Shuman: in Q1 2026 versus 16.4% in Q1 2025. The year-over-year increase was driven by higher manufacturing volume and favorable sales mix. Turning now to liquidity and capital resources. In Q1 2026, we generated 11.2 million in cash flow from operating activities compared to 0.8 million in Q1 of last year. The significant increase in cash generation is a great start to the year for us and was driven by higher net income and contract liabilities, partially offset by higher accounts receivable and lower accrued liabilities in the quarter. In Q4, the company amended its credit agreement, which now includes a $200 million term loan and a $450 million revolver. The new $650 million facility lowers our cost of capital and gives us incremental capacity to execute on our acquisition strategy. As of the end of the quarter, we had available liquidity of $384 million comprising of the unutilized portion of our revolver and cash on hand. Interest expense in Q1 2025 was $4 million compared to $3.3 million in Q1 of 2025. Year-over-year increase in interest cost was primarily due to higher debt balances. offset by lower interest rates on our debt. In November 2021, we put in place an interest rate hedge that went into effect for a seven-year period starting January 2024 and pegs the one-month term so far at 170 basis points for 150 million of our debt. The hedge is still in place and will continue to drive significant interest cost savings in 2026 and beyond. To conclude the financial overview, I would like to say that the first quarter results demonstrate that our Vision 2027 strategy is working and that we are well positioned for 2026 and beyond. I'll now turn it back to Steve for his closing remarks. Steve?
Steve Oswald: Okay, thanks, Shuman. In closing, you know, we had a great, great start to the year with Q1 results. Revenue growth was strong. and margins continued to improve. It was also our fourth consecutive quarter of revenue over $200 million, and gross margin adjusted even to margins were at 26.9% and 16.9% respectively. This is wonderful news, as we've talked about already, on track to meet our vision 2027 goals. In addition, the company's engineered product revenues over the past 12 months was 23% in excellent shape as we drive higher OEM and AM aftermarket products to the P&L. As everyone knows, and as we spoke about in previous calls, driving this percentage as high as possible is our number one strategic focus and with 100% commitment. Finally, with increasing defense budgets ahead and commercial bill rates heading higher, I'm very optimistic about the rest of 2026 and the next few years. Okay, so with that, now let's go to questions. Thank you.
Operator: As a reminder, if you'd like to ask a question at this time, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our first question comes from John Godden with Citi.
John Godden: Hey, guys. Thanks for taking my question. I wanted to follow up on two things, just to better understand kind of the revenue outlook going forward. Number one, on commercial OE and the inventory issues, and number two, on missile growth. Maybe on commercial OE first, can we just unpack this inventory overhang a bit more? And it feels like there may be a point toward the end of the year or next year where really your volumes have to kind of snap back and catch up and grow even faster than OE growth. Am I thinking about that shape the right way? Maybe you could just offer some color.
Steve Oswald: Yeah, just a couple things. First, you know, a big part of our program, especially on the MAX, is through Wichita, the legacy spirit business, which obviously now is owned by Boeing and which we're very happy about. And, you know, they obviously produce the fuselage, You know, they still have lots of fuselages that they've built. So that's a big part of, you know, the common story is that that's something that we're just going to have to overcome. And I think, you know, this is going to be the year, I mean, the best thing that we're going to see over the summer is the increase in the rate. So as that rate goes up in Washington State and they continue to build the MAXs, those fuselages will go down to some level, which is basically at safety stop. You know, I think, again, this year is going to be, you know, destocking, whether we see it in one quarter or two quarters. You know, we're going to get through it by the end of the year. Then I think we're going to be clear. We're going to see, I think, some nice growth, you know, going ahead on the max. Airbus is sort of steady because, I mean, obviously they had some problems with fuselages and their engines, but their order rate is going to be pretty steady when they get to 75%. I don't know about that. We'll have to see over the next couple of years. So I think what I've said in the remarks is probably going to be just about the best I can share right now is mid to high level in the next three quarters, and we'll just have to see how it goes the rest of the year, John.
John Godden: Okay, that's helpful. And then on missiles, another big kind of growth driver. You have a great chart that you guys distribute the missile production outlooks over the next few years. You're on a lot of different programs. It seems like there's even more kind of upward pressure to missile production when we talk to the primes, et cetera. I just wanted to plug into kind of your long-term thinking. I mean, it seems like this is something that could really drive revenue growth for multiple years here. And I'd love to just understand that shape as well.
