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

Okay. Good morning. I see the clock ticking down. I don't think you're going to be able to see it there, but I'll give you...

No, that's okay.

I'll make sure I keep you abreast of how we're doing. Hopefully, the torture won't go on for too long.

Looking forward to it, so...

All right. Well, good morning, everybody in the room. I suspect on the webcast as well for joining us this morning. My name is Jason Gursky, Citi's Aerospace and Defense Analyst. I have the pleasure of welcoming to the stage this morning, the CEO and CFO of Curtiss-Wright, Lynn and Chris, thanks for joining us this morning.

Thank you.

We've got a laundry list of questions we'll go through. But I always like to start off with a really high level one to help those that may not be as familiar with the company that are in the audience or webcast with, having you step back for a second, just kind of from a very basic level, describe the problems that the company is trying to solve. How you go about doing that from a technological perspective. And then if you're successful in solving those problems, what kind of markets are you addressing customers that you're helping out and kind of a big level setting of exactly what the company does?

Sure. Thank you for that. That's -- for a company like Curtiss-Wright that is a highly engineered company, that's an important question and something that's a big focus and we spend a lot of time thinking about that. We're a diversified company. We serve a variety of end markets. I mean, the majority of the business is aerospace and defense, about 2/3. But we're in a variety of other specialized markets. And most fundamentally, the products and services we provide are for mission-critical, life-critical high safety applications. So we really pride ourselves in taking on really challenging tasks that are hard engineering projects and really delivering products that really have a must not fail type of solution for the applications they're in. So if you say what the heart and soul? What's Curtiss-Wright? That's really the heart and soul of what we are. And so where we apply that and something that makes Curtiss-Wright, I think, a powerful company is we target picking places where we can build our products in applications that maybe we've developed a capability maybe decades ago, quite frankly, a lot of the businesses we do, did first instantiations of products 30, 40 years ago. And then build a capability and then we'll always have an eye to adjacent markets where you can maybe change the technology slightly or something and then apply that very well-honed capability to other end markets. And a simple example of this, that's one that's gone on over the past 50 years, is our canned motor technology, which was developed for the Navy 50-some years ago that has been taken to commercial nuclear power and now to subsea pumping. And we had a recent press release with Petrobras of a significant win with them to take that technology. But we're solving a lot of problems across our end markets. Our defense electronics capability is critical in thousands of programs across the globe, predominantly in the U.S., but worldwide with the NATO countries. We have very important footprints of delivering that defense electronics capability into those platforms. We do things are a critical supplier to our nuclear Navy type of platform, so aircraft carriers and subs for a variety of products that go into them and are really a valued partner to the Navy in working very much right now on next-generation platforms that are coming in are really a design partner with the Navy in that retrospect. We play a significant role in commercial nuclear energy, which is surely kind of made quite a significant turn in public perception and the role it needs to play in our carbon-free goals. And then we've been taking the carbon-free initiatives that are being embraced around the world to products that we're bringing to market that are tied to electric vehicles. And so you look across those type of things, and there's others. We have really an outstanding capability in electromechanical actuation, that is applicable to not only the commercial aerospace market, where we have some big growth opportunities there, but finding really some significant wins in defense application. So again, looking to build out that great capability and then taking our market footprint and our sales footprint and our knowledge of how customers want to do business in these various end markets and taking those technologies and bringing them across. So I would say that at a high level, that's who Curtiss-Wright is. And then obviously, you can deep dive into sensor technologies and electromechanical actuation and, that's more than the 40 minutes we have here. So I would say that's the essence of who Curtiss-Wright is.

Okay. Great. appreciate that. I know that you recently had an earnings call.

Yes.

So I do want to provide you the opportunity to maybe kind of sum up what you -- what we all learned then and give you an opportunity to make some kind of follow-up comments, if you want to kind of clarify any messages coming out of that. But kind of the key points that you want everybody to walk away from -- coming out of that earnings call.

