Curtiss-Wright Corporation (CW) Earnings Call Transcript & Summary

Welcome back to UBS Industrials and Transportation Conference. I'm Myles Walton, the Aerospace and Defense and Airlines analyst here at UBS. It's a pleasure to continue the conference this morning with the management team of Curtiss-Wright, including CEO, Dave Adams; CFO, Chris Farkas; and 2 segment Presidents, Lynn Bamford, President of Defense and Power; and Jim (sic) [ Kevin ] Rayment, President of Commercial and Industrial. We'll have pretty much an open Q&A session with the management team. [Operator Instructions] And so we'll just get started. Dave, welcome.

Thanks, Myles. Appreciate the hosting this conference for us.

Absolutely. So maybe for those who aren't as familiar with Curtiss-Wright, give us a quick snapshot of your primary end markets and the relative proportional size, defense, aerospace, power and industrial or any other way you'd want to divide it.

Sure. First of all, let me just say that we do have a safe harbor act, a slide that I think Myles has up on the webcast. And you can find all the details necessary in our -- on the SEC web page. But yes, just to give you some sort of context of who we are and what we're about. We are roughly split half and half between defense and industrial -- Commercial/Industrial business, the -- where numbers are up to 45% on the Defense side, 55% in the commercial. Of the defense markets, naval being our largest, 25% aerospace and then Ground -- following ground being the smallest at 4%. And then over on the commercial side, commercial aero is a total of about 17% of our revenue. And then power gen, about 16% and then 22% for general industrial. So a nice blend with a mix there of, we call it, it's a mixed market, obviously, diversified industrial, but it really positions us well relative to what's going on right now. And we feel very fortunate to have had the strength on the Defense side, given some of the challenges and headwinds that we're seeing on that Commercial/Industrial.

And maybe let's start on the Defense side, if we can. And that has been a source of strength across the Defense complex. And obviously, your first quarter, 20% organic growth, it was probably the highest amongst the defense companies I cover from a growth perspective. Obviously, that's not something that persists at that level. But maybe give us some color as to what the drivers of the most recent growth are. And what the visibility is for sustained mid-single to high single-digit growth.

Yes. We found that the cycles that we go in with some of the large shipbuilding and applications that we have with -- especially like I indicated on the Defense side being -- the ship order being the largest part, and it's the nuclear side. And as we have the 3 largest platforms being the carriers and then the Columbia-class subs and then the Virginia-class subs. We have -- of those 3, everything is fully engaged relative to, let's call them, start-up on them at this point. We found that with -- it's interesting how these -- the carriers go on a 5-year build cycle. And then the Columbia is new, so it's not necessarily on a relatively repeatable build cycle at this point, still going through its initial stages, but it will get into that, probably -- I think it's once every 18, 20 months. And then on the Virginia-class, there are 2 per year. So we did have a buildup of orders and that led to what we're seeing as the bump into it now. We expect some more orders to come in this quarter, which will help us additionally. And so it's extremely solid outlook for us. And this thing goes out, I'd like to look at it 5 to 10 years. Because when you look at the block buys of some of these platforms, when they do try to combine these things, while the combination doesn't mean a doubling up in the same period of time, it does mean that the outlook is very forecastable, if you will. And we're able to draw the demand for labor that we need and parts and get better deals and have better margins and so forth. So it's been that robustness in combination with some of the refreshing that the Defense department is doing in some of their platforms. And so, I mean it's been just the perfect scenario for us that is somewhat cyclical. Like I said, every 5 years, we build a new carrier. And so you got every 2 years -- I mean once every year, with 2 per year on the Virginia. So you see those coming and going and a lot of orders being placed.

And I mean there's been a good pickup in profitability in Defense as well. And then just kind of more curious than not, is it mix? Is it productivity? I know in the first quarter, you had a bit of a gain, but even excluding that, you're still in the first quarter high-teens type margins, which is some of the best margin performance you've put up in that segment in a while in the first quarter. Maybe just give some color as to what the profitability mix you're seeing through the Defense business is.

Yes. I'll ask Chris to do that.

Yes, thanks, Dave. Yes, as we looked at the first quarter, I mean, we really had a strong spike in revenues, not only naval, but then also in aero defense. It's really the alignment of the key platforms that Dave had mentioned and the subs, the CVN-80 and 81 aircraft carrier. And then also our contribution from 901D on the defense aero side. We saw strong revenues coming out of UAVs and embedded computing products supporting UAVs as well as the F-35 program in electronics and also actuations. So most of what happened here in the first quarter was just driven by the higher defense revenues and favorable absorption. We did have a very small gain that came through in the quarter. But for the 320 basis points of expansion that we experienced, that was only about 120. So 200 really more what I would characterize is due to favorable absorption.

