管理層發言
Hello, everyone. Thank you for joining us, and welcome to the Moog Inc. Second Quarter Fiscal 2026 Earnings Conference Call. I will now hand the conference over to Aaron Astrachan, Director of Investor Relations and Financial Planning and Analysis. Aaron, please go ahead.
Good morning, and thank you for joining Moog's Second Quarter 2026 Earnings Release Conference Call. I'm Aaron Astrachan, Director of Investor Relations. With me today are Pat Roche, our Chief Executive Officer; and Jennifer Walter, our Chief Financial Officer. Earlier this morning, we released our results and our supplemental slides, both of which are available on our website. Our earnings press release, our supplemental slides and remarks made during our call today contain adjusted non-GAAP results. Reconciliations for these adjusted results to GAAP results are contained within the provided materials. Lastly, our comments today may include statements related to expected future results and other forward-looking statements, which are not guarantees. Our actual results may differ materially from those described in our forward-looking statements and are subject to a variety of risks and uncertainties that are described in our earnings press release and in our other SEC filings. Now I'm happy to turn the call over to Pat.
Good morning, and welcome to our earnings call. We delivered an outstanding second quarter. We achieved double-digit revenue growth relative to prior year, our second highest revenue on record with strength in all segments. We set records for both total and 12-month backlog with 12-month backlog up 33% from the prior year. We also delivered record adjusted earnings per share due to our strong growth and improved adjusted operating margin. Demand is strong. The business is executing well, and we're delivering ahead of our guidance. We are continuing to see the effect of a structural shift in the defense market, and we're well positioned to meet that growth. Our focus on operational simplification ensures that we can deliver on that growth and continue to meet customer commitments. Our results are reflective of continuing success in driving both improved operational and financial performance, and we're confident in our ability to deliver for the rest of the year. Now let's turn attention to end markets and the macro environment, starting with defense. The Middle Eastern war has further increased the need and urgency to boost U.S. defense industrial manufacturing capacity. This has resulted in increased spending requests by the administration and alternative procurement strategies to align resources within the industry. We are actively partnering with the primes and agencies to respond to this urgent and growing need. For example, production rates on key missile defense programs are anticipated to increase by factors ranging from 2 to 4x over the next few years. For our part, we continue to invest in expanding our capacity and are well positioned to respond and deliver increased production output. Moving to commercial aerospace. Customer demand remains strong with clear and consistent signals of increased production rates. We are confident in our customers' growth. Our production plans support those customers' near-term needs and longer-term goals while judiciously managing inventory growth. On the aftermarket side, higher fuel costs may result in a shift to more fuel-efficient aircraft and a reduction in some operating routes. Despite this, we are confident that our platform exposure and strong aftermarket position will support our current plan. Finally, within industrial markets, we see continuing stability with no discernible impact from the Middle Eastern war at this point. Backlog is firm relative to prior quarter. We see further strengthening of data center cooling pump demand. Overall, end market conditions across the board continue to be very favorable for our business. Now turning attention to the 3 leadership priorities that guide our work: Customer focus; people, community and planet; and financial strength. It was inspiring to see the successful launch of Artemis II and the safe return of NASA astronauts after traveling around the moon and back. Moog played a key role across the Artemis II mission with launch platform gantry actuation, thrust vector control on all stages of the SLS rocket and critical light control systems in the Orion spacecraft. We are proud of how our innovation has supported manned space exploration on Mercury, Gemini, Apollo, Space Shuttle and now Artemis missions. Back on earth, we are pleased that 2 important customers have recognized unique contributions we make to their business. We received Embraer's Supplier of the Year Award for 2025, recognizing consistent operational execution and technical collaboration on mechanical systems. We also received General Dynamics Land Systems Supplier of the Year for Technology and Innovation Award for 2025. Our technology leadership to solve our customers' most difficult technical challenges and our focus on operational excellence, always ensuring we meet our commitments has built through long-term partnerships. Our customers' demand is strong and rising. We are proactively investing in capacity and capability