I appreciate it. It was -- it's always good when you're proud of the results you're bringing forward. And we were proud of the results we could bring to -- at the earnings call. And we really -- we ended 2023 with record levels of sales, profitability, diluted earnings per share, free cash flows and an order book. So a pretty clean sweep of the things that we're focused on and driving in the company. We put out our initial 2024 guidance, and so we're proud to put up, I think, a strong guidance across the board of those types of metrics, with growth being guided at 5% at the midpoint of our guidance, which are 3-year -- our prior 3-year average was 4.7%, so guiding with continuing to build the momentum of what we feel we can drive with organic growth and guiding above that, some moderate margin expansion. But really, what we were proud to report on coming out of that earnings call was the delivering on our '23 commitments, delivering on our 3-year Investor Day commitments, where we had a nearly clean sweep of really exceeding all the targets. Our cash was just under what the average free cash flow conversion of 110%. We came in at 108%. And clearly, some of the challenges with inflation and supply chain disruption, put a little extra challenge into that, but we grew operating margin 110% over those 3 years, achieved an average total sales growth of 7.4%, double-digit EPS growth at 12.5%. So it's really -- I think the thing to bring home is we're a well-performing company. We really have the systems and the processes in place that are really helping us manage the company to deliver great results. And we're looking forward to our Investor Day here coming in May -- May 21st, for all of you. Hopefully, you can either join or listen in. It will be live webcast. And to really talk about more than just '24, but the bigger picture of what's -- there's still so much potential for Curtiss-Wright out there and things that we know are going to drive great momentum through the next handful of years, and we're looking forward to that opportunity to talk about those things.

Yes. Great. So I won't try to front run the Investor Day by asking you about what comes after 2024, but maybe we could spend a minute just talking a little bit more about 2024, I think you're -- and maybe spend a little bit more money this year on R&D. So maybe you can just kind of walk us through where the -- where you're targeting the investments to go and what you think comes out the other side, maybe both the quantum of opportunity that you have in front of you as you make those investment dollars and the cadence of when those might start to pull through?

Sure. So really fundamental to what we launched 3 years ago with our Pivot to Growth strategy of not adding top line sales growth to our overall financial targets that we're driving is a willingness to invest to drive that growth going forward and whether that's covering dilution from an acquisition in year 1 or driving R&D either from a technology standpoint or working on a program with the customer that's probably going to be dilutive margin to the corporation overall, but to being willing to drive those investments, and we did drive an incremental $20 million investment in 2023, and we're building on that and driving another $20 million of incremental investment in 2024 is what we're -- is baked into our guidance that we've put forward. And that's a combination of both internally funded and working in customer-funded R&D that in many of our defense applications and some of the commercial nuclear applications where we have a lot of work going on even in the Subsea. The customers are quite willing to spend money to fund your R&D. It's dilutive to the corporation, but it's great to get funded for it and, so we're making those investments. We continue to make sure we're driving operational efficiencies across the organization to allow for margin expansion while we're also funding those areas. And so it's something we're very proud of being able to do both and really feel confident that we -- the momentum is just building with the monies we've spent in. There's a handful of areas where we're targeting those investments. The first and foremost that we talk about is across our defense electronics portfolio that's the most visible with IR&D funding, and we're really proud of where we've built out our product offering portfolio and believe we have the strongest portfolio of products that aligns with the MOSA and SOSA, just acronyms, but it's really a mandate that comes out of the DoD for buying open standards, computing equipment to build systems on it and making that a differentiator in the selection criteria. And so we continue to build out that portfolio of products. That's important to us. Our electric mechanical actuation is an area where we're continuing to just hone in an expertise that is really fairly unique in our ability to take on really high power, high load type of applications. The announcement with Petrobras for building out the subsea pumping is an area that's just got great potential. And this is an entirely new market area for Curtiss-Wright, that is something that we've been working towards for a couple of years. We talked about our partnership with Shell and Saipan, the Petrobras is new, and we were really just getting to the point of any production revenues from this. So it's an exciting growth vector for Curtiss-Wright. And then the investments that we're making around all -- a variety of applications with power electronics tied to electric vehicles that is an area that we have a quite a unique capability and a growing portfolio of products in that area that is, there may be some fits and starts of what's going on in that. We understand that. But it surely, long term is a completely growing portion of the industry and those new product starts are affording to some growth, while maybe there's a little bit of leveling off in those end markets. But maybe I'd ask Chris to talk a little bit about the -- from a financial standpoint, how we think about R&D investments?

