Good morning, everyone, and thank you for taking some time this morning to come learn a bit more about Curtiss-Wright and hear about what we see in the future that is yet to drive an absolutely outstanding future for Curtiss-Wright. With that, I will try to keep this to maybe half of the time, so we do have time for Q&A, and I'm gonna jump right into it. There are forward-looking statements, and there is risk. Did I cover, Jim?
So for those of you who maybe don't know Curtiss-Wright quite as well, I'll just say at a glance that we are, you know, a highly engineering-centric company that builds very specialized products that are for applications that are frequently and must not fail, safe, you know, mission-critical, safety-critical applications across the aerospace and defense market, predominantly with about 2/3 of our business, but then select commercial, nuclear, or commercial industries for about 1/3 of our business. We are a global company. We have major sites across 45 countries, and we have 8,600 employees currently. We've built up our workforce quite a bit over the past three years, and about 20% of our workforce is engineers.
So I think, you know, one of the things that's really essential about Curtiss-Wright and foundational to the, you know, why we win and why we have the positions we have in our industry, really comes from the deep expertise and the history, the legacy inside of our end industries. And hopefully, many of you here, you know, recognize Curtiss as Glenn Curtiss and the Wright as the Wright brothers. And so that foundation in aviation is, you know, core to the company as we move towards celebrating our 95th anniversary, anniversary year in a couple months. But what's possibly not known is that same legacy of being in our industry since the very inception is true across the Nuclear Navy, commercial nuclear, and our Defense Electronics portfolio of products, that is our Defense Electronics segment.
That, you know, all those companies really started at the inceptions of those industries, and, you know, with that comes, you know, deep knowledge as to what the customer needs are, deep relationships with customers. One of the things I think is special in Curtiss-Wright is our transfer of knowledge, you know, over decades, through from generation to generation of employees, as we, you know, take the learnings of the past and the understanding of how a customer wants to work and pass that on to newer employees.
We don't just do that in a, "Hey, let's have a four-hour discussion in the conference room." There's actual processes and procedures for how we go about doing this, and it's a very formal process, and I think that's part of, you know, what gives us our unique relationships with our customers across many of our end industries. The other thing that I think is unique within Curtiss-Wright is, you know, we have a very collaborative culture that values innovation. We've clearly, you know, increased the focus on that over the past three, four years as we launched the Pivot to Growth strategy, and I'll come to more of that in the beginning. But it...
You know, we really take our global reach and our unique IP, and we work very hard to take our products and our solutions across the globe to relevant countries, and then we work very hard to see the various end markets we play in and say, "Hey, this technology could be applicable in this other end market," and work the channels that serve that end market to take technology maybe developed for one end market. And a simple example of that is our electromechanical actuation, which was developed for commercial markets, for industrial automation, and we have taken it to commercial aviation and are taking it very broadly across defense applications.
So those engineering dollars you spend, you get to leverage, you know, across multiple end markets, and I think that's a really key element of why we've been able to drive the financial performance we've driven over the past decade. Turning back in time for a moment, we launched our Pivot to Growth strategy, our Investor Day, three years ago. If you don't know, we had an Investor Day just two weeks ago, and the information on it is up on our web, and clearly, there's a lot more detail than anything we're gonna even begin to touch on today.
But, you know, we had several, you know, key messages, and fundamental to the Pivot to Growth was us giving ourselves to balance our financial targets with committing to operating margin expansion by growing our operating income faster than our sales growth, but giving ourselves the freedom to invest back into the business because of some things that we saw going on in our end markets and the criticality of it being the time to invest for the growth of the future. You know, with that, we would deepen our customer relations. We would, you know, launch the Curtiss-Wright OGP, which has really, really kind of codified what it was in our DNA around a continuous improvement mindset, and we've continued that, and that's very important that...