to meet the increased demand. This includes robust investment in facilities, manufacturing equipment and automation and supplier resilience. It also includes the onboarding and upskilling of talent to support next-generation production. Across each segment, we are simplifying, optimizing and driving productivity improvements to systematically reduce lead times, increase throughput and ensure readiness for further growth. We will continue to invest in our organic growth and partner with customers in the U.S. and the U.S. government to ensure that we are ready to deliver at higher production rates. Now turning to people, community and planet. We're committed to developing our high-performing and engaged workforce through targeted leadership development, strategic workforce planning and global talent initiatives that accelerate skill building and succession readiness. Our collaborative efforts extend beyond our walls as we've actively strengthened local community engagement by increasing the level of hands-on volunteer efforts globally, supporting education, well-being and social impact. In parallel, our sustainability efforts are advancing with meaningful projects like rainwater harvesting installations. Together, these integrated initiatives reflect Moog's holistic approach to building a sustainable business that cares for its people, enriches its communities and protects the planet. Turning to financial strength. Our 80/20 mindset is key to simplifying the business. It allows us to focus our commitment of people and investments to the most productive and profitable uses. We're achieving operational improvements, and we are redeploying resources to accommodate new demand. Our portfolio reviews stretch from our operating segments through business units to our individual facilities. We continue to prune the portfolio through licensing, asset sales and end-of-life decisions. This quarter, we exited the general aviation avionics market with the licensing of IP and a last-time buy for our customers. As we further develop our 80/20 capabilities, we're evolving our playbook to reflect the nuanced difference of applying 80/20 to our businesses from industrial businesses with thousands of customers and hundreds of products to aerospace businesses with fewer customers and highly integrated platforms. This learning and refinement are part of increasing our maturity. Now let me switch over to the work we are doing to optimize our balance sheet, specifically the structural improvement in our commercial aircraft business. We're simplifying our global manufacturing and supply chain network and reshaping our supplier relationships. We have made excellent progress on the supplier side in this quarter. We're ahead of our plan in moving suppliers to a more agile demand arrangement. And in that process, we've achieved inventory destocking exceeding our plan. We have also selected a fourth-party logistics coordinator who will assume the management of nearly 30% of our suppliers. These are all transactional suppliers. We continue to drive cycle time and work in progress reduction by transitioning to focused factories with fewer non-value-add handoffs between Moog facilities or outside services. We used an 80/20 mindset to prioritize the transition required to achieve this. We also invested in a new Philippine facility at Clark to accommodate inbound transitions and vertical integrations to support our focused factory in Baguio for commercial flight control systems. The cycle time impact on parts transferred is substantial. In this early phase, it gives us the confidence that we can continue to optimize the balance sheet. In addition, these transitions release floor space in our domestic U.S. defense facilities, which is needed to accommodate growth. These examples highlight our continued progress with 80/20, driving productivity and margin enhancement. Our drive to make structural change is also starting to demonstrate operational improvement. Pricing reviews are integral to our business process and continue to happen at all levels in the organization. We are taking actions to mitigate any cost risk arising from the Middle Eastern war. We are also reviewing the evolving tariff landscape, adjusting our mitigation actions as appropriate and pursuing refunds when available. Our pricing activities are ensuring that we are fairly compensated for the value we create for our customers. Now turning to the full year. We've updated our guidance for fiscal '26 to reflect our excellent performance in the first half and a more positive market outlook. We've increased sales and adjusted diluted earnings per share and held adjusted operating margin and free cash flow conversion unchanged. With this updated guidance, FY '26 will be a year of solid double-digit year-over-year sales growth, further expansion in adjusted operating margin, even stronger double-digit growth in adjusted diluted earnings per share and improved free cash flow conversion. This represents substantive achievement against our Investor Day goals, outperforming on sales growth and operating margin, excluding tariffs. And with that, let me hand over to Jennifer for a detailed breakdown on the quarter and our updated fiscal '26 guidance.
