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MOOG INC. REPORTS FIRST QUARTER 2023 RESULTS WITH SALES GROWTH AND IMPROVING MARGINS

East Aurora, NY -- Moog Inc. (NYSE: MOG.A and MOG.B), a worldwide designer, manufacturer and systems integrator of high-performance precision motion and fluid controls and controls systems, today reported first quarter 2023 diluted earnings per share of $1.44 and adjusted diluted earnings per share of $1.25.

 

Quarter Highlights

▪     Net sales were $760 million in the first quarter of 2023, an increase of 5% compared to the first quarter of 2022, reflecting higher sales across all three segments. Net sales increased 9% excluding the impacts of weaker foreign currencies and the lost sales associated with divested operations.
▪     Adjusted operating margin of 10.4% in the first quarter of 2023 increased compared to adjusted operating margin of 9.1% in the first quarter of 2022. The increase reflects higher sales volumes in Industrial Systems and improved sales mix in both Aircraft Controls and Industrial Systems.
▪     Adjusted diluted earnings per share increased 14% in the first quarter of 2023 compared to the first quarter of 2022. Stronger operating margin drove the higher earnings, partially offset by higher interest expense.
▪     Consolidated twelve-month backlog was $2.3 billion, an 8% increase from a year ago, and a 3% increase from the previous quarter.

“I’m pleased by our strong financial performance and how our employees, together, overcame many constraints to meet our increased customer demand,” said Pat Roche, Chief Executive Officer.  “As the new CEO, I am very excited for the future of Moog. We have a solid core business with positive growth drivers, and we are creating new opportunities by entering new markets and redefining our position in existing markets. My focus will be on organic growth and simplifying our business to enhance margins. I’m confident this will drive shareholder value.”

 

Segment Results

Aircraft Controls’ sales in the first quarter of 2023 increased 2%. Sales for commercial aftermarket programs increased significantly, driven by market recovery in widebody programs including the 787 and A350 programs. Partially offsetting this growth was lower military sales in both OEM and aftermarket programs due to the timing of activity. Adjusted operating margin increased 110 basis points to 9.6% resulting from a favorable sales mix along with lower research and development expenses.

Space and Defense Controls’ sales increased 5% in the first quarter of 2023 compared to the first quarter of 2022, driven primarily by the production ramp of the reconfigurable turret program. Adjusted operating margin decreased 160 basis points to 9.4% as charges on space vehicle programs and supply chain pressures continued.

Industrial Systems’ sales increased 17%, excluding both the impacts of weaker foreign currencies and the prior year’s sales associated with a divested business. The underlying sales growth was most significant in industrial automation products and in simulation and test products. Adjusted operating margin increased more than 400 basis points to 12.3% due to incremental margin from stronger sales as well as a favorable sales mix.

 

Free Cash Flow Results

Free cash flow in the first quarter of 2023 was a $22 million use of cash. Working capital increased in the first quarter of 2023 due to continued supply chain pressures, higher production rates on the 787 program and delayed milestones for billings. Capital expenditures of $30 million in the first quarter of 2023 was $7 million lower than the first quarter of 2022.

 

2023 Financial Guidance

“It was a great start to the year from an operational perspective. We achieved our adjusted earnings per share guidance of $1.25 despite the negative impact from the storms in Western New York,” said Jennifer Walter, Chief Financial Officer. “We are reiterating our fiscal year 2023 guidance for sales, adjusted operating margin and adjusted earnings per share. Our backlog is strong, and our performance is on track to achieve these results.”

The company lowered its fiscal year 2023 free cash flow guidance due to an assumption change related to the previously anticipated repeal of the R&D expense amortization law.

In conjunction with today’s release, Moog Inc. will host a conference call today beginning at 10:00 a.m. ET, which will be broadcast live over the Internet. Pat Roche, CEO, and Jennifer Walter, CFO, will host the call. Listeners can access the call live or in replay mode at www.moog.com/investors/communications. Supplemental financial data will be available on the webcast web page 90 minutes prior to the conference call.

 

Cautionary Statement 

Information included or incorporated by reference in this press release that does not consist of historical facts, including statements accompanied by or containing words such as “may,” “will,” “should,” “believes,” “expects,” “expected,” “intends,” “plans,” “projects,” “approximate,” “estimates,” “predicts,” “potential,” “outlook,” “forecast,” “anticipates,” “presume” and “assume,” are forward-looking statements. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not guarantees of future performance and are subject to several factors, risks and uncertainties, the impact or occurrence of which could cause actual results to differ materially from the expected results described in the forward-looking statements. In evaluating these forward-looking statements, you should carefully consider the factors set forth below.