You know, when we first launched the Pivot to Growth strategy, we were asked, "You know, does this mean you're taking your focus off of operational excellence and that continuous improvement?" And the answer is absolutely not. It's fundamental and key to how we've created the dollars to be able to reinvest in, into ourselves, and again, I will have a slide on that in just a moment that I'll come back to. But the results on the right-hand side of the slide show what we delivered over the past three years. We said we would grow total sales between 5% and 10%. We landed right in the middle of that at 7.4%.
Very pleased that we came in near the top end of our organic range, sales growth range of 3%-5% at 4.7%, 4.7%, and I think that really is, you know, fundamental to demonstrating our Pivot to Growth strategy is working. We expanded margins 110 basis points over the three-year period. We grew our EPS by 12.5% and came just short of our goal on free cash flow of 110%, average, cash generation at 108% cash generation. But, you know, there was quite a supply chain disruptions during that time that were, you know, impactful to our business, and so I'm still very proud of the team for achieving that result.
So, within the Operational Growth Platform, which I just mentioned, there's a lot of different parts of it that are about us having better approaches, more sophisticated approaches to managing the company. So as we grow, we're not just growing by spending R&D, but we're growing by building up our processes and our approach to managing the business as it gets bigger and bigger, that we have the tools that give visibility down inside of our different business units, management tools for oversight, ways that we can evaluate efficiencies within the business. And so that's broadly from, you know, across all portions, whether it's how we manage contracts and implementing an AI tool for how we manage contracts, to visibility on our shop floors.
But the one area I wanted to touch on here in these opening remarks is really our approach to innovation and R&D, which is near and dear to me as a trained engineer, and I practiced probably half of my working career as, you know, doing engineering work before I moved more into a manager role. And really, you know, as I said in the beginning, we're an engineering-centric company, and, you know, how we manage our R&D spend and our engineering talent is really at the heart of how we succeed as a company. There's a lot more to it, but it's, it is the foundational element. And so it's not just, you know, what we spend on R&D, it's how we have structured within the company and matured our processes to the managing of that R&D, and it all, all starts with innovation.
We launched our innovation platform about 3.5 to four years ago, which is a cross-enterprise platform that every employee can have access to, to put forward ideas of how we can make the company better. Everyone, all the employees can see the ideas that are inside the platform and, you know, add their expertise to ideas across the corporation. So it's really helped bind us together as an organization in many ways, and look for those areas of collaboration across the organization, because it was just... people didn't know what was going on across the entire organization, and now they do. So that's really fundamental to making sure, you know, the best ideas across the organization have visibility and then have a chance to get funded.
Even if they can't be funded at a local level, they can be brought forward and can be funded at a corporate level. So, you know, as those innovation ideas move through that platform, there's very good rigor for how we analyze both the value proposition for differentiation in the marketplace and the customer base to really be able to target and steer our investments across the corporation to the best areas of use for profitable growth for Curtiss-Wright. And so that's a real maturing of how we managed the company over the past three years that's different than in the past. It's still a work in progress, but it's an area that a lot of progress has been made on. And likewise, it's not just about spending more money. We wanna spend more money and always drive the efficiency in how we're using that money.
So that's something that's also, something we're focused on right now, is our measurement tools for, the efficiency of our R&D. Because, you know, the more efficient we are, the more of those innovative ideas that are in the platform we can turn into R&D projects and turn into products and services we bring to our customers. So definitely a lot of information on this slide, and a lot of this is what is, laid out in much more detail in our investor, in our, Investor Day presentation a couple weeks ago.
But really, you know, the reason we pivoted to growth three years ago is there have been secular trends that have been building across our end markets that are, you know, really found where we have very solid footprints, and it was critical that we make the choice to invest now to maximize the value for our shareholders, our employees, and our customers going forward. And that's everything from the ramp of naval shipbuilding to the advancement of technology in the battlefield across, you know, so many different areas where, you know, we have very relevant products. Very proud of our progress there. The move towards decarbonization and energy efficiency and the electrification of many things across, you know, many different platforms in the air, on the land, and in the sea.