Yes, sure. I mean it's a very, very important topic for us. It's critical to our Pivot to Growth strategy, as Lynn had mentioned. If you look back at Curtiss-Wright historically, we're probably about 6% to 6.5% of sales and spend in R&D, the IR&D and the CR&D. With the $20 million that Lynn had mentioned that we spent this last year, we were still able to provide margin expansion during that year. And with the $20 million that we're targeting incremental again this year, we're targeting operating margin expansion. And that's going to put us over 6.5% of sales this year. So we're really starting to kind of accelerate our investments to stimulate organic growth in these great technologies that Lynn is referring to. But when you're in growth mode, you have to be very, very focused to make sure that this money is being spent effectively. And it's the same way that we approach all of our capital allocation decisions. We're looking at the investments that we're making at a project or program level. We're looking at the revenue impact upon the organization. We're looking at the operating margin impact. We evaluate KPIs and IRRs and NPVs and paybacks and ROICs, to make sure that these investments are going to pay off. And I think we got a common question that we get is, well, when are we going to see it? Well, 11% growth is pretty darn good, and 10% of that was organic. So we feel like we're starting to see that within our KPIs. But just spend IR&D just generally, you would say that the things that we're spending our money on now will turn into profitable production revenues beyond 2024. It's our internal investments to seize those technologies and opportunities that are out there. And then CR&D as we're increasing that, the contract R&D, we're seeing that impact right now, right? But it's at a compressed margins. I'd rather have somebody pay for the R&D so long as I can build in the technology at the end of the day. But we're seeing that impact now. And more importantly, that will also turn into very profitable production revenues in the future. And I think it depends on the market and where you are, how quickly that converge. In Power segment, these are long lived platforms and sometimes you're investing 10 years ahead, right? In other areas, it could be 1 to 2 years. So we're seeing it in our results. We're really excited about it. And despite those investments, margin continues to expand.

Great. One of the themes that's emerged in some of the conversations I've had with aerospace and defense companies here offers thus far, has been around the security situation in Europe. And one of the CEOs that had just come back from the Munich Security Conference. I guess, cutting out a little bit there. I'll try -- I'll face this straightway so I'm not ignoring you. But I think the only way my mic is going to work is if I'm facing this way. I'll do this. And I had dinner last night with one of the large cap prime contractors as well. And so the guy -- the gentleman that had come back from the security conference was suggesting boy, it seems like there is -- the half of the countries in NATO that aren't spending 2% of GDP are going to giddy-up and get there. So certainly, we're going to see an acceleration of spending in Europe. And then a large-cap prime that I was with last night suggested that, they are seeing the aperture open a little on the willingness of European countries to engage with U.S. companies directly in light of the fact that they need capabilities quickly, and they may not have the industrial base over there to get it done as quickly as they would perhaps like. So the question to you is maybe you could talk a little bit about some of the exposure that you have in the European market and whether the opportunity here to have this be kind of a, I want to call it, unexpected growth factor, maybe it wouldn't surprise you, but maybe it would surprise some of us on the outside that didn't really fully appreciate kind of the activity levels that you have going on over in Europe.

