Curtiss-Wright Reports Fourth Quarter and Full-Year 2023 Financial Results; Issues Full-Year 2024 Guidance Reflecting Strong Growth in Sales, EPS and Free Cash Flow

Company Delivers Record FY23 Sales, Profitability, EPS, Free Cash Flow and Orders

DAVIDSON, N.C.--(BUSINESS WIRE)-- Curtiss-Wright Corporation (NYSE: CW) reports financial results for the fourth quarter and full-year ended December 31, 2023.

Fourth Quarter 2023 Highlights:

• Reported sales of $786 million, up 4%, operating income of $161 million, operating margin of 20.4%, and diluted earnings per share (EPS) of $3.11;
• Adjusted operating income of $163 million, up 2%;
• Adjusted operating margin of 20.8%;
• Adjusted diluted EPS of $3.16, up 8%; and
• Free cash flow (FCF) of $270 million, generating 221% Adjusted FCF conversion.

Full-Year 2023 Highlights:

• Reported sales of $2.8 billion, up 11%, operating income of $485 million, operating margin of 17.0%, diluted EPS of $9.20 and Reported FCF of $403 million;
• Adjusted operating income of $494 million, up 11%;
• Adjusted operating margin of 17.4%;
• Adjusted diluted EPS of $9.38, up 15%;
• Adjusted FCF of $413 million, generating 114% Adjusted FCF conversion;
• Total share repurchases of $50 million;
• New orders of $3.1 billion, up 5%, reflecting solid demand in Aerospace & Defense (A&D) and Commercial markets, and book-to-bill of 1.1x; and
• Backlog of $2.9 billion, up 9%;

"Curtiss-Wright ended the year with a strong fourth quarter financial performance that reflected better-than-expected sales growth, record quarterly Adjusted diluted EPS of $3.16 and strong free cash flow," said Lynn M. Bamford, Chair and CEO of Curtiss-Wright Corporation.

"Our full-year 2023 results were highlighted by another year of strong operational performance, as we delivered record high sales and operating income driven by 10% organic growth, and improved profitability while continuing to ramp up our investments in research and development across the portfolio. We achieved record Adjusted free cash flow of $413 million, driven by 15% growth in Adjusted diluted EPS as well as our continued efforts to reduce working capital. Our results also reflected strong demand across our A&D and Commercial markets, which drove record new orders exceeding $3 billion and a book-to-bill of 1.1x. Overall, these results mark the final, successful year for the three year goals we established at our May 2021 Investor Day. I'm incredibly proud of the team's efforts to successfully execute our pivot to growth strategy and the momentum we now carry forward into 2024."

"Looking ahead, our strong backlog entering the year supports our expectations to deliver total organic sales growth of 4% to 6% in 2024, including growth in all of our A&D and Commercial end markets. We expect to deliver continued operating margin expansion while increasing R&D investments, diluted EPS growth of 7% to 10%, and strong free cash flow generation ranging from $415 to $435 million. We remain well-positioned with strong alignment of our technologies to the favorable secular growth trends in each of our end markets, and confident in our ability to deliver profitable growth and drive long-term shareholder value."

Fourth Quarter 2023 Operating Results

• Sales of $786 million increased 4% compared with the prior year period;
• Total A&D market sales increased 5%, while total Commercial market sales increased 2%;
• In our A&D markets, we experienced solid growth in the defense markets principally driven by higher defense electronics revenues and higher sales of arresting systems equipment, as well as strong sales growth in the commercial aerospace market;
• In our Commercial markets, we experienced solid growth in the power & process markets, despite the wind down on the China Direct AP1000 program, while sales in the general industrial market were in-line with the prior year period; and
• Adjusted operating income was $163 million, up 2% compared with the prior year period, while Adjusted operating margin decreased 30 basis points to 20.8%, as favorable overhead absorption on higher revenues in all three segments was offset by unfavorable mix on products and higher investment in research and development.

Fourth Quarter 2023 Segment Performance

Aerospace & Industrial

• Sales of $238 million, up $15 million, or 7%;
• Higher commercial aerospace market revenues reflected increased OEM sales of actuation and sensors products, as well as surface treatment services, on narrowbody and widebody platforms;
• In the defense markets, higher revenue in the aerospace defense market supporting various fighter jet programs was mainly offset by lower sales on ground missile launchers in the ground defense market;
• General industrial market revenue was essentially flat, as the benefit of new product introductions addressing the electrification of vehicles was mainly offset by lower sales on off-highway vehicle platforms; and
• Adjusted operating income was $44 million, up 7%, with a strong Adjusted operating margin of 18.5%, as favorable absorption on higher revenues was partially offset by the timing of development contracts.