Steve Oswald: Yeah, thank you, John. Yes, and that's, John, that's my favorite chart, just so you know, okay? So thank you for bringing it up. Me too. Exactly. So anyway, so look, you know, just top level, we are heavily engaged with RTX. As I mentioned, they're our largest customer. We're on, you know, pretty much every one of their platforms for missiles. And the problem, not problem, but the challenge is with RTX is that you know, the big companies move a little bit slower than maybe any of us would like, but that's where we are. So, you know, we're incumbent on it. So we make a lot of the products already. So I think we're, you know, market-wise, strategic-wise, we're right where we need to be. We're a little, we're hedging a little bit. We think it's more of a end of year, early 2027 where this thing's really going to start to pop. And I mean, you know, we're looking at, A lot of these programs are looking at 3X and even more than that. I mean, you know, we're major players on the Tomahawk, and, you know, I think maybe it's not 10X from our sheet, but it's going to be at least 8X. And, you know, we make this just for people. We make the cabling. We make lots of cabling for the Tomahawk, and, you know, that's a big moneymaker for us as well. So 2027, 2028, looking great.
John Godden: Okay, and just a quick clarification, it sounds like you sort of see it accelerating at your end into early 27 and then continuing for a while. Is that the right visual? 100%. Excellent. Thank you.
Shuman: Thank you, John. Appreciate you being here. Certainly from an orders perspective, I think revenues may, it starts reflecting in revenues later in 27, but from an order perspective, yes, late in this year into next year. Okay.
Operator: Our next question comes from Mike Crawford with B Riley securities.
Mike Crawford: Uh, yeah, thanks. I was just going to ask about when you would expect to start seeing these orders, these missile orders in particular, coming into your backlog, you're saying second half of 27.
Steve Oswald: No 26. So you have 26.
Mike Crawford: I mean, I'm in 26. Yeah.
Steve Oswald: Yeah.
Mike Crawford: Right.
Steve Oswald: So, yeah, yeah. We're, we're just like, we're in every discussion right now. We don't really anything to report on this call. We'll certainly have more, uh, when we talk to you again.
Mike Crawford: uh in august but uh uh you know we're we're uh we're heavily engaged we just don't have anything to report on the order side okay and then just on the m a fund it's been over three years since you acquired blr aerospace and everett and i think it had like 40 million revenue at the time is are you willing to share like what revenue run right might be for that that that business or any of your other engineered products, businesses, and then I guess the second part of this is what's been the hang-up? You just can't find quality companies, or people are asking too much, or you've come close or not in the last three years. Because I know in a perfect world, you'd like to do one of these a year.
Shuman: Yes, Mike, good question. So first, when it comes to the growth in our engineered product businesses, They have been growing very nicely, even organically, right? So if you see the mix shift over the last few years in our business from 2022 through 2026, year Q1, we've gone from 15% to 23%. Only, you know, as you noted, a smaller portion of that has come from acquisitions. than we would like, but the good thing about that story is that the business, the engineered product business, has grown organically very well over the last few years, taking us, therefore, from 15 to the 23 percent. We are actively engaged in pursuing acquisition opportunities. We have gotten close on a number of opportunities over the last 18 months. but we continue to remain disciplined on valuation. We remain disciplined to make sure that any deal we pursue will create value for our shareholders. We do believe there are enough opportunities out there for us to be able to execute, and we definitely remain hopeful that we will here over the next several months be able to bring one or more of these opportunities home.
Mike Crawford: Great. Thank you very much.
Steve Oswald: Mike, let me jump in here. Yeah, look, again, I mentioned this in the past, you know, we're picky eaters. Like I said previously, you know, we had a couple of things we looked at. Just at least one just couldn't get there. And some others we've, you know, we've worked pretty hard on and just has not worked out yet. But we have the money and we have the team and we're optimistic that something's going to happen soon. So just stay tuned.
Mike Crawford: All right, thank you.
Steve Oswald: Thanks, Mike.
Operator: Our next question comes from Alexandra Mandry with Truist Securities.
Alexandra Mandry: Hey, thanks for taking my question. Do you anticipate any capacity expansion being required later in the year to ramp production once orders are received for missiles?
Steve Oswald: Yeah, welcome, Alexandra. Great to have you with us. No, we don't. Fortunately, in a couple of our sites, we have a footprint which wasn't being utilized. And we're a little bit proactive on some. Others, we were more lucky where we had an extra building in the back which wasn't being utilized. So as far as footprint, I think we're in excellent shape. And the other nice thing is that we don't We don't run our factories. We do some, some, we do in some areas, but we're not running, you know, a heavy second shift operations. So we also have a lot of hours that we can still maximize. So we have the footprint, we have capacity in hours. Uh, you know, the only challenges are, you know, the obvious thing is once we get the orders, we have to bring a highly high qualified people in and train them. And that's the only thing I would say that still is not, uh, has not been done yet, obviously.
Alexandra Mandry: Great. And then another question. You mentioned weakness in radars and rotorcraft in military and space due to timing. So what were those timing issues and will they be alleviated? And I guess, will we expect an uptick in 2Q on maybe timing of those orders being pushed back?