Got it.

Maybe I can jump in. This is Lynn Bamford.

Yes, Lynn, go.

I just want to comment on the aerospace and the ground market. Dave talked a lot about really where the bulk of our content is on the naval side, and it's kind of piggyback on to what Chris has said with the margins. In the aerospace portion of our Defense business, the bulk of the revenue comes through our commercial-off-the-shelf or our cost-embedded computing products which tend to be some of our higher-margin sales across the company. Curtiss-Wright is one of the largest suppliers of cost-embedded computing into the industry. We have a very broad capability across multiple technologies and multiple size weight power types of solutions that really lets us have content that is applicable really across any military platform that requires electronic capabilities. In addition, I'd say one of the things that gives us strength is Curtiss-Wright has a long 10-, 15-year track record of being a leader in the open standard offerings, which is really what the military continues to migrate to away from proprietary solutions. Another comment that I think sometimes gets a bit missed in what we do offer from an electronics capability, as much of it is building blocks that can be used to make the same products to be built into a wide variety of end solutions. We do have some products that are more targeted at a specific application, such as our instrumentation capability. We have products geared at working in a denied GPS environment on the battlefield, are just 2 examples of what we have. Curtiss-Wright really is staying in the aerospace. We have content on every major U.S. fighter jet, UAV and helicopter program. That F-35 is our largest single platform. We've recently secured our order for LRIP 12 through 14. If I move on just a bit to the ground space, our business there is really split. Kind of in the U.S., it's much more electronics oriented with tech refreshes or life cycle extensions on some of the major platforms, Bradley, Abrams and Stryker. Internationally, our content is more the turret stabilization capability. And then the last comment I wanted to make was just to look back to the naval. As you probably are aware, we closed on the 901D acquisition that has given us a broader electronics capability into the naval side. And the integration of that business into Curtiss-Wright and bringing forth the synergies that we have a strong track record of with acquisitions is well underway even in this difficult environment where face-to-face interaction is limited.

That's great color. And if I could just ask, the microphone may have broken up a little bit, so when you speak, can you just get a touch closer? And then I think, Dave, you had mentioned and Lynn, you kind of alluded to it, the order trends in Defense, it sounds like in 2Q actually are coming through quite nicely. Is that -- have you seen it? What's driving it? And any color you'd want to add there?

Order trends from the Defense side have been really good. And for all reasons that Lynn mentioned from -- all the way from the shipboard side to the -- the embedded computing side. So the electronics to the big stuff, the big reactor, coolant pumps, valves and other things that we provide. And so it's just been an across-the-board bump for us. And kind of expected in this time frame, and we saw it coming a while back. So like I said, timing has been great. On the Industrial side, not so great. Just -- it's what everybody else has been seeing. And just to preface where we're at with regard to the quarter, we see this as probably being our lowest quarter on, I would say, certainly from a performance standpoint within that Industrial side order intake. I can ask Kevin Rayment, who runs that Industrial business, to give us any insight into what he's seen generally. But suffice it to say, Defense looking great. Industrial, Kevin, what are you seeing?

Well, obviously, as everyone else is experiencing, it's quite a sort of a difficult sort of environment. It takes a bit of time and this depends why we've sort of haven't put forward sort of detailed information associated with our second quarter because it takes a bit of time for -- as production schedules change, et cetera, it takes a while for our primes and some of the OEMs to then filter that down through us through the various different sort of businesses, so we can get our production schedules right. Just to say though, I mean, April, in particular, was -- for example, was probably one of our lowest months that we've seen in several years within our valves and surface tech businesses. And I think that's sort of concern about making sure that we've got some stability in terms of order intake is why we haven't been giving too much in a way of detail at this stage. But obviously, as it starts to move forward, then we'll provide more information as we feel fit.

Okay. Okay. And just to kind of, I guess, transition over to the Industrial side and on the commercial aerospace, which in part you alluded to, but the production rates that you guys have been able to maintain on the [ 3 7 ] given the contract negotiated in 2018 at 52 a month. Is that something that you think you'll be able to absorb that headwind in '21 when those production rates step down? Could that be a headwind in '22? How are you thinking about managing that?

