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

Good morning, and welcome to Curtiss-Wright's 2021 Investor Day. My name is Jim Ryan, and I'm the Senior Director of Investor Relations. Thank you so much to everyone for joining us at today's event. We greatly appreciate your interest in Curtiss-Wright. Having been with the company for more than 10 years myself and working closely with the investment community, I'm particularly excited about the new opportunities we have to unlock value for our shareholders. So with that, we'll review some logistics for today. Today's event is being webcast live. The presentation material can be accessed through the Investor Relations section of our website at investors.curtisswright.com, and a replay will be available immediately after the event. For those of you who joined through the link on our website, you'll be able to follow slides and view the speakers on the webcast player. You'll also find a PDF posted there that you can download. Earlier this morning, we issued a press release announcing our new long-term financial targets that we will reference during today's event, which is also available on our website. Before we begin, a reminder that today's presentation contains estimates, projections and other forward-looking statements. These statements are subject to certain risks, uncertainties and other factors that may cause actual results to differ. A detailed discussion of the many factors that we believe may have a material effect on our business on an ongoing basis is contained in our SEC filings. Please take a moment to review the safe harbor statement that is on the screen and available online. Curtiss-Wright Corporation assumes no obligation to update that information. During this presentation, we may discuss certain non-GAAP financial measures. For reconciliation of non-GAAP measures as well as other information regarding these measures, please refer to the Investor Relations section of our website. Turning to the agenda and our speakers. Today, you will have the opportunity to hear from several members of our executive leadership team, all having played critical roles in driving Curtiss-Wright's long-term profitable growth and delivering significant shareholder value. Lynn Bamford, our President and Chief Executive Officer, will start the presentation by providing our company overview and strategic direction. Next, Kevin Rayment, our Chief Operating Officer, will explain our operational transformation and new operational growth platform. He will be followed by Greg Hempfling, Senior Vice President and General Manager within the Naval and Power segment, and then Kevin will return to review the Aerospace and Industrial segment. After a short 5-minute break, you'll hear from Chris Wiltsey, Senior Vice President and General Manager within the Defense Electronics segment. Our financial overview and outlook will then be provided by Chris Farkas, our Chief Financial Officer, and then Lynn will provide some closing remarks. Finally, we will wrap up with Q&A. Before turning today's event over to Lynn, I want to take a minute to explain the Q&A process. As you can see by the agenda, we will be conducting one Q&A session at the end of our prepared remarks. You will need to submit your questions electronically through the Q&A window that you'll find at the lower portion of the webcast player. If you have a question, we encourage you to enter it at any time during our presentations this morning. You do not need to wait until the Q&A begins. I will be moderating the Q&A session, and I'll be communicating the questions to our team. In addition, we will be showing a number of videos throughout the presentations. We'd like to begin by sharing a 3-minute overview video to showcase our history, innovation and technology. [Presentation]

We hope you enjoyed the video and gained a stronger appreciation for our technology and the importance of One Curtiss-Wright. Now I'm pleased to turn it over to Lynn Bamford, our President and Chief Executive Officer. Thank you.

Thanks, Jim, and good morning, everyone. Thank you for participating via the webcast. I'm Lynn Bamford, and I'm the President and Chief Executive Officer, and I'm based in our headquarters in Davidson, North Carolina. I have been with Curtiss-Wright for more than 15 years and have spent my entire career in the Aerospace and Defense industry. We're sorry that we cannot be together in-person today, but I can assure you that we have a really fantastic morning planned for you today, where I will be joined by several members of Curtiss-Wright's senior leadership team. I'm excited to share the next phase of the Curtiss-Wright journey this morning, including our new strategy entitled Pivot to Growth, our enhanced focus on operational excellence, our robust capital deployment framework and our new 3-year financial targets. Curtiss-Wright remains well positioned to drive tremendous value for all of our stakeholders, and the team and I look forward with confidence to deliver on the next phase of our journey. As we progress through our presentation today, I would like you to take away 4 key messages. First, our new Pivot to Growth strategy is led by a renewed focus on top line acceleration through both organic and inorganic sales growth. This strategy will be built upon continued investments in R&D to fuel the innovation engine, while also maintaining our stringent and disciplined approach to acquisitions. Over the past 7 years, we have raised several of our financial metrics to top quartile compared with our peer group, where, for example, we have driven strong growth in operating margin, diluted EPS and free cash flow. Now we intend to increase our pace and focus on top line growth in order to achieve top quartile performance across the board. Second is our intent to deepen and expand our customer relationships by driving One Curtiss-Wright to the customer. Third, we are excited to introduce our new operational growth platform today, which builds upon our strong track record of operational excellence and financial discipline. And in support of our new strategy, we'll continue to play a key role in driving Curtiss-Wright's robust cash flow generation. And finally, the simplification of our story and business model announced earlier this year where we transitioned to a new and more cohesive segment and end market structure. This, in turn, positions us to further unlock shareholder value. Throughout the morning, we will share our strategic initiatives and provide some examples in terms of how we plan to support these efforts. Next, I'd like to provide a snapshot of who we are today. For those of you less familiar with Curtiss-Wright, we have been a publicly traded company since 1929 and are one of less than 60 continuously listed companies on the New York Stock Exchange. Today, we are a global diversified $2.5 billion organization with a rich history across Naval and Aerospace Defense, Commercial Aerospace and Power Generation industries, including many first in innovation, along with a growing strong industrial market presence. Our sales break down into 2 primary markets, with 2/3 of our revenue in Aerospace Defense and 1/3 in Commercial. We serve more than 90 countries and about 3/4 of our sales are in North America. We have 40 major manufacturing sites across the globe. And finally, we have a dedicated team of 8,200 employees, of which more than 20% are engineers. I'd like to thank the entire team for their dedication and passion to ensure that our company remains on a path to success. Next, I would like to share some of my observations as taking over as CEO from the role of Dave Adams on January 1 this year. Curtiss-Wright has a strong culture, ever focused on continuous improvement to ensure that we remain leaders in our key markets. We have a proven leadership team with the experience to drive our new strategies, including several members of our senior leadership team that you will hear from today. We have strong momentum and are energized to continue the One Curtiss-Wright journey that we began in 2013 to advance the culture of our company. I'd also like to provide a sense of what's changing under my leadership. In addition to our new Pivot to Growth strategy, I expect greater leadership oversight of our critical investments in growth opportunities, including investments in R&D and innovation. Increased sharing of ideas and best practices to further capitalize on our employees' strong knowledge base and creativity to further drive Curtiss-Wright's value creation and a more proactive approach to M&A, which includes leveraging the strength of our balance sheet to support our new Pivot to Growth strategy. We continuously look for opportunities to provide a greater level of transparency and enhanced Curtiss-Wright's communication. Earlier this year, we updated and simplified both our segment and our end market structures, which included renaming our 3 segments to Aerospace and Industrial, Defense Electronics and Naval and Power. We firmly believe that this segmentation is a better representation of our portfolio as it established a consistent product alignment across the 3 segments. It also presents a clearer picture externally that is more aligned with how we manage the company, while also creating better alignment to peers. Further, it better enables us to highlight the many product synergies across our defense and commercial markets, where, for example, in our Naval and Power segment, we have core technologies that not only have supported the naval defense market for decades, but are also transferable to the power and process markets. Overall, we believe these changes will provide greater clarity and help you understand our long-term value proposition. Today, we will show you that each segment has significant opportunities to collaborate and leverage synergies in business development, sales channels and innovation for growth beyond what they are capable of on their own. As I mentioned earlier, we have a strong leadership team, and today, you will hear from several of its key members. Each of the presenters here today are respected leaders within the organization and have long track records of driving success. I've had the pleasure of working closely with each of them for more than a decade. Further, each has played a critical role in driving Curtiss-Wright's strong operational and financial performance, particularly, operating margin expansion and reducing working capital to drive strong free cash flow generation. While most of us are beginning new roles, we intend to apply that same rigor and leadership prowess to accelerate top line growth and drive our new Pivot to Growth strategy. Next, I'd like to provide some insights into our ESG journey. We have a strong set of core values driving our commitment to sound ESG principles to protect the best interests of our employees, shareholders and environment and support the continued growth of our enterprise. The path begins with some core principles and a long track record of strong governance and oversight from our Board of Directors. We have a strict focus on safety metrics where we consistently measure and compare our safety performance with industry benchmarks with a goal to be best-in-class. The health and safety of our fellow employees is a paramount importance to our culture. We've created a cross-functional ESG council, inclusive of leaders across the organization to review and collect data, enhance our disclosure and work closely with the rating agencies. Last year, we built and launched a new sustainability website to increase transparency of our ESG initiatives. And we recently launched a new EHS management system where we are collecting and will begin reporting on energy and waste usage, consistent with the Sustainable Accounting Standards Board, or SASB. I'd also highlight that Curtiss-Wright has achieved an MSCI ESG rating of A based on our continuous improvement in sustainability. We look forward to continue the dialogue on various ESG initiatives and their positive impact on Curtiss-Wright and all our stakeholders. Curtiss-Wright has a strong experience and diversified Board of Directors maintaining oversight of our business, as you can see based on the matrix shown on the slide. Our 10-person Board, half of which has joined in the past 5 years, is represented by several current and former CEOs, company executives, industry leaders and includes a cross-section of industry experience that covers all of our major end markets. I'm very thankful to have such a deeply engaged Board of Directors. Next, I'd like to focus on how Curtiss-Wright is positioned to win through our sustainable competitive advantages. We have strong technical expertise across our entire portfolio. And as you heard in the opening video, we remain dedicated to providing quality products while reducing risk for our customers. As complexity increases, customers continuously look to Curtiss-Wright to solve their hardest problems. We have tremendous long-standing and deep customer relationships, some dating back 80 years, including the roots of key customers such as Boeing and Lockheed Martin. We have been involved since the inception of most of our major markets, enabling decades of knowledge transfer, which supports our market-leading positions. We have a strong culture with a steady drive for continuous improvement, backed by a foundation of proven operational excellence. As you saw in an earlier slide, we have a broad global footprint across our engineering, sales, support and manufacturing locations, where, in many cases, we are located near our customers' facilities. Our products are highly engineered, complex, mission-critical, and in most cases, must not fail, no matter how severe the environment. We take pride in developing niche products focused on enhancing safety, reliability and performance. As a result, we are well positioned as a market leader with strong revenue share across our end markets. Importantly, Curtiss-Wright is differentiated because we have strength in the combined portfolio, led by long-term stability in our defense business and agility in our commercial business. With our sustainable competitive advantages in place, we are leveraging our core competencies and technologies to capture growth from key market trends. We remain focused on the highest growth vectors to invest, expand our business and extend our footprint. Such areas include: the need to maintain and grow our strong global ship building base is driven by emerging threats from U.S. adversaries, which continue to enhance their naval capabilities. The return to a major power competition is very much real and continued investment in U.S. shipbuilding capabilities will drive our growth for decades to come. The demand for more sophisticated high-tech warfare and emerging defense technologies where Curtiss-Wright maintains strong capabilities to support new development programs as well as technology refresh on existing platforms. Next, we see strong support by the Biden Administration, promoting the need for nuclear innovation and safety and advanced products to enhance nuclear plant efficiency and reliability in the drive to achieve carbon-free energy. Curtiss-Wright maintains a highly regarded and long-standing presence in this market for support of existing reactors as well as next-generation advanced and small modular reactors, where we continue to gain a solid presence. Further, there will be a move to electrification and electronification across a broad range of air, land and sea platforms, where we expect to benefit in commercial as well as defense applications. And we remain well positioned to benefit from the expected rebound in industrial economic activity, which will provide a boost to our wide-ranging industrial applications. Throughout the morning, we will provide more details on how we are aligned with those growth opportunities. Next, I'd like to dig a little deeper into our strong position in Defense, which represents about half of our company's revenues, and tell you why we remain very optimistic and why we are so well positioned to continue to outpace the market. We have demonstrated a very successful track record, where we have grown at or above the base DoD budget over the past 20 years or the last 3 presidential terms, whether Republican or Democrat. In 2021, we remain on track to once again exceed the DoD budget with current projections for our A&D market sales to grow at 7% to 9%. Curtis Moore is well positioned with long-term visibility across key platforms, including critical aircraft carrier, submarine and fighter jet platforms where we have strong bipartisan support. While we recognize headwinds exist in the current budget environment, we remain well insulated from budget trimming due to the breadth of our portfolio, market penetration through steadfast investments in technology. We continue to build on our strong position in defense electronics and long-term platform agnostic approach with wins on more than 3,000 programs across 325 platforms over the past 10 years. We have single source positions across more than 50% of our Defense business and strong IT content. Finally, we are aligned with high-growth and high priority DoD investments and emerging technology trends, leveraging our strong core position in embedded computing, where we are continuously driving open standards. A few examples that reflect Curtiss-Wright's alignment include security and cyber, which ties to our embedded computing capabilities; hypersonics, tied to our flight test equipment; and the next-generation of open systems architecture, which Chris will review in more detail later this morning. So how do we intend to enable this Pivot to Growth? We have a clear strategy to achieve it based on these 3 pillars: First, accelerate organic growth through intense and dedicated focus on innovation and collaboration across our 3 segments with steady reinvestment. Second, drive a continued strong focus on operational excellence and not let up on our goal to maintain our top quartile financial performance compared with our peers. And finally, we will maintain the same stead pass and disciplined approach for all our strategic investments utilizing M&A as a strategic accelerator of top line growth to reach our new growth targets. Turning to our first pillar. I will highlight a few of the key drivers of organic growth. First, building on our established positions across our markets, enhancing our collaboration while leveraging technologies across our segments and divisions to provide better value to our customers, maximizing visibility across the organization through the efforts of our innovation council and our new innovation operating systems to drive new ideas. Efficiently investing our R&D dollars while ensuring that we protect our intellectual property and technical leadership, leveraging our deep relationships and engineering expertise by expanding our technologies into new and adjacent markets where we've had great success in improving business development, sales and engineering collaboration to chase new opportunities where solutions may not currently exist. Finally, as we've done historically, realign the organization's incentive compensation structure to accelerate the achievement of our objectives. Turning to our second pillar. In a few minutes, you will hear from Kevin as he introduces the company's new operational growth platform, which builds upon our strong foundation of operational excellence and supports our drive to maintain top quartile performance. We're leveraging our historically strong focus on lean organizational optimization and top quartile performance and increasing our focus on 4 new elements of the platform: innovation, strategy, M&A and commercial excellence to drive our Pivot to Growth. Kevin will provide an in-depth review of these 4 new elements, while the team will provide some examples within the segment presentations. At the heart of all that we do is our talent, which is essential to our long-term success and includes our ability to attract, develop and retain our people. We have a culture of continuous improvement embodied by a widespread and strong succession planning process. We provide our employees with numerous opportunities and various programs to grow their responsibilities, expand their horizons, while maintaining a strong focus and commitment to diversity and inclusion within our workforce. As we extend leadership oversight around all areas of the new growth platform, talent and talent strategy remain core to optimizing our performance. Our third pillar focuses on prioritizing our capital allocation towards M&A by putting our strong free cash flow and efficient balance sheet to work to fuel our top line growth. Starting on the left side, we have 6 strategic filters that drive our M&A efforts. We're constantly searching for acquisitions that either possess this criteria or have the potential to achieve them by becoming part of Curtiss-Wright. We would generally prefer to remain within our current end market structure and are not looking to add a fourth leg to the stool. Of course, we strive to have each acquisition aligned to our stringent financial filters or have a clear path to achieve them, and our goal to maintain our top quartile performance. Chris will give more color on our updated filters later this morning. On the right, we've shared some of our top M&A priorities, expanding on our embedded computing capabilities and adjacent Defense Electronic technologies, both in hardware and software. Major naval, safety and propulsion systems as we continue to grow our content supporting both domestic and international navies. Drive to electrification and electronification with opportunities supporting on and off-highway vehicles, electric aircraft and numerous types of unmanned platforms. Technology supporting the drive for carbon-free energy, opportunities to find niche power generation businesses supporting both existing reactors and new build projects sponsored by the DOE and the DOD. And finally, geographic and customer expansion, whether it's bolting on to our current capabilities or adding key businesses to expand our reach. On this slide, we're pleased to share our M&A scorecard that embodies our strong track record of successful acquisitions, where 5 of the past 6 major deals have been in the A&D markets. We've added nearly $400 million in sales via acquisitions since 2017, and we've gained critical technology, both hardware and software, while delivering strong returns from these acquisitions. By and large, they have gone very well, and we're incredibly pleased with their performance as well as the integration process, as you will hear later in the segment presentations. Overall, 6 successful diligence processes have led to 6 successful acquisitions without compromising our financial position, which we believe should provide you confidence in our team's efforts moving forward to expand our top line via M&A. Next, I will briefly recap the first quarter results where we had a great start to the year, which allowed us to raise our full year 2021 guidance. Our results included many reasons for optimism to support our full year expectations, including strong commercial orders with a 1.2x book-to-bill and also sequentially strong activity. Expectations for strong second quarter Naval Defense orders will support our stable defense backlog. Turning to our 2021 outlook. We expect double-digit growth at the high end of our operating income and diluted EPS guidance ranges, driving strong free cash flow generation, with our conversion remaining above our 110% target yet again. Based on our 2021 outlook and efforts to drive continued operational excellence, we remain on track to achieve 17% operating margin in 2022. At this time, I'm pleased to introduce our new 3-year financial targets through 2023 that will be supported by our Pivot to Growth strategy. They include a minimum of 5% sales CAGR, led by 3% to 5% organic growth and an upside target of 10%, including an increased pace of acquisitions. We expect operating income growth to exceed revenue growth, and this outlook includes continued investment in innovation and R&D, while not losing sight of our focus on maintaining top quartile performance. We expect to drive an EPS CAGR of above 10% and will maintain our strong focus on free cash flow with a conversion rate north of 110%. Chris will provide greater detail later on, on our end market assumptions to support the baseline and upside scenarios. So with that, I look forward to answering any questions at the conclusion of our presentation. Now I'm pleased to turn the presentation over to Kevin. Thank you.

