Moog (MOG.A) 2025 Conference Summary Company Overview - Moog is a 75-year-old technology company specializing in precision components and engineered systems, particularly in motion control applications [2][3] - The company operates in various markets: 50% defense, 20% commercial aerospace, 20% industrial, and just under 10% medical devices [6] Industry Dynamics - The aerospace and defense industry is experiencing a shortage of component suppliers, which has increased Moog's favorability [2] - Defense spending is on the rise due to geopolitical tensions, with the US budget exceeding $1 trillion and NATO allies increasing defense spending from 2% to 3.5% of GDP [8] - The commercial aerospace sector is recovering from the pandemic, with increasing production volumes for wide-body aircraft [9] Growth Drivers - **Defense Sector**: Strong demand driven by geopolitical tensions, replenishment of arsenals, and modernization programs [33][35] - **Commercial Aerospace**: Recovery post-pandemic with a focus on wide-body aircraft, particularly Boeing 787 and Airbus A350 [14][15] - **Industrial Sector**: Stable performance with robust growth in industrial automation and medical pumps [53][55] Aftermarket Business - The aftermarket segment is currently robust, approaching 40% of the commercial aircraft segment, driven by increased air traffic and long-term support agreements [19][20] - Anticipated decline in aftermarket sales as production ramp rates for new aircraft outpace aftermarket growth [21] Tariff Impact - Moog has implemented mitigation strategies in response to tariffs, which are expected to impact operating profit by $15 million to $20 million for the year [30][31] - Tariff rates are projected to average between 15% to 19% for most countries [31] Defense Portfolio - The defense portfolio is seeing broad-based demand, particularly in missile systems and modernization programs [33][35] - Moog has secured significant contracts, including a $100 million order from Lockheed Martin for the PAC-3 program [34] International Exposure - Approximately 90% of Moog's defense business is US-driven, with 10% from international markets, particularly in Europe [45][46] Margin Expansion - Moog has achieved a 260 basis point improvement in margins since 2022, focusing on pricing and simplification strategies [60][71] - The company aims for continuous improvement in margins, with a target of 75% to 100% free cash flow conversion as a percentage of net income [80][81] Acquisition Strategy - Moog recently acquired KotzWorks, a company providing fiber optic components, which complements its existing technology and enhances its defense product offerings [61][62] Conclusion - Moog is well-positioned for growth in the defense and aerospace sectors, with strong demand drivers and a focus on margin expansion through strategic initiatives and acquisitions [72][74]