Well, we talked to Boeing once there, about 18 to 24 months we negotiated with them. And we were fortunate enough, and it was '19 that we actually negotiated that contract in. And then going into this year, full year up of 52 a month. And obviously, you think about it, they're not putting those on any airplanes, and there could be some buildup of inventory out there, which I would imagine is the case. And we haven't really had any visibility or enough visibility to determine where we're going to be at with regard to next year or the subsequent years relative to that long -- that's a longer gestation and turnaround type product than the services side, which Kevin talked about a second ago. So it could present a little bit of a headwind. But I think for the most part, what we're seeing with some of the buildup in our Defense side, the way we look at it is overall, that we will attempt to overcome anything if that becomes a headwind, then we'll attempt to overcome that with some other products and/or M&A activities. And that's just the way we typically run the business, especially if we have some sort of visibility. And so given this one certainly we think that, that gives us a little bit more visibility into what we think might happen there. Albeit this environment right now has been kind of crazy from our supply base basically with everything that we have on aircraft. Because it's not only those actuators that we build, as you know, we do sensors and we do all sorts of electronics and services that we're on basically every Boeing and Airbus platform out there as well as some of the other aircraft as well. So that's kind of difficult to say right now, Myles, but I'll also add just a little note in there that every time we do have one of these negotiations, we look at -- as we did with this last one and we did with the one prior, and I'm talking specifically about these that are on the MAX -- the 737 MAX, and that is, does it meet our financial expectations? Does it meet the accretive nature of what we would expect of a program like that accretive to our story? And as you know, our story was, we said a couple of years ago, we intend to achieve the higher margins in 3 years and the third year is coming up next year. So -- and that was 17%. And so with that in mind, if that particular program and/or any others that are of the size of that or have any kind of leverage-ability on the rest of the organization. If it doesn't meet that, then we certainly look at that as being something that we would decline for, let's just work something else out here. And so that is always a possibility. But right now, it's just that we don't really have that kind of good visibility on it.

Okay. No, that's fair. I did get an incoming question on the AP1000 and update on the progress there is I'd add in just the general outlook for the nuclear power side. I know in the last quarter call, you talked about some of the COVID impacting plant refurbs and aftermarket work. So maybe just give some color on that piece of the business.

Yes. I'll give you a little high level, and then if Lynn wants to talk about it in a little further detail, she can. The China contract, just to give you a little bit of where we're at today. We have all of the original 2017 -- or 2007 pumps, those were 16. They're operating without issue. We had the one issue a while will back and that not to our surprise has gone away. It's -- everything is good now. We have well over 0.25 million hours cumulatively on all those pumps that are operational and everything is running fine. So we're very happy with that. It turns out that it was a one-off, and that's what we would have expected. And so the specific details, the root causes behind that, we still can't talk about, but it's a closed -- it's closed at this point in terms of what happened. And regarding our 2015 China direct contract, our production continues. We are well into the program. Of the original roughly $450 million program, we have about $150 million left, of which we will recover about $100 million this year through the revenue. And then we'll have the next $50 million or so over the next couple of years as it sort of ramps down. And then we await a new order, which I'll just say that we don't have any idea when we'll get the new order, just like I've said over the last several quarters. And so we just don't know. I think that COVID certainly has slowed -- dimmed down in China, and that's because they are -- they were suffering from the economy in China going down just a little bit and not as robust in the double-digit arena as they used to be. And then I think COVID just kind of kicked up some more dust and that slowed some of the discussions down. But we believe that the discussions will resume at some point in the future, and then we'll get things -- get another order going and that will be great, and we'll be happy. Like, as you know, we have -- we took those out of our forecast, and we haven't put them back in. And we did it just for the very reason that we just don't know. And so that's pretty much where we're at on the AP1000. With regard to the aftermarket side, we're seeing a little slowdown COVID-related with regard to some of the maintenance and the plant shutdowns. And we'll -- I think we'll continue to see that a little bit of degradation in that side of the business as a result of that. But as Lynn pointed out in -- earlier that those are not going away. It's not that, that business goes away, it does need refurbishing of -- the plants do. So when they do have an outage, then -- a plant outage, then they will do the business that they have to do. If it's pushed out, then that's exactly what it is. It's pushed out, it's not gone. So we don't see us having lost any of that business that has been slow to come so far. It's just simply pushed out. It could be pushed out until the fall outage season, which, as you know, we have 2 per year. So it could be then. It could be even into next year, some of it. But yes, we're seeing a little bit down on that. Lynn, anything you want to add to that?