Thanks, Pat. Before I get into our financial performance, I wanted to describe the refinancing activities we successfully completed this quarter. First, we amended our $1.1 billion revolving credit facility and our $250 million term loan, extending maturities of each out to 5 years. We also issued $500 million of 5.5% senior notes maturing in 8.5 years. We used the proceeds to call our 4.25% notes that were coming due in under 2 years, redeeming them just after quarter end. We're pleased to have extended and staggered our debt maturities and achieved tight pricing on the new notes. We had contemplated refinancing activities in our previous guidance, so there are no material updates to the guidance we're providing today related to these activities. I'll now turn to the financial performance of our business. It was another outstanding quarter. Sales were robust and adjusted operating margin was strong, resulting in adjusted earnings per share well above our guidance. We also generated free cash flow in excess of earnings. We took $3 million of charges in the second quarter that we've adjusted out of the operating profit numbers that we'll describe. These charges were largely associated with simplification activities, in particular, continuing activities related to footprint rationalization. I'll now talk through our second quarter results, excluding these charges. Sales in the second quarter of $1.1 billion were 13% higher than last year's second quarter. Sales increased nicely in each of our segments. The largest increase in segment sales was in Space and Defense. Sales were $314 million, up 16% over the second quarter last year, reflecting broad-based defense demand. Demand was particularly strong for space vehicles and missile controls. Commercial Aircraft sales of $247 million increased 15% over the same quarter a year ago. The increase was driven by higher volume and pricing on some of our major production programs. In Military Aircraft, sales of $235 million were up 10% over the second quarter last year. Activity continued to increase on the MV-75 program, reaching peak levels for the current development phase earlier than we had planned. Industrial sales were $256 million in the quarter, up 9% over the same quarter a year ago. The expanding data center cooling market fueled our sales growth, and we also benefited from foreign currency effects. We'll now shift to operating margins. Adjusted operating margin in the second quarter was 13.4%, up 90 basis points from the second quarter a year ago. We achieved these results despite 100 basis points of pressure from tariffs. Excluding this pressure, all of our segments were up nicely, reflecting operating strength. Space & Defense operating margin was 14.6% in the second quarter, up 200 basis points. The increase was driven by profitable sales growth, offset partially by increased product development, business capture and operational readiness investments. The margin expansion drivers have been consistent over the past several quarters. Military Aircraft operating margin was 13.7% in the second quarter, up 170 basis points from the second quarter last year. We benefited from profitable sales growth. Commercial Aircraft operating margin was 11.9%, just above that of the second quarter last year. Operating margin expanded from pricing benefits and was pressured from tariffs. Industrial operating margin was 13.2%, just below that of the same period last year, up 40 basis points compared to last year's second quarter. The increase, which we achieved despite the pressure from tariffs, reflects both higher operating margins and sales. Let's shift over to cash flow. In the second quarter, we generated nearly $100 million of free cash flow, bringing our year-to-date performance into solid positive territory and better than we had projected. Strong earnings contributed to our cash generation. Despite our strong sales growth, we held working capital relatively constant. Growth in physical inventories associated with sales growth was largely offset by customer advances. Capital expenditures were somewhat below the quarterly average from the past year and are expected to pick up in the rest of the year. We continue to invest in our facilities to support our strong growth opportunities. In particular, we'll invest to support secured growth within Space and Defense and operational initiatives within commercial aircraft. Our leverage ratio was 1.8x as of the end of the second quarter, putting us just below the target leverage of 2 to 3x. Our capital deployment priorities center around organic growth, and we'll pursue strategic acquisitions to complement our existing portfolio. We strive to have a balanced capital deployment strategy over the long term. We'll now shift over to our updated guidance for the year. We're increasing 2026 guidance for sales and adjusted earnings per share from what we provided a quarter ago, and we're reaffirming our guidance on adjusted operating margin and free cash flow conversion. We're increasing our sales guidance for the year, reflecting the strong second quarter as well as further sales growth later in the year. We're increasing our sales guidance for 3 of our segments and lowering it for one. In Space and Defense, we're increasing our guidance by $35 million to reflect broad-based defense demand. We're increasing guidance for Industrial by $30 million, reflecting a strengthened order book, including for data center cooling pumps. We're also increasing guidance for Military Aircraft with an additional $25 million of growth largely associated with accelerated activity on the MV-75 program. For Commercial Aircraft, we're decreasing our sales guidance by $20 million to reflect our decision to slow the rate of incoming inventory on certain narrow-body platforms. We're pleased to report that we're maintaining our adjusted operating margin in FY '26 at 13.4% despite growing tariff pressure. We're now expecting 110 basis points of pressure from tariffs in FY '26, up 30 basis points from our previous guidance. Increased activity within our Industrial segment is causing this additional pressure, and we continue to work on our tariff mitigation plan. Our underlying business is performing well such that we were able to compensate for the increasing tariff pressure. At the segment level, we're increasing operating margin in Space and Defense on second quarter strength, partially offset by higher levels of research and development that we'll make in the second half of the year. We're decreasing operating margin in commercial aircraft on mix. We're holding operating margins for Military Aircraft and Industrial. Within Industrial, we're fully offsetting increased tariff pressure with benefits associated with higher sales growth. We're increasing our FY '26 adjusted earnings per share guidance by $0.40 to $10.60, plus or minus $0.20. We're reflecting our second quarter EPS beat, additional operating profit we're now expecting in the back half of the year and lower nonoperating costs, which are partially offset by higher tariff pressure. For the third quarter, we're forecasting earnings per share to be $2.65, plus or minus $0.10. Finally, turning to cash. We're still projecting free cash flow conversion to be about 60% with some changes within our guidance from a quarter ago. We'll use more cash for growth in physical inventories, and this will be offset by an increase in customer advances that we've secured as well as reduced capital expenditures as we align our spend with growth areas and adjust our timing to our needs. With respect to physical inventories, it has taken us longer to address existing operational challenges, and we continue to focus on resolving those. We have made progress, however, on rescheduling material receipts within commercial aircraft, as Pat described earlier. Next quarter, we expect to generate free cash flow conversion at about 100%. We won't consume cash for changes in working capital but we will increase our investments in capital expenditures. Fiscal year 2026 is shaping up to be another great year. We'll achieve a record level of sales, further expand our operating margins and make meaningful progress towards generating strong free cash flow. And now I'll turn it back to Pat.
