Ken Herbert

Mike framed the Stellant DOJ challenge as a one-off (the third failed deal out of 100 in company history), not indicative of future deal ability, and said the M&A team remains busy.

Joel gave confidence on Q3 given no April impact and noted less backlog visibility further out, but declined to address 2027 until next year's guidance.

Patrick confirmed destocking is done and they're now in lockstep supporting Boeing and Airbus build rates. Positive indicators from both OEMs creating tailwind. Mike added wide brackets on OEM guidance are appropriate given last 2 years of ramp-up challenges.

Mike confirmed underlying base business margin improvement is squarely between the expected 1% to 1.5% range when adjusting for acquisition dilution and OEM mix shift. Simmonds and Servotronics margins came in low but products are great with nothing fundamentally different preventing margin march upward.

Mike said defense bookings were very strong year-to-date, well in excess of shipments. Growth broadly distributed across operating units. DoD outlays slowed from high single digits to low single digits.

Mike said TDG evaluates all aerospace deals including software if they offer sticky earnings with PE-like return potential. Won't launch down a software-specific path.

Kevin said no meaningful pre-buy detected to get ahead of tariffs. Limited visibility into airline purchasing motivations through distribution channel.

Joel said no change in pricing dynamics. Approach remains covering inflationary costs plus a little more.

Joel said engine aftermarket was up significantly more than the 9% total but didn't quantify the exact share or growth rate.

Mike said defense mix is roughly half OEM and half aftermarket, similar to commercial. Both grew at similar rates in FY2024.

Mike said defense strength was uniform across operating units with Avtech and Armtec slightly stronger. Consistent outlay growth of 8-12% for many quarters aided results.

Cage said Health run rate stays at Q2 levels in the back half, Homeland and Defense continue to accelerate, and Intel and Digital is most vulnerable to year-end CR disruption; FAA is potential upside.

Bell highlighted clean quick close in 2 months, seamless integration, and deployment of AI tools into Entrust while learning Entrust's technology tools for legacy electric services. Customers receptive to increased scale and capacity. Energy business has shorter cycle times than rest of Leidos, so orders liquidate within 1-2 years enabling rapid growth.

Bell attributed strong bookings to purposeful multi-year investment in the growth function with new leadership. Cage added the next-12-month pipeline of submittal activity is at its highest point, with three-quarters geared toward new business and takeaway rather than recompetes.

Bell signaled a shift from shareholder-friendly buybacks to growth-oriented investment now that NorthStar 2030 strategy is in hand. Cage confirmed no buybacks baked into FY2026 guidance, with capital priorities being organic investment, M&A, and dividend continuation.

Bell explained inorganic will now be more part of the playbook with defined NorthStar growth pillars, but balanced with organic investment, buybacks, and dividends. Remains judicious with hurdle rates.

Cage declined specifics but confirmed substantial savings achieved through austerity in first half, with tens of millions returning to investment in second half for AI adoption, maritime capabilities, and defense products.

Bell noted no changes yet in contract terms but fully anticipates shifts toward outcome-based contracting, citing recent FAR revision letters from the administration. Leidos is preparing internally.

Danny acknowledged potential small impact if conflict persists, specifically on G280. Q1 was unaffected as aircraft were already in inventory for completion.

Kim emphasized broad-based outperformance across all 10 business units, not one-time advances. Cash will be positive but lower in remaining quarters. Hinted cash conversion could exceed 100% for the year.

No cash collection impact yet but contracting personnel furloughed, assessing impact on rolling weekly basis, longer duration increases risk especially in supply chain

Indicated consistent delivery cadence with normal quarterly mix variations, reaffirmed sticking with January guidance with potential Q2 update

Confirmed consistent demand patterns with U.S. and Middle East both strong, no systemic changes observed

Warden expects 2026 particularly strong for international awards. US and Poland expanding IBCS deployment, two or three new country awards expected this year. Munitions also double-digit international growth. Airborne radar awards in 2026 with sales impact more in 2027.

Warden said IBCS applicable for homeland protection as demonstrated in Poland live fire. Over a dozen countries expressing interest.

Warden confirmed international IBCS orders start phasing in 2026. IBCS expected to be a significant double-digit growth driver next year.

Warden confirmed no change in F-35 expectations; contracted to produce at max rate of 156 aircraft.

Warden highlighted 1.45x international book-to-bill, broad-based demand across IBCS, Argum, Argum ER, E-2D, and Triton with double-digit DS international growth.

Culp acknowledged the concerns and cited near-zero LEAP AOGs and durability retrofits as the fix.

Culp firmly denied pull-forward, citing portfolio breadth and still-rising delinquency as evidence that underlying demand remains genuine and supply-constrained.

Rahul broke down the $4B services improvement: 600 incremental CFM56 shop visits from fewer retirements and longer fleet life (lease renewals at 90-95% vs 30-40%), plus LEAP installed base growth. Wide-body similarly improved with 100 additional GE90 shop visits.

Rahul confirmed no pre-buys, LEAP growing faster with 30%+ shop visit growth expected and external channel rising to 15% of total shop visit revenue.

John stressed uncertainty over true multi-year demand and supply-base constraints, declining to commit to specific rate readiness while affirming Howmet will make more.

Plant noted Howmet powered through aerospace destocking that hit peers with high single-digit declines. Guidance still layers in some Q3 destocking while expecting growth acceleration.

Plant pushed CFM56 peak spares demand to 2027, citing older fleet working harder. Expects healthy increase in both spares and OE builds in 2025.