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K. Christopher Farkas

Thank you.
On slide 5, I'll review the key drivers of our fourth quarter 2024 performance by segment. I begin in Aerospace and industrial where overall sales increased 5% and was in line with our expectations. Within the segment's defense markets, we experienced solid increases in actuation equipment sales, most notably within our aerospace defense market supporting the F-35 program.
Within the segment's commercial Aerospace market, our results reflected solid OEM sales growth supporting increased production on both narrow body and wide body platforms. In the general industrial market, our results reflected lower global off highway and specialty industrial vehicle sales as certain customers continued to reduce their inventory levels through year end.
Partially offsetting those declines was a modest increase in domestic demand for on-highway vehicle equipment and surface treatment services. Of note, and despite reduced sales in this market, we have continued to see improving year over year industrial vehicle order trends since the second quarter of 2024.
In turning to the segment's fourth quarter profitability, we delivered a record quarterly operating margin of 21.3%. This was driven by favorable absorption on higher sales along with the benefits of our restructuring initiatives while we continue to invest in R&D to support our future growth.
Next, in the defense electronics segment, if you recall, we implemented several restructuring initiatives beginning in the second half of 2024 to support this business's future growth. Given the expected ramp up in these efforts and to ensure on-time delivery to our customers' schedules, we accelerated some revenues and deliveries into the third quarter.
As the fourth quarter unfolded, those restructuring efforts progressed ahead of schedule, and we were able to effectively take on more volume. And as a result, while we recognized year over year and sequential declines in quarterly revenue, the performance was slightly ahead of our expectations.
Regarding the segment's fourth quarter operating performance, though we delivered a solid 24.3% operating margin, our profitability was impacted by under absorption and timing on lower revenues, partly due to the realignments of our manufacturing footprint as well as unfavorable nicks.
Turning to the naval and power segment, sales growth of 12% was ahead of our expectations, principally driven by higher revenue across several key platforms in naval defense. Within this market, we experience stronger than anticipated growth in production on Columbia class and Virginia class submarines, as well as the CVN 81 aircraft carrier program due in part to the timing and material receipts.
We also experienced higher development revenues on the next generation SSNX submarine program and increased demand for aircraft handling systems to international customers. Within the segment's aerospace defense market, our results reflected lower international aircraft arresting systems revenues based on timing and strong performance in the prior year period.
In the power and process market, our results reflected continued strong demand in commercial nuclear supporting the ongoing maintenance of US operating reactors. Partially offsetting the strong demand was lower sales in the process market based on the timing of domestic MRO valve sales following strong growth in the prior year period.
Turning to the segment's fourth quarter operating performance, despite favorable absorption on higher revenues, profitability was mainly impacted by unfavorable mixs across our defense and process markets. To sum up Curtiss-Wright's fourth quarter overall results, we generated a strong operating margin of nearly 20% while maintaining our commitment to R&D investment across the portfolio.
Turning to our full year guidance, 2025 guidance, I'll begin on slide 6, with our end market sales outlook where we anticipate total sales to grow 7% to 8%, reflecting mid single digital organic growth plus the contribution from Ultra Energy.
Please note that while the majority of Ultra Energy sales are tied to our power and process market, the business also sells equipment to customers within our A&D markets. Starting in aerospace defense, our outlook for growth of 6% to 8% mainly reflects higher embedded computing revenues in defense electronics serving both domestic and international customers.
We also expect increased sales of aircraft arresting systems equipment, principally supporting international customers. Within ground defense, our outlook for 3% to 5% growth reflects continued strong demand for tactical communications equipment, which, as a reminder follows strong 15% sales growth in 2024.
In naval defense, growth of 3% to 5% reflects higher revenue on aircraft carriers, including increased production on the CVN-81, as well as support for the CVN-75 refueling and complex overhaul program, which is a multi-year effort that will begin to ramp up this year.
We expect those increases to be partially offset by timing on submarine programs that accelerated into 2024. Elsewhere within our defense electronics business, we anticipate higher embedded computing revenues supporting various domestic and international programs.
Looking more broadly across all three defense markets, I'd like to highlight the expected contribution of direct foreign military sales. In 2025 we expect continued low double digit growth in FMS to be driven by the alignment of our technologies to support increased global defense spending priorities.
Turning to commercial aerospace, our outlook for 10% to 12% sales growth reflects our strong order book driving high ROEM production sales on narrow body and wide-body aircraft, including modest growth expectations on the 737 max in the back half of the year.
We expect those increases to be driven by higher sales within our aerospace and industrial segment for sensors and surface treatment services. As well as our defense electronics segment for avionics and instrumentation equipment. Wrapping up our aerospace and defense markets, we expect total sales in these markets to increase 5% to 7% in 2025.
Moving to our commercial markets and power and process, our outlook for 16% to 18% growth reflects a combination of mid to high single digit organic revenue growth, as well as the contribution from Ultra Energy.
Starting in commercial nuclear, growth and aftermarket revenues is expected to be driven by continued strong US demand despite lower year over year domestic outages, as well as increased sales supporting the UK aftermarket from newly acquired Ultra Energy.