And, you know, we have really established positions in all of those places, and as the industries are changing, there's dynamics that are both, you know, near term, that we need to be ready to solve our customers' problems, you know, maybe in the next one to three years, midterm, three to five, and then long term, five, 10, 10+ years. And so we really look to balance those R&D investments across all those timelines to ensure we're setting the stage for Curtiss-Wright to have success going forward, you know, through the next decade and beyond. So when I talk about investing, you know, there's several, you know, areas. You know, obviously, we invest in a lot of different things, but I wanted to highlight a couple. So, you know, we talked a lot about R&D already in these few brief moments.
We delivered that financial performance that I showed with the margin expansion of 110 basis points over the past three years, while investing an incremental $20 million in total R&D in 2023, and targeting to invest another $20 million of incremental R&D in 2024. So we are doing what we said. We are both investing in ourselves and delivering margin expansion. And if you can clearly take your mind to understand that there must be a continuous improvement and lean mindset within the company to be able to achieve both of those things. Something that I've always very personally been passionate about is that, you know, as, you know, you invest the R&D and build these great products, you need to balance and align your investments in R&D with your investments in sales and marketing.
If you have a great product and you don't get it out and show it to the world, and you have a sales force that can go out and represent it to the global industry, you're not gonna maximize the value for the organization. And so that is an area we don't talk about as much, but we've done some really interesting things or are in the process of doing some interesting things to really, you know, improve our approach to sales and marketing. And it's everything from, you know, we're most of the way through implementing a common CRM across the organization, which may not sound like much, but I mean, it will connect, you know, allow us to have full visibility into our customer base and our reach across the, you know, our global customers.
We're in the process of implementing a unified website, which again is something that's well overdue, that help us help our customers when they're looking at products we have, connect all the products that we have that maybe can be part of their solution set by, you know, what they find when they go to a website. And then, of course, people, which is, you know, the most critical asset across almost everything we do is our people. I mentioned a little bit about the systems and processes. There's a lot more information about that in our Investor Day presentation, and things we're doing around everything from automation to visualization of data, to employee tools, to modernize the tools we give to our employees that make Curtiss-Wright a more modern place to work.
So we're really looking broadly across these things and making investments across all of those. Then, of course, acquisitions and, you know, an area that is, you know, we say is our top priority for our capital allocation. Of course, that's after we make the investments in the businesses we need to make to be prepared for our growth, but that is our top priority. But we will return capital to shareholders if those opportunities don't exist. You know, we've got a strong track record of, you know, buying back stock, another example. Maybe we'll talk a bit more about that, and Chris can elaborate on that in the Q&A.
So this is just we gave a track record of our, you know, our recent acquisitions, you know, over the really, you know, the PacStar was a little bit before, you know, right as the transition from the prior CEO was being made to myself, you know, just over 3.5 years ago. But, you know, we've really had a great track record and are really pleased that, you know, what we pride ourselves in, that we know how to do due diligence from both a strategic standpoint, that we really understand, you know, the differentiated position and the unique value position in the market to matching our financial filters, that, you know, we're able to find companies that we can bring into Curtiss-Wright and create value because they're better being part of Curtiss-Wright.
You know, a really strong track record there. Pleased that we announced on Monday of this week another commercial nuclear acquisition, Ultra Energy. It's not closed yet, but should close here in the next couple of months. Feel very passionately that it will, you know, match the excellent performance of, you know, the other ones on this slide. That's maybe something we'll come to in the Q&A a little bit. We put up our new financial targets. We've committed to grow organic sales over 5%, continue our push to grow operating income at a pace faster than we grow sales, implying operating margin expansion, maintaining top-quartile performance.