Thank you, Lynn. Good morning. My name is Kevin Rayment, and I am the Chief Operating Officer, and I'm based in our headquarters in Davidson, North Carolina. I have 30 years of experience at Curtiss-Wright and its associated businesses, and I'm extremely proud to share with you today our operational transformation as we continue to grow this iconic company. There are a number of topics I want to cover this morning. As we walk through the presentation, I would like you to take away 4 key messages: First, I'm excited to introduce our new operational growth platform of GP, that builds upon our strong track record of operational excellence; second, I'm going to focus on innovation, strategy and M&A, all of which are essential to our growth engine; third, we are shifting to a more market-facing organization, driving more opportunities with our customer base through commercial excellence; and finally, we're adopting a new continuous assessment process to measure our performance in each element of the OGP to help us drive operational excellence and growth. We've been on an amazing journey. Back in 2013, we started an initiative that focused on our top 10 priorities. It covered multiple aspects with a single clear purpose to drive operating margin. It is ships such as operational excellence, consolidation, shared services and developing low-cost economy manufacturing sites in China, India and Mexico. All of these projects drove enormous value to the corporation and created a foundation for our operational excellence program at Curtiss-Wright. And by 2018, we exceeded our financial goals for the program. In the last 2 years, despite the pandemic, we have continued to drive top quartile performance with strategic investments and optimization of our sites. We have also launched new initiatives centered around growth, innovation, including aggressively defending our IP ownership. Furthermore, we're taking a critical look at our operations, assessing how work is performed and adapting to new ways of working. Importantly, we introduced a framework for growth, which has ultimately led us to our new operational growth platform. This platform combines our great foundational work on operational excellence with the essential elements that we are focusing on as we pivot to growth. Our new operational growth platform comprises of 8 elements. You heard from Lynn earlier as she spoke about talent, and you are now going to see some great examples of the remaining elements throughout the presentations today. As the entire organization is leveraging every element of the model, the aim of the OGP is to drive stakeholder value and customer satisfaction whilst creating greater collaboration across the organization. To deliver growth and to achieve our new 3-year targets, our businesses will be measured on KPIs to ensure performance to the highest standards of operational excellence. If you take lean, for example, we're driving digitization of our shop floor to improve performance, efficiency and visual management. As you'll see in the video, this is being enabled by the introduction of software tools to provide real-time operator feedback on performance, which, in this case, reduced material wastage by 56%. And notably, we increased efficiency across the site to 90%, while providing real-time visual management. We intend to leverage achieved efficiencies and share best practices across the entire organization. Another good example is the investments we've been making in organization optimization. During 2020, we consolidated a further 11 sites across the corporation. A good example of this is an integration of our U.K. Christchurch facility, where we saved a further $3 million on top of the $12 million we saved back in 2018. As one CW, we will continue to look for opportunities to optimize our footprint, reduce our overheads and make us stronger by sharing resources across businesses. Now let me take you through in detail the 4 growth elements of innovation, strategy, M&A and commercial excellence to illustrate our incremental changes. As you know, innovation is a competitive differentiator at Curtiss-Wright, and we have many great examples of technology-first in our respective markets. I'm excited to share that now we have an enterprise wide, comprehensive and all-encompassing program, which further elevates our innovation process. The program is run by a multi disciplined team with members from all of the respective businesses covering all aspects of the program from recognition to process. At the heart of the system is a software-based tool, which provides our 8,200 employees access to a portal, which allows the ability to log individual or joint inventions or campaigns to solicit ideas. The process is gated to ensure the invention has customer engagement, market demand and the appropriate return on investments. This can be achieved through a disciplined approach, leveraging all of CW's technology where possible and making sure as a company, we select the right ideas to invest in. This culminates in ideas being approved for funding so that the business can perform the research necessary to take it to early prototype, for development then transfers to the business unit to see the product through to production. Staff have been incentivized through personal objectives and our executive oversight is in place throughout the process with KPIs monitored on a monthly basis. Overall, this new innovation process will be embedded into the fabric of what we do at Curtiss-Wright to create real value. As you would expect, we take a critical look at our strategy on an annual basis but evaluate continuously. It's well-structured and results in a strategic plan that is driven throughout the company. It provides a powerful mechanism to drive growth. And in 2021 alone, we are tracking in excess of 150 initiatives across the organization. As we move forward, we must continue to adapt and strengthen our approach. We are creating a more common evaluation method and decision-making process, testing strategic assumptions throughout the stages of projects to ensure investments are provided to the highest growth areas and provide a common execution approach to our strategic initiatives, making it easier to evaluate, track and deliver our strategic plans. In addition, we see R&D investment as a crucial step in accelerating our strategies. In the past 5 years, we have grown our investment from $60 million to $85 million. That's a CAGR of 6% and above our peer average. We typically spend 70% on our core, 20% expand markets or technology and 10% on breakthrough ideas. As we continue to improve margins, we intend to partially reinvest those gains back into R&D funding. These investments will help expand our technology offerings, enable us to deploy products faster and drive our strategic initiatives to obtain our organic growth targets of 3% to 5%. As you saw from Lynn's presentation, we have been very successful in our acquisition strategy. Most of the presenters here today come from businesses that Curtiss-Wright has acquired, approximately 75 since 2000. This brings enormous amounts of experience in the technology and markets we serve, along with the -- ability to integrate acquisitions. The success of this approach is due to the discipline we use in both of the work we performed in building up relationships, but with the respective sellers and the integration approach that we deployed over many acquisitions. Although this approach came when we reduce the number of deals we take to the finish line, it ensures a much higher success rate with a better quality of acquisition, making sure we are investing our capital for the best possible returns. We have also more recently expanded our potential acquisition funnel for strategic adjacencies. For example, adding 2 software businesses to our Defense division. We intend to continue with this approach, widening our technology, but sticking to our core markets and our strategy. We also prefer proprietary deals, as evidenced by 4 of our last 6 transactions, again, illustrating the importance of relationships. With an experienced team and constantly refined process, we have the ability to quickly address market needs and close on acquisitions. But make no mistake, speed will not deter us from our disciplined approach to evaluating deals of all sizes. Commercial excellence is another one of our key focus areas, led by the 4 initiatives you see on the left-hand side. We are creating a more customer-friendly website to make it easier to see what Curtis Moore can offer across various markets. This will be supported by additional business development efforts across the corporation with a single face to the customer. In conjunction with our assessment program, we are launching a new approach to customer satisfaction and retention, getting direct feedback to the voice of the customer and new approaches on how we measure important customer criteria, ensuring we are aligned to their expectations. As you know, we have multiple pricing models across our businesses. Importantly, we are reexamining the frequency of pricing changes to ensure we are capturing the value we bring to our customers. We are launching new training programs on commercial terms and conditions for all 400 of our market-facing employees, along with continuing to invest in further digitization of our sales tools to help the team be more successful in tracking and winning new business. Overall, we're focused on commercial excellence to further drive value for customers and our shareholders. At Curtiss-Wright, we are firm believers in what gets measured, gets improved. So as part of our operational growth platform, we have developed a full site stroke business assessment tool. The continuous assessment tool is managed by our operational excellence team, again, with representation from each of our divisions. The tool allows for diversification of products and services we provide and sets criteria, goals and KPIs to be measured and scored against. The teams then show evidence to the counsel of how they have scored themselves and justify their rankings, providing consistency, oversight and a high-performance level. Executive approvals are required at higher levels of award, raising the profile and engagement. Our plan is to have the first pilot assessments taking place in Q2, which has already commenced, and we are targeting at least 30 sites in 2021 to create baseline assessments. Staff objectives have been heavily weighted towards growth, accountability and the assessment process, taking a similar approach to that of 2013 that drove our operating margin, and we look forward to updating you as this new exciting initiative develops. As we implement our operational growth platform, I want to introduce you to 3 KPIs that we've been tracking across the organization. These 3 metrics will be an important aspect of showing our progress towards growth: First, innovation pipeline is a measure of the number of ideas we track in our organization. Today, we are tracking 325 in our system. Next, design wins is a measure of new program wins that represent additional wins outside of our existing business. Today, we are targeting 446. And finally, LTV, Lifetime Value is the measure of the value of those wins. Today, this equates to $2.5 billion. We are targeting to grow these metrics by 5% year-over-year to drive our organic revenue growth rate. These metrics will ensure we closely monitor our progress to drive long-term sustainable growth for the organization. And finally, I want to give you an excellent example of innovation at work. Within our Naval and Power segment, our EMS division is well-known for its technical innovations and tackling the most difficult of engineering problems. It took its innovative ideas from Naval Nuclear Pump technology, long life mustn't fail and applied it to multiple applications. This application for subsea pumps will drive enormous value to the customer by replacing failure pumps with a fit and forget technology, and saving significant amounts of cost and potential loss of production, resulting in 2 major customer opportunities, which could drive in excess of $350 million in Lifetime Value and have the potential to unlock nearly $700 million of potential revenue in this market, a great initiative, bringing real value to our customers. So in summary, we are introducing a new operational growth platform, fueling our engine for growth through focused efforts on innovation, strategy and M&A, creating a more market-facing organization with improved commercial excellence while driving continuous assessment to measure and improve performance, delivering top line growth and maintaining our top quartile performance. Now let me turn you over to Greg to cover the first of our segment presentations. Greg?