Our commercial nuclear outlook also includes a ramp up in development revenues across several SMR designs, including the X Energy and TerraPower advanced reactors. And as a result, we anticipate high single digit organic growth in this market and greater than 20% growth overall this year when including acquisitions.
Next, in the process market, our outlook for low to mid single digital organic growth reflects increased development on subsea pumps, most notably supporting Petrobras's deep sea operations, as well as a contribution from ultra Energy with sales to the oil and gas and non-nuclear power generation markets.
Lastly, in the general industrial market, we anticipate sales to be flat in 2025. Our outlook reflects modest sales growth in industrial automation and surface treatment services, which typically aligns with global GDP growth rates. However, that growth will be offset by reduced sales of industrial vehicles amid ongoing market challenges, but we remain cautiously optimistic based upon our improving order book throughout 2024. Wrapping up our total commercial markets, we're targeting full year sales growth of 9% to 11%.
Moving on to our full year 2025 outlook by segment on slide 7, I begin in aerospace and industrial, where where we expect sales to grow 3% to 5% overall, reflecting strong growth in commercial aerospace and flat sales in general industrial.
Regarding the segment's profitability, we project operating income growth of 5% to 8% and operating margins to increase 40 basis points to 60 basis points and range from 17.4% to 17.6%. This outlook reflects our expectation for higher sales as well as the savings generated by our restructuring actions.
Next, in defense electronics, we expect sales to grow 7% to 9% principally driven by the strength of this business's record 2024 order book, which is driving solid growth across all A&D markets.
Regarding the segment's profitability, we expect operating income growth of 8% to 10% and operating margin expansion of 10 basis points to 30 basis points to a new all-time high range of 25% to 25.2%, which includes a $5 million or 50 basis points headwind from increased internally funded R&D investments. And enabling power, we expect overall sales growth of 10% to 11% or 3% to 5% organically reflecting solid growth across this segment's defense and commercial markets.
Regarding the segment's profitability, we expect operating income growth of 13% to 16% and operating margin expansion of 50 basis points to 70 basis points to a range of 16.3% to 16.5%, reflecting both favorable absorption on higher organic sales, as well as the contribution from Ultra Energy, which will initially be diluted the operating margin.
We'll also move past the $10 million dollar impact from last year's first quarter in Aval contract adjustment. In addition, our guidance reflects approximately $4 million in incremental R&D investments to support internally funded development programs.
Regarding ultra energy, we expect this business to generate high single digit revenue growth and produce a low double digit operating margin in 2025. And I note this outlook includes increased year over year investments in advanced reactor technology as this business similarly focuses on expanding its presence across major SMR designers.
So to summarize our 2025 outlook, overall, we expect total Curtiss-Wright operating income to grow 10% to 12%. We expect operating margin to range from 17.9% to 18.1%, up 40 basis points to 60 basis points.
Next, in your quarterly modeling the sales and operating margin. We expect first quarter 2025 sales to grow by high single digits relative to the first quarter of 2024, including Ultra Energy. Within the AI segment based on the seasonality within these businesses, we expect that sales and operating margin will be in line with our first quarter 2024 results.
In defense electronics, we expect to demonstrate strong growth in sales and profitability and exceed last year's first quarter results. Lastly, in the naval and power segment, while we expect solid growth in sales, our first quarter 2025 profitability will reflect initial margin solution from the Ultra Energy acquisition. In summary, at the overall Curtis Wright level, we're expecting mid-teens first quarter operating margin on strong sales growth.
Continuing with our financial outlook on slide 8, I wanted to provide some color on a few non-operational items. I'll start with other income which we expect to decrease by approximately $4million to $5 million this year. This is principally due to lower interest income as we entered the year with a slightly lower cash balance given our fourth quarter 2024 cash payment for Ultra Energy and increased share repurchase activity.
Later this month we'll pay down the $90 million in senior notes coming due, which will have a positive offset and lower interest expense. And not this current guidance assumes that we'll have no borrowings against the revolver again in 2025.
In addition, our outlook reflects a reduction in our 2025 tax rate to 22%, further building on last year's tax optimization and efficiency efforts. Turning to our EPS guidance, we expect full year 2025 dilud EPS to range from $12.10 to $12.40 up 11% to 14%, reflecting the strong profitable growth within our operations.
Paid in your quarterly EPS modeling, we expect first quarter EPS to reflect approximately 20% growth relative to the first quarter of 2024. And similar to last year, we expect sequential quarterly improvement with the fourth quarter being our strongest.
Please note that our EPS outlook also includes a reduction in our share count following the completion of $250 million in share purchases in 2024. For 2025, here we anticipate $60 million in standard share purchases reflecting a $10 million dollar year over year program increase as we continue to offset pollution.
And lastly, we're projecting a full year free cash flow of $485 million to $505 million in 2025, essentially in line to slightly above last year's record performance. Growth in cash flow from operations is expected to benefit from higher cash earnings, a small contribution from Ultra Energy, and our continued focus on working capital management.
And as a reminder, last year's free cash flow benefited from an all-time record level of advances, a portion which we would expect to be consumed as work progresses in 2025. In addition, we expect capital expenditures to increase nearly $20 million year over year relative to the of our guide as we continue to invest in support of our future growth.
Overall, our outlook reflects a healthy free cash flow conversion rate in excess of 105% again this year, which remains in line with our long-term targets.
Now I'd like to turn the call back over to Lynn.