That is something, you know, during the prior decade, we had talked a lot about getting ourselves to top-quartile performance, and we achieved that through, you know, the end of the last decade. But we did not achieve it within the sales area, and that was really the accelerant we needed to focus on and, you know, are seeing early days. And I do want to say that, you know, we're really in the process of building momentum around what we can do with our focus on growth. But again, growing our EPS over 10% and delivering free cash flow at an average rate of 105%. And really important to note that these targets do not include a new AP1000 order. And for those of you who know us, you know exactly what I'm talking about.
If you're new, this is, you know, our significant content into the Westinghouse AP1000 plant that is, you know, game-changing revenues for Curtiss-Wright when the orders come. You know, we've not been executing on any, you know, the very wind down over the past couple of years of just a handful of millions of dollars and none this year. And so when this comes, it's, it's needle moving for Curtiss-Wright, and we'll be excited. And we do still say it'll. We expect an order in the next one to three years. So, you know, very likely in this time frame, but, you know, the revenue profile can differ from it so much, depending if it's on the front end of the one or more on the back end of the three.
We felt, you know, just it was better to show where we think we can take the core of the company outside of that meaningful business, you know, without that AP1000 orders, and hence why we chose to leave it out of our targets. But with that said, just to take a touch on, you know, where how we feel, you know, we will perform in our end markets to achieve that greater than 5% organic growth that we feel strongly that we can achieve across all our defense markets. We think we will grow mid or high single digits. And I'd like to emphasize, this is in a backdrop where, you know, the FY 2025 FYDP, you know, is really showing very low single-digit growth and global, you know, defense growth, as much as it's ramping, it's very low single digits.
It's really the strategies we have, the products we're bringing to market, our position in the marketplace, that really, you know, give us the confidence to say we're gonna very much outpace those defense markets. And again, there's a lot of detail in the Investor Day presentation that really lays out, you know, a lot more detail around that than I have the time to go into here today. We picked to grow our target for commercial aerospace at high single digits. We've taken a fairly conservative approach here, just given some of the dynamics in the industry and the slowness to ramp rates than, you know, I think is desired. And so just took a conservative position there. We're really pleased to say that our commercial nuclear business, which is, you know-...
largely aftermarket business and the growing new build business can, we believe, will be able to grow at low double digits. For both our process and our industrial business, that they're relatively flat markets, but you know, it's really through new product introductions, whether it's in the power electronics area or our subsea pumping area, which is, again, another dynamic growing portion of Curtiss-Wright's business that is laid out in the Investor Day presentation, that we think we can overcome some of the dynamics in those markets and grow slightly faster than the markets. And lastly, you know, probably today we'll talk about it, in our meetings we'll talk about it. There's a lot of interest in, you know, where Curtiss-Wright sees the future related to our commercial nuclear business because it is, you know, very, very exciting.
We always wanna make sure we're taking the time to emphasize, you know, our Defense Electronics business is great. We are well-positioned in our naval business. You know, across the board, we have, you know, wonderful positions with the business, but this does stand the most dynamic growth opportunity for the organization. And, you know, we feel that, you know, by 2028, that we can double our commercial nuclear business from the $300 million baseline in 2023 to $600 million, and grow that business to a $1.5 billion annualized revenue by the middle of next decade. And so those are pretty dramatic numbers, but, you know, the reasons why we believe that are laid out on the slide.
That, for those, again, you know, some of you probably have heard us talk about this, but the concept of plant life extensions, keeping the current operating reactors around the world online, there's been a lot of financial support for that. That is only beginning to ramp. That will continue. There's a lot of declared interest in building AP1000 plants across Eastern Europe, as, you know, they look to find alternative sources of energy. So we believe we will be ramping and in production, you know, beginning for sure, for Poland and Bulgaria, by 2028 as part of that 2X, and then at a kind of a steady rate production by the middle of next decade, supplying the content we do into Westinghouse's AP1000.
