Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sales were strong, with double-digit growth in defense and mid-single-digit growth in commercial markets.
- Adjusted diluted earnings per share increased by almost 40% relative to the prior year.
- Cash flow improved compared to the prior year.
- New airline support contracts were announced, expanding the commercial aftermarket business.
- The company received full and final facility security clearance, enabling new classified program contract awards.
Negative Points
- Industrial sales were fairly flat, with a noted softening in industrial automation.
- Free cash flow for the third quarter was a $2 million use of cash, driven by growth in net working capital.
- Customer advances were a use of cash this quarter, reflecting significant progress across major defense programs.
- Capital expenditures were $32 million in the third quarter, indicating a high level of investment.
- The company faces ongoing macroeconomic challenges, including conflicts in Europe and the Middle East.
Q & A Highlights
Moog Inc (MOG.A, Financial) Q3 2024 Earnings Call Highlights
Q: Can you provide more color on the change in commercial aircraft revenue, particularly regarding wide-body aircraft?
A: Patrick Roche (CEO): The change is primarily due to timing issues within Q3 and Q4 orders from a significant customer. It does not reflect a change in production rates for wide-body programs. We are delivering to Boeing at a rate of about five ship sets per month and are in constant communication with them to ensure stability in the supply chain.
Q: What is the outlook for the commercial aircraft aftermarket side?
A: Patrick Roche (CEO): The aftermarket business remains strong, and we expect this trend to continue. We have signed additional contracts with more airlines, which should bolster our aftermarket performance.
Q: What is the path for working capital unwind in Q4 to achieve positive free cash flow?
A: Jennifer Walter (CFO): We expect positive cash flow in Q4, driven by strong receivables collection and a slight benefit from working down physical inventories. Customer advances will continue to be a use of cash, but we are making progress in inventory management and vendor systems.
Q: Are there any changes in what you are charging customers to improve cash conversion cycles?
A: Jennifer Walter (CFO): We negotiate comprehensively with customers, balancing pricing and terms to achieve the best economic outcomes. This approach ensures that we maintain a healthy cash flow while meeting customer needs.
Q: Given the upcoming election and market conditions, can you provide an early read on fiscal 2025?
A: Patrick Roche (CEO): We will provide detailed guidance in the November call. However, we remain optimistic about fiscal 2025, expecting continued progress in margin enhancement and sales growth, regardless of the election outcome.
Q: What are the expectations for free cash flow conversion in fiscal 2025?
A: Jennifer Walter (CFO): We are still working towards our Investor Day commitments and will provide more specific guidance in November. We aim to demonstrate continued success in our financial metrics.
Q: Can you elaborate on the impact of macroeconomic conditions on your industrial segment?
A: Patrick Roche (CEO): Manufacturing activity in Europe remains weak, affecting our industrial automation business. However, this has been partially offset by growth in other subsegments like simulation and energy. Orders in the quarter were higher than the average trailing four quarters.
Q: How are you managing the supply chain challenges with Boeing?
A: Patrick Roche (CEO): We are in constant communication with Boeing to ensure a stable supply chain. Both parties have a shared interest in maintaining stability, and we are working closely to align our production schedules.
Q: What are the key drivers for the strong performance in the defense segment?
A: Jennifer Walter (CFO): Strong defense demand across our portfolio, particularly in the U.S. and Europe, has driven performance. Increased activity in space vehicle programs and launch vehicle activity also contributed to the growth.
Q: Can you provide more details on the operational performance and strategic initiatives?
A: Patrick Roche (CEO): We are focusing on margin enhancement through pricing and simplification. Our 80/20 initiatives are being deployed across manufacturing locations, and we are training leaders to support data analytics for better decision-making. We are also consolidating facilities and selling non-core businesses to streamline operations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