Thank you. We delivered outstanding second quarter financial results. We increased our guidance based on the continuing strong performance within robust markets. And with that, let me open it up to the floor for questions.
分析師問答
Your first question comes from Jon Tanwanteng of CJS Securities.
Nice job on the quarter and the outlook. I was wondering if you could start with the missile business: is there any update to the 20% growth outlook you've seen there? And secondly, can the industry and your company grow faster than that if asked by the government, and are you being asked to do so?
Jon, could you repeat which piece of the business you were asking about at the very beginning?
The missile controls business.
Yes. As you can see with what's going on in the world currently, the demand is obviously increasing in the urgency of that demand. I talked about changing procurement strategies from the government, and you saw that reflected in 7-year agreements with the primes on ramping up their capacity by significant amounts. You can see production rates moving from 650 missiles per year up to the level of 2,000 per year for some programs. We've been in discussions with our customers over the last year or more about these increasing demands. It was becoming obvious that the arsenal was depleted and that production rates needed to increase, and we've been preparing ourselves for that at our Salt Lake City facility where we do many control actuation systems that go onto missiles. We have freed up floor space within that facility by transitioning other products out of that building. We are investing in the facility with some new capabilities to support this growth in the missile programs. And we feel that we have the facility space available and the capabilities to increase our rate at the level that's being asked for.
Okay. Great. And then on the Commercial Aircraft side, how should we think about the impact of the war on your airline customers' demand? Is that fully reflected in your outlook today? And does your wide-body focus provide more relative insulation just due to the airplane economics? Or maybe does the impact on these customers shift the other direction? Just help us understand how you're thinking about that demand picture going through next year.
We have reflected our current thinking into the guidance. There is some impact on flight patterns. Flights in and out of the Middle East are down, and we have two forward stocking locations in the Middle East where we hold product for aircraft on the ground servicing. We shut those down as a consequence of what was going on, and we're servicing those from other parts of the world at present. A lot of airlines are suffering from higher aviation fuel, and therefore, they're making decisions on number of flights on routes. That likely shifts their focus toward more fuel-efficient aircraft, such as the 787 and A350. So you could expect more hours on those types of aircraft. When we look at it in balance, we see our business sustaining on the aftermarket side for the rest of the year at roughly our current run rate, and that is included in the guidance. On the OE production side, we're continuing to support customers' interest in increasing ramp rates and their longer-term aspirational goals within our plans.
The next question comes from Kristine Liwag.
Pat, Jennifer, Aaron, I just wanted to ask on the defense environment. It seems like we're in a completely different trajectory versus prior cycles. The White House is asking for $1.5 trillion for fiscal year '27. Now whether or not that materializes, it seems like the general direction for fiscal year '27 is still higher than fiscal year '26, meaningfully so, maybe at least 20%. I was wondering when you look at your outlook for your defense business, how is Moog positioned to capitalize on this potentially meaningful growth ahead? Because when you look at your core capabilities over the years, you guys have transformed from a component manufacturer to really providing more systems and solutions that are in greater need. So I just want to understand what that looks like and what's embedded in your base case. And if we look out a few years, how meaningfully higher could revenue be?