And then, you know, building out the SMRs, that are small modular reactors, you know, through going, you know, we're in design phases right now, moving to prototyping and initial production by the middle of next decade, with the predictions, that are very clearly outlined by industry that, you know, we should be seeing orders of 10-20 per year by the middle of next decade. So there's just, you know, a great opportunity, and we are well-positioned to, you know, win across that industry and, you know, participate in that and very proud of it.
And one other thing, if you do have a chance to look at our Investor Day or listen to it more specifically, we had a great nuclear panel that participated in our Investor Day with the head of NEI, the individual that leads AP300, which is Westinghouse's small modular reactor, and a customer with Energy Northwest, who is committed to building out nuclear power plants after they get through their ARDP build. And, you know, they really talked about the industry, not about Curtiss-Wright, and, you know, how determined there is to make this happen. And so with that, you know, I'd encourage you to go there and just close with, you know, I think, you know, at a very quick level, you know, we really feel the future is great for Curtiss-Wright.
We're proud of what we've achieved over the past three years and the value we've created, but in no way, shape, or form have we arrived. We really feel we're in the beginning of a journey, and we're doing the right things inside of the company to build the structures and the processes and the tools to scale with our growth and continue to be, you know, give success to our customers and our employees and investing our R&D in the right places, and then very purposely allocating capital in a very thoughtful manner as we have. Thank you.
Thanks, Lynn. I think many members of this standing-room-only audience are interested in learning more about the acquisition that you announced earlier this week of Ultra Energy, and how is that strategic for the company?
So I'll be hopefully quick with this. So we're super excited about the acquisition, and, I mean, I don't usually use those kinds of words, but it has got fantastic technology that's incremental to what we do with radiation and flux monitoring and some very high, highly specialized, temperature and sensor, pressure and temperature sensors that we, you know, we know we can, we partnered with them in the past, that we can leverage into our systems and help them expand their reach. They don't have quite as good of a reach in the U.S. as they do in Europe, and so that's a place where we're very strong, and so we'll be able to take our sales force and, you know, get right to business of helping, you know, build out their product footprint in the U.S.
And almost more important is, you know, their major site is over in the U.K., and, you know, as, you know, the various countries want to build these plants, the concept of localizing jobs is just critically important to how they make selections of who they want to work with. And this is our first nuclear plant, but we obviously have other plants over in the U.K., but, you know, with nuclear engineers and equipment that's needed in, we know we'll be able to localize some of our technologies over to their site and be able to, you know, really demonstrate that European footprint, which we know is gonna help us as, you know, specifically Rolls-Royce, who's, you know, got a lot of momentum building across Europe, and we're building a great relationship with them, but this is really gonna help us build that out.
Great. And you mentioned how, for your electromechanical actuation products, you've been able to successfully cross-sell them through your, like, very wide and diverse customer base. Do you think you'll be able to do some of that with the Ultra Energy asset since it seems that there'd be applicability there.
So, there's definitely a couple areas for that. So it's, you know, in the press release, but, you know, they have a very deep relationship into the Navy and the European navies for, specifically the U.K.. So that is an area we will leverage that footprint to build out our relationship with that customer. But the pressure and temperature sensors are pretty specialized capabilities that they've only ever taken into the nuclear industry. And, you know, obviously, Curtiss-Wright builds a lot of sensors, and we take them to, you know, many other industries, largely aviation. And our teams, as part of the due diligence, really looked at how they build their technology, and they have some great things that we know we will be able to leverage over into the commercial aviation.
That's something that, you know, we'll be exploring, and probably we'll have to do some tweaks to the products. It's not going to be a just pick it up and sell it, but the core technology, which is quite advanced, the team is excited to have brought into the portfolio.
Great. And there's, you know, the nuclear energy renaissance that's taking place, and you showed on your slide your projection, I think, to grow your commercial nuclear business from, I think, $300 million in revenue last year to $1.5 billion, and, you know, you mentioned your pivot to growth strategy, and I think that exemplifies it. What is your outlook in terms of, the existing nuclear reactors in the United States, like upgrading to, like, newer technologies and, you know, your ability to continue to offer plant life extensions as well?