Thanks, Kevin. Good morning. My name is Greg Hempfling, and I'm a Senior Vice President and General Manager at the Naval and Power segment. I am based in Pittsburgh, Pennsylvania, and I have been with Curtiss-Wright for over 15 years. I have over 35 years of experience in Naval Defense and Commercial Nuclear power. Today, I will be briefing you on the new Naval and Power segment. The Naval and Power segment has a rich and long history in our primary markets. First, we have been in them since the inception of steam propulsion for the Navy in the mid-1800s through one of our legacy companies, and since the inception of nuclear power, for both U.S. Navy nuclear propulsion and commercial nuclear power. Second, we have a track record of success in leveraging our core technologies and applying them into other markets. Third, as Lynn mentioned earlier, the world threats are increasingly dangerous and evolving, and this strongly supports the U.S. Navy's 30-year shipbuilding plan. Fourth, because of our heritage and experience, Curtiss-Wright is in a strong position to benefit from new reactor developments. The Naval and Power segment is the largest in Curtis Moore today at just under $1 billion in revenues, with over half coming from Naval Defense, where we enjoy a single source position for much of our work. The Navy's 30-year shipbuilding plan provides the segment great visibility into the demand and the ship mix content. The U.S. Navy is driving their ships harder than ever, and this is increasing aftermarket service needs. It is an unprecedented renewal and worldwide shipbuilding that provides us growth opportunities. Next, in commercial nuclear power, while the existing fleet is aging, we are actively engaged with the utilities and helping them with plant life extensions to realize more benefit from many plants. Curtiss-Wright also is working with several small module reactor designers and advanced reactors, more of which to follow. While oil prices remain low, oil exploration subsea and the desire for more reliable pumping systems is providing us opportunities to capitalize on the spending in the process market. Curtiss-Wright provides lifetime support, including engineering and field services across all our served markets to ensure our products and the platforms themselves are operating at optimal levels. As you can see in our product portfolio, we have significant content that is critical to the safety and operation of the Navy's top end ships as well as ensuring helicopter safety. We have developed significant products for critical nuclear reactor equipment that is our in Curtiss-Wright, a strong reputation in the industry. As a result, our customers regard Curtiss-Wright as a partner and the go-to company, leveraging our expertise and substantial knowledge base when faced with operational improvement and technological advancement opportunities. The segment enjoys numerous, sustainable competitive advantages. Our industries are requirement rich, rigorous and engineering and verified by extensive quality and testing programs. We enjoy a single source position for much of our portfolio, and we have long-established integration of our design, analysis, manufacture and testing of our equipment. Because of the nature of application of our products from high-temperature and pressure in a highly radioactive environment to sitting on the ocean floor in a harsh environment of temperature and pressure. We have significant expertise in our workforce and engineering codes for unique acoustic, shock, pressure and flow requirements. This is supported by unique test facilities that some are considered national assets. As you can imagine, the quality of our products is paramount to the safe and survivable operation of the Navy's top end platforms. As a result, we have robust quality systems that are rigorously and regularly tested by our customers and industries. For example, we have an unusually broad set of scopes approved by the ASME under our N certificate. Lastly, we give back to our industries to share our expertise. Our employees are actively involved and integrated into our industry's regulatory and oversight bodies. The segment is well positioned for growth and stability with the current industry trends. The ongoing construction of the Ford-class aircraft carriers and the continuing refueling and overhaul of the fleet drive significant demand for our products. I will go into more detail on this in a minute. The segment has been awarded all of our traditionally submarine shipset content and new services on the Columbia class submarine. I will also speak more to the Columbia program shortly. The segment's existing products and our preparation for the transition to the electrification of traditionally mechanical systems and unmanned systems, has us well positioned for growth internationally as well. This growth has already started to materialize with our recent wins in Australia for both their new surface combatant and submarine programs. We believe that the world's current focus on carbon-free emissions will drive continued and growing support for nuclear power as one of the solutions. It is carbon-free and it's highly reliable. While China has set a goal for 150 gigawatts of new nuclear power by 2030, other nations in Eastern Europe and India have also initiated their planning for new nuclear power plants that give us confidence in more AP1000 orders in the future. By applying Curtiss-Wright's unique capabilities to supply first-of-a-kind equipment and our long legacy of proven products puts us in a strong position with the SMR designers and advanced reactors. Operating on the ocean floor to pump oil is a highly demanding environment that requires robust, high reliability solutions. This type of solution is exactly what Curtiss-Wright is known for in our Navy and Power products. In summary, these various industry trends are enabling the segment to maintain our key core positions and capitalize off of them into new and adjacent areas. The next few slides, I'm going to focus on each of our strategic pillars for long-term profitable growth. Our position in the U.S. Navy top end platforms of aircraft carriers and submarines provides us a strong base of business. Additionally, between acquisition and a strong competitive spirit, we have significantly grown our shipset content. Because of how large and critical these programs are to Curtiss-Wright, I'm going to spend a few minutes at a more detailed level on each. First, the Ford-class aircraft carrier is our largest shipset content in Curtiss-Wright. We have increased our shipset content by 33% since 2016, and we are very proud of the role we play in the nuclear power, propulsion, aircraft launch and a myriad of other services throughout the ship. The carrier is a long-term project. Any one ship, the revenue recognition takes on the order of 7 years with the majority of the revenue in the middle 5 years. Next, the Columbia-class submarine is our nation's top priority and will serve as the most secure of the nuclear Again, we have increased our shipset content by 28%. While I can't go into details, we have set new records of achievement in various technologies and our products that go into this unique and critical platform. And on the right, the Virginia-class submarine program is Curtiss-Wright's largest revenue program as a result of the quantities of this summary. No surprise, we have increased our shipset content on this platform by 25%. This provides you an overview of much of the naval business we enjoy today. I can assure you that we are working on the next-generation of technologies that will serve the U.S. Navy in the coming decades for the FFG-62 and by follow-on technology insertions in Virginia and the next-generation submarine. We cannot discuss those technologies at this time because of security restrictions. Next, I'm going to turn my attention to a few examples in our power and process markets, demonstrating our innovation and collaboration. The U.S. Department of Energy is supporting 10 U.S. advanced reactor designs to help mature and demonstrate their technologies called the Advanced Reactor Design Program, ARDP. Advanced Nuclear Energy Systems hold enormous potential to lower emissions, create new jobs and build an even stronger economy. The ARDP will speed the demonstration of advanced reactors through co-shared partnerships with U.S. industry, by rapidly developing these advanced reactors that hold so much promise, we can expand access to clean energy and take advantage of market opportunities before key infrastructure and supply chain capabilities are lost. The first example is small modular reactors in the critical equipment that Curtiss-Wright designs and manufactures. Curtiss-Wright provides existing and new equipment and technology, which enable development of these reactors. They will provide significant per plant content. The second example is advanced reactors, where we provide similar equipment, and our ability to scale up and scale down helps the reactor designer to enable development of new micro and mobile reactors, 1 to 20 megawatts, again, with good per plant content. The third example is cryogenic safety relief valve servicing the process market at liquefied natural gas, LNG terminals. Curtiss-Wright is developing new sizes, capacities and sealing technology to provide the LNG operator a greater range of customer design options with better efficiencies and better protection through seat tightness. I'd like to take a minute to talk about one of the synergies highlighted on the right, as an example. I have already discussed the ARDP program. I want to focus on the subsea pumping system on the lower right. Kevin already provided you an overview of this opportunity. This is a great example where we leverage our key motor expertise at one business unit with another business unit's multistage pumping system experience to provide the subsea industry a much more reliable product. I'll now provide some color on our second key strategic pillar to drive growth through operational excellence, with a focus on enhancing operational excellence, state-of-the-art facilities and strategy. We see many product and customer synergies across our power and process markets and have just begun our journey on sharing our wealth of knowledge across the business units and segments to drive innovation. Digging deeper into our lean practices, welding the equipment in various parts and stages of manufacture is a critical step in the pressure boundary integrity of the product and the high reliability of our equipment. Many of these welds have to undergo radiographic inspection to ensure they are correct. As a result, a couple of years ago, we embarked on a digital transformation of the welding process and resulting world records. We focused on validation items and airproofing. And what I mean by validation is things like correct weld rod being used, welder being current and qualified to perform the weld, correct parts being welded, inspection items and sign-offs and such. After the digital transformation was complete, we have now completed over 17,500 welds with 0 validation failures. Over the past several years, the segment has had the opportunity to build 2 new state-of-the-art facilities to replace legacy undercapitalized ones. The results have been profound in many ways. Customer and employee satisfaction are both significantly improved. We were able to refresh and augment our capabilities, and in our latest one, deploy a complete digital transformation in how we do business. These investments have also resulted in reduced cycle times and rework costs. Additionally, we consolidated 5 nuclear aftermarket facilities into 2 to significantly reduce our fixed costs. My last example is on MRO revenues. We have worked hard in integrating the DRG service business into Curtiss-Wright and to leverage Curtiss-Wright products and IP and add them to the service center's portfolio of products that they can service. This has been a win-win as it has resulted in service opportunities for Curtiss-Wright, where the OEM business unit was not local to the shipyard, and as a result, wasn't given the opportunity to bid. Our local presence and having the OEM parts and knowledge has resulted in a number of new business wins that will only grow as we mature the process. Now on our third strategic pillar. The Naval and Power segment also is a great example on how we are delivering value through M&A. The acquisition of the DRG business, which we have split into Steam and Air Solutions, SAS, and fleet services has been a great contributor to our carrier program growth. As I was just discussing on the previous slide, the acquisition brought us a field service business that we did not have prior and is driving both growth and profitability. We have completed construction of our new facility in Summerville, South Carolina and are finalizing the equipment and steam test loop installations. You will see much more on this site in an upcoming video. Second, we added Dyna-Flo to our portfolio. They bring Curtiss-Wright critical, severe service valves right in our strike zone. Our post-acquisition is mostly complete, and they are sold in conjunction with our pressure relief valves or to the same customers. We are excited about the innovation that will come as a result of greater customer intimacy, knowledge and Dyna-Flo leveraging our nuclear market channel. These acquisitions have been a bit more challenging than norm as a result of the COVID-19 pandemic, but our teams have worked hard to complete the integrations and to build a brand-new facility and commission it in the midst of the pandemic. Overall, M&A will continue to be a key accelerator of the Curtiss-Wright Pivot to Growth strategy. Next, we have a short video on our SAS new facility in Summerville, South Carolina. [Presentation]

I have conveyed you our long and rich history and heritage in highly engineered critical products for the U.S. Navy Sting propulsion, nuclear-powered propulsion and commercial nuclear power markets, also that the Naval and Power segment has proven skills in leveraging our core technologies for current markets, next-generation markets and into other markets, that the U.S. Navy 30-year shipbuilding plan provides us a great demand signal to plan and invest and world events continue to drive the need for strong navies for the U.S. and our allies. And lastly, Curtiss-Wright's experience in highly engineered first-of-a-kind equipment is in a strong position to benefit from new reactor developments. In conclusion, I hope you're as excited as I am in terms of the significant positions the segment holds and the opportunities ahead of us and how well positioned we are to capture them as we continue to focus on execution and our Pivot to Growth. With that, I'll now turn it back to Kevin. Thank you.