I think you've covered all that well. Just to remind a few other facts about our nuclear new build, we have shipped the final Vogtle RCP in the first quarter of this year. So that order is closed, and CW has been paid in full for all 8 of those RCPs. We have the last RCP for summer to be shipped here shortly. And at this point, we don't anticipate any additional builds in the U.S. of AP1000 currently. But other than that, Dave, I think you covered it.

All right. And then maybe just at a higher level, you guys are a larger manufacturing company. And maybe just a comment on workforce and how they're dealing with COVID and attendance. And kind of where you are in that whole scheme of things, which is obviously a pretty challenging problem for anyone, but probably especially for a manufacturing company where remote work isn't quite as possible.

Yes. You're right. It has been challenging, but I've got to say, we've done an exceptional job. We've been tremendously blessed with good health across the board. The last statistic I saw, we were in the range of, let's say, mid-30s in the number of people that had contracted COVID, and we were able to pretty much contain that within the entirety of the organization. So that's out of close to 10,000 people. And we unfortunately had one fatality due to that. And things are -- as this disease progresses, it -- things were going well. The individual was on the road to recovery, and then next thing we know, he took a turn for the worse, and that was a sad event for us, and we're extremely sorry over that loss. But just very surprising that we've not had more than the mid-30s in the number of people. We did have -- from a business interruption perspective, we did have our plants in Mexico closed for a couple of months, and that was nationally closed. It wasn't that we had a problem within the plants themselves. I don't think that we had any cases in those plants, and we had 2 plants that were shut down for a total of 60 days. They're back online now and that was fortuitous for us. The Mexican government decided to bring them back. We attempted at -- in many instances to overcome the closures with essential business declarations. But for the most part, that didn't happen until the second closing, and then we were able to overcome that and have them opened up. So generally, we're following the same protocol everybody does, with the temperature taking, and the masks and all the stuff, social distancing, the staggering of the workforce and different shift moves and stuff like that. So I think generally, I felt pretty good about it. I'll let Kevin and Lynn chime in if you all it saw differently.

Yes. If anything I would add, once, obviously, the disease sort of took hold, we set up a proper task force across the company where all the sort of relative sort of VPs and General Managers were involved. So we, again, tried to use as much as possible best practices. As you could expect, across the sort of countries and different states, there are various different rules and regulations that we've complied to. And we've done a lot of sharing of information and best practices. We staggered our workforce over various different shifts. We've done social distancing. And basically maintained, keeping our plants up and running and operational, other than what Dave said in terms of the facilities that were shut down outside of our control. So I think the thing for us is, obviously, absolutely the most prime importance is the safety of our staff, and we've been doing all the right things to ensure that is in place. Lynn, I don't know if you can add anything else.

No, I think you covered it, Kevin.

Okay. Good. And then early in 2020, you had actually started a cost reduction program, and then COVID came in. And you'd mentioned on the call, you might accelerate that. Can you give us an update on where you are today with respect to that plan?

Yes, this is Chris. So our 2020 restructuring projects, Myles, remain on track. As you know, these were part of our recession playbook, which we initiated before the outbreak. And really just a continuation of actions that we've taken historically to maintain a solid upward trajectory in our operating margins. Back in February, we gave guidance that we would spend $28 million in 2020 to achieve $20 million in annualized savings, and the bulk of that would be recognized in 2021. In the first quarter, we spent roughly $2 million, and we expect to ramp up quickly through the remainder of the year as we accelerate some of the plans in response to COVID. And given the additional cost containment measures that we've implemented, we believe there will be some upside to the annualized savings and then some of those savings will be accelerated into 2020 to help mitigate any top line headwinds. And -- but to go into detail at this point in time is probably not appropriate. As you can imagine, some of these plans are very sensitive in nature impacting our operations and our employee base, and we won't get more specific at this time. But we will certainly provide some updates a little bit later in the year.

Okay. Okay. And maybe to bring it back to a higher level, your industrial business, the general industrial business more specifically, you've got a number of different businesses in there from vehicles to surface tech and valves. And I'm curious, maybe not product specific, but more geographic specific, where are the trends that you're seeing there are? Are there parts of the globe where you're seeing declining trends and parts where you're seeing recovery? And maybe point out some of those differences.