Lynn Bamford

Thank you, Chris. And turning to slide 9, as we have discussed today, our record order book and growing backlog, as well as our positioning within our end markets provides us with confidence to deliver profitable growth again in 2025. While we remain cautious in light of the ongoing political and macroeconomic environment, we expect to generate high single digit total sales growth this year.
This output outlook reflects both increases in both our A&D in commercial markets and the strength of our combined portfolio. Beyond the top line, one of the most significant milestones that we're forecasting in 2025 is to reach 18% operating margin at the midpoint of our guide.
Our drive to generate operating income growth in excess of revenue growth continues to be a fundamental premise under the pivot to growth strategy, and we expect this to result in an accelerated pace of margin expansion in 2025.
Further, our steadfast focus on operational excellence allows us to continue to make incremental R&D investments while still targeting double digit EPS growth.
And as we've noted, based on our strong outlook for free cash flow generation this year, we are able to fuel investments in our systems and infrastructure as we continue to grow our operations and increase efficiencies to better serve our customers. These investments will better enable us to capture positions on next generation defense platforms or benefit from the continued development of SMR technology in commercial nuclear.
Next, regarding our capital allocation and as we look beyond the recently completed Ultra Energy acquisition, we continuously look to put the strength of our balance sheet to work through a disciplined and strategic approach to capital deployment, and we are focused on investing our capital for the best possible returns to drive long-term shareholder value.
Our pursuit of high quality acquisitions has been and will continue to remain our highest priority for capital allocation. Beyond that, we'll supplement those pursuits by driving consistent returns to our shareholders as I highlighted earlier in our remarks.
Finally, having demonstrated strong financial results this past year and considerable progress towards our long-term growth objectives, we remain confident and committed to achieving all of the three-year targets established at our 2024 investor day.
Beyond these targets and as we look out across the next decade to the art of the possible that we proposed at last May Investor Day, we remain confident in our focused strategy and the alignment of our technologies to key secular growth trends. The external market forces and related push for carbon-free energy and energy independence is a global movement and one that is needed to address growing energy demands that remain at an all-time high.
This in turn will drive the continued expansion of projects to satisfy both traditional energy demand, including electricity and process and heat applications, as well as the potential for incremental demand to support AI and data centers. We recognize that the impacts of legislative and technological disruption on these large and complex projects is likely to continue to create uncertainty along the way.
But the core fundamentals remain unchanged, and our view on Curtiss-Wright's ability to generate strong growth in this market and provide continued value to our shareholders over the near, medium, and long term remains firmly within our sights.
We are aligned with Westinghouse in their pursuits to construct new AP1,000 power plants across Europe and North America, and we continue to expect an order for our reactor coolant pumps in the next 1 to 2 years.
We also continue to grow our presence with the leading designers of small modular reactors, both organically and through acquisition, with construction of advanced reactor technology expected to accelerate later this decade. The numerous projects that Curtis Wright is supporting are all still moving forward and continue to build upon our very strong position supporting existing reactors across the globe. At this point, nothing has changed that would impact our investor day outlook, which many of you know was a conservative and prudent assessment of the overall growth opportunity for Curtis Wright.
Finally, we remain encouraged by the new administration's pro-nuclear stance and the recent appointments of [Curtiss-Wright] as the new US Energy Secretary and Doug Burgum as the Secretary of the Interior. As a reminder, the US's initiative to regain our commercial nuclear advantage started in 2017, and this industry continues to garner strong bipartisan support.
Collectively, these positive market forces support our confidence in projecting our commercial nuclear business to grow fivefold by the middle of the next decade to an annual run rate of $1.5 billion providing tremendous long-term value to Curtiss-Wright and our shareholders. In closing, I'm excited about Curtiss-Wright's future and the many great pursuits across our operations beyond that nuclear option optionality. Such as our world class defense electronics portfolio and our position as a mission critical partner to the US Navy, we expect to sustain our growth by winning in strong and expanding markets with exciting and new technologies and solutions while continuing to build momentum in our pivot to growth strategy.
Thank you. And at this time I would like to open up today's conference call for questions.

Question and Answer Session

Operator

(Operator Instructions)
Nathan Jones, Steeple.