Thanks, Greg, and good morning, again. Now I'd like to discuss the significant opportunities for growth that we see in our new A&I segment. As you'll see from the presentation today, there are a number of exciting things happening in our business. I really want to convey 4 key messages to help you understand our business. First, we have a number of core technologies and services and not only span both the aerospace and industrial markets but are also transferable to defense. Second, we are leading the way in electronification of vehicles as technology moves from mechanical to electric control and electrification of powertrains. Third, our products are highly engineered for custom applications, promoting efficiency, safety and reduced emissions for all of our customers, many of which we have partnered with for decades. And finally, we continue to drive strategic investments and have proven our ability to manage through cycles while maintaining top quartile operating margins. Our business is evenly split between Aerospace and Industrial, with Defense providing about 21% of our revenue. We leverage similar products to serve multiple markets. Market splits are reasonably consistent with some fluctuation depending on platform demands. Our key market drivers for the industrial business are production rates for the respective platforms of truck, bus, agriculture, construction and material handling equipment. GDP and other general industrial market strength also impact demand for our products. Commercial Aerospace follows OEM production rates, with the majority of our parts being supplied to Tier 1 manufacturers. And Defense is predominantly related to aircraft production. Our product portfolio spans 4 major categories. To give you some frame of reference, I thought it might be easier for me to give you a few examples of the products and platforms we provide. We provide electric flap and spoiler actuation systems for the market-leading PC-24 business jet. Electric actuations provides huge advantages in weight, efficiency and reduced maintenance. Precision sensors for multiple engine manufacturers, aircraft control surfaces and vehicles. In fact, we produce over 2 million sensors a year, and our sensors provide robust, accurate and high-temperature solutions in very demanding environments. Through a decade-long relationship with Allison Transmission, we provide the hybrid propulsion system used in thousands of hybrid transit buses across North America. Our devices have clocked 4.2 billion kilometers, enough to circumnavigate the earth over 100,000 times. We provide electronic joysticks to the world's leading off-highway vehicle manufacturers, producing 0.5 million units a year, meeting the rugged demands of end users and benefiting from the trend towards electronification. And we provide world-leading laser peening services supporting the F-35 sustainment program and coatings to the NASA perseverance Rover. Overall, our technology provides solutions to some of the world's most demanding applications. What underpins our great technology are a number of sustainable competitive advantages from world-class power management and range of power electronics that meet the requirements of multiple vehicle types, to sensors and actuation products utilized on both commercial and military aircraft worldwide. In fact, in some cases, we provide common product families such as engine hot air valves on Sun Pratt & Whitney, commercial and military engines. High-power density precision and size of our electric actuators make them highly valued by companies developing more fuel-efficient and/or electric aircraft. Our portfolio of sensors and solenoids products on every major commercial aircraft program and almost every military program. Higher temperature and improved accuracy, sensors and solenoids allow engine manufacturers to push the limits on temperature to reduce fuel burn. Highly engineered surface treatments with a focus on complex, critical components and a unique laser technology utilizing robotics. All this, combined with an extensive global network spanning 16 countries, working in seamless collaboration with our customers. For example, our 80-year relationship with Boeing. We create long-standing relationships with many products designed for the life of the platform in both Aerospace and Industrial applications. The examples discussed so far are just a few proof points of our robust innovation process and customers' focus to reduce risk and improve time to market with new products. With our capabilities, technology and talented team, we're well positioned to capture growth and benefit from compelling industry trends. For example, we have a broad range of products and systems that meet the demand for electronification vehicles from full armrest and joystick control systems, electronic shifters for automatic transmissions, sensors and electronic throttle controls, with customers like [ HEICO ], where we launched a full suite of in-cab operator control systems. We also have a full range of qualified traction inverters and charge switching units to specifically address the powertrain electrification of commercial vehicles. Our new S260 traction inverter launched in Q1 with Wujin Industrial Systems is being manufactured in CW's Shuzo facility, while the motor and transmission have been specified and sourced by CW as part of the driveline package. We are also addressing the need for electrification on aircraft from conventional electric propulsion, with electric flight control, actuators and sensor technology. As an example, last December, CW was selected by Eviation to provide electromechanical actuators for primary flight controls on their all-electric commuter aircraft. We're also seeing, driven by the need for reduced carbon footprint, there is a great demand for higher engine efficiency, which is driving the demand for advanced coatings, sensors and solenoids that can meet the increasing temperature requirements. Growth opportunities also exist with a range of intelligent actuators for industrial automation and robotics, which help our customers quickly leverage data and utilize analytics within the Internet of Things environments. Importantly, with ever-increasing need for smart sensing control and connectivity, we are ensuring we have the latest capabilities and talent to stay at the forefront of technology. Now that you understand who we are, what we do and our sustainable competitive advantages, I want to drill down on each of our strategic pillars for long-term profitable growth. First, we will accelerate organic growth through innovation and collaboration. As we covered earlier, innovation and collaboration across CW are absolutely crucial to our growth plans. We have a number of innovative development projects all with LTVs of $200 million to $300 million, for example. Electronification improves operator ergonomics, efficiency and visibility and also facilitates vehicle connectivity and autonomy. Developing solid-state center technology, allowing for higher temperature and improved accuracy. These developments also include dual-channel proximity sensors, which have the potential to replace 2 existing sensors with one. We are also developing digital controls, more integrated actuator and electronic control systems for future aircraft platforms. Our WTI traction inverter family is scalable to a wide variety of applications from mini buses and medium-duty trucks up to fully-articulated transit buses and heavy-duty mining vehicles. It also incorporates adaptive tuning software, which optimizes motor performance and reduces overall system cost. And on the right side of this slide, I want to highlight that cross-segment collaboration unlocks technology synergies across CW. Some good examples include our high-temperature and accuracy aerospace center technologies have applications in nuclear power plants for improved safety and advanced health and monitoring systems. Technology from industrial sensors, both design and manufacture has been adapted to aerospace sensors to reduce cost and improve performance. Collaboration on leading U.S. military vehicle electrification program offering our WTI and suite of cab HMI products. Importantly, we are also bringing together engineers from our avionics and actuation business to support the development of actuators and electronic controls. Overall, we remain focused on innovation and collaboration across One CW to drive electronification and electrification. I'll now provide some color on our second key strategic pillar to drive growth through operational excellence with a focus on commercial excellence, organization optimization and lean. In terms of commercial excellence, our Surface Technologies business provides dedicated lean manufacturing processing cells to allow customers to select from pricing based on turn times. Aftermarket framework built into new program agreements, which allow for more competitive pricing upfront, but with a strong aftermarket tail and increasing the use of PMA, Parts Manufacturer Approval Process, to sell spares directly to the aftermarket at more favorable prices rather than selling them through our systems integration customers at production prices. Now we've also accomplished a lot already in terms of organization optimization, but we can always get better. Positively, we rightsized every division during the downturn and are now seeing the benefits as the markets recover. The consolidation of 2 production sites into our [indiscernible] footprint, yielding $3 million in annual savings. Utilizing our facilities and LCEs for not only cost savings, but also getting geographically closer to the customer during development and support. Notably, in terms of lean, we continue to invest in new technology equipment for factory modernization. We're utilizing our equipment design center of excellence to support the use of robotics and process automation throughout CW's global network of facilities. Our investments will allow the new HMI product line to be assembled and tested almost fully automatically. And we're enabling the digital transformation of our operations through the adoption of the Power Business intelligence platform. Our international management and engineering expansion program provides additional product development in LCE regions like India. We also continue to leverage our supply chain in India and China to drive cost savings and lower total cost of ownership for our customers. Overall, we are driving growth through operational excellence, maintaining top quartile performance and fueling growth investments. Before I cover the third pillar, we would like to share a short video illustrating our organization optimization that took place in our U.K. Christchurch facility. [Presentation]

Now on our third strategic pillar. The industrial division is a great example on how we are delivering value through M&A. From Curtiss-Wright's original acquisition of Penny & Giles and subsequent businesses of Williams Controls, PG Drives, Arens Controls, we created a cornerstone industrial business. The synergies of products, technologies, target markets and facility locations fueled one of the most successful integrations within CW history. Consolidated sites in China and expanded our low-cost manufacturing facilities in Shuzo China and Pune in India, which now support the entire division, with worldwide manufacturing, engineering support for all of our product lines. The division's complementary products of WTI, power management, electronic throttles and shifters, HMI products and sensors, and investment in new products, make this the center for our electronification and electrification strategy. We are now ready to expand the breadth of our technology through future acquisitions, a key focus area as we continue to expand our scope of strategic adjacencies. The key takeaway from this slide is that we have a proven track record and an integration muscle to execute on acquisitions and our focus on expanding our technology portfolio. The division is in a great position with new products and developments, focused on taking advantage of many megatrends such as connectivity, the Internet of Things, centralization, electrification and electronification. Overall, M&A is a key accelerator for our pivot to growth strategy. In summary, we are a recognized key supplier of critical technologies to both industrial and commercial markets, with opportunities for growth in defense markets. We are leading the way in electronification and electrification of vehicles, providing highly engineered products that remain with the life of the platform, which helps to deepen long-standing relationships with our customers. And we are continuing to drive strategic investments with proven capabilities to manage through aerospace and industrial cycles. To conclude, I hope you're as excited as I am in terms of the significant opportunities ahead of us and how well positioned we are to capture them as we continue to focus on execution and our Pivot to Growth. With that, we'll now take a short 5-minute break before resuming with Chris to discuss Defense Electronics. Thank you. [Break]