Yes. So maybe I'll talk to some of the places where we're most active and where we're seeing the pull on that and then ask Chris to talk through maybe some of the numbers that we have already experienced in that and what we see going forward. And so, this has been a good area for us for sure and driven some nice growth that I'll leave for Chris to speak to. I will say, broadly, when Russia invaded Ukraine in 2022, and there was a quick punch of like the spending is going to come. That is not -- it has not come as rapidly as I think everyone has come. So I think the momentum is really early days of building of them truly spending that money in us seeing the uptick of that. It's already been significant to us, and I think it's got a lot of a growth areas to go. And I'll touch on a few areas. I mean, we really can see that content quite broadly. I mean we sell our defense electronic COT's content. We have a very active sales team in Europe and sell across the NATO countries and have very much a part of the platforms that are built in Europe and sell those COT supplies directly into Europe for that. We have our turret stabilization business, which is a high-power electronics control type of application has -- really has largely a European footprint is where they have always built their business. We've built up great partnerships across BAE and Rheinmetall really kind of prior to these -- the invasion in 2022 and are their selected partner for a variety of subsystems. And they're obviously a critical supplier across Europe. And, of course, as these countries want to spend their money and are being pushed to spend their full 2% or Poland spend 3%, some even over, they want to drive jobs in their country. So where they can build -- spend the dollars and build out their own industrial base where pragmatic, they want to do that. And that's largely in ground vehicles is the belief of that. They're not going to go in and design a new jet. I mean there's Eurofighter but like largely, so some of those dollars come back to the primes here in the U.S. and we're across virtually every platform that the U.S. provides. So we will get dollars that way, but also in country directly. And then even other areas such as our tactical communications equipment, where they've really been selling into the U.S. government, the Army and the Marines predominantly and have built up fantastic growth. In those end markets, we started seeing even last year more of a pull from the NATO country. Some furnished through the U.S. government and then some pull directly out of the NATO countries for that communications equipment. So I think like that's another area that's going to continue to grow. And then we've always sold a lot of the equipment we have for landing in high-seas helicopters and such on jets in high sea states. They've always had an international footprint and is not just a situation in Europe, but the situation in Asia Pacific grows and the focus on Navies across those countries. That's great for that business. And our recent ESCO, the arresting systems business that we acquired in the summer of '22, they always were 75% overseas, 25% U.S. and they've really seen an explosion in their order book. And I think pragmatically of things that we sell that can directly lead to NATO countries improving their defensive posture, the communication equipment is you have it, you can deploy it with soldiers, you can use it that day [indiscernible]. But right away. And then the landing equipment for aircraft, so you can set up forward battlefields and be able to have your aircraft be part of the battlefield. And so I think those 2 areas have just seen dynamic growth. And I think there are front end of how we can deploy equipment, but all those electronics, the naval ship capabilities, all that other stuff, is still a growing momentum for us. So I think we have a lot of equipment that is really going to benefit as the spendings do take stronger hold in the years to come. And with that, maybe Chris can talk about some of the numbers that we have experienced.

Sure. I'll just -- I'll try to be brief with this. So our foreign military sales, which we categorize as sales directly to foreign governments or directly to foreign customers, excluding those sales that we have to primes that go to overseas. So that 35 Stryker platforms, various other domestic platforms going overseas. Our FMS sales are about 8% to 9% of our sales across the organization. And, this last year, we saw our FMS sales grow 20%. So it was a pretty big jump forward. We had broad improvements across our defense electronics portfolio for military sales serving all 3 of the naval-aero ground defense markets. We also saw increased arresting systems. We saw increases of turret drive stabilization systems this last year, so a big boost. Quite frankly, it was great to see when we got to year-end, I didn't think it would come that quickly. But I agree with Lynn. I think there's a lot more to come in that regard and companies are really -- countries are really just starting to ramp up in terms of their spending. As we go into this year, the guide that we have for foreign military sales is going to be a mid-single-digit growth rate now. There's going to be strong sales underneath that. And aircraft handling systems supporting naval markets, and then there will also be some improvements in tactical communications that we have overseas. But we grew so strong this last year in our aircraft arresting systems in aero defense markets, it was greater than 20% in that market alone. That's going to level off a little bit this year. And then these turret drive stabilization systems programs can be a little bit lumpy. So this would be kind of maybe a flatter year for that as well. So mid-single-digit growth coming into the year and optimistic about where our portfolio is going to take us in the future.

Right, right. Okay. Good. So that theme continues essentially is what I'm hearing across -- more companies in the ecosystem. Maybe you can talk a little bit about, I guess, it's kind of risks and opportunities. But I want to put this in the context of the backlog. You talked about having record backlog.

Yes.

I think that's the way you described it. And that's a pretty common statement that I hear from most aerospace and defense companies. Good reason, right? We're seeing lots of demand on the commercial side, lots of demand on the defense side. But we've learned, however, over the last couple of years is that there's maybe a little bit -- there has been a little bit more risk in that backlog that I think people would have otherwise thought to be true, if this was 5 years ago, prepandemic. And that backlog is -- those risks have manifested themselves to the supply chain bottlenecks and with the higher cost inflationary pressures on labor that have led to higher costs, particularly for companies that are operating on firm fixed priced development programs. So maybe you can just talk a little bit about your backlog? How it's balanced from the risk and opportunity perspective and kind of the dynamics around the idea of a firm fixed price program which take that completely off the table if there aren't any of those kinds of things for industries. But those that are going to come in from the outside, see record backlog, aerospace and defense company. How do I know where the risks and opportunities are in that backlog?