Nathan Jones

Good morning everyone. I guess I'll start on the ultra energy acquisition. I know this is one you guys have been excited about, and you touched on some of these things in your, prepared remarks from how you get a bit more color on.
How it improves your position on some of the European SMR manufacturers, how you can leverage that business with your current businesses to maybe grow content on some of these platforms, just a little bit more color on kind of the strategic value you see just outside of the financial.

Lynn Bamford

Sure, and thank you for that question. We were, it took longer than we anticipated to get it to close, but December 31, we got it done in the year, so it's a nice clean break point you could say from that position, but we're, definitely out of the gate strong with these guys. We've had, the two main locations, one in the UK, one down in Texas, we've had kickoff meetings, with both of them, and, both teams.
We, chomping at the bit to get started on figuring out how we would collaborate together because, the closing of the acquisition took longer than anticipated. So there's a lot of enthusiasm and activity going on. So with that said, to talk more about the strategic fit, there's a couple of aspects to it.
One is as a European supplier with a European footprint, it gives us the opportunity to possibly transition some products to be able to be supported through that facility and provide more localized content, which you know is important as you think of the major reactor providers that are European based and most notably Rolls-Royce that they have a great relationship with and. Already initial meetings on how we can better advance our partnership, with them, with ultra being, we were engaged with them beforehand but really opening the doors there, so that, that's, one example of leveraging that footprint, but it won't be just with that one customer. I don't want to imply that, but that's kind of, the biggest and one that's most before us right now.
They also do work, as we mentioned with the UK submarine fleet, dollar wise it's not, an overly significant part of their revenue stream, but it's critical technologies and critical relationships that we'll see where potentially that can take us as a partnership there. Very high temperature, pressure and sensor, pressure and temperature sensors, were produced and designed mainly for the nuclear market, but as the world tries to get more energy efficient, it, there's a much broader applicability of these, products more globally and something that, with our, strong market breath across, commercial aerospace, is one example.
I think we'll have a much greater reach in how we can take these products to market than was really, a focus for that team. And so we're early days of working with them on that area. So that's just to touch on a couple, but, their heritage, one of the things I think is exciting, from our investor day we talked about how, we're proud that we have heritage in many of our, businesses from the inception of the industries and these, this team, brings that same heritage and with it just deep industry knowledge, different some different customer connections than we have and so, this, it's more than just the tangible things, they're a well established strong player and this was really unique and great technology that just broadens what we can take to our customer base.

Nathan Jones

Awesome, thanks for the color. I guess I guess my second question, I'm going to go on foreign military sales. There's obviously a big push from the US administration to get Europe to increase their defense spending.
I think air defense and ground defense would likely be areas of focus should our foreign military or European governments look to to increase military spending, which should fit very well with Curtiss's portfolio. Maybe you could just give us some color on.
What kind of improvement you would expect in foreign military sales if I don't know, Europe increased defense spending by 1% or or just any kind of color you can give us on how you would benefit.

Lynn Bamford

Well let Chriss speak to the numbers, but before that, you're very much right. Ground defense is, a great area over there. We have a very sophistic capability in stabilization equipment that is used on a variety of type of of vehicle platforms and a very strong partnership with (inaudible) Natal, which is really the leading manufacturer of vehicles over in Europe, not the only and then that's not the only place we partner, but, a very preeminent one.
And so that and, we have a systems capability to deliver, other types of products into, both ground. And aerial vehicles that are there, but we ship a lot of stuff just out of the US and so directly into those customers, so you know our our product applicability is pretty great, but with that maybe I'll turn it over to talk let Chris walk through some of the numbers.

K. Christopher Farkas

Yeah, sure, that's been a great growth factor for us, Nathan, as you know. I will say that it's very difficult for us to predict, what a 1% increase in GDP across NATO is going to necessarily translate to for Curtiss-Wright, but we have seen some really great increases in NATO spending over the past few years in 2024, and we now have 70% of the country spending in more than 2% of their GDP, and if that continues to accelerate, then we would expect that that will only continue to help accelerate our portfolio.
But back in '23. FMS growth or direct FMS growth, I should say, grew more than 20% for Curtiss-Wright, in 2024, our FMS sales grew 10%, and that was really despite some timing issues that we had in the prior year with our TDS business which can kind of be a little bit lumpy. But we saw a really strong demand across our defense electronics business given that a very broad portfolios supporting, arrow and ground markets and as well as some benefit to our aircraft handling business with naval power.
And as we enter into this next year, we're expecting that we're going to continue to grow at a low double digit plus pace, and that'll be mainly driven. Again, by C-5 ISR naval aircraft handling, and then also some of the ground based arresting systems that we have within naval and power. So we see it as an opportunity for Curtiss-Wright going forward for sure.

Operator

Mich Ciarmoli, Truist Securities.

Michael Ciarmoli

Hey, good morning guys. Folks, thanks for taking the question. Hey, Chris, I guess just looking at, great order flow, record backlog, you've got the organic growth outlook in in 2025 decelerating a bit, defense has obviously been extremely strong. But any other kind of hooks and takes, and I know that the mid single digits in line with with kind of what you laid out in investor day, it seems like, I would have thought maybe, the arrow piece would have been a little bit better, but any other puts and takes on just kind of that revenue dynamic?