Kevin?

Yes. Sure. Just to give you perhaps a flavor, I think geographically, I think, obviously, the first sort of area that started to get hit was obviously China, but that sort of pulled up and back up to sort of full capacity now in terms of our facilities. But we started to see sort of activity increase in that area and also now as in Europe as facilities are sort of slowly coming off of the lockdown. I'd say at this stage, April was certainly a low point in orders for us, in particular, associated with the valves and surface tech business. That was sort of -- for several years, it's been certainly a significant low point. And to some extent, that's why what we did in relation to the last call, which was hold off our guidance or information around that because there was obviously various different delays as sort of order intake was starting to sort of flow through and it took time for us to start to see the visibility of that in our order books. But I would say, increase in activity starting from sort of Far East and in Europe, and we're beginning to see a little bit of increased activity in the U.S. as obviously people are coming back to work. As you'd expect, COVID, in particular, with a number of our different customers that have been sort of shut down, realistically, it takes time for them to sort of get up -- back up to speed again and start sort of the processes as they sort of come back on to line.

I guess maybe a follow-up to that, Dave or Chris or whomever, but you and others have taken guidance offline, which makes complete sense. I'm just curious, do you think July, you'd be in a position where you'd be able to reinsert that as enough visibility coming back together? Or is it a lower likelihood that, that will happen?

We're not sure at this point to be honest with you, Myles. We're hopeful, yes, that we can, absolutely. And that's the biggest -- worst thing for me possible is to not be able to give our constituents any idea of what we're doing, where we're going and then they can measure us. And so we're diligently in pursuit of the means by which we can do that. I think -- even we had discussions this morning and over the last week in terms of what do we know and what do we know into this quarter so far. Because we don't give guidance, obviously, you know that, on a quarterly basis. But where we're at, can we describe how we're feeling and what things are we seeing and can we describe that with financial metrics? And the best that we come up with right now is, given where we are in this quarter, for example, is that we do feel strongly that this will be the lowest point, this quarter will be the lowest point from an EPS perspective in the year, and then we will start seeing things pick up in the back half of the year. Now going any further with more details than that, we just don't have them yet. But they will then begin to reveal themselves in over the next 30 days, 20 days as we close out this last month, May, and then enter June. We just -- we have to have the time to close. And so once we do that, then we'll have a little better perspective. I do follow and track what Kevin said relative to the weather vane of the surface technologies and how they're performing and what they're seeing out there, do we see pickup and is anybody talking more and asking for quotes. That always signals something to us. And normally, it's good news if they're asking for quote. So it just -- it pains us dearly to not be able to provide the guidance. We -- I'll tell you what, we went through a lot of discussion before that last earnings call, and it wasn't until the very last second that we said, you know what, let's just be prudent. As you know, we're a conservative company, and we're going to under-promise and over-deliver. That's just what we do. And we weren't in a position, and I don't know if we're going to be in July. Chris?

I would only offer that we started off the year, Myles, with Defense growth projections for 8% to 10%. And in our last call, we echoed that we feel very strongly that our Defense businesses are going to maintain solid growth for us this year. As Kevin and Dave both mentioned, there's instability in the commercial markets right now. And as we look at the April order patterns, they were certainly the lowest point for us on the year. But we also know, based upon our position within the market, that it takes a little bit of time for the true full year order patterns to flow down to us as the primes and OEMs that are above us actually manage those orders and their inventory and then flow down those requirements. So we remain hopeful and optimistic that we're going to provide some more detailed guidance in the short term. And if things go well and we get that stability that we're looking for, we would like to do that in Q2. But we're going to have to kind of pay attention, as David mentioned, to what happens here in those businesses very closely over the next 20 to 30 days, and we'll respond accordingly.

Okay. Makes sense. And then maybe to balance sheet and cash flow. So you did $300 million debt offering on pretty attractive levels. I know you've got the revolver out there, and I guess you've got a 2021 note. But any color on the size that you're -- you went out to the market for? And also, I think there's a delay draw in the -- in half of the $300 million offering. Could you just give us some color there?