Okay. Yes. So maybe another question I'll tag team with Chris to give some of the specifics about how we manage our contracts and approach taking these larger contracts. When I think of risk, in our business, there's a variety of things that we are focused on. And I'm very conscious that we have the continuing resolution. We have the need for staffing. I mean there's lots of things. But we have, as I talked last year, we increased our engineering spend by $20 million and another $20 million this year. So we're taking on a lot of big meaningful development programs. Some of this in the new nuclear development area, some big projects with our Navy as we move towards next-generation ships, the subsea projects with Petrobras. I mean, these are big, complicated engineering projects. So it's something that has been an area of continuous improvement for us is to -- our approach is to provide oversight and make sure we're analyzing the risk in these contracts, managing them and continuing knocking down those risk items and buffering ourselves financially that we're not going to get bit by these things. And you can never say never. But I feel like we've got a good handle on it. And our approach to taking these larger contracts, a lot of this isn't new to Curtiss-Wright, and I think we've had pretty good approaches. And maybe I'll talk -- just turn it over to Chris to talk about some of the ways we enter these contracts.

Right. So when we go through each of these reviews of the programs and projects before we make the investment. I mean it's a very thorough technological review. It's a very thorough financial review. And if it's something that we're getting into a contract for that's, we'll call it, more experimental or more developmental to Curtiss-Wright and something that we're -- is less something that we don't do on the regular. We addressed that in the risk of the proposal and our pricing. And we enter that negotiation with the customer with that in mind, whereas we do have some development contracts that are a little bit more simplistic, and we [indiscernible] that way as well. We don't do very many cost type contracts across the organization. Most of what we do is on a fixed price basis. And I think there are advantages and disadvantages, right, for those -- you've heard a lot from some of the primes as to, "hey, we're not going to fixed-price route" But I think by and large, in the 14 years that I've been here at Curtiss-Wright, we executed very, very well on these contracts. I mean, in the time that I've been here, maybe a small handful of actually been lost contracts in that time and certainly nothing that's been material. So the team does a really good job at assessing the requirements, pricing accordingly and then executing to those contracts. I think that's very important. You have to know what your capabilities are and not get too far out in front of things. I mean if we were to get into something that was highly experimental, yes, I think a cost-type contract could be warranted, but you have to be careful sometimes in what you ask for because cost type contracts generally come with lower margins. So you have to believe in yourself and you understand the products that you're working with and are good engineers, which we do, you generally execute very well on those fixed price contracts.

The other thing I would -- just jumping back in for a second to say that on some of the larger multiyear contracts that we take, we have very good processes for locking in our supply chain ahead of taking those contracts. So we don't have inflationary pressures that are eating away at our margins. I can't say never. But in the vast, vast majority, we're very purposeful about when we do take these larger multiyear fixed-price contracts that we know our cost base.

That's a good point. We have about 70% of our costs locked in under contracts at any point.

Yes.

Right, right. Okay. Good.

So it's something we watch, I don't want to be dismissive about it. I don't want the tone to have that. It is something that is something that we're very conscious of, but I think we're doing the right things to manage it.

Right, right. Okay. Good. Maybe just going back to 2024, maybe the nearer-term things, just kind of recent opportunities for the guidance for this year, kind of the key watch items that you think you're going to be paying particular attention to? I know we've got the potential for the CR to continue to, I don't know, exist, I guess, for a lack of a better word.

Yes. Turn into a sequestration.

Yes, exactly, yes.