Shuman: Yes. So if you look at radars, for example, we have a very strong radar franchise right from the Spy6 radar used across the Navy to the Gator program to LTAM, which is used on the Patriot missile. So we have a very strong franchise. It is a matter of kind of timing of those orders, changes in some cases to specification of specific components we make by our customer that affects the timing of when we build and ship out product. So those are all pure timing-related issues. The franchise is really very strong, and as demand for radar systems just independently or radar systems linked to missile defense, the demand for those continue to grow, we are well positioned and expect to see growth in that particular segment in the medium to long term. Military rotorcraft, we have good presence on both Apache and Black Hawk, and we do expect demand to stay There are often push-outs by the customers that may affect timing within quarters, but we do expect that business to stay stable. We are also positioning ourselves well for the Black Hawk replacement and have been supplying prototypes to Bell to support that program. So we do feel like our Rotocraft franchise is one where we are either maintaining or growing shares.
Steve Oswald: Yeah, I think that's right. And I think also, and I know you're catching up on the story, is we moved our back rotor blade for the Apache across the country from California to New York. And we've been basically ramping that up, and that's going to be in much better shape later in the second quarter. So more June timeframe. So that's also going to help.
Alexandra Mandry: Awesome. Very helpful.
Operator: Thank you.
Steve Oswald: Thank you.
Operator: Our next question comes from Ken Herbert with RBC Capital Markets.
Kevin Liu: Hi, this is actually Kevin Liu on for Ken Herbert, but thank you for taking the question and good luck on the strong results. Thank you. Thank you. So you guys had really strong EBITDA margins, 16.9% in the quarter coming out of the gate this year, despite margins typically starting off a bit slower and building throughout the year. So could you maybe talk about how investors should think about the margin cadence for the remainder of the year? And is there any reason we shouldn't expect sequential improvements throughout the year like you typically see?
Shuman: So we do, you know, margins were strong during the quarter. Some favorability due to product mix. but it is not as much as we had in Q3 and Q4 where we had much more maybe skewed product mix favorability in the revenues. So it could be 20 basis points approximately of that here in Q1, but outside of that, we do expect margins to maintain and strengthen as we go through the rest of the year. That's right.
Steve Oswald: We're heading to 18.
Kevin Liu: Awesome. I'll leave it at one. Thank you.
Steve Oswald: Thanks for being with us.
Operator: As a reminder, if you'd like to ask a question at this time, please press star 1 1 on your touch tone phone. Our next question comes from Noah Poppenack with Goldman Sachs.
Will Hermiron: Hi, guys. This is Will Hermiron from NOAA. Thanks for taking our questions.
Operator: You're welcome.
Will Hermiron: Two parts here. First, can you talk a little bit more about the recent appointment of the prior head of Northrop Mission Systems to the board? The press release mentioned that the appointment would help support the miscellaneous radar franchise. Is there any specific initiatives there or just generally adding support for the growth we've talked about today?
Steve Oswald: Yeah, I think it's, I think it's just, you know, first we're delighted to have Mark, you know, join us. I think it, you know, also says a lot about to comment that to be able to attract someone like Mark to our board. You know, he, for those who don't know, he was a top level executive, an executive with Northrop, a long track record of success. He just joined us and we're thrilled with that. I think it's more general support. You know, we are obviously, you know, Raytheon being our biggest customer. Northrop is a big strategic customer as well for us. So we continue to work those areas where we can grow with them. And Mark can only help, right, just for insights and just generally just helping us, guide us a little bit. So, yes, thanks for bringing it up. And, yeah, we're thrilled to have Mark.
Will Hermiron: Great. And then following up on that, you mentioned that missiles, radars, and electric warfare is about 19% of total revenue. Would you be willing to help us size how big missiles and radar are individually today? And maybe how big should we think about those being, say, three years down the road?
Shuman: So, good question. And we'll have more color on the defense business and different portions and different where there are more significant growth opportunities during our investor day in September. We have in the past said that missiles represent about 20% of our defense revenues. That still continues to be kind of in that ballpark. And we do expect that that business is going to grow much more exponentially than the rest of the defense business. So that is going to be the key driver. for our defense growth over the next several years. We do have a page in the deck which shows the growth expected on some of the key platforms, but in terms of specific percentage mix of missiles in our tiers, we'll have more color around that when we do the report out.
Steve Oswald: Yeah, I think that's a good question. Sorry, I'm just going to have to wait until September.
Will Hermiron: It'll be a good story.
Steve Oswald: I can promise you that.
Will Hermiron: That's helpful. We look forward to it.
Steve Oswald: Okay.
Will Hermiron: Thanks for being with us.
Operator: I'm showing no further questions in queue at this time. I'd like to turn the call back to Steve Oswald for closing remarks.
Steve Oswald: Okay. Thank you again for everyone for joining us. Obviously, we're very, very happy with the start of 2026. Proud of our results and believe with our markets heading in the right direction on both sides. We're going to have a a terrific year. We're also looking forward to our Investor Day. Let me just mention that. That's going to be in September. We're going to have a press release out this Thursday before the bell on details for that. And we look forward to sharing not only an update on Vision 2027, but also a very exciting roadmap and new phase for DCO called Vision 2032. We look forward to that meeting very much. So, again, thank you for your time, and have a great and safe day.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