Thank you for the question, Kristine. Our business is continuing to expand as a consequence of this. Whether it's a 50% step-up next year or 20%, it's a business that we are well positioned to secure. I think that's from two perspectives: our operational effectiveness as a business and the technical capabilities we have. On the operational efficiency side, our delivery performance on the missiles has been 100% on time and 100% in quality to our customers. That is winning more business. When we announced our orders on PAC-3, that was a partial takeaway from one of our competitors. Our operational performance wins us additional business, especially in an environment where the primes are struggling to get capacity. So we have an opportunity not just with the uplift on existing programs, but with the ability to displace competitors on other programs. On the technical side, we can increase our scope of supply, and we're actively pursuing opportunities where we can add to the solutions we deliver for customers. Those are important factors that feed into a growing and strengthening business within this market.
Super helpful. We're also seeing multiyear agreements for the defense primes to increase capacity. When it comes down to where you are in your tier of a supplier, how do you anticipate that capacity spend being supported? Do you expect more customer advances to support some of that incremental working capital or CapEx? Or would you have to invest your own money to be able to meet some of those demand signals? How do we think about that balance?
I think there's a mix in there. We are in the process of discussions with our customers about the ramp in front of us. If you reflect on the PAC-3 orders, that was reflective of current production volumes of 650 units per year, and obviously there's a significant ramp to the higher levels now being discussed. We're negotiating with each of our customers on how we support that ramp with them over an extended period. We are prepared to invest in the business; we think that's the right thing to do. Jennifer has consistently said we have a balanced capital investment plan, and supporting organic growth in the areas where we excel makes sense. For example, on the missile side at the Salt Lake City facility, we're putting in a circuit card assembly line specifically to support missile programs. So we are making internal investments and also looking to our customers and the government about how they might help accelerate things if needed. Those discussions are ongoing.
Switching gears to space. You called out the Artemis II mission and your legacy presence in space exploration. Can you talk about the environment for that? What's your presence with the newer space companies? How do you see dollars shifting from legacy space versus new space innovators, and what's your presence between the two?
Thanks for highlighting the heritage in space exploration. We've been in that from the beginning; a piece of Moog hardware flies into space every week. It's not just legacy programs. We're involved in thrust vector actuation on many launch vehicles, so as commercialization and defense activity in space drives demand, we get exposure on the thrust vector control side of launch vehicles. Our investment in Plant 27 on the East Aurora campus is around avionics and actuation that goes into those launch vehicles, and we've been ramping capacity there. Our exposure in space also extends to space vehicles. With space being a growing warfighting domain, there is increasing defense-side interest in our space capabilities, and we see growth there as well. Jennifer called out space vehicle strength within the Space and Defense Group in the second quarter.
One more: You've given a multiyear outlook on margins and you've been executing well. With all these opportunities and end markets experiencing significant growth, and with changed pricing mechanisms, how conservative is the previous 3-year guidance you've given on margin now? With how well you've executed so far, where do you see the maximum limit on margin? It could be in reference to your 3-year outlook or over time. Just want to understand the earnings power of Moog going forward.
I'm incredibly proud of the success we've achieved delivering on those long-term goals set out in 2023. This comes to the tail end of that period now in 2026, and we're delivering substantively on what we committed to. We will give an update on what comes beyond this and plan to do another Investor Day later in our calendar year; we'll announce a date in the future. I look forward with a high degree of optimism to our future.
I would add that for our guidance this year, we feel we've taken a balanced approach. For EPS, we increased guidance by $0.40, and we beat guidance roughly by that same amount. We're reflecting strong Q2 in our guidance and projecting some benefit in the second half as well. Operating profit, specifically in Space and Defense, will continue to contribute. We've adjusted for that, but we're also making additional R&D investments because of the opportunities. We do have tariff pressure that is increasing and offsetting some benefits, so we want to stay balanced. We're continuing to invest at higher rates to secure and ensure we're well positioned for new business opportunities.
Your next question comes from the line of Gautam Khanna from TD Securities.
I wanted to make sure I understood. On the Commercial Aircraft guidance revision, what's driving that? Because it sounds like demand is pretty strong. Just curious.
Overall, demand is strong for our Commercial business. The guidance change is a deliberate decision so we are not bringing in materials ahead of when we need them, and that does have some downward pressure on our guidance. It's not that there's any long-term substantial change in outlook. It's simply us managing inventory to align with the timing of deliveries and avoid building excess inventory. It's a timing issue incorporated into the guide.
And just to be clear, is that due to cost-to-cost accounting or meaning what you expect to ship is no different?
We're bringing in lower amounts of material that otherwise would have been absorbed into cost-to-cost accounting and reflected in sales and operating margin. We're simply delaying that somewhat.
Got you. And so does that have an equal impact to benefit cash flow by the same amount?