And so -- yes. So I mean, honestly, watching the defense budget, it's our largest end market. It's over half of the business is a top watch item. We were in, obviously, we only put our guidance out a couple weeks ago, and we are where we are. So we feel we've positioned ourselves with our guidance to be able to play out the different scenarios of -- we do stay in the CR for the full year. And so the range of the guidance, probably if we see in the CR for the whole year be more towards the bottom of the guidance, but hopefully not. Even across our defense electronics, we guided it 5% to 7%. And we had a great booking year in defense electronics last year booked $936 million worth of business and the middle of the guide is $865 million. So obviously, we're well prepared more than, I think for those of you who followed us for a while, in '22, when we had the very long CR that went on 180 days. We dropped our guidance in defense electronics that year, as a result, largely somewhat supply chain, but also the CR. And I think we've buffered ourselves in that situation and the supply chain is entirely different now than it was in 2022. And so that's really one of our top watch items is really what's going on with the defense budget. But another watch item for us is our talent management and the ability to attract new talent that we increased our headcount. Last year, almost 500 people. We still have attrition in the business underneath that. So you have to overcome the attrition and then -- and drive new heads and then make sure we're onboarding those people. We're training them up. We're making sure we hold our efficiency metrics. Of our current open heads, which is down slightly. I think last year, I mentioned a couple of times, we had over 500 open heads. We're currently at just under 400 open heads across the organization. That's a lot of people we need to bring in to the businesses and about 1/4 of those are engineers that we need to hire to execute on some of the project work we're endeavoring on. And so that's our ability to attract that talent and making sure we're the kind of business that people want to come work for is a top focus area as we just talked, watching execution on these, some of these really larger development opportunities is something that is a watch item for us. We do watch a few of our businesses, business areas are a little bit more economically sensitive. So some of our industrial businesses and our process valves. And so watching the order books and those and feels if we have pretty good stability and visibility as to what's going on across those. And then in -- anticipating very modest growth, low single digits across those, which is largely being driven by new product introductions. So even if the markets are not showing much growth, we are thinking we can drive some growth through some of our new product introductions. And it's interesting in the vehicle space, you can go to the ACT and the LCM forecast and see some fairly negative perspectives. I think that we're hearing slightly different messages from our OEM partners and what they are anticipating. So I think we're a little more positive than what comes out of those forecasts. But again, really driving a lot of new product introductions. And then even the Boeing 737 situation being on a production hold, that's a couple of percentage points of headwind for our commercial and aerospace business that's in our guidance, but that could be a tailwind if they would be allowed to ramp back up production in this calendar year, so that -- so -- and I could keep going, but I don't want to scare everyone away.

Yes. No, fair enough. Maybe just double click on the 37. You said a couple of points of headwind, but trying to think of why that would necessarily be the case because I suspect that from a production perspective, they'll be higher or a little bit higher...

If they would have ramped the way they anticipated...

So the growth would have otherwise been higher.

Yes, otherwise, it would've been higher, sorry, that was to come out fairly...

Got it. Got it.

Just as a data point, last year, we grew at 18%. This year, we're guiding 10% to 12%. We will probably be guiding in the mid-teens if it were not for the FAA's halt and Boeing 747 production.

Right. Okay. Great. In rough order of magnitude, I know that they're talking about -- they came into the year at 38. They're producing something below that at this point. Is that the same case for you? Or so you're producing below the 38 a month now?

Yes, that's fair. We've got a fairly diversified product portfolio. We're selling actuation sensors, surface technologies, electronics onto these platforms. So they're not all at the same production pace. But on average, that's a fair assessment.

Yes. Okay. They still haven't changed their master schedule, right? They still want everybody to be kind of the North Star kind of thing getting up into the 50 range in that '25-'26 time frame? Is just a question of when, I guess? right?

Yes.

Yes.

The future is bright. We just have to -- we've got to get through this issue.

Yes, yes. Okay. We'll get to commercial aero in a little bit longer. I do, in a bit more detail. I want to go maybe look back to some of the comments you made earlier about the nuclear opportunity. And kind of give us an update on where you play in the commercial market, in particular. And you mentioned that public perception of that technology seems to be getting a little bit better. So how do you see this market playing out over the next -- I think this is going to be a long cycle, right, 10, 20 years, right? So talk about where you play? Who your partners are there? And then kind of what you -- how you are all viewing the opportunity set, particularly set against the investments that you're making?

So it's -- I mean, it's a really exciting portion of our portfolio. And when we kind of think of it in kind of 2 or 3 buckets, and 1 is the aftermarket, which I'll let Chris maybe talk to some of the numbers there, which is here and now. I mean it's growth now. It's not something that's a decade out, and then there's the newbuild. And so I'll give Chris to talk about some of the aftermarket numbers and then maybe I'll talk through the various ways we play in the newbuild and are building our presence there.