So the topic Louis just mentioned, plant life extensions, is really when the operating reactor, so to get their license reapproved to go from 60 years of operation to 80 years of operation. And that drives a lot of force by the NRC maintenance work, but it also makes the operators really look at how they're operating their plants and look for opportunities to do upgrades and drive efficiency in the workforce and such. And a lot of times that leads them to really modernize a lot of systems, which is, you know, a great place for Curtiss-Wright. And so early, early days, about a third of the 94 operating reactors in the U.S. have declared that they're going to go through this plant life extension. It's anticipated by 2050, 80% of those reactors will go through that extension.
And we laid out that we see this as a $7 billion opportunity for products and services like Curtiss-Wright makes, you know, a- as these existing opportunities go through these life extensions that we'll be right in the middle of pursuing business for. So again, that's, you know, that portion of our nuclear portfolio, which is 90% of the 10%, that's our commercial nuclear footprint, is growing well and really kind of at the heart of the low double-digit growth that, you know, showed on the prior slide that, you know, we believe we'll be able to achieve.
Great, and that's for your current generation technology. Can you also discuss some of your partnerships with the small modular reactor OEM?
So our goal, and we think that one of the things that's a unique investment thesis for Curtiss-Wright is, you know, our goal is to have a meaningful role with all of the significant small modular reactors that are in that 300 MW, you know, type of range that's, you know, really for building out, you know, the electricity grid and major, you know, process applications. And, you know, we've established that, you know, our content across X-energy, which is one of the two ARDP, their leading Gen IV technologies, of over $120 million of content per reactor. We have some wins announced with TerraPower, but no dollar figures with that. And that's Bill Gates' company, that he's partnering with Warren Buffett to build out their first plant at PacifiCorp. X-energy's first plant will be Dow Chemical.
But then just moving, you know, through the other, you know, what we consider the other four major reactors, you know, may not have the same level as, as X-energy on all of them, but we did put forward our Investor Day. We expect to have $20 million-$120 million of content across, you know, the other, you know, the other four, you know, major players. And if you take, you know, just Westinghouse's SMR, the AP300, which is, you know, kind of half of an AP1000 to make it really more simple than it is. But for Curtiss-Wright, you know, where we have well over $100 million of content per plant on an AP1000, you know, that should translate to over $50 million of content on the AP300. So that's another one that's clear line of sight.
And then with Rolls-Royce and GE and NuScale, it's a bit more of a work in progress, as, you know, they're designing, you know, aspects of their reactors, and we're working with them.
Great. For Chris, what is the general, like, margin and profitability profile for the SMR business, the AP1000, or the commercial nuclear in general?
Well, we're heavily focused on profit margins. You know, as Lynn presented some of the results over the last three years, we achieved 110 basis points of margin expansion while increasing our research and development by more than $20 million over the same time frame. We're entering into 2024 with another $20 million in increase in focused R&D investments, and we're still going to provide operating margin expansion. Step back over the last 10 years, I mean, it's been a remarkable transformation for this company, more than 800 basis points of operating margin expansion. So it's something that's kind of fundamental in our core.
Our people have very strong financial acumen, and we're constantly driving to free up money for funding, and these investments are going to capitalize upon these great markets that we sit in and these technologies that we offer that can help us to exceed the market growth rates. As you look forward, I mean, right now we're in the process of developing these advanced technologies, so we don't have a specific margin profile that we can say, "Hey, it's going to be X or Y." But I think as you take a look at where we are, where we sit as a company, knowing that we're focused on retaining and controlling the technology, which helps us to command the premiums, helps us to strategically price, it's going to be good business for us going forward. We're excited about it.
Fantastic. Thanks, Lynn and Chris, and we're going to resume the conversation in the Ghiberti Room upstairs. So thanks.
Okay.
Thank you, Louis.
Thank you.