Hello, everyone, and welcome back. My name is Chris Wiltsey, and it is my distinct pleasure to share with you much of what we are excited about with regard to Curtiss-Wright's Defense Electronics segment and the segment Pivot to Growth. I've been with the company for nearly 20 years, during which time, I've held a variety of general management positions. Currently, I am Senior Vice President and General Manager in the Defense Electronics segment and based in Los Angeles, California at one of the segment's cornerstone business units. I want to start with 4 key messages that are fundamental to our future performance. First, we have a long history in the Defense Electronics industry, having been leading suppliers in the commercial off-the-shelf, or COTS, embedded electronics business for more than a decade before 1994. That's when then Secretary of Defense, William Perry, issued the landmark cost initiative memo that launched the military's use of open standards electronics. We continue to maintain a leadership role in the industry, and our expertise has helped shape definition of open standards for the military since the very beginning. More recently, the so-called TRI services memo of January 2019, issued jointly by the offices of the secretaries of the Air Force, Army and Navy, directed that a modular open systems approach, or MOSA, be reflected in all future requirements and programs. This memo has put Curtiss-Wright yet again in a leadership position for the next-generation of Defense Electronics products. And this year, we have already begun fielding, to greater acclaim, solutions aligned with the latest new standards currently in development. Secondly, as our product catalog has grown dramatically over recent years, we are even better positioned to provide our Defense customers with higher-value, complete system-level solutions rather than a subset of components. Increasingly, our customers have come to recognize that the lowest risk for their programs results from choosing a single, trusted, proven vendor to deliver as much of their system as possible. This approach significantly derisks the many integration challenges that might arise when sourcing products from multiple vendors, and allows us to maximize our content on platforms. Even better, our broad and deep product and technology portfolio allows us to compete across the full spectrum of the defense market's platforms and applications rather than narrow vertical segments. Third, we continue to deploy a healthy, well-managed R&D budget, aligned with the DOD's highest priorities. Using our deep understanding of the emerging trends in the market, we direct our investments at a holistic system-level across the breadth of our portfolio to ensure we generate the greatest cumulative returns. Finally, the Defense Electronics segment continues to align the growth of our technology solutions, whether organically or by addition through acquisition, so that our new product offerings are as compelling for new defense platform starts as they are for life extension programs for the military's priority platforms. Our business is spread across all types of military platforms, aerospace, ground and naval, with some of our technology finding applications in commercial aerospace. We are tracking several key market drivers we believe will shape the future of our business over the next several years. Obviously, the future defense spending plan, specifically the investment accounts, will have a significant impact on our customers' buying behaviors. Although significant at a macro level, other factors have as much or even more impact. The global threat environment driven by geopolitical instability continues. Many daily news stories highlight the need for continued investment in combat system modernization, providing battlefield overmatch through technology exploitation versus force structure. The Department of the Navy's 30-year naval shipbuilding plan, driving towards a 355-ship modernized battle force, will also provide us with many opportunities in coming years. Although a smaller part of our overall business, commercial aerospace production rate recovery is another market driver that we are tracking. On the right side of the slide, you can see that our products fall into 4 major categories. The color-coated dots highlight that most of our products can play in all domains. Our catalog is both broad and deep, and because our products and product lines aren't purpose-built for narrow dedicated applications, every platform type provides us with multiple opportunities. Additionally, because multiple product categories are applicable to the same platform, we can deliver full systems to these platforms with ever-expanding scope. For our customers, the more our products can be integrated together to create a more complete system solution, the more compelling we are as a supplier to all services. Augmenting our broad portfolio of highly engineered electronics are a variety of software products, including support packages, high-performance computing and secure networking tools and data visualization software, to name but a few. The importance of these offerings to our electronic products is clearly evidenced by our software engineering force, representing approximately half of our total engineering population. Our customers view us as a trusted, proven leader. They trust us to deliver a highly reliable product that works on time and on budget, and they trust us to support them as expert system architects, leveraging our large catalog to provide an optimized solution for their unique applications. We've been proven over and over again as a partner across thousands of programs. We've been here for a long time, and we've continued to perform at the highest levels. We've built extensive relationships with industry and government, and we have set the standard for longevity of supply. Now I'd like to talk about our sustainable competitive advantages. First, we have decades of experience with over 2,000 customers and more than 3,000 programs. And this rich history and experience makes us a highly valuable partner for our customers when architecting the optimum solution for their application. We're platform agnostic. Since our open standards-based products are not overly tailored to specific platforms or applications, we can architect and provide high-performance systems rugged enough to perform in any environment for any deployed platform. We have an expansive range of IP. The larger our catalog gets, the better we are able to tailor an optimal solution for our customer and the more applications we can support. Our pace of development is impressive. We've released more than 500 new products over the last 10 years, and we've added more than 20 completely new product lines in just the last 5 years. These are not just additional products, but complete new product lines that enhance, broaden and deepen our catalog. Our engineering workforce spans all functional requirements. And we have established processes that maintain and pass along our deep knowledge history to each new wave of engineers we bring on board. This ensures that our valuable DNA and expertise is preserved as we welcome new engineers into the organization. Our products deliver the highest performance and operate in the harshest military environments. We've accumulated over 30 years of proof that our products meet and exceed the most stringent military performance and ruggedization requirements, thanks to our expertise and industry leadership in system architecture, material science and packaging. Our products are designed for these requirements from the beginning and are always size, weight and power optimized. We consider this a key differentiator. Also, we have established the industry's best practices for longevity of supply of our products, addressing supply chain, obsolescence, end-of-life and counterfeit detection challenges to ensure that our products can support the extremely long life cycles required of deployed military systems. We are constantly monitoring and testing to make sure that all of our efforts are fully aligned with the DoD's top priorities in platforms, programs and technology. In recent years, we have seen a huge increase of opportunities requiring alignment with the modular open systems approach. We will continue to lead the market with products complying to most of the standards, and we will continue our legacy of taking a leadership role in their development. The requirement to secure data on deployed platforms has become increasingly important in recent years. We continue developing technologies to protect critical data residing on and transmitted by our deployed systems and applications, using advanced cyber encryption and other trusted computing and protection techniques. Emerging requirements in the battlefield are a continued focus for us. As new types of platforms emerge, such as hypersonics, unmanned autonomous and intelligent systems, our position in these applications will continue to grow through the alignment of our solutions to the unique needs of these new platforms. As new types of threats emerge, we will be ready for these as well. A recent government accounting office memo highlighted the need for increased DoD investment where technologies able to provide assured position, navigation and timing in the event that GPS is disrupted or spoofed by our adversaries on the battlefield. We have been investing in solutions related to these requirements for several years. And earlier this year, we successfully demonstrated our most current solution in open standard form factor for the U.S. Army. Providing network connectivity to the tactical edge of the battlefield is another high priority for the DoD. Under the integrated tactical network program, pre-planned upgrades for NetCentric battlefield solutions are being performed on a biannual basis. Formerly, our long history in the connected battlefield was primarily focused on intra-platform solutions. With the recent acquisition of PacStar, we have added substantial expertise and market leadership for secure inter-platform communications, greatly extending our segment's reach across the entire connected battlefield. The resultant expansion to our product portfolio made possible by the addition of PacStar's technologies provides us access to $5 billion worth of top DoD priority opportunities. We've also continued to expand our opportunities in the naval shipbuilding market. Our long-established relationships supporting our nuclear Navy instrumentation and control programs continue to strengthen. With our recent acquisition of 901D, we've broadened our available naval platform opportunities, both for other surface vessels and in the growing market for unmanned underwater vehicles. The UUV applications have also started providing great opportunities for our businesses that provide small form factor electronic subsystems. Recently introduced DoD acquisition strategies that utilize other transaction authorities, or OTAs, are intended to accelerate the acquisition process by specifically leveraging companies like ours that are investing in non-developmental items and COTS open standard-based solutions. We are in an optimal position to support the DoD as they seek to accelerate the fielding of key technologies for insertion into existing systems to deliver technological overmatch to the battlefield. Now that I have described who we are, what we do and our sustainable competitive advantages, I want to drill down on each of our strategic pillars supporting long-term profitable growth. Our pivot to growth will occur through heavy leverage of both innovation and collaboration. To address MOSA opportunities, we will innovate products that follow open standards and provide the most compelling technologies to our defense customers. We will maintain our leadership role in development of these standards, and we will continue to be one of the first COTS suppliers to market with new MOSA-aligned system solutions. PacStar continues to lead innovation in the tactical battlefield. One exciting example is the continued expansion of capabilities in their secure wireless command post product family that extends network connectivity to the soldier. Initially connecting soldiers from expeditionary forces via WiFi, their solutions now enable sensitive data to be connected to phones and tablets using cell phone technology, vastly extending the distance and reach to soldiers at the tactical edge of the battlefield. These innovations provide a great example of how innovation has effectively created an expanded market for our products and services. I mentioned earlier a recent example of our MOSA innovation, in which we demonstrated a unique assured position, navigation and timing, or APNT, hardware architecture on a ground vehicle to the DoD with great success. This achievement was a result of our investments in developing rugged, open standards-based subsystems that integrate complementary position, navigation and timing services to augment or temporarily replace GPS when lost or denied as well as identifying when adversaries attempt to deliver spoofed GPS data. The quality, high performance and reliability of our industry-leading system-level flight test instrumentation solutions has led customers to increasingly select them, not just for the flight test program, but for deployment in operational applications, opening significant new program opportunities. On the right side of this slide, we highlight a number of ways in which collaboration across Curtiss-Wright helps to drive growth. Collaboration, whether on these examples or countless others, comes in nearly every form imaginable. The Defense Electronics segment provides IP, subsystems and subject matter expertise to the other Curtiss-Wright segments to help complete their offerings, and the reverse happens as well. The graphics on top of this slide show but 2 examples of this. We also provide each other with paths to new customers and markets. For example, we are actively leveraging vehicle electrification products and technology from our industrial businesses for use by our defense customers. We also collaborate extensively within the segment. The addition of PacStar immediately extended our commercial solutions for classified data protection capabilities, from protection of data at rest to protection of data in motion. Further enhancing this expansion of our capabilities, we've already begun planning the migration of PacStar's techniques to a broad portion of our other product portfolios for very little incremental cost. Operational excellence, the second pillar supporting our pivot to growth, affects all aspects of our business. And I highlight just a few examples here. The way we invest in our product lines and bring them to market allows us to keep our pricing within the commercial realm. We also work closely with our customers to understand their business capture strategies and contracting approaches so that we can tailor our contracting with them to maximize the mutual probability of win as well as to achieve mutually beneficial financial terms. The intimacy of this cooperative arrangements often extends to us helping author portions of our customers' proposals where our expertise can be particularly impactful. Having completed 4 acquisitions since 2017, our cross-functional M&A team continues to hone our diligence and integration expertise. We've built an all-star team that includes many of the same participants for each opportunity. The team has developed a real muscle in terms of what works best, with great care taken during integration to avoid inserting any friction into the acquired organization while offering world-class support for accelerating growth. I can confidently state that these recent acquisitions have been successful and have benefited from being owned by Curtiss-Wright. We've recently consolidated all of our North American operations under a single leadership team. This ensures that these operations share best practices and benefit from the team's broad expertise, implementing lean and other operational excellence programs. As a COTS supplier, managing our supply chain is critical. We have increased the centralization of our supply chain management, leveraging our 30-year legacy of expertise in this discipline. Importantly, this year, amidst the well-reported challenges of widespread component shortages, we have so far successfully mitigated every lead time challenge that has risen. And we are expecting to finish the year with no material impact to our sales as a result of any component shortages. We are also actively leveraging our supply chain management expertise across the other segments of the corporation. We encourage collaboration among our sales and business development staff as well. As a result, staff crossed between defense and commercial civil markets, between foreign and domestic, and between nuclear and nonnuclear Navy. This enables us to apply quite easily relevant products and technology from one into any other. A great example is provided by our family of Fortress crash-protected flight recorders. Initially designed for military platforms, these super rugged products have recently seen big wins with Honeywell in the commercial market, and we have great expectations for leveraging Honeywell's relationship with Boeing. In the defense market, we recently had a large win for Fortress with a T-6 Texan II trainer aircraft. The very same core technology is being applied in both of these quite different markets. As I mentioned previously, we continue to deploy a healthy, well-managed R&D budget aligned with the highest DoD priorities. Our R&D committee that I chair meets every week to review the R&D pipeline across the entire segment, following all projects from initial concept to product release, ensuring that we deliver the most compelling and relevant technology to our customers. We balance our investment across our portfolio, and we deliver every product as soon as the underlying technology is available in order to lock up our positions with our customers. In the last 12 months alone, we've reviewed over 70 project proposals. Many of these are currently in development and will result in release product this year and next. While the R&D Committee manages the product development pipeline, our CTO Council monitors new technology, technology differentiation and technology disruption developments to keep our teams informed on all of the choices available for their product architectures. Our 2 most recent acquisitions, 901D early last year and PacStar last November, have added significant capabilities to the segment. As I have previously mentioned, we have a long legacy of excellence in intra-platform data communications. With the addition of PacStar, we've greatly extended our reach with solutions for inter-platform communication to the tactical edge of the battlefield. The graphic on the left highlights just how far-reaching PacStar solutions are. Every one of those diagrammed connections represent inter-platform communication paths where we now can have a significant presence. What's more, our combined security solutions for protecting data at rest and in motion squarely meet today's security requirements. The widely recognized ease of use which allows PacStar products to be rapidly deployed have made them an industry favorite, and our battlefield communication story has become much more compelling and complete with their addition to our business. The integration of PacStar into the segment is now essentially complete. We had a close partnership with PacStar for 4 years before we acquired them, and that relationship has only been enhanced by bringing them under the same corporate umbrella. We now work even more closely when planning development, go-to-market strategies and customer engagement. Turning to the 901D acquisition, we've greatly expanded the range of Navy platforms on which we can gain a presence. In addition to opportunities on nonnuclear platforms, we are seeing early interest on some nonnaval vehicles where 901D's rugged chassis are also applicable. 901D also adds new opportunities across the segment for integrating our products into their enclosure solutions, establishing yet another path for selling to our customers. As with PacStar, 901D is now essentially integrated into the segment. They are fully integrated into our sales channel, our business development group and all other functional disciplines. And importantly, we have avoided introducing any friction into their ability to execute on their strategies. Instead, we have only augmented and added to their ability to operate in their markets. I now invite you to watch a short video that will highlight some of the reasons that we are so excited to have PacStar become part of the Curtiss-Wright Defense Electronics family. [Presentation]

I never get tired of watching that video. In summary, we have a long history and well-established reputation in the defense electronics industry, having been a leader for several decades. We will continue to grow our leadership position in delivering products and services aligned with the modular open systems approach, and you will see evidence of this in press releases planned for the coming weeks and months. We will continue to grow and expand our product catalog and become an ever more compelling systems solution provider across all of the military markets, platforms and programs. We remain committed to a robust and well-managed R&D investment that delivers compelling technology, meeting the highest priority needs of the military. And finally, we will continue to align our strategies to support growth and win in any budget environment we find ourselves in, as we have been over the past many years. I hope that this presentation has provided you with insight as to why I am so excited about the segment's future as we pivot to growth. I thank you for your time today and look forward to answering any questions you may have during the upcoming Q&A segment of today's presentation. With that, I now turn the presentation over to our Chief Financial Officer, Chris Farkas.

