ground defense. CEO Lynn Bamford stated that the company is actively managing potential tariff impacts through mitigation teams, drawing on its experience with past disruptions. She reaffirmed the 1-to-2-year timeline for the first AP1000 RCP order, expected by the end of 2026, likely from Poland.

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CEO Lynn Bamford stated that a plant restart is more lucrative than a typical life extension but noted revenue per plant varies too widely to provide a specific dollar figure. Regarding Canada, she and CFO Chris Farkas described the AP1000 opportunity as being in its early days, but noted that Westinghouse's new ownership by Canadian company Cameco could shift dynamics favorably.

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Peter Gundermann, Chairman, CEO & President, stated he is comfortable with the sustainability of the 16% adjusted aerospace margin, supported by sales growth and successful pricing increases, though the tariff impact remains an unknown. He confirmed successful price negotiations with both OEMs and airline customers. Gundermann described the retrofit market as very strong, driven by consumer electronics cycles. On the Test segment's future, he clarified that there are no immediate plans to evaluate strategic alternatives, as the current focus is on improving its performance.

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Chairman, President & CEO Peter Gundermann projected a continued 90/10 revenue split between Aerospace and Test, with strong Aero margins potentially seeing upside from Boeing production rates. He noted the Test segment's performance hinges on the timing of a key Army radio program. Regarding tariffs, he stated the supply chain has reduced its China dependence but the situation remains fluid. He also confirmed the retrofit market remains strong, driven by new aircraft delivery delays and the constant demand for updated in-cabin electronics.

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Chairman, President & CEO Peter Gundermann responded that the business mix has been roughly 50/50 between linefit and aftermarket, but the Boeing strike could skew Q4 more toward aftermarket. He confirmed Southwest is a major customer and that Astronics' new USB-C power architecture was developed in partnership with them. Regarding the legal case, he stated the expired patents pose no current competitive threat and that the company's strengthening financial position and the likelihood of a lengthy appeals process mitigate the immediate financial risk.

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SVP & CFO Mike Fitzgerald explained the Government Operations outlook is due to the timing of material procurements and contract performance being pulled forward into Q2. President, CEO & Director Rex Geveden added that operational performance remains strong. Fitzgerald confirmed that the second-half Commercial margin improvement will be driven by a favorable mix shift as higher-margin field services revenue increases seasonally.

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CEO Rex Geveden responded that these developments do not fundamentally change the 3-5% long-term revenue CAGR for naval propulsion but do de-risk the forecast. Regarding the ANPI program, he noted there is significant uncertainty as negotiations with the eight selected suppliers are just beginning, making it too early to project funding or cadence.

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EVP & CFO Robb LeMasters confirmed a half-year contribution from Kinectrics is a reasonable assumption and explained the commercial margin guidance reflects a mix of accretive medical sales and acquired revenue. President & CEO Rex Geveden clarified that the DRACO program is seeing an increase in scope for more ground testing, which represents additional business for BWXT, not a headwind.

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CFO Robb LeMasters explained that margin mix is impacted by lower-margin, early-stage programs like the microreactor prototypes (Pele and DRACO) and certain special materials contracts. The aircraft carrier lull also creates volume softness that pressures margins. On Project Pele, LeMasters confirmed the program will not end in 2025, as the customer has expanded the scope, and he would not be surprised if the total value ultimately runs higher than the initial $300 million.

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Robert Sullivan, VP & CFO, provided Q2 guidance for VACCO, projecting $15-20 million in revenue at 25-30% gross margins, and confirmed all revenue will be allocated to the Aerospace & Defense segment. Dr. Michael Hartnett, Chairman, President & CEO, added that commercial aerospace trends are positive, with ongoing negotiations to expand work statements with major OEMs over the next five years.

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Executive Robert Sullivan provided the segment gross margins (Industrial at 45.7%, A&D at 41.5%) and confirmed there is significant runway for A&D margin expansion, though he declined to provide a full-year revenue target. Executive Mike Hartnett added that while the short-term tariff impact is neutral, significant long-term tariffs would be a net benefit to RBC by creating domestic supply shortages.

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CEO Dr. Michael Hartnett stated that while it's hard to predict oil and gas spending, unpredictable supply interruptions often drive investment. He confirmed new Aerospace contracts effective January 2026 will be 'better,' reflecting significant producer price index increases. On M&A, he emphasized a focus on organic growth and seeking a high-quality target like Dodge, noting that private equity activity is making deals expensive. Rob Moffatt, Director of Corporate Development, added that strong organic growth allows them to be patient and not take risks on M&A.