Although it is not possible to create a comprehensive list of all factors that may cause actual results to differ from the results expressed or implied by our forward-looking statements or that may affect our future results, some of these factors and other risks and uncertainties that arise from time to time are described in Item 1A “Risk Factors” of our Annual Report on Form 10-K and in our other periodic filings with the SEC and include the following:

Strategic risks

•   We operate in highly competitive markets with competitors who may have greater resources than we possess;
•   Our research and development and innovation efforts are substantial and may not be successful, which could reduce our sales and earnings;
•   If we are unable to adequately enforce and protect our intellectual property or defend against assertions of infringement, our business and our ability to compete could be harmed; and
•   Our sales and earnings may be affected if we cannot identify, acquire or integrate strategic acquisitions, or as we conduct divestitures.

 

Market condition risks

•   The markets we serve are cyclical and sensitive to domestic and foreign economic conditions and events, which may cause our operating results to fluctuate;
•   We depend heavily on government contracts that may not be fully funded or may be terminated, and the failure to receive funding or the termination of one or more of these contracts could reduce our sales and increase our costs;
•   The loss of The Boeing Company or Lockheed Martin as a customer or a significant reduction in sales to either company could adversely impact our operating results; and
•   We may not realize the full amounts reflected in our backlog as revenue, which could adversely affect our future revenue and growth prospects.

 

Operational risks

•   A reduced supply, as well as inflated prices, across various raw materials and third-party provided components and sub-assemblies within our supply chain could have a material impact on our ability to manufacture and ship our products, in addition to adversely impacting our operating profit and balance sheet;
•   We face various risks related to health pandemics, such as the COVID-19 pandemic, which have had material adverse consequences on our operations, financial position, cash flows, and those of our customers and suppliers;
•   If our subcontractors or suppliers fail to perform their contractual obligations, our prime contract performance and our ability to obtain future business could be materially and adversely impacted;
•   We face, and may continue to face, risks related to information systems interruptions, intrusions or new software implementations, which may adversely affect our business operations;
•   We may not be able to prevent, or timely detect, issues with our products and our manufacturing processes, which may adversely affect our operations and our earnings; and
•   The failure or misuse of our products may damage our reputation, necessitate a product recall or result in claims against us that exceed our insurance coverage, thereby requiring us to pay significant damages.

 

Financial risks

•       We make estimates in accounting for over-time contracts, and changes in these estimates may have significant impacts on our earnings;
•       We enter into fixed-price contracts, which could subject us to losses if we have cost overruns;
•       Our indebtedness and restrictive covenants under our credit facilities and indenture governing our senior notes could limit our operational and financial flexibility;
•       Significant changes in discount rates, rates of return on pension assets, mortality tables and other factors could adversely affect our earnings and equity and increase our pension funding requirements;
•       A write-off of all or part of our goodwill or other intangible assets could adversely affect our operating results and net worth; and
•       Unforeseen exposure to additional income tax liabilities may affect our operating results.

 

Legal and compliance risks

•       Contracting on government programs is subject to significant regulation, including rules related to bidding, billing and accounting standards, and any false claims or non-compliance could subject us to fines, penalties or possible debarment;
•       Our operations in foreign countries expose us to currency, political and trade risks and adverse changes in local legal and regulatory environments could impact our results of operations;
•       Government regulations could limit our ability to sell our products outside the United States and otherwise adversely affect our business;
•       We are involved in various legal proceedings, the outcome of which may be unfavorable to us;
•       Our operations are subject to environmental laws and complying with those laws may cause us to incur significant costs; and
•       We may face reputational, regulatory or financial risks from a perceived, or an actual, failure to achieve our sustainability goals.

 

General risks

▪       Future terror attacks, war, natural disasters or other catastrophic events beyond our control could negatively impact our business; and
•       Our performance could suffer if we cannot maintain our culture as well as attract, retain and engage our employees.

While we believe we have identified and discussed above the material risks affecting our business, there may be additional factors, risks and uncertainties not currently known to us or that we currently consider immaterial that may affect the forward-looking statements made herein. Given these factors, risks and uncertainties, investors should not place undue reliance on forward-looking statements as predictive of future results. Any forward-looking statement speaks only as of the date on which it is made, and we disclaim any obligation to update any forward-looking statement made in this report, except as required by law.

 

Contact

+1 716.687.4225
Email: investorrelations@moog.com