Thank you, Chris, and good morning, everyone. My name is Chris Farkas, and I'm the Chief Financial Officer of Curtiss-Wright. I'm delighted to have this opportunity to share our financial vision with you today. But before I do, let me share a bit about my background. I'm a financial executive with 30-plus years of diversified experience, working mainly within Fortune 50 and 250 aerospace and defense companies. Before becoming CFO last May, like many of the leaders that you've met today, I've been with the company for more than a decade, and I've had the pleasure of working with this team to achieve exceptional financial results. Today, I'll discuss 4 key messages, beginning with how we can leverage the strong foundation that has been created and further enhance our operational and financial excellence. While we've had great success in optimizing our financial performance, we now have the challenge of pivoting to growth, driving growth through innovation and investment while maintaining top quartile financial performance. In support of this strategy, we'll continue to generate robust free cash flow to fuel the reinvestment, and we will unlock the power of our balance sheet for growth while maintaining financial rigor and a disciplined approach to capital allocation, and I'm excited about the benefit to our shareholders. So I have the pleasure to follow our segment presentations, each uniquely positioned to offer strong value to our shareholders. With our recent segment realignment we strove for transparency and established each segment with a goal for improved comparability to industry peers. However, CW is differentiated because we have strength in the combined portfolio. Through the combination of these businesses, we have the ability to both capture and insulate investors to current industry trends. Our Defense businesses offer tremendous stability and consistent cash flow generation that drives strength into our balance sheet, while our commercial businesses have consistently demonstrated the highest levels of agility in response to the ebbs and flows of our commercial markets. We offer stability in times of economic weakness and exceptional opportunity in times of economic recovery. Beyond these benefits, you heard from the team and how we can accelerate growth to further leverage our broad portfolio, enhancing collaboration, innovation and customer engagement. But it's important to note that we have and continue to support our combined portfolio through more than 100 shared service professionals, yielding a substantial annualized savings across the corporation while enhancing management control. Our shared services extend through IT, HR, finance and the procurement functions. And in addition to our shared services, we have a culture of deep engagement between finance and operations where we operate as business partners to achieve exceptional financial results, driving profitability and free cash flow generation. With a strong foundation, we now have continued opportunities to enhance shareholder value through heightening our focus on company-wide investment priorities where we can refocus some of that autonomy towards the greatest investment returns. We also have a substantial opportunity in deploying more systemic improvements in areas such as commercial excellence and enterprise performance management to improve our financials and not simply rely upon efficiency and tenacity to optimize our information flow and performance. These systemic improvements will also facilitate growth and accelerate the adoption of best practices across our company and newly-acquired businesses. It's our intention to sustain top-quartile performance while maximizing growth and operating income for our investors. Here you can see Curtiss-Wright's strong track record of financial performance, and I'll begin by highlighting the top 2 graphs. In the top left of the slide, we grew revenue at a CAGR of 3% over the past 5 years. And while respectable, especially in light of the pandemic, this was not top-quartile performance, and we're now seizing the opportunity to accelerate growth. Our historical focus, as you can see, has been towards optimizing the portfolio. We were able to expand our operating margins by 220 basis points, driving operating income growth at a faster rate than revenue growth. With our recession playbook in hand entering into 2020 and additional actions taken in response to the pandemic, we were able to mitigate the loss of $300 million in commercial revenues to only a 20 basis point decline in margin in just 9 short months, again highlighting our organizational agility. Looking back over the past 5 years, we drove a double-digit EPS CAGR of 13% and bought back 7% of our total shares, returning capital to shareholders in addition to the quality acquisitions we added to our portfolio. This is a solid reflection of our balanced capital allocation strategy. And while we optimized our P&L, we launched a substantial campaign to train and educate the leaders in our company and the importance of improving working capital for the benefit of free cash flow, and our efforts have paid off. Not only have we attained 8 consecutive years of free cash flow conversion greater than 100%, but we achieved an average free cash flow conversion of 145% over the past 5 years, which is top-quartile performance in both our peer group and the Russell 1000. So how did we deploy the strong free cash flow generation? Well, during this time frame, we spent more than $2.4 billion through a disciplined capital allocation framework. $1.1 billion was spent on 6 deals, 5 A&D and 1 commercial, acquiring more than $350 million in revenues, while substantially improving our product portfolio. At the same time, we returned $800 million to shareholders, mainly through buybacks, including more than $200 million in buybacks last year during the pandemic where we successfully took advantage of a drastically undervalued share price. And for the remaining $500 million, we made various operational investments, including paying down our debt, investing in state-of-the-art manufacturing capabilities and fully funding our pension plan, which will stabilize this and pay a benefit for years to come. Going forward, while M&A remains the top priority, we are committed to deploying our capital towards the highest returns for shareholders. Despite the $2.4 billion in capital deployment, over the same time frame, our strong free cash flow generation helped us to maintain a flexible and conservative capital structure. This past year alone, we made $850 million in investments, acquisitions, share buybacks and other during a year in which many companies borrowed to simply maintain solvency. And while doing so, we maintained our investment-grade rating and added $300 million in 3% senior notes, which reduced our overall average interest rate on our long-term debt. Entering into 2021, we have a fully untapped revolving credit facility with an accordion feature, which we can easily use to accelerate the purchase of a sizable acquisition. Beyond the revolver, we had borrowing capacity up to $1.6 billion in an active pipeline of interested lenders offering very attractive rates, driven by our strong free cash flow generation and low debt to EBITDA. We are well positioned for 2021 and beyond. As Lynn reviewed earlier, we have a successful track record of M&A. These acquisitions all passed through our due diligence process and were evaluated using a stringent set of strategic and financial criteria. Earlier in the presentation, Kevin, Chris and Greg helped to provide some confidence in both our due diligence and integration processes, which also contributes to our success. And as we move forward, even with opening the aperture for leverage, we will not approach our investment decisions with any less rigor. In concert with our strategic filters on the left-hand side of the slide that Lynn reviewed earlier, we'll utilize the financial filters on the right-hand side of the slide to evaluate these opportunities. As you can see, this includes long-term sustainable organic growth, EPS accretion in year 1 and a return on invested capital in excess of cost of capital by year 3, to just name a few. It's important to note that every acquisition will not meet every criteria all of the time, but it is expected that all will contribute to our goals for top-quartile financial performance. Each of the presenters here today has discussed the operational growth platform and how the platform will support our pivot to growth. We've heard about the opportunities that exist in business development, collaboration, innovation, investment in R&D and operational excellence, and administration is no different. As I mentioned earlier, shared services binds the portfolio, and opportunities still exist for systemic improvements. Within our shared services organization, while highly effective to date, we have the continued opportunity to enhance the value streams that they support, expanding capabilities, strengthening management control and improving process flow from inception to closure. And we've only just started this journey. Within supply chain management, this value stream is known as procure to pay; within sales and customer fulfillment, this is known as quote to cash; in accounting, record to report; and human resources, hire to retire, to just name a few. Through this focus, we can further leverage the substantial contributions these teams have made to date in profitability and free cash flow, unlocking further value for reinvestment. Turning to our information systems. We're about to go through the transformation of our 14-year-old legacy consolidation and reporting system, and are replacing the system over the next 18 months with a state-of-the-art enterprise performance management system. This system has the potential to not only improve the speed of information flow across the corporation, but we believe it will allow us to enhance our management reporting processes and KPIs, standardized best-in-class controllership and accelerate the integration of new acquisitions into our company. Turning to commercial excellence. I believe the program we are launching has the ability to drive further improvements in working capital. Much of what we've accomplished to date has been accomplished by people and not process in working capital management outside of the contract. This program can work to strengthen the contract terms and negotiations with our customers, in turn putting our contracts to work for us. Lastly, looking at M&A, we have the capacity and ability to open our balance sheet to fuel inorganic growth, which I'll discuss in greater detail on an upcoming slide. But before we do, I'd like to reaffirm our 2021 financial outlook, as we positioned ourselves for yet another strong year. Revenue growth is projected at 7% to 9%, 2% to 4% of which is organic, with defense market growth once again outpacing the DoD budget. And our commercial markets are well positioned for the economic recovery. We're projecting operating margin expansion of 30 to 40 basis points to 16.6% to 16.7%, despite $10 million in increased R&D investments. Our adjusted diluted EPS guidance consists of $7.10 to $7.30, offers the potential to exceed double-digit growth this year, while reflecting only our minimum standard for share repurchase activity of $50 million. And lastly, our free cash flow generation remains strong. And with a free cash flow conversion projection above 113% this year, we expect to remain above our long-term conversion target of 110% and exceed 100% conversion for the ninth consecutive year. Our 2021 projections provide us with confidence, and we remain on track to achieve 17% margin in 2022. Now turning to our 3-year financial targets. We start at the top line with our pivot to growth, where we're projecting a revenue CAGR of 5% to 10%. Underpinning the 5% baseline is a solid 3% to 5% organic revenue and the addition of our PacStar acquisition. Our market assumptions underlying this baseline growth can be seen on the right-hand side of the slide and align to or exceed industry estimates. And as I've mentioned previously, we have the capacity and ability to open our balance sheet to fuel inorganic growth while maintaining an investment-grade rating, which we consider to be 3x debt to EBITDA. By simply taking our debt structure to this 3x level above our current 2.5x level, we believe we can comfortably deploy $1.2 billion towards M&A over the next 3 years and expand our revenue CAGR by up to 500 basis points, taking our total revenue growth up to a 10% compounded annual growth rate. And as we deploy our balance sheet while maintaining a stringent focus on our investment criteria, we believe that we can unlock further margin for reinvestment towards organic growth, compounding the benefit to the company while driving continued top-quartile performance. And lastly, I'll wrap up with our new 3-year targets, which include a 5% to 10% revenue CAGR, operating income growth greater than revenue growth. And please note, this implies margin expansion. We'll continue to target top-quartile margin performance, but only where it maximizes operating income growth for our investors. We plan to achieve a minimum adjusted EPS CAGR at or above 10% and sustained free cash flow conversion above 110% on average. In summary, Curtiss-Wright can and will leverage its strong foundation and operational and financial excellence to enhance value for our shareholders. With the development of our operational growth platform and the alignment of our highly-talented workforce, we will reinvest into the business to drive top line growth while maintaining a keen focus on the financial criteria that has helped us to optimize our portfolio. With our strong free cash flow generation, we feel confident that we can open the aperture for leverage on our balance sheet while maintaining an investment-grade rating to support our disciplined approach to capital allocation. And now I'd like to thank you very much for your time today. I truly appreciate your interest in Curtiss-Wright, and I hope you share my excitement for our pivot to growth. At this time, I'll turn the presentation back over to Lynn for closing remarks. Thank you.

Thanks, Chris, and thanks to the entire management team for their contribution today. Great job. As I mentioned earlier, I have been with Curtiss-Wright for more than 15 years. Hopefully, through the presentations today on our new vision and pivot to growth, you understand why I've never been more excited about the prospects for the company. As you heard this morning, Curtiss-Wright has a rich history of technical expertise and innovation, deep customer relationships and an engaged culture with proven operational excellence. As we embark on the next stage of value creation, build upon these strong legacies, I wanted to bring you back to today's key messages. First, we are confidently pivoting to growth with a renewed focus on top-line acceleration, both organic and inorganic. As it relates to organic growth, we are reinvesting in innovation to remain an industry technology leader. Inorganic growth will be driven by continued disciplined M&A while maintaining top-quartile performance. Second, as we continue to deliver One Curtiss-Wright to our customers, we expect to deepen and expand relationships through world-class execution and by supplying innovative and mission-critical technologies that not only bring value but also reduce total cost of ownership. Third, we are building upon a strong track record of operational excellence with a new framework for growth through our operational growth platform. The goal is to create greater collaboration across the organization while increasing customer satisfaction and stakeholder value. And lastly, we have simplified Curtiss-Wright's business model for improved transparency, enhanced communications and portfolio synergies. We try to be as transparent today as possible and show the tremendous potential to leverage our technical leadership and customer relationships across the organization. I especially want to thank our 8,200 team members and innovators at Curtiss-Wright whose dedicated efforts make this all possible. Overall, the team and I are excited about the future here at Curtiss-Wright and are confident in our ability to achieve our new 3-year financial targets. And with that, we are ready to take your questions. Jim, I'll turn it back over to you, and thanks.

Thanks, Lynn. Okay. We're now ready to begin Q&A. A question coming in here. You mentioned that the management team has some really exciting ideas. Which ideas are you most excited about, and why?

Well, thanks, Jim, and thank you for whoever asked the question. That's a great opening question to get us started for our Q&A session today. There's one topic that's top of mind for me that I'd like to open with. And then I'd give both Kevin and Chris a chance to talk about something that they feel is important. The topic that I want to talk about that I'm excited about is really the topic of collaboration. And I know during the presentation today, you heard the word collaboration mentioned quite a few times. And I guess the first comment I want to make is, of course, we collaborated in the past at Curtiss-Wright. So it's not that this is a brand-new concept. It's more the management oversight and the focus on collaboration that is new. You saw that it was part of the operational growth platform that we introduced here today, and that's indicative of the new focus on it. And as we're rolling that out to the team, it's really been great to see the response of leadership and down through our employee base, the enthusiasm to really look for areas to collaborate across the corporation. I have a couple of examples I wanted to highlight that I think show that this collaboration has a real chance to be very strategic in our pivot to growth. The first area I wanted to take a moment and talk about is electrification. You heard several times today about the capabilities we've built up around electrification for on- and off-highway vehicles. Interestingly, across various defense platforms, the move to electrification is also taking hold. And so with our footprint in these defense -- our defense customers, we're able to take that electrification capability and bring it across to defense customers. And potentially, as that plays out, maybe add some ruggedization capabilities as needed to really make it applicable for those platforms. The second area where this collaboration is already showing the chance to really provide value and support our pivot to growth is around the topic of actuation. Historically, actuation has been largely hydraulic actuation. And it is moving -- that industry is moving more towards electronic actuation. And with that, our Defense Electronics team has some strong expertise in high-power control applications, and they're able to -- bringing that capability to the actuation team to really help them derisk and climb the learning curve of that type of capability in a manner that's much better than they would have been able to do on their own. And so that's another area where we've got some very specific collaboration going on that's going to bring real value to our customers and accentuate our pivot to growth strategy. The last example I would bring forward is less of an intellectual property or technology sharing, but more about how we approach our customers. And that's about presenting One Curtiss-Wright to the customer. Also, today, you heard us mention, there's a lot of new starts on nuclear technologies around -- largely funded by the DOE and DoD, but also out of private industry. As we have opportunity to present our capabilities to those customers, we're working very closely to assure we present the total capability of what Curtiss-Wright has to bring to those customers with one face of Curtiss-Wright to the customer. And I know we've heard from many customers that they appreciate this approach in working with them. And I truly believe that we will win more business by taking this approach with working with the customers. So that's some of how I see the collaboration aspects supporting our pivot to growth. For that, I'd turn it over to you, Kevin.

Thanks, Lynn. I think for me, it's the operational growth platform. I think the 8 elements that we pulled together in the model, I think there's a significant opportunity for us to continue to grow the business and to expand further our sort of operational excellence across the different groups, and really a chance to sort of raise the bar across the different parts of the business. And I think that's really down to the fact that we continue to share best practices across all elements of the organization. And I think that will help us grow significantly. In addition, I would say probably one of the elements that I'm really excited about is the innovation piece. We started out that program sort of about a year ago. And more recently, we invested in a new software program and launched it out to our 8,200 employees. And I think a good indication of it is that we have something in the order of about 325 sort of ideas in the pipeline already against the target of 400 that we set ourselves this year. So I think that's a really good measure of the enthusiasm that innovation is bringing across the whole of the organization. And I'm really excited about seeing how that develops, not only from the point of view of new technology, but we're seeing some great ideas across the organization in supply chain, operational excellence, in a number of different areas, and I can't wait to see that sort of come to fruition.

Okay. Great. I think there's a lot to be excited about the new strategy, the content that we shared today and how that's going to impact our financials, but I'll step back and talk about our new system implementation. But before I do, let me define what an EPM is, or an Enterprise Performance Management system. It's really a system that's designed to link strategy to your planning activities in an organization and then ultimately help to enhance the execution towards those strategies. And we heard a lot today about the pivot to growth and our pivot to growth strategy. And I think we've got a tremendous opportunity to link that strategy to the system enhancing reporting and KPIs. I'll also add that I think we have a tremendous finance organization here at Curtiss-Wright. We are business partners to operations. And I think that there's an opportunity in a system deployment to standardize best-in-class controllership and then to leverage that controllership across the organization consistently, including facilitating the integration of new acquisitions. So there's a lot to be excited about. I mean of course, it's a 14-year-old legacy consolidation and reporting system that we're replacing. So just by its nature, coming up to the times, there's going to be a lot of expanded capabilities here that are going to help us to guide the organization to achieving these strategies.

Thanks, Chris. Back to you, Jim.

Okay. All right. Thank you. Next question, your revenue CAGR from 2016 through 2020 was 3%, inclusive of your historical acquisitions. And your outlook through 2023 is now 5% to 10%. What gives you the confidence to achieve this higher growth rate? And which end markets will be the biggest contributors or detractors to this growth?