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CEO Mike Hartnett explained that while a precise margin impact couldn't be provided on the call, the consolidated gross margin is a fair proxy. He does not foresee a destocking issue with Boeing, anticipating a 'big vacuum' on the system upon production restart. Hartnett attributed the strong munitions demand to a domestic capacity shortage for specialized U.S.-made miniature bearings required for guided weapons.

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President & CEO Gunnar Kleveland defended the guidance by expressing confidence that the AEC team can now achieve its performance targets, particularly on the CH-53K program, as operational readiness has improved. He highlighted that other AEC programs are also ramping up in the second half, including Bell, LEAP, and JASSM, which provides a basis for the expected growth.

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President and CEO Gunnar Kleveland clarified the Bell contract involves simpler parts than the Gulfstream program and stemmed from a supplier exiting the business, not failing. He stated they are targeting high-teen returns for AEC. On LEAP, executive Robert Starr noted Q1 would be the low point for the year but did not disclose specific revenue. Kleveland added that current margin pressure in the Machine Clothing segment is a temporary effect of significant Heimbach integration actions, and the company remains confident in hitting its long-term synergy goals.

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CEO Gunnar Kleveland confirmed destocking in the first half of the year is a factor for the LEAP outlook and that the new compensation plan is healthier, balancing EBITDA dollars with relative TSR and ROIC for long-term value. CFO Robert Starr added that the company is being conservative on LEAP after 2024's downward revisions and that the new long-term incentive plan's EBITDA targets are set by the Board to be challenging and success-oriented.

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Robert Starr expressed confidence in long-term margins, citing a favorable mix of high-margin programs and prudent risk management on development contracts. President and CEO Gunnar Kleveland explained the LEAP production plan is a balance between meeting Safran's needs and maintaining ramp-up capability. Starr deferred the question on the 2026 revenue target to the company's upcoming Investor Day.

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Chairman & CEO William Lynn opined that early orders for Golden Dome would likely be for existing, mature systems due to the time required to develop new requirements and run competitions. Regarding the budget, he suggested that historically, a Republican administration tends to moderately increase defense spending over its predecessor to fund new initiatives and project strength, expecting the budget to be higher over time.

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CEO William Lynn explained that the material acceleration was broad-based, not program-specific, and that Q1 growth was driven by domestic demand. He clarified that the strong first-half performance reflects a strategic push for improved quarterly linearity, not necessarily weakness in the second half. Lynn also stated that the primary financial impact of the ASC margin issue was absorbed in Q1, with margins expected to recover going forward.

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CEO William Lynn responded that DRS is now more balanced, with Army exposure at ~30%, and its portfolio is aligned with growth areas like counter-UAS and advanced computing, making it resilient to platform cuts. CFO Michael Dippold added that the IMS segment will drive 2025 margin expansion, and the company plans to increase IRAD by about 20 basis points as a percentage of revenue to support rapid innovation.

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CFO Mike Dippold noted that while 2025 growth is now guided higher to 5-8%, the long-term view remains mid-single digits, with minimal direct impact from Ukraine. CEO Bill Lynn said Replicator 2 has not yet impacted their counter-UAS efforts, which are driven by other factors. Dippold confirmed they are now working on shipset 3 for the Columbia program and are on schedule.

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CEO Chip Blankenship provided specifics, noting Woodward will supply 12 of the 14 actuators per wing with a target entry-into-service of 2028. He stated that while the investment is substantial, it is justified by the A350 program alone and strategically positions the company for future opportunities, such as the next-generation narrow-body aircraft.

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CEO Charles Blankenship clarified the growth hierarchy, stating defense OE would lead, followed by commercial aftermarket, and then commercial OE. CFO William Lacey reiterated that a second-half mix shift toward higher volumes of defense OE and commercial OE would normalize incremental margins to their 30-35% target range.

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CEO Charles Blankenship and CFO William Lacey attributed the robust 19.2% margin to lean transformation benefits, improved productivity, and strong pricing, which offset mix headwinds from growing Defense OE. They reaffirmed the 20-21% full-year margin guide. Mr. Blankenship also mentioned needing a "couple of months' worth of hiring" to meet the resurgent demand signal after allowing attrition to lower staffing during the Boeing pause.