K. Christopher Farkas

As we enter into the year, we feel really well positioned with where we are, from a backlog perspective, particularly across our A&D markets, a lot of that, order activity that we experienced here in 2024, when you look at, like a second quarter book to bill 1.7 times in naval and power, that's multi-year work that's that's coming to Curtiss-Wright. So as we look across naval defense, we certainly see a solid opportunity for growth ahead for that business, within aerospace defense, that there's a strong driver there, not only what's happening within C5-ISR, but also what's happening over in in the actuation business relative to get some additional work that they have with the F-35 program and other fighter jets and then within naval and power, you're looking at at some uplift relative to the ground-based arresting systems on an international level, as we approach ground defense, we had 15%. Growth in that business this last year and it was even stronger the year before.
Yeah, the order book is great, but as we enter into the year, some of that footprint capacity and management that we're doing within that business continues, so we'll expect a little bit of more chatter here maybe in the first quarter until we get some of those efforts completed and then. Yeah, just overall, I think if you look at defense electronics, we've got some really exciting things that we're doing.
You saw it in the CapEx and some of that is systems enhancements and improvements in the organization. Other investments are really just to expand footprinting capacity and we just have to balance some of those major projects that are going on across the organization to support future growth with the expectations for what we what we can achieve in 2025. So I think like I feel like we've taken an appropriate position entering into the year given all that.

Michael Ciarmoli

Got it, that's helpful. And then I guess just a question on the topic that's coming up across almost every call tariffs and I guess we're going to get more news here at [01:00] today, presumably, but going back and kind of looking at. At your exposure, I guess back in 2018, maybe you had a couple million dollars here or there. How are you thinking about, potential tariff headwinds, either the revenues or operating income kind of contemplated in the outlook?

Lynn Bamford

It's definitely a topic of conversation and a, a fluid situation to say the least, but I appreciate you bringing up, the past situation, and I guess, the thing I would communicate first is current rights over, the recent past has dealt with, a variety of disruptive, situations, whether it was the tariffs back in the late teens, which you're right, we're about $9 million of which about half we were able to mitigate with our customers and half we absorbed. But not material to the business, but we absorbed the pandemic came along and we lost $300 million of sales. We have the supply chain disruption and defense of electronics, ongoing inflation, and I think it's important to note.
Curtiss-Wright has delivered steady growth and steady margin expansion through all these situations. So, we have our commitments to manage this current situation as we, have a very agile and or you know. Action oriented team and so you know we're already doing the things that we can do with the information we have. We've started some cross functional tiger teams that are, really making sure that, we have our handle around everything, related to operations, contracts, financial, legal, etc.
We're definitely reviewing things such as. Flow of products, contracts, terms, and watching the formal government communications to consider all the options that we can lever now and continuously thinking through areas we can improve to minimize the impact and are focused on mitigating actions whether that's, price recovery or a different.
Approach to delivering a product to a customer that isn't overly disruptive in communicating those things. So we feel at this point in time that, we will manage this as we have managed in situations in the past, but we're also contemplating, with.
If the tariffs stay more permanent, more broad, more, and appear to be more durable, how we might make some other even more significant changes to protect the business. And so obviously you need more details than we have right now to do those things, but we feel really good about our guidance and they're, entering the year and this is obviously, an ongoing situation and we know of it, but we feel as if we will be able to manage our way through it.

Michael Ciarmoli

Got it. Helpful. And then just last one, Lynn, I think I heard you correct, you're expecting maybe a reactor coolant pump order in the next 1 to 2 years. Is that just maybe color on that timeline is that that sort of in line? Is it sliding to the right? Anything changing out there, I guess the latest news maybe Ukraine is looking at buying some Russian reactors from Bulgaria, but. Any kind of general update on market opportunities with with RCPs for the AP1,000?

Lynn Bamford

Yeah. So it's been -- I'd say, honestly, amazingly steady over the past 3 years from coming out with our February 24, 2022 guidance when this whole situation over Ukraine began that morning, the time line for our first RCP orders has gone from 3 to 5, 2 to 4, 1 to 2 with a steady progression year-over-year. And so it has remained very, very stable. We work very closely with Westinghouse on monitoring the pipeline.
And when we say 1 to 2 years, we're really saying we expect an initial order by the end of 2026. So just to be a little bit more specific, somewhere between now and then. I wouldn't say now, I would say more in the 1- to 2-year time frame, but really by the end of 2026. And one piece of news that's out there for those who follow all the news feeds is Poland has moved their operational date from 2031 to 2033.
But that absolutely does not impact our time line of expecting the first order. Westinghouse has known that for some time. It just was not made public. So as we worked with Westinghouse and anticipate that order don't let that think that's a delay to that first order, which is still anticipated to be in Poland. So that's just one thing. Two other points of note is there's talk of trying the VC Summer plant back online, and that has a potential of being a very good opportunity for Curtiss-Wright. If that were to happen, I mean, there's not much specificity around that. But it has been put forward.
And kind of the late breaking news this week that again, needs to be flushed out is that India is considering changing their approach to indemnification on nuclear power plant which could break down what has always been the barrier for plants being sold into India. So those are kind of two new things. I don't think there either of those are going to play out in a manner that's going to jump ahead of a Poland or potentially Bulgaria order, but there are things that are new and good.