Defense Electronics

• Sales of $240 million, up $3 million, or 1%;
• Aerospace defense market revenue declines principally reflected the timing of sales of our embedded computing equipment on various helicopter programs partially offset by higher sales of flight test instrumentation equipment on various fighter jet programs;
• Strong revenue growth in the ground defense market reflected higher sales of tactical battlefield communications equipment as well as higher sales of embedded computing equipment on the Stryker ground combat vehicle;
• Higher revenue in the naval defense market reflected increased sales of our embedded computing equipment supporting various domestic and international programs; and
• Adjusted operating income was $69 million, down 2% from the prior year period, while adjusted operating margin decreased 90 basis points to 28.8%, as favorable absorption on higher revenues was offset by unfavorable mix and higher investments in research and development.

Naval & Power

• Sales of $308 million, up $10 million, or 3%;
• Higher revenue in the aerospace defense market was primarily driven by increased sales of our arresting systems equipment supporting various domestic and international customers;
• Naval defense market revenue was essentially flat, as higher revenues on Columbia-class and Virginia-class submarines were mainly offset by the timing of revenues on the CVN-80 and CVN-81 aircraft carrier programs;
• Higher power & process market revenues reflected strong growth in industrial valve sales in the process market, and solid growth in the commercial nuclear market supporting increased development on Advanced Small Modular Reactors (ASMRs); Those increases were partially offset by lower China Direct AP1000 program revenues; and
• Adjusted operating income was $59 million, down 2% from the prior year period, while adjusted operating margin decreased 100 basis points to 19.3%, as favorable absorption on higher revenues was offset by unfavorable mix of products and timing of development contracts.

Free Cash Flow

• Reported free cash flow of $270 million decreased $13 million, as higher cash earnings were more than offset by higher taxes;
• Adjusted free cash flow of $270 million decreased $29 million; and
• Capital expenditures increased approximately $3 million compared with the prior year period, primarily due to higher growth investments within the Naval & Power segment.

New Orders and Backlog

• New orders of $685 million decreased 4% in the fourth quarter, reflecting timing in our Defense markets, partially offset by strong demand within our Commercial markets for nuclear aftermarket products as well as subsea pumps to the process market;
• Full-year 2023 new orders of $3.1 billion increased 5% and generated an overall book-to-bill of 1.1x, reflecting growth in our A&D and Commercial markets; and
• Backlog of $2.9 billion, up 9% from December 31, 2022, reflects strong demand in both our A&D and Commercial markets.

Share Repurchase and Dividends

• During the fourth quarter, the Company repurchased 60,442 shares of its common stock for approximately $13 million;
• During full-year 2023, the Company repurchased 0.3 million shares for $50 million; and
• The Company also declared a quarterly dividend of $0.20 a share.

Full-Year 2024 Guidance

The Company's full-year 2024 financial guidance(1) is as follows:

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A more detailed breakdown of the Company’s 2024 financial guidance by segment and by market, as well as all reconciliations of Reported GAAP amounts to Adjusted non-GAAP amounts, can be found in the accompanying schedules. Historical financial results are available in the Investor Relations section of Curtiss-Wright’s website.

Conference Call & Webcast Information

The Company will host a conference call to discuss fourth quarter and full-year 2023 financial results and expectations for 2024 guidance at 10:00 a.m. ET on Thursday, February 15, 2024. A live webcast of the call and the accompanying financial presentation, as well as a webcast replay of the call, will be made available on the internet by visiting the Investor Relations section of the Company’s website at www.curtisswright.com.

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Use and Definitions of Non-GAAP Financial Information (Unaudited)

The Corporation supplements its financial information determined under U.S. generally accepted accounting principles (GAAP) with certain non-GAAP financial information. Curtiss-Wright believes that these Adjusted (non-GAAP) measures provide investors with improved transparency in order to better measure Curtiss-Wright’s ongoing operating and financial performance and better comparisons of our key financial metrics to our peers. These non-GAAP measures should not be considered in isolation or as a substitute for the related GAAP measures, and other companies may define such measures differently. Curtiss-Wright encourages investors to review its financial statements and publicly filed reports in their entirety and not to rely on any single financial measure. Reconciliations of “Reported” GAAP amounts to “Adjusted” non-GAAP amounts are furnished within this release.

The following definitions are provided:

Adjusted Sales, Operating Income, Operating Margin, Net Earnings and Diluted EPS

These Adjusted financials are defined as Reported Sales, Operating Income, Operating Margin, Net Earnings and Diluted Earnings per Share under GAAP excluding: (i) the impact of first year purchase accounting costs associated with acquisitions, specifically one-time inventory step-up, backlog amortization, deferred revenue adjustments and transaction costs; (ii) the sale or divestiture of a business or product line; (iii) pension settlement charges; and (iv) significant legal settlements, impairment costs, and costs associated with shareholder activism, as applicable.