Thanks, Jim. So I'll take that one. I guess I'd open by commenting on, if you think back to the slide that Chris showed at the end of his presentation that showed that we do have minimally single -- low single-digit growth in actually all of our end markets, that's a great foundation to build upon. And then in several of them, we have mid-single-digit growth and even high single-digit growth. So really, if you take that as a starting point across our end markets, that's a strong foundation to support these targets. When I look more deeply into what we do in those end markets, and I turn to the defense end market, which is the largest portion of our revenues, over 50% of our revenues, and I consider the product portfolio that Chris has talked about and our position on major naval platforms that Greg has talked about, we are really well positioned to continue our track record of beating the base DoD budget, and I feel really confident about our growth opportunities in this market. When I turn to our commercial markets, the first thing that comes to mind is our general industrial business, which we've seen a great rebound already in this year and are anticipating double-digit single -- double-digit growth in this end market already this year. And I think of our industrial automation and some of our service markets, these markets tend to really align with GDP. With GDP anticipating being 6% this year, we're looking very positively in these markets. When I look to our process markets, which also do align with GDP, but are also bolstered by increased capital expenditures, that gives optimism in those markets. If I think lastly about our power markets where you've heard a couple -- several times today about new initiatives to build out the United States nuclear capabilities through funding from the DOE and the DoD, we are very active in those opportunities and have really great products to bring across those opportunities. So those are really the drivers that give us confidence that we are going to achieve that 5% baseline growth. I add to that, the rollout of the operational growth platform that really just is giving us greater management focus and attention and energy across the organization to drive the things that are critical to growth. I talked about collaboration is just one of those. Kevin mentioned innovation. There's a variety of things that we're just heightening from a management oversight that are going to lead us to really maximize our growth potential in those industries. And lastly, I'll layer in PacStar, which is now part of Curtiss-Wright, and they're expected to achieve high single-digit growth. So with that, there's good line of sight on achieving that 5% base growth. And again, more management attention on M&A, and I really feel very optimistic that we'll push high above that 5% towards the 10% target as we find some critical strategic actuate -- acquisitions, excuse me, to bring into Curtiss-Wright. Thanks, Jim.

Okay. All right. We've had several questions coming in on operating margins. I'll put a few out here. Can you frame the margin expansion opportunity over the 2023 period? And talk about what incremental margins you are expecting over the next 3 years. And also, how much incremental investment do you expect to make into R&D to drive organic growth?

Thanks. That is a question we definitely anticipated. So I'm going to let Chris talk a bit about margins, and then I'd like to talk about R&D.

Okay. Great. I'll start with the incremental margin part of that question. As we've looked at incremental margins, they tend to be 25% to 30% of sales. So as you look forward in sales grow 25% to 30% would fall to the bottom line. But there are a lot of things that change that, incremental investments within R&D, cost containment initiatives, the mix within the product portfolio. So these are all things that we have to take into consideration. As we look forward across the period -- the target period, 2022, we are still firmly on track to achieving 17% margin. And we're really excited about the direction we're headed in and feel confident. Looking past 2022 into 2023, I'm not going to comment on that at this point in time. However, we do see continued opportunity in benefiting through our operational excellence initiatives, and we plan to take that benefit and reinvest it back into the company to maximize revenue growth and operating income growth for our investors. So in the 3-year targets, we did provide a range that basically says, I'll say, a soft guide, but operating income growth will be greater than revenue growth. And at this point in time, I think that's where we feel comfortable.

Thanks, Chris. And I just really wanted to comment because it's a question we get quite frequently about do we have targets around R&D investment going forward? This year, we're spending 3.4% of our revenues on R&D. And we don't choose to guide towards R&D investments going forward because each year, we're looking at our total opportunities to invest dollars to best grow the corporation profitably. And those might come in R&D and they might come in other areas. So sometimes we choose to make more program investments, and sometimes we choose to spend R&D and technology. So we don't view this is a metric that we want to dive to. We view it as a choice about how we use our dollars to just best drive the strategies of the corporation. Thanks, Jim.

Okay. All right. We've had a couple of questions come in related to M&A. I'll start with a few here. With M&A clearly coming into focus, can you provide an update on your M&A pipeline and what opportunities you are seeing? Any end market preference on defense versus commercial or industrial?

So I'll just lead off by saying our pipeline is very healthy. We're seeing a steady flow of books coming across. And also, the team, as you've heard us mention many times, is always pursuing potential acquisition targets that we can cultivate to want to bring their businesses to join Curtiss-Wright and become part of Curtiss-Wright outside of an auction type of process. And there's a handful of those that we're in -- we're active with right now, and the timing of those is hard to determine. But in general, the acquisition pipeline is healthy, and this is important to us, as you heard. We can achieve our 5% growth through our organic efforts, but we see really a lot of exciting potential to push up above that as we're able to acquire. In the presentation today, I mentioned a couple of the areas that we are, our highest priorities, and clearly adding on to our Defense Electronics segment with additional capabilities in that area is a priority. That's our highest margin business across the organization. So we're always looking to add on to that segment. When I look across our naval businesses with major propulsion and safety systems is very steady, predictable business with strong cash flow. So that is another high priority area for us. But it's not only in defense industries. When I -- you heard a lot today about our capability around electronification and electrification of vehicles. As that's a significant growth vector where we have a great market presence, that's an area where we would look to build out our capabilities. Thanks.

Okay. Another question on the M&A side of things. Given that M&A is such a large piece of your strategy going forward, given the right company, how much are you willing to increase your leverage ratio? And would you be open to a transformational acquisition?

So I think I'll kick that off and then turn it over to Chris to really talk about our balance sheet. You saw the scorecard that we showed today that really put forth a very successful track record of M&A. And with the largest deal we did at the end of last year with PacStar, I think we've really honed our capability to execute on due diligence and then integration. And with that, I think we feel confident that we've created the memory muscle around these processes that, yes, we would look and be open to doing something more transformational to Curtiss-Wright. So with that, I'll turn it over to Chris to talk about the balance sheet.

Okay. Thanks, Lynn. We generally view debt-to-EBITDA ratio of 3x to be considered an investment-grade rating. And we finished the first quarter at a 2.5x ratio. As we look forward, I think trying to figure out what the best spend to tempo mix is to maintain that investment-grade rating, I'd say a $400 million acquisition once a year. And PacStar, which we just completed in the last year in the fourth quarter, it was $400 million and the largest acquisition that we've executed in recent history. So I think we have the ability to meet that demand and the ability to support the acquisition pipeline. I think if something more transformational came to light, we would feel comfortable bringing our leverage ratio up 3.5 to 4x and then quickly using the cash flow to pay that back down and bring us back into an investment-grade rating. I think we need to stay open-minded in the process, and we're excited about the pipeline.

Great. Thanks. Jim?

Next question. Conversely, are you looking to divest any businesses?

So right now, we really like the portfolio as it stands across Curtiss-Wright. We think we've got great businesses that are well positioned in their end markets that are well positioned to take advantage of some of the growth vectors that we've talked in length about today. And so, no. Today, we're not looking for -- to divest any of our -- any additional businesses. But I mean as those of you who have follow Curtiss-Wright, we continuously analyze our portfolio as market dynamics shift and have chosen to divest businesses in the past. And we will continue that rigor going forward. But today, we really like our portfolio as it stands. Thank you.

Okay. Next question, regarding the OGP, what inning are you in? From an implementation perspective, what level of training is required? And how do you ensure that you'll have cultural buy-in for the OGP?

Yes, Thanks. Kevin?

Yes. As far as the OGP is concerned, we're in the early stages of the rollout of the initiative. It's obviously being deployed across the whole organization. So you can see that we've got training involved because we've got 8,200 employees. We'll need to roll out that training and make sure it's across the organization. But I think it has a strong foundation of our operational excellence program. So I think the transition is going to be relatively straightforward and easy for us to move forward on. And in the cultural aspect, I think we've done several different things. First of all, we've put forward our -- an initiative across the group. It was set out by our operational excellence group. And that is -- involved many different aspects of the organization from HR and strategy to help the organization and understand the different elements within the OGP. And I think that's allowing us to get that sort of cultural buy-in through that aspect. And second, we're deploying a number of pilot studies to actually initially push it out to the teams so that we can get good feedback and make sure that we're sort of moving forward with the program and getting the right feedback across the organization and the buy-in that we need to do that. In addition, there's sort of executive oversight from Lynn and myself and the executive team on what's happening with the OGP, and we've tied in a number of different objectives for the staff. So it's into their incentive program, which, again, I think, will ensure that we get that sort of cultural buy-in as a team.

Thanks, Kevin. And I would just comment that it's really been quite rewarding to see the enthusiasm across the organization to look for new initiatives that are going to drive growth, and the buy-in on a new program right off the bat as Kevin is rolling it out across his team. So that's really been great. Thanks. Jim?

All right. We've had a few questions related to the size of Curtiss-Wright's opportunity as it relates to Gen3+ and Gen 4 commercial nuclear reactors. How does that break down by geography? And what is Curtiss-Wright's competitive advantage in this market?

Greg, I'll turn that one over to you.

Thanks, Lynn. For Generation 3+ plans, the new reactor build market, including AP1000, is very large. And a lot of interest in China, India and other countries. And this interest is very exciting for us. It has the potential for us getting to 100 reactor coolant pumps ordered by the end of the decade, which would have a value greater than $2.5 billion. For those of you that may not recall or were not familiar with the history, our last AP1000 reactor coolant pump order with China was for 16 RCPs with a value just under $500 million. For Generation 4, we're expecting our content to be in the neighborhood of $10 million to $80 million, depending upon which per plant, dependent upon which SMR or advanced reactor we're talking about. New scale, for example, we've secured $40 million for a 12 reactor plant site. There's a lot of interest worldwide in these technologies. I would say it's still not clear from a market standpoint as to what the market size in any one particular geography is going to be. I think one of our key competitive advantages is our long history in the industry. We've been there since the inception. We have a large installed base, and we have a proven capability of designing first-of-a-kind equipment, leveraging that knowledge. So our focus today is really working with the reactor designers to secure our content and help them be successful in the marketplace.

Yes, thank you, Greg. I'd say you covered that very well. Thank you.

Okay. Another question has come in, when is the next AP1000 order? And if you did win an order, what could that mean for your overall growth rate?

I think I'll turn that back to you to talk about the prospects of a new order.

Yes. While we are very excited about the interest in AP1000, in our reactor coolant pumps from the various countries that I talked about in the last question, I'm very excited about the potential orders that brings to us. I don't think it would be prudent for us to speculate on specific timing.

Thanks, Greg. And just to remind everyone, if it wasn't clear during the presentation, the targets we put out through 2023 do not include a new AP1000 order. And so obviously, if we were to receive an order, it's upside to those targets. And as Greg mentioned, this is significant business and could provide some real great upside to Curtiss-Wright. But again, we're planning our future outside of anticipating an order. And when it happens, it's just going to be great. So thank you.

Okay. All right. Questions come in related to commercial aerospace. Can you elaborate more on the potential expansion into the PMA market within your aftermarket business, and how do you plan to compete? What is the path to gain acceptance from customers? How are you determining what products to focus on? And what is the path to approval with the FAA?

I'll turn that over to you, Kevin.

Yes. I'll take that one. I think from our perspective is that our aftermarket business is a relatively small piece within our commercial business. It's roughly about 15% within our commercial aerospace market. And we're primarily focusing this initiative. It's relatively small on our sort of sensors and our product support teams. And we're trying to sort of really take a more selective approach so that we can really support our customers directly so that we can supply in the parts that we need to directly to them. We're being very cost-conscious because, as you know, PMA type of process and approval requires funding to be done. And the anticipation is that we're going to select certain programs to make sure that we really support those customers directly where it's appropriate. So it's a relatively small piece of our overall initiative.

Thanks, Kevin.

All right. Next question related to the Defense Electronics. You spent a lot of time today referring to Modular Open System Approach, or MOSA. How does this trend influence outsourcing? How big is MOSA today as a percentage of your sales? And can you frame out the growth opportunity over the next 3 to 5 years?

So as much as I'd like to answer that question myself, I am going to turn it over to Chris Wiltsey.

Thanks, Lynn, and great question. Obviously, I spoke to MOSA a couple of times in my presentation today. The Tri-Services memo from 2019 that I mentioned during the presentation, we think is the most significant commitment to open standards-based solutions in the history of defense electronics. And the alignment of all the services behind it is quite unprecedented. We are also seeing significant interest from our international customers, which just shows you the power of this approach. We've already demonstrated MOSA-aligned systems to the military as recently as in the last month or 2. And we are currently engaged in several dozen customer opportunities where our customers are looking for our guidance in architecture and providing them with MOSA-based solutions. Obviously, the number represents significant business opportunity for us. But it additionally is providing us with a couple of important data points. First, it's providing us with a wide landscape of how our customers across many platforms for many applications tend to architect and field MOSA-based solutions. And we can take that very diverse data and feed it directly into our R&D plans, which means that we'll be able to, as we always have done, build a very broad, deep and diverse catalog of products that can be applied in many different ways for many different solutions. And two, it's providing us an opportunity to get the feel for what our customers are looking for. And we really think that there's going to be an inflection point relative to the amount of outsourcing they do as they move into these MOSA-directed approaches. The addition of PacStar has been absolutely great for us in terms of the engagements with our customers in MOSA opportunities. I mentioned a couple of times in the presentation the fact that PacStar is bringing inter-platform communication expertise and products to our portfolio to add to our intra-networking products and capabilities is terrific as well as for our classified solutions for protecting data in motion, in addition to data at rest. And it's just making those conversations that we have with our customers much more powerful and improving our probability of win across the landscape. Thanks for the questions.

Thanks, Chris. And I guess I'm glad I turned it over to you. So with that, Jim, what's next?