Yes. This was a great opportunity for us to further strengthen our already solid balance sheet and rebalancing our debt structure and taking advantage of excellent pricing in the private placement market. The rates were lower than many of the other recent deals that I think you've seen in the markets. And the 10- to 12-year maturities provide us with a lot of financial flexibility. In terms of timing, our circle date was May 15, and we opted for a delayed draw feature for up to 3 months, and that provides us with a little bit more flexibility here as to when we pull down that cash. But we didn't do this deal to pay off our revolver. We feel confident about our full year cash position and our ability to pay down the current revolver balance. It had more to do with executing our balanced capital allocation strategy, which consists of reinvesting in our business and supplementing our organic growth with strategic acquisitions and returning capital to shareholders. So we have a lot of confidence in our balance sheet and our ability to deploy capital for the benefit of the corporation and our shareholders.

So maybe then to dive into that one, just to touch, we only have a few minutes left, but are you anticipating working capital as a material source this year of cash or any color there? And then likewise, if the cash isn't necessarily paid on the revolving, the revolver is going to come out of cash from operations. Dave, what's the outlook from an M&A perspective in terms of the pipeline, pricing and availability and the like?

Yes. I'll take the first question on cash flow, Myles, and what we've been seeing. And surprisingly, we've actually had stronger-than-expected collections year-to-date. Now I think that we're going to, like we are with our order patterns, pay very close attention to that over the next few months to understand how our customers are reacting and responding to this. But we've taken actions to reallocate resources within our shared service center in Costa Rica to amplify our collections activities, and it appears to be paying off to date. With what's happening in the order requirements, we are seeing some reduced outgoing cash payables on the AP side. We are taking action to mitigate the impact of any inventory declines on our working capital. So we're -- there will be some headwinds in working capital this year, but -- as a percentage of sales, but we're taking the appropriate actions to address the key components. One thing that's been kind of a pleasant surprise to us is the receipt of advanced payments on Defense programs. As you know, the U.S. government is doing what it can and many primes are doing what they can to flow down cash receipts. So there'll be some uplift there as well. And then we are taking advantage of many of the programs that are available to us, whether that's deferring tax payments in the year, opportunities that are available to us under the CARES Act in terms of deferring FICA payments. So we've got a lot of levers to pull to maintain our free cash flow. So far, signs have been positive that -- giving us confidence in our full year, and I feel pretty good about where we are. So…

So given in next couple of minutes we have, Myles, relative to our M&A side, it's -- we had a couple of deals just right before this whole thing hit. And we're really excited about them, still are, frankly. But where we're at right now is trying to determine where the multiples should be, what's the cash flow situation. I really appreciated the work that the finance team has done with everything that Chris just talked about, and the strength that we have behind that cash flow as we've put an extraordinary amount of emphasis on it over the last several years, and it's paid off handsomely, and it doesn't look to be really deteriorating. It is changing, but -- and it's not changing in a bad manner. So things are going very well there. And I look for cash to pay off some of the things that we buy. And so we're really on a pause just awaiting some market recognition of what those multiples are, what the expectations are and frankly, what the impact to some of our targets has been of this COVID interruption. And so far, by the way, where the targets that we've been watching, there's been very little interruption. So we've been feeling really good about that. So I don't say that it's positive, but it's just a timing issue right now on some of the -- it's about growth for us. And it's more growth from an acquisitive standpoint than it is from a share repo side. Speaking of EPS, I really like this -- the -- I like the share repo, and it's a good deal, and it was, and it still is. I mean we're -- I think we're an excellent buy still. And -- but I look at the longer-term side, 5, 10, 20 years out, and that really resides in the enhancement of our company through our M&A abilities. And so it's very positive. But we're just waiting and watching for some others to jump in the water before we do.

And one just closing one. So do you have a preference? You're roughly half Defense and half Industrial; do you have a preference on which side is the pipeline follow-on?

Yes. I like Defense. I've always liked Defense. I'm not afraid to delve further into that, particularly into the niche Defense areas that you've seen where we've demonstrated extraordinarily good capability to attain the highest level of margins that you can possibly get. And so we like that. We want to stay in that arena. I also think there might be some smoking deals out there on the Industrial side. We just keep watching for that. And as I've said before, I think commercial aerospace, over the last several years, I've been saying it's a little overpriced, and I still think it's overpriced. But there are some industrials that pique our interest periodically. But I'd say that it's been between those 2 and they line up in that order, Defense and then some Industrial stuff.

Okay. Well, that's a good way to end it on smoking deals. And so, Dave and team, I really appreciate you being here, and it's a good conversation, and enjoy the rest of the conference. Thanks, again.

Thank you, Myles.

Thank you, Myles.

Take care. Bye.

Bye.

Bye.