It does benefit our cash flow. You can see we're holding cash flow roughly the same. From a short-term perspective, pushing out material receipts has a benefit. We're also working on operational execution to get shipments out and managing customer demand and transitions, which also factors into this.
That's very helpful. Could you give some flavor for whether demand has changed on some major Commercial Aircraft production programs like the A350, 787? Does that explain some of the guidance change?
No, demand has not changed materially. Sometimes it's just the timing of when we do the work that impacts when we recognize sales. Overall, there's strong demand for the aircraft. We're seeing that on wide-body platforms where we have significant content and on narrow-body platforms as well. These adjustments reflect timing rather than a change in market demand.
Timing by Moog, not by the OEM customer?
By Moog. We're not going to bring in material earlier than needed so we can manage cash flow and the business for cash.
I was curious also, a quarter ago there was an urgent order for V-22 parts. Are you seeing other pockets of more urgent demand? I know you mentioned missiles but elsewhere in defense?
Not to that same extent. That V-22 order was unusual because demand expected over a year was captured in one quarter, which is why we highlighted it. There hasn't been anything as significant since. However, the overall growth in the defense business is significant, which is why we've beaten on sales and raised guidance. It's more broad-based strength rather than a single accelerated program.
Can you elaborate on what changed from the first quarter with respect to tariff impacts for the year? I remember you were moving product flows and helping airlines file for duty drawback and the like. Is that still happening? What explains the variance on tariffs relative to a quarter ago?
It's a fluid situation. Some tariffs were struck down in the quarter, but Section 121 tariffs were imposed and have a 90-day validity. We anticipate Section 301 tariffs for the balance of the year as the administration focuses on tariffs. We assume we will have tariffs on an ongoing basis and have incorporated that into guidance. What changed for us is the level of business in parts of the organization that are particularly sensitive to tariffs. We have greater volume in our Industrial side, which is more sensitive to tariffs, so the dollars we're spending on tariffs increased as a consequence of that mix shift.
Is there any direct Middle East impact you could foresee in the business other than demand? I'm not talking just demand-wise, but supply chain or input costs or other diffuse impacts we can see?
A couple of direct impacts come to mind. We had two forward stocking locations in the Middle East; their activities have wound down because of the war, so we've redirected that work. Fuel costs have increased in many parts of the world, which affects transportation costs and some input costs. For example, in the Philippines, fuel costs have increased because fuel is imported, and we've reflected that in our thinking for the quarter. Indirectly, changing flight patterns and aircraft routes also affect demand; we've integrated our best thinking into guidance and will monitor how this unfolds. The duration and depth of the war will determine further impacts.
But the fuel impacts are already reflected in your guidance?
Yes. The transportation costs I described, like in the Philippines, are included. The direct input costs we expect for the full year have also been reflected in our guidance.
We are about 3.5 weeks into the quarter. Have you seen any indications of demand weakness incrementally from what you saw in the March quarter?
No, nothing we've seen so far.
Your next question comes from Jon Tanwanteng from CJS Securities.
Can you hear me?
Yes.
I was wondering if you could give a little more color on the FLRAA MV-75 program. How much was that pulled in by, and how does that impact your revenue and profitability run rate in the out years, not specifically this year?
In this year, we saw high levels of activity in Q2 that got us up to a level of activity earlier than planned. We expected to reach that peak level in Q3 but got there in Q2 because of focus from our customer and the government. We brought forward some of the work we were doing and are now at the peak run rate for the EMD phase, engineering and manufacturing development. Conversations between our customer, Bell, and the government about getting to flight earlier than originally planned are active, and we are supporting those discussions. The accelerated activity reflects higher near-term work, and the impact on out-year revenue and profitability will depend on the program schedule and whether earlier production is agreed upon.
How should we think about the potential for Congress to change or flip this fall, and how could that impact your expectation on defense spending in general? Could that bleed through to specific programs like munitions, aircraft or space?
Whatever the total level of spending is, it comes down to our exposure to different programs. We believe we are exposed to priority programs. Replenishment is one example where there's a clear need that will have to be satisfied regardless of total budget. We have exposure across many priority programs, and even if some programs change, we believe we have a solid and growing business based on current developments.
Thank you. There are no further questions at this time. We have reached the end of the Q&A. I will now pass the call back over to Pat for closing remarks.
So that concludes our earnings call. I appreciate you taking the time to listen to our update on the business, and I look forward to providing an update again next quarter. Thank you.
This concludes today's call. Thank you for attending. You may now disconnect.