Operator

Myles Walton, Wolfe Research.

Myles Walton

Thanks. Could you comment on what the order was that triggered the large deferred revenue to come through on the cash flow? And then also, as I look at your naval defense business, that went from an expectation in 2024 of started the year at 3% to 5% growth and end up at 14%.
Can you give some color as to it seems like every quarter that was getting revised higher. What exactly was going on there? And the new starting point for 2025 is 3% to 5%. So is there a similar upside opportunity?

K. Christopher Farkas

Yeah. I mean, first, to discuss the upside opportunity. I think we feel pretty well positioned with where we're coming into the year Myles. And I would say that to answer maybe the first question that you asked, I mean, the volume of naval orders that we had received across this business this last year was very, very strong. When you look at that business and then our ability to convert that, whether it be through material receipts or the significant ramp-up in staffing that we were able to achieve for this business this last year. I think we certainly surpassed our own expectations.
And as that work gets completed, or as those orders come on in, that provides an opportunity for us to kind of bill and bill in advance of certain milestones being achieved. So if you step back and take a look at the balance sheet for Curtiss-Wright, I mean we were up $140 million in deferred revenue this last year.
So a record level of advances not only across the full year, but in the fourth quarter, as well. So most of that relates to what you saw in submarines and the acceleration of work that happened here into the fourth quarter, but I also want to say, across our Defense Electronics business, they did a really solid job of getting in advances ahead of their work.
So there was a lot that kind of went into that. I wouldn't say it's a single contract, but -- so that was all good effort. And as we go into this year, will there be upside in Naval Defense. I think a lot of that is just -- is going to continue to depend upon the ability to put the right CapEx and people in place and execute on that backlog and get through that sooner. But I'll say that, again, we do feel good about the guide entering into the year.

Myles Walton

Okay, and what was the book to build by segment, for 2024 if you have that?

K. Christopher Farkas

Yeah, so if you look at aerospace and industrial, it was 1.05. Defense Electronics was 1.16, and naval power was 1.3.

Myles Walton

Yeah. Okay. And then maybe, Lynn, on the subsea pump business, given we know have the Gulf of America and we're going to drill a lot. What's the outlook for the subsea pumps and if that's a material opportunity over the next 3 to 5 years upside versus what you've previously been thinking?

Lynn Bamford

Well, I'd say across our entire process end market, it's surely drill baby drill is probably a good thing. So -- but joking aside. The early executive orders -- the first executive orders of Curtiss-Wright, not only was very pro nuclear, it was very pro LNG and all things fossil fuels, and that is going to be good for Curtiss-Wright. And so we size the opportunity for the subsea pumps at $250 million of potential by the end of this decade. That has not changed as of yet.
We sort of going through the last stages of getting the Shell pump deployed and we're really developing it with Petrobras. But I feel like it will surely only be a tailwind for not just at subsea, but many things around our valve footprints and some other equipment that we sell across the process industry.

Operator

Jason Gursky, Citigroup.

Jason Gursky

Hey, good morning everybody. Lynn, I'd like to just do a couple of big picture questions with you, if that's okay. Just starting with the transition with the administration. And maybe just kind of reflect if you wouldn't mind for a minute on how this transition has been different than what you all have seen in the past. And what, if anything, you all are doing differently as a result of any differences that you've seen in this transition?