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CFO William Lacey noted that overall aerospace pricing would be slightly above the company's 5% average, helped by carryover from FY24 negotiations and new pricing on some defense contracts. CEO Charles Blankenship confirmed Q1 is expected to be seasonally softer due to fewer workdays, OEM inventory management, and the timing of contract escalations.

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CEO Tom Gentile confirmed Q3 will be softer than usual due to destocking and European holidays, with the full-year A350 outlook in the low-to-mid sixties. He clarified that the potential $3-4 million quarterly tariff impact was excluded from guidance due to uncertainty but acknowledged it could pressure EPS toward the lower end of the range.

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Chairman, CEO and President Tom Gentile stated that many of Hexcel's contracts, particularly out of Europe, are on an 'Ex Works' basis, making the buyer responsible for tariffs. Additionally, some contracts for major commodities have pass-through clauses that allow for cost adjustments, including tariffs. Gentile acknowledged that gaining domestic share is a possibility but noted it remains an uncertainty dependent on the final impact of tariffs on foreign suppliers.

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CEO Tom Gentile explained that Hexcel aligns LEAP production with both the MAX and A320 programs. He stated that while Hexcel took a conservative view on the MAX for Q4, they expect rates to be higher next year and are not aware of any significant excess inventory or destocking risk for the LEAP engine program at this time.

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Co-CEO Eric Mendelson clarified that FSG's margin strength is broad-based, with parts, distribution, and repair also performing exceptionally well. He explained that while ETG's 9% year-to-date defense growth is strong, its products are typically manufactured in-house, whereas FSG has more sourcing flexibility, leading to different growth dynamics.

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Co-President Eric Mendelson dismissed the focus on sequential growth, emphasizing that the year-over-year organic growth of 12% was "phenomenal" and the more relevant metric. CFO Carlos Macau provided the ETG figure, stating the segment was down approximately 4% organically in Q4, driven by weakness in other electronics and defense, which was partially offset by space.

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Eric Mendelson, Co-President, expressed confidence that growth will continue, arguing that any headwind from retirements is mitigated by the higher maintenance costs and HEICO's greater content on the large fleet of newer-generation aircraft. He also stated that he believes Capewell's products are complementary to TransDigm's, noting that many of Capewell's release mechanisms are sold to TransDigm.

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CEO Stephen Oswald stated that while Q2 would be flattish, he anticipates a strong second half driven by the commercial aerospace recovery and continued respectable growth in defense. Suman Mookerji added that programs like TOW, Tomahawk, and 737 spoilers coming back online will provide a lift. Oswald confirmed the A220 program remains strong with no headwinds seen. Suman Mookerji noted the in-flight entertainment business is a small part of revenue and will likely see continued softness, though Stephen Oswald mentioned the year-over-year comparisons become easier.

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Suman Mookerji, an executive, attributed the guidance revision to lower-than-expected 737 MAX build rates and the Boeing strike's impact on shipments. Stephen Oswald, Chairman, President and CEO, added that OEM approval delays for program transfers also played a role. Suman Mookerji stated that Q4 margins should remain in the 'same ballpark' without material changes, as the diversified portfolio and ongoing production activity provide a buffer. Stephen Oswald confirmed the industrial business is being actively wound down, with revenue down approximately 50% year-over-year.

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CEO John Cuomo identified air traffic data and direct communication with engine overhaul shops as the strongest demand indicators. He noted the market is less likely to pull back work quickly due to the difficulty of restarting the MRO cycle. CFO Adam Cohn addressed cash flow, explaining that Q1 is a typical high-usage period for inventory and was also impacted by a lease buyout and investments for the Honeywell program transition. He reiterated the expectation for positive cash flow for the rest of the year.

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CFO Adam Cohn outlined that 2025 cash flow will benefit from the non-recurrence of 2024's Pratt & Whitney inventory provisioning and FDS transaction costs. These tailwinds will be partially offset by real estate payments and inventory buildup for the Honeywell program. He added that the newly acquired TCI and Kellstrom businesses are less working-capital intensive. President and CEO John Cuomo attributed the strong organic growth outlook to a balanced contribution from natural market growth, solving additional problems for OEM partners, and increased exposure to the high-growth commercial engine market.

