Hello, everyone. Thank you for joining us, and welcome to the Moog Inc. Second Quarter Fiscal 2026 Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Aaron Astrachan, Director of Investor Relations and Financial Planning & Analysis. Aaron, please go ahead.
Good morning, and thank you for joining Moog's second quarter 2026 earnings release conference call. I'm Aaron Astrachan, Director of Investor Relations. With me today are Pat Roche, our Chief Executive Officer, and Jennifer Walter, our Chief Financial Officer. Earlier this morning, we released our results and our supplemental slides, both of which are available on our website. Our earnings press release, our supplemental slides, and remarks made during our call today contain adjusted non-GAAP results.
Reconciliations for these adjusted results to GAAP results are contained within the provided materials. Lastly, our comments today may include statements related to expected future results and other forward-looking statements, which are not guarantees. Our actual results may differ materially from those described in our forward-looking statements and are subject to a variety of risks and uncertainties that are described in our earnings press release and in our other SEC filings.
Now, I'm happy to turn the call over to Pat.
Good morning, and welcome to our earnings call. We delivered an outstanding second quarter. We achieved double-digit revenue growth relative to prior year, our second highest revenue on record with strength in all segments. We set records for both total and 12-month backlog, with 12-month backlog up 33% from the prior year. We also delivered record adjusted earnings per share due to our strong growth and improved adjusted operating margin. Demand is strong, the business is executing well, and we're delivering ahead of our guidance. We are continuing to see the effect of a structural shift in the defense market, and we're well positioned to meet that growth. Our focus on operational simplification ensures that we can deliver on that growth and continue to meet customer commitments.
Our results are reflective of continuing success in driving both improved operational and financial performance, and we're confident in our ability to deliver for the rest of the year. Now let's turn attention to end markets and the macro environment, starting with defense. The Middle Eastern war has further increased the need and urgency to boost U.S. defense industrial manufacturing capacity. This has resulted in increased spending requests by the administration and alternative procurement strategies to align resources within the industry.
We are actively partnering with the primes and agencies to respond to this urgent and growing need. For example, production rates on key missile defense programs are anticipated to increase by factors ranging from two to four times over the next few years. For our part, we continue to invest in expanding our capacity and are well positioned to respond and deliver increased production output.
Moving to commercial aerospace, customer demand remains strong with clear and consistent signals of increased production rates. We are confident in our customers' growth. Our production plans support those customers' near-term needs and longer-term goals while judiciously managing inventory growth. On the aftermarket side, higher fuel costs may result in a shift to more fuel-efficient aircraft and a reduction in some operating routes. Despite this, we are confident that our platform exposure and strong aftermarket position will support our current plan. Finally, within industrial markets, we see continuing stability with no discernible impact from the Middle Eastern war at this point. Backlog is firm relative to prior quarter. We see further strengthening of data center cooling pump demand. Overall, end market conditions across the board continue to be very favorable for our business.
Now turning attention to the three leadership priorities that guide our work, customer focus, people, community, and planet, and financial strength. It was inspiring to see the successful launch of Artemis II and the safe return of NASA astronauts after traveling around the Moon and back. Moog played a key role across the Artemis II mission with launch platform gantry actuation, thrust vector control on all stages of the SLS rocket, and critical life control systems in the Orion spacecraft. We are proud of our innovation has supported manned space exploration on Mercury, Gemini, Apollo, Space Shuttle, and now Artemis missions. Back on Earth, we are pleased that two important customers have recognized unique contributions we make to their business. We received Embraer's Supplier of the Year award for 2025, recognizing consistent operational execution and technical collaboration on mechanical systems.
We also received General Dynamics Land Systems Supplier of the Year for Technology and Innovation award for 2025. Our technology leadership to solve our customers' most difficult technical challenges and our focus on operational excellence, always ensuring we meet our commitments, have built true long-term partnerships. Our customers' demand is strong and rising. We are proactively investing in capacity and capability to meet the increased demand.
This includes robust investment in facilities, manufacturing equipment and automation, and supplier resilience. It also includes the onboarding and upskilling of talent to support next-generation production. Across each segment, we are simplifying, optimizing, and driving productivity improvements to systematically reduce lead times, increase throughput, and ensure readiness for further growth. We will continue to invest in our organic growth and partner with customers in the U.S. and the U.S. government to ensure that we are ready to deliver at higher production rates.
Now turning to people, community, and planet. We're committed to developing our high-performing and engaged workforce through targeted leadership development, strategic workforce planning, and global talent initiatives that accelerate skill building and succession readiness. Our collaborative efforts extend beyond our walls as we've actively strengthened local community engagement by increasing the level of hands-on volunteer efforts globally, supporting education, wellbeing, and social impact. In parallel, our sustainability efforts are advancing with meaningful projects like rainwater harvesting installations.
Together, these integrated initiatives reflect Moog's holistic approach to building a sustainable business that cares for its people, enriches its communities, and protects the planet. Turning to financial strength. Our 80/20 mindset is key to simplifying the business. It allows us to focus our commitment of people and investments to the most productive and profitable uses. We're achieving operational improvements, and we are redeploying resources to accommodate new demand.
Our portfolio reviews stretch from our operating segments through business units to our individual facilities. We continue to prune the portfolio through licensing, asset sales, and end-of-life decisions. This quarter, we exited the general aviation avionics market with the licensing of IP and a last-time buy for our customers. As we further develop our 80/20 capabilities, we're evolving our playbook to reflect the nuanced difference of applying 80/20 to our businesses, from industrial businesses with thousands of customers and hundreds of products, to aerospace businesses with fewer customers and highly integrated platforms.
This learning and refinement are part of increasing our maturity. Now let me switch over to the work we are doing to optimize our balance sheet, specifically the structural improvement in our commercial aircraft business. We're simplifying our global manufacturing and supply chain network and reshaping our supplier relationships.
We have made excellent progress on the supplier side in this quarter. We're ahead of our plan in moving suppliers to a more agile demand arrangement, and in that process, we've achieved inventory destocking exceeding our plan. We have also selected a fourth-party logistics coordinator who will assume the management of nearly 30% of our suppliers. These are all transactional suppliers. We continue to drive cycle time and work-in-progress reduction by transitioning to focused factories with fewer non-value-add handoffs between Moog facilities or outside services. We used an 80/20 mindset to prioritize the transition required to achieve this. We also invested in a new Philippine facility at Clark to accommodate inbound transitions and vertical integrations to support our focus factory in Baguio for commercial flight control systems. The cycle time impact on parts transfer is substantial.
In this early phase, it gives us the confidence that we can continue to optimize the balance sheet. In addition, these transitions release floor space in our domestic U.S. defense facilities, which is needed to accommodate growth. These examples highlight our continued progress with 80/20, driving productivity and margin enhancement. Our drive to make structural change is also starting to demonstrate operational improvement. Pricing reviews are integral to our