Lynn Bamford

So it's been a fast-paced transition that I think everybody realizes the terms on the news. And so I think that's universally true not necessarily tied to Curtiss-Wright in any particular way. I think the clarity of position on things such as nuclear coming out with an executive order in the first like 2 weeks on how the administration sees energy dominance and the very clear support for nuclear and really all things fossil fuel production.
I think those are levels of clarity and speed of clarity that is not typical. Now what's not clear is the tariffs, right? So I mean, that's kind of -- on the other side of the paper is that, which is not clear. But I think, hopefully, that will sort itself out here in the next couple of weeks as to what the position is going to be and we'll just have to live with the ambiguity and do what we can in the meantime.
But I also see things, (inaudible) obviously all over the news and okay, set aside what anybody thinks about, broadly speaking, if we have a more efficient government that wants to spend dollars wisely, and if you take that is what the big picture intent of it is. I think that's going to be a great thing for Curtiss-Wright. One of the beliefs out of it is that a lot less friendly attitude to all of these cost-plus contracts and wanting to drive more fixed-price contracts, which is the vast, vast majority of where Curtiss-Wright plays is a good thing.
And I believe that if a more efficient government and the value proposition Curtiss-Wright gives for the dollars that we take, either directly from the government or through a prime to deliver equipment, I think we produce a great value. I feel very confident that the money spent at Curtiss-Wright delivers value to our military. And with that, I feel like it could only be good in that sense.
And then if you take that efficiency and apply it to the process of building out commercial nuclear, which is clearly called out in the energy dominance is to finally deliver on a commercial nuclear footprint in a meaningful way across the US making that less bureaucratic only speeds up the time line to some of these projects can be implemented.
So I think all those things, we see it is way more a positive than a negative. There's -- we'll see what happens with the tax code. I mean that's -- we'll see where that goes. But we don't produce everything in the US, but we produced a lot of things in the US. And if there is a favorability towards companies that hire in the US and produce products in the US, that will be good for Curtiss-Wright. If that's how that turns out and even take the executive order on Iron Dome, I mean we have a lot of content, whether it's through our Enduring Shield win back in 2022 and many other things across Defense Electronics that would drive great content to us.
So, there's a lot of areas, again, taxes, tariffs, you name it, but we like to hire and build things here in America, and that's clearly a focus of this administration. So we're trying to stay nimble. I will say that and take the news in daily as it comes and consider how we can best take those moves by the federal government to our advantage.

Jason Gursky

That's great. And you touched on what was -- you briefly touched on what was going to be my follow-up question, which was on those. It sounds like those guys are going to make their way across the Key bridge and over to the Pentagon at some point here in the near term.
And you touched on maybe more firm fixed price type contracts. But maybe if you could step back and give some recommendations or prescriptions, actions that you'd like to see to take at the Pentagon, I think that might be interesting to hear your thoughts on what other the firm fixed price contracts, maybe should they be looking to get done.

Lynn Bamford

Well, I would say, broadly, the whole acquisition process is fairly -- is a slow process. And I think attacking that broadly, and you've heard some of the CEOs of even larger defense companies than us talk about that. In the end, our industry will produce more value for the government, not less. If the acquisition process is streamlined. So I'd say that's one that comes top of mind.
But just to add -- go back to your first question about things we're doing different. One of the things we are doing differently as a company in 2025 is -- and it's as much coincidental as response to this because we were decided to make this a big initiative later last year is really increasing our visibility and our touch points at the Pentagon and on Capitol Hill to really emphasize what Curtiss-Wright does and what value we bring to the government.
And I think connecting a drive for efficiency, and I will stand up and proudly present what we do for the dollars we get and know that we are a great supplier to the US government. And so I think that will align nicely us bringing that message out to the forefront as this is all going on.

Operator

Peter Arment, Baird

Peter Arment

Yeah, thanks, good morning or good afternoon now I guess, Lynn, Chris, Jim. Hey Lynn, could you comment a little bit about the outlook on commercial nuclear. You called out for a high single organic growth -- high single-digit organic growth this year, but you grew low double digits last year in your guidance for '26 assumes low double digits. Are we -- is there -- is this just timing related? Or is there a deceleration something get pushed out that is a change from '24 versus '25.

K. Christopher Farkas

No. I think, Peter, we did have a very strong year this last year. And as we committed to Investor Day, we would grow and we still see the trajectory being a low double-digit CAGR over the 3 year period. This year, I'll say that while we are seeing and benefiting from some of the license renewals and flex work that's starting to kind of happen more around the industry, one of the headwinds that we are facing is that there are lower year-over-year outages, and that's just something that's going to happen once every 3 years or so, there's going to be a little bit of a dip there.
But overall, higher maintenance activity across the operating fleet to support that. We are going to see a steady ramp-up in the design effort. We talked a little bit about that in the prepared remarks, but it's not just TerraPower and X-energy. We're excited about what Ultra Energy can do, and they're investing in research and development to secure some new and exciting wins themselves.
So overall, I think we feel really good about the low double-digit guide that we gave over the 3 year period. And as we enter into 2026, we only expect that to continue to ramp up as this SMR work gets closer to prototyping.

Peter Arment

Got it. Okay. That's helpful color. And then just, Lynn, you made the comment about the nuclear business being 5x as you get out into the next decade. Is that all organic? Or do you contemplate more M&A in this space?
Thanks.

Lynn Bamford

We really did that build up from an organic standpoint of where we are driving content that we know of today and what we anticipate from the AP1000 build-outs, the aftermarket and plant life extensions and the beginning of the build-out of SMRs at a rhythm drumbeat that is anticipated. So that is a business that is within our wheelhouse to drive for Curtiss-Wright.

Operator

Pete Skibitski, Olympic Global.

Pete Skibitski

Yeah, good morning guys. Nice quarter. A couple of follow-ups on Naval & Power. First, just a clarification. So the material receipts that you brought in and booked revenue on in the fourth quarter, that is what led to the strong revenue. But I assume those low-margin revenue on the material, and that's why I guess, the 4Q margin at Naval came in a little below your expectations. Is that kind of the way you work there?