Right. Great.

So there's a lot of strong forces at play. Lynn had mentioned decarbonization, energy independence is really important for Eastern Europe. But also here in the U.S., there's a lot of legislative support, whether it's coming through the Inflation Reduction Act or the Infrastructure Bill. There are these specific programs that are dedicated billions of dollars towards the preservation of the existing nuclear operating reactor fleet. And those programs have helped to already prevent the shutdown of plants in California and Illinois. And now that we're even talking about a $1.5 billion loan to restart the shuttered plant that's in Michigan Palisades, which would be the first time in U.S. history that a closed plant has ever been fully reopened. So these programs are having a dramatic impact on the spending habits of the fleet operators and we're looking at a mid-single-digit growth rate for this year. And I think we're optimistic as these plant owners become more familiar with the credits and funding that's available to them that that's only going to further enhance this. I mean 2023 was the first time that we have ever faced or that I have faced, I think, in the last 10 years, a year where we didn't shut down a plant. So post Fukushima, we were growing at low single digits with plants closing down and consolidation in the industry forward. So as you look forward, you say, well, take that headwind away from you and you have an opportunity going forward. So I think, that provides a very strong base and foundation to our business to then build upon in some of these development or more exciting opportunities that we have in SMRs and AP1000 [indiscernible].

And just as a quick aftermarket question before you talk about the newbuilds. You mentioned I think Diablo Canyon is what you're referring to in California, right? So how -- you've got that facility, I don't remember when it was built, but I'm guessing...

It's an early one. Because it's just at that process of going from a 60- to 80-year life extension. And so that's -- usually, they're shutting them down when they're making that when their prior license is starting to expire, that is they're approaching that 60-year life that, there's a fair amount of work they ought to do when they go from the 60 to 80, which all this, Chris, was talking about is really a lot of funding that's making it economically viable, a, the social pressures to keep the carbon-free energy on the grid, but also economically viable through some of the [indiscernible] pass through Congress to head into those life extensions. And that's not just -- that's a ramp from the [indiscernible]. So these plants that were intending to shut down, right? They're probably doing the minimal maintenance that they could do. And now we've got some catch-up to do. So it's just really a great portion. We see some plants starting to make the decisions to do things like modernize their instrumentation and control systems, which are much bigger investments than just the normal routine maintenance where you have to go in and inspect and do things. And so it's a pretty dynamic opportunity for us. And the other thing I would just mention in the aftermarket, and I think over the past year, we've talked about us pursuing content in France, which is another -- they have a very significant amount of their energy comes from the nuclear fleet. So that's a journey. It's not something that happens right away, but we're engaged with them and have hosted them in our factories and are making progress in that area. And interestingly, another area that we're pursuing that's longer term than France even is all these Eastern European countries that have nuclear power plants are largely Russian nuclear power plants. They don't want to -- they don't want support out of Russia anymore, and we're early days of engagement with them to say how can we be in those plants and be your aftermarket partner in those plants to do work. So that's a very TBD. We'll see where that goes. But again, things we're exploring as a business for how the driver aftermarket business.

How common are Russian designs versus Western?

It's funny. So I was talking to the gentleman that runs our -- a very large portion of our nuclear business. And he said it's striking, they traveled to Czechoslovakia and touring plants and did things to see hands on what it would mean to be in these plants and he says, you never know the difference, that it's very, very, very similar. So...

Fascinating.

Yes, yes. I don't know -- I don't think anybody had an expectation of what they would find. So it was kind of interesting the revelation with that.

Yes. Okay. Great. So on the newbuild side?