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CEO John Cuomo outlined three primary growth drivers: winning non-traditional work directly from OEMs, gaining share from large traditional competitors, and capitalizing on MRO demand by increasing internal capacity, as turnaround time is a key differentiator. He acknowledged that pricing contributes to growth but noted its impact is moderating compared to the immediate post-COVID period.

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CFO Dave Farnsworth reaffirmed the long-term 50% free cash flow conversion target from adjusted EBITDA and stated the goal for net working capital is 35-40% of revenue, down from the current low 50s. He clarified that margin improvement from burning off old backlog will be gradual as new, higher-margin bookings replace older contracts over time, meaning Q4 is a step in that direction, not a final launching point.

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CEO Bill Ballhaus explained that normalizing for revenue pull-forwards in both Q1 and Q2 reveals a more balanced growth profile for the full year. He stated that Q4 margin expansion is expected from two sources: the continued replacement of lower-margin backlog with higher-margin new bookings, and positive operating leverage from seasonally higher volume in Q4. CFO Dave Farnsworth added that completing and moving past low-margin contracts naturally raises the average margin of the remaining backlog.

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CEO William Ballhaus emphasized that the company's focus is on the fiscal year-end exit run rate, driven by improved execution, CPA ramp-up, and accretive bookings, rather than providing specific quarterly guidance. Executive David Farnsworth confirmed that new production bookings are coming in with margins aligned with the company's target model, and the increasing mix toward production is a positive factor for future margins.

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Co-COO Mike Lisman explained that a large percentage of commercial aftermarket orders book and ship within the same quarter, making booking rates a key short-term indicator. He confirmed they monitor bookings closely and have seen continued strength. He also noted that while they look at all metrics, takeoffs and landings are "probably the best" proxy for their aftermarket business.

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CEO Kathy Warden confirmed the process change was a joint decision with the Air Force to reduce risk. She acknowledged that material consumption estimates include factors like scrap and waste. She also stated the company remains on track to achieve its $200 million in enterprise-wide cost efficiencies.

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CEO Kathy Warden expressed confidence in continued strong demand from NATO allies for U.S. systems like IBCS, E-2, and Triton, which can be fielded quickly while Europe's industrial base rebuilds. Regarding contracting, she noted that she sees more opportunity than risk in working with new entrants and embraces collaborating with the government to improve cost efficiency and timeliness.

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Maria Lee, an executive, confirmed the improved outlook is fueled by strong missile orders, higher international budgets, and better supply chain performance, which offset the NGAD impact. James Taiclet, CEO, stated that exportability of the F-35 upgrades would be a U.S. government decision but that they design with exportability in mind. He also highlighted other growth drivers like F-35 sustainment, CH-53K, and FBM.

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CFO Jesus Malave reported that while supply chain performance improved in 2024, discrete issues still pace certain programs like MFC munitions and the CH-53K. He stated that while encouraged, he needs more time in 2025 to see if trends hold before committing to a firm 4-5% growth outlook for 2026 and beyond, though confidence is growing.

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CEO John Holmes confirmed USM sales were below expectations but stated the deferrals were not ominous, attributing them to airlines needing aircraft for lift, which suggests strong demand. While AAR is seeing more assets come to market, he noted the long-predicted 'bow wave' of retirements has not yet materialized in full. CFO Sean Gillen provided the quarter's organic growth figure of 6%.

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Executive John Holmes attributed the Parts Supply margin dip entirely to the mix of whole asset sales, stating it was not a trend and that the asset pipeline is now stronger. He suggested availability is situational and a result of strong sourcing. Executive Sean Gillen added that future Repair & Engineering margin expansion will primarily come from product support synergies and hangar expansions in FY26, with the landing gear divestiture providing a benefit starting in Q4 after the deal closes.

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John Holmes, Chairman, President and CEO, acknowledged that forecasting whole asset sales is difficult and that market tightness, while a headwind for USM supply, creates robust demand for the other 80%+ of AAR's business. He added that individual USM piece-part sales are at near-record highs. Sean Gillen, VP and CFO, clarified that the investigation costs are related to an ongoing matter and the termination costs stem from an Expeditionary Services contract.

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CFO Mark Suchinski clarified that OEMs typically own program-specific tooling, while Spirit owns the facilities and general equipment. CEO Pat Shanahan addressed the strategic rationale, explaining that the full value of reintegration, particularly in supply chain optimization, can only be unlocked by the OEM, which represents a significant opportunity.

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