K. Christopher Farkas

Yeah, partly. I mean -- so I'll definitely say that a good portion of the beat in Naval was associated with material, but other portions of it were just better progress and staffing and ramping up to support the strong order book. Another little nuance here for those that had actually been out to the Cheswick facility, where we do a lot of naval work and AP1000 work and the subsea work. We did see some resources shift from subsea pump development to support some of those Naval milestones in the fourth quarter.
So that's another little nuance here. But as you look at the overall while we still had a very strong 19.1% margin here in the fourth quarter, by and large, the biggest reason for the missed versus expectations is just higher defense business. And it's a great business.
There's very solid margins. They're obviously a strong cash producer, but as you look across the Naval & Power portfolio and you think about nuclear products and process products and narrow defense products and international sales, it can be dilutive. So it's really a combination of the strong naval defense sales lower product valve sales during the fourth quarter, lower arresting systems, and we had a really great quarter of the prior year and international arresting systems, and those carry very high margins. So mostly mix as you look across the explain.

Pete Skibitski

That's helpful. I appreciate it. And then looking ahead to 2025 in the segment, what's the right way to think about the restructuring that you guys are doing there? Are you closing sites, doing other investments? Can you help us understand what's going on? And it looks like that restructuring is going to impact margin positively by the end of the year. Just kind of -- or maybe the mix shifts back, but I was just wondering if you could add some color there?

K. Christopher Farkas

Yeah. So just to be clear, the vast majority of the restructuring that we spent this year, and we spent $15 million to get $10 million of annualized savings. $3 million of which fell into 2024, $7 million is going to fall into 2025 to get you to that $10 million spend. But the $3 million the majority of that fell through the A&I segment, and we increased our margin, I think maybe in the second or third quarter call, 30 basis points to account for that. The other biggest piece of that entering into 2025 is going to continue to benefit the aerospace and industrial group.
A lot of efficiency behind some of those actions that we took within that restructuring. But then as you step back and you look at defense electronics, which is probably the second biggest contributor towards that spend and what we're doing is really just. yes, we're moving footprint. We're expanding capacity. There's still going to be some -- there was disruption, obviously, here in the fourth quarter, even though we had very strong results, but that will continue a little bit into Q1.
And the order book looks incredibly strong. We're excited about the outlook for that business going forward. So I hope that we're in a position as we get deeper into the year or maybe we have to do some more of this. But then I'll also say that we are investing back not only in restructuring, CapEx, systems across the organization, we're doing some exciting things from a systems perspective.
And that's a lot of work is going on in defense electronics at this point to support that. And -- but the trajectory going forward and where we're spending most of that time and effort is really in aerospace and industrial and defense electronics.

Operator

(Operator Instructions)
Bryce Sandberg, William Berg.

Bryce Sandberg

Lynn, Chris and Jim, good morning and thanks for the question. Good morning. Just want to ask on the Naval business, we've seen pretty significant supply chain and labor disruption that one of the shipyards that's impacting production. But obviously, you've had strong momentum in your naval business. So just kind of want to understand better how that disruption may or may not flow through your business? And does that represent an opportunity for you to take on more work within the supply chain?

Lynn Bamford

So that's a question we get asked fairly frequently. And we're -- to some degree, we're reasonably decoupled from the exact flow in the shipyards as our material is such long lead. And if you're curious, Chris can walk through kind of the flow of material. But our equipment is usually order years in advance, a couple of years in advance of the shipyards. And so there really isn't a one-to-one coupling.
Now from an opportunity standpoint, we are always out presenting ourselves as a hungry, ambitious, naval equipment supplier and open to taking on new work as the Navy needs to second source things or move points of supply. And those don't happen frequently, but they do happen. And we've won some content through taking that kind of attitude, but it's not really a one to one coupling with the shipyards.

K. Christopher Farkas

I'll just add that one of the exciting things about our business, and we talked about this at Investor Day so it's really gratifying to see some of this play out and we talked a little bit about it in the script. It's just the aftermarket work that's becoming available to Curtiss-Wright. We got two service centers on the East Coast and one in the West Coast.
And not only is it RCOH work, but there's also just a lot of aftermarket coming Virginia-class submarines with initial spares provisioning that's helping Curtiss-Wright to grow. We've got a great footprint in naval arresting systems that also is growing internationally. So there's other ways for us to grow that are -- and what we are experiencing now that's not tied directly to what's happening in the shipyards.

Operator

Thank you. There are no further questions coming from the phone lines. I will now turn the call over to Lynn Bamford, Chair and Chief Executive Officer, for additional or closing remarks.

Lynn Bamford

Thank you, everybody, for joining us today, and we look forward to reconvening when we have our Q1 results. Have a good rest of your day.

Operator

Thank you. This does conclude today's Curtiss-Wright earnings conference call. Please disconnect your line at this time, and have a wonderful day.