Yes, maybe talking to newbuild. So when we think of our newbuild and again for people, some of you maybe know Curtiss-Wright, and this is old news. But there's kind of 2 parts of it. We're a major supplier of content on the Westinghouse's AP1000 power plants. Sell the reactor coolant pumps. across those. So Westinghouse has really done a fantastic job. We have a great partnership with them and very closely aligned with them. And they've done a really strong job over the past several years of getting into Eastern Europe and promoting the technology, which is called Generation 3 Plus. And so it's the safest current generation, large plant that's available in the world and promoting their content and having success across a whole variety of countries. And Poland is declared they're going to build AP1000s. Ukraine has declared they're going to build AP1000s. There was an announcement just yesterday or the day before, out of the Netherlands. Bulgaria has announced that they're going to -- they're trying to negotiate a contract for their first 2 AP1000. So, all in all, we see an opportunity for 20 to 25 AP1000s being built with starts in this decade going online throughout the 2030s. And this is somewhere, even if Westinghouse doesn't -- only wins half or 60% of those, it's $1 billion to $1.5 billion of business coming to Curtiss-Wright. And again, for some of you we took our last major content was taken back in the mid-teens, and that contract has wound down, and we have -- we took the final few million dollars of revenue last year. We have no revenue in this area this year. So this is an entire growth market for Curtiss-Wright as these AP1000 orders begin to flow. And we talked about time lines starting 2 years ago and saying 3 to 5 years. Last year, we said 2 to 4 years. We're now officially saying 1 to 3 years. So I mean, for anyone who's done things in the nuclear industry, to have time lines hold, that's a great thing. So we'll just be happy with that and really feel optimistic. I mean this is a game-changing business for Curtiss-Wright. I mean AP1000 will have -- our content is well over $100 million per plant as they're building those out. And so -- and good business for Curtiss-Wright. So that's one portion of how the move towards commercial power with newbuilds will provide great tailwinds for Curtiss-Wright throughout the end of this decade. The other area is around the Gen 4 new Advanced Reactor Program. So kind of a new approach to building out nuclear power that's -- the intent is to take away some of the risks and overages that have been in these larger projects that have not gone well and gone significantly over budget. And it's just a concept that the plants will be built more in the factory and basically assembled on site. I mean there's still work to do on the site, but it's more not piece mill coming in, in this huge construction project. And this was really launched back in 2020 in earnest. It's been building for longer than that. And the government put forward ARDP program and picked 2 companies that they would provide funding to a matching funding approach. And that was X-energy and TerraPower were the winners of that. And we've been open about our content with X-energy. We have over $100 million of content for their instantiation of a plant. And so we're very pleased with our partnership with them. We have one announced system with TerraPower that we've won the Reactive Protection System, which is basically controls overall, the safety of the plant. No dollar content that TerraPower has asked us not to speak about that. So of course, we're not going to another pursuits with them. But even more broadly than those 2, GE Hitachi is building an SMR, Rolls Royce, NuScale and Westinghouse has a small modular reactor, the AP300. And there's great advancements across all of these. A, we're pursuing content in every one of the SMRs. And we think it's a real investment opportunity in Curtiss-Wright is that we're not one instantiation of the plant. We're not just AP1000. We're not just one of the SMRs, but we really are working very hard to ensure we have meaningful content across all of those platforms. And so as -- no one is going to win the world. I mean there's going to be different winners in different countries, and you can already see that. I mean, Poland has declared they're going to build 24 GE Hitachi plants. The U.K. just announced they're going to build 4 AP300s. So these different companies are going to win. The U.K. is also looking broadly that Rolls-Royce will probably be a significant player. And we're indicating that we anticipate our content will be anywhere from $10 million to that $100 million plus kind of range across all these different plants. And we believe we have a role to play on all of the providers. And so there was a study in the U.S. a couple of years ago, across energy producers in the U.S. that indicated that they have plans to build 300 SMRs by 2050. And so if you take our content, that half of, and that's only half of energy producers in just the U.S. Canada is already also making indications. They're going to build out some SMRs. And then the incremental opportunity across process industries that require high temperature steam, it's -- there's a lot of zeros in the potential for the market size. And so we're focused on today of being a great partner with these guys, helping deliver the content that gets their first reactors built online performing safely. And it's just a fantastic opportunity for Curtiss-Wright.

It's awesome. And I think we're going to leave on a high note because I just realized that we've counted up 7 minutes and gone over.

I can't see, so I don't know what's going on.

I looked down and we were already at plus 2. Oh my God, how did we do that. So I want to thank you both for joining us. I really appreciate you coming down and supporting the conference. And I hope you have a great after -- good rest of your morning and afternoon.

Thank you very much. Our pleasure.

All right. Thanks, everybody.