Okay. Question there regarding talent. You highlighted that several new members of the leadership team are recently new to their positions. How deep is the bench? And are there still talent gaps that you're looking to fill? And how does this succession planning process work?

So I appreciate that question because it's a great opportunity to thank the people on the stage here that have new opportunities, but also to really give a shout out to a really broad and deep leadership team that is out in the field. And I know many of you are online today listening to the presentation, and I think that's great. So there's a really deep, strong talent bench across Curtiss-Wright that goes across our business units and down within our business units. Our succession planning really is built business unit by business unit up, looking at critical leaders or critical technologists or across a variety of functions that have a specific knowledge that we want to assure as they choose to retire or move on from Curtiss-Wright, that we pass their expertise on to the next generation of employees. And you heard that today as something we mentioned that we think is something we do exceptionally well because we have a very purposeful and disciplined plan around doing this. It's very systematic. It's something I will review with Kevin. It's something I will review with our Board of Directors. They have very strong oversight of our succession planning process. So this isn't something that's sort of ad hoc. It's very purposeful. If you think back to the talent slide that I had in my presentation in my opening remarks, I had a list of a variety of development programs that we have for our employees across the organization. And whether that's to help them gain specific technical skills or functional skills in a specific area or broader leadership skills, we really want to invest in our employees to help them develop their skill set. So when the opportunity for -- to step forward and take on a new role happens that they're -- they feel ready to do that. So I really feel great about our talent process and how we're developing our talent. But I would clearly say, we're always looking for what's considered best-in-class and new ideas in this area, and we'll build out our talent development plans and programs as we encounter new ideas. Thank you.

Okay. Right. [Operator Instructions] Next question, going back to the Defense Electronics. Can PacStar still grow sales at high single digits with a flat or declining DoD budget? Isn't the U.S. Army typically the payer?

Excellent. Yes, we're very confident that PacStar can grow at high single digits. They are right in the middle of the Army's -- one of the Army's highest priority programs, which is modernization of battlefield communication. As part of their modernization program, the Army is fielding ever more expeditionary forces. And by their very nature, these forces need to be nimble, you need to get out to the battlefield and set up their communication infrastructure quickly. Part of doing it quickly is making sure that there are no errors as they set up that communication. They also have a need to try to extend that communications beyond whatever the forward operating base is to soldiers who are at the tactical edge of the battlefield. And especially some of their recent product announcement does that quite well. And we believe that PacStar is the user's #1 choice for that product. They're right at the beginning of a decade-long planned upgrade to the tactical network. And so we've got a long visibility of what's being planned as the Army rolls out future capabilities. We also see with PacStar's experience that PacStar has the capability to roll out the requested or planned improvements to the tactical network, but offer additional capability, maybe not thought of or not planned, and they're creating their own additional opportunities, which further fuels their growth. I've talked several times during my presentation and actually in the previous answer about the fact that PacStar's technologies also can be leveraged by almost every business unit within the segment. And so not only do we feel very confident about their own individual growth and sustaining that for the foreseeable future in high single digits, but they are also helping to confirm the growth in the other business units with the synergies that they're providing. Well, thank you.

Thanks, Chris. Back to you, Jim, if there's more questions.

Okay. Yes, certainly, a couple more. This one focused on the naval side of things. Can you talk about your competitive position for advanced capabilities and how that aligns to the return to major power competition? And how can you grow your platform content in the naval defense area going forward?

I'll turn that to you, Greg.

Okay. Thanks, Lynn. That's a really good question and a timely question. Today, we provide the Navy the most advanced technology in terms of performance, acoustics and shock. And I think my answer to how do we support the Navy with the increasing threats as well as how we grow, I think the first couple of pathways, I think, are very much aligned. First, we pay high attention to any new needs of the Navy, and particularly, their more stressful ones. And if those are aligned with our technology capabilities, we'll be front and center in helping to advance those and resolve those needs. Secondly, the Navy is regularly looking for technology insertions for the various platforms to improve performance or to improve capability. And again, where that's within our technology wheelhouse, we'll be right there in front with ideas and helping to drive those technology insertions. Both of those, I think, are key ways that we continue to grow our Navy business. Additionally, we're very excited about our allies in the international navies. New shipbuilding plans is providing us great opportunity for both our aircraft and towed array handling systems. And so we're excited about that. Another vector for growth is our field service capabilities that we acquired from DRG. We continue to augment those capabilities with them learning the various OEM of products and technologies. And so we see that as a great opportunity to continue to grow the business. And lastly, M&A. We -- as a company, we have very strict and selective criteria that we apply when we're looking at a candidate, but we're going to be opportunistic in this market space for companies that do the same kind of things that we do and add to the Navy's performance and capability.

Thanks, Greg.

Okay. Next question is coming in related to the industrial vehicles market. What kind of disruption is the push to electric vehicles having on the industrial vehicle market in general?

Okay. Yes. I think from a disruption point of view, actually for us is that we're not seeing that much in the way of disruption. I think the move towards electric vehicles is really driving some good opportunities for us. Most of our technology, from our shifters or WTI power inverters, sensors, electronic throttle controls, really applicable across multiple different sort of vehicle types. So everything from a sort of conventional combustion engine-type vehicle and the sort of heavy-duty truck, medium-duty truck arena, right way through to fully electric and hybrid vehicles. And we can manage and work with each of those different types of platforms, regardless of whether it's battery-operated or even fuel cell-operated in terms of the vehicle because the technology is ideal for that type of application. Second point is that when you think about electric vehicles, they are moving more towards an electric platform. So inherently, they end up using our types of technologies. And I think as a good sort of segue is that we're not going to see sort of a sudden drop-off of sort of conventional powered vehicles into electric because our technology transcends both of those different markets. So it will be ideally positioned as we continue to see the growth and the adoption of that type of electric technology for us as a business.

Thanks, Kevin. Thanks.

All right.

Any more questions?

Yes, we do. We've actually had several questions come in related to Defense Electronics. So can you talk about your positioning in defense electronics and specifically within embedded computing versus some of your key competitors and your ability to achieve much higher margins?

Thanks for the question. We've been in defense electronics and embedded computing for a long time, for decades. For embedded computing specifically, we've been around since the very beginning of open standards-based solutions and helped to lead and drive those standards. And we deliver those products to our military customers with all of the programs and services that they need, like longevity of supply and longevity of repair and counterfeit mitigation, all of those sorts of things. Importantly, we've -- over this entire time, again, for decades, our goal has been to build the broadest and deepest catalog of products that serve the market. We're platform agnostic. And we don't focus on narrow applications. We keep our approach broad and deep so that our products are all reusable across many platforms, in many applications, in many environments within our industry. And that's what's really worked for us. With the militaries pivot to MOSA, we see exactly the same landscape in front of us. And our plan is to continue to build and develop the broadest and deepest platform-agnostic catalog, and we believe we'll be able to meet all, if not most of the MOSA applications that people are looking for. And it should give us the same performance and allow us to enjoy the same margins that we have for many years.

Thanks, Chris. Thanks.

Next one here we have coming in from the chat related to innovation. I mean you mentioned earlier, 325 ideas in the pipeline. How do you manage the process of investing in the best ones and weaning out the not so good ones? And then is there an opportunity to improve the velocity of new ideas through the funnel? And how important is the voice of the customer in that process?

Yes. I think on the innovation process, the whole idea behind the concept is that it's gated. So it sort of progresses the idea through the various different stages of the development as we innovate new things across the organization. And there are sort of, if you like, those stages themselves have a number of things involved so that we can really try and accelerate or push them through that funnel. First thing is, is that we put an innovation champion in place. So as soon as the idea comes into play, an innovation champion is assigned to that idea, and they sort of, if you like, shepherd it through the process to really ensure that it continues to move through the stages so it doesn't stall at any of those different stages. There's also what we call a sort of an automatic promotion aspect, so as it moves through the gate process, it then gets flagged at the various different sort of management levels and executive team throughout so they can actually see how far it's going. Is it making the appropriate sort of progress? Is it sort of answering all the right questions to ensure that it's going to end up being a meaningful sort of idea or an innovation that goes through the system? So it follows it through as part of that activity. So that really helps to try and accelerate it through. I think as we move forward, though, we will continue to look at the process such that if there are ideas that really do need to accelerate quickly through the stages, we'll look to refine the process or put more attention to those, especially if the market requirements are very much committed to sort of speed, so we have to get it through to the end goal. So I think that's a good way in which we can accelerate it through. On the voice of the customer side, that's really, really important. At the end of the day, there's no point in innovating in a vacuum. You need to innovate and make sure that there is complete buy-in from our customers, that there's market demand for the innovation, for sure. And it's set up such that as we go through those stages, the teams that are championing the ideas have to provide that data and that information so that we make sure that we're investing in the right areas. And you'd expect, as we go through that funnel, things are going to drop off. Not all ideas are going to make it through, but we need to make sure that the voice of the customer is paramount in the way in which we make that selection so that we invest in the right areas going forward.

Great. Thank you, Kevin.

Okay. Next question coming through the chat here. Coming off of your solid Q1 bookings, how is the order book looking today? Can you provide some visibility into your A&D and commercial market activity?

So I'll just open by saying what we saw in Q1 led us to raise our guidance for the full year. And so that's pretty exciting to be able to do right out of the gate in this year. But to talk about how things have progressed since raising that guidance at the end of Q1, I'll turn it over to Kevin. And then, Chris, if you have anything you want to add, feel free to jump in at the end.

Yes. Let me cover that. So I think from -- we look across the spectrum of the different businesses, very much from what we saw in Q1, we're continuing to see a good strong performance across the board, which is really encouraging. In particular, our industrial sort of vehicle market has really rebounded very well in this first quarter, driven by, as you can see, by things like the ACT forecast showing an increase in vehicle requirements driven across our various different platforms from Class 8 to medium-duty trucks. So that's really quite a positive move that we're seeing within that market space. And then the rest of the commercial sort of areas are at sort of varying different degrees of recoveries. Lynn picked up earlier on talking about the process industry, that that's beginning to improve. And I think certainly, our process side and things like our nuclear industry, which has been very much driven by the impact of COVID not being able to get us into the respective sites. As those sort of restrictions are beginning to live, we're starting to see orders come through associated with more activity at those respective plants. Naval side of the business, very strong. Also, Defense continuing to do really well across our markets, nice and stable. And I think the only area from an orders perspective that's still relatively slow is the commercial aerospace side. That's slowly improving. As you'd expect, commercial aerospace, certainly from a domestic point of view in the U.S., is beginning to improve as restrictions are reducing. And also, you're seeing that in the Far East, good domestic market growth. But Europe is still a bit slow, obviously, with where they are in the pandemic. And for us, really, then it's the case of seeing that business travel, that lucrative business travel is starting to come back. I think that will accentuate more positive moves across the industry, and we'll start to see orders being placed in that respective order. Chris, do you want to sort of cover some stuff?

I think you said it well, Kevin. I guess I would only add that yesterday afternoon, we released a press release for new naval contracts awarded in excess of $130 million for naval nuclear valves, generators, advanced instrumentation and controls on our 3 major platforms, so the CDN, the Virginia-class submarine and the Columbia-class submarine program.

Yes. That's great.

Yes, that was great. Thank you, guys. So I think we probably have time for about one more, Jim.

Yes. This one relates to the M&A scorecard. You had highlighted that you had a number of continued opportunities in your acquisitions on that scorecard chart. Can you elaborate, please?

Sure. If you remember back to the slide I showed in my opening presentation, there was a couple of places where we had not put green check marks, which the green check mark means we're on target to achieve what we had anticipated as we brought these businesses into Curtiss-Wright and how they executed as part of Curtiss-Wright. So there's a couple of areas we're behind where our initial expectations have been. And we wanted to put this forward very transparently to show you a few areas where we are a bit behind. One was the financial performance with Dyna-Flo, and that's really only tied to the top line. I would definitely want to comment that the team did a great job in controlling their costs and really performing on an op margin basis with a top line that did not match our expectations, really driven by the pandemic. Another area where we had a yellow dot was around TCG. With them integrating their technology into Curtiss-Wright, that we've been a little slower in making -- marrying their great software capability into our defense electronics and finding customers for that. It's definitely a work in progress. We're very optimistic it's still there. It's just taking a little bit longer than we anticipated. And one of the other yellow dots was tied to the SAS -- the DRG acquisition and the build-out of SAS and our ability to leverage our supply chain and operational capability. And some of that is just some of the supply chain synergies have not panned out as we had initially thought. And then some of the operational efficiencies really again was tied back to COVID, doing all this stuff in a year where no one traveled, where we thought we would have a real freedom to have technical and operational experts go into that building and help set them up. But again, a great shout out for that team that they have managed to get that facility up, running, meet customer expectations without some of the support that we would have anticipated. So in closing, I would say, all of these acquisitions, we're very pleased that we made them, and they're great contributors into Curtiss-Wright. But we did want to put forward some of the areas that maybe not everything plays out exactly as you had. And that, again, we wanted to show that as we balance -- we spent a lot of time talking today about the things we're doing to drive organic growth. Inorganic growth is a part of our strategy and to show you as a track record that we know how to do due diligence and integrate companies, and you have a few bumps in the road, overcome them and make acquisitions successful within Curtiss-Wright. So thank you. I think we're out of time, Jim.

Yes, we are.

So with that, I'd just like to close by saying thank you to everybody who joined today. All of our employees, all of our potential investors, analysts, everyone on the line, thank you for your interest in Curtiss-Wright and participating today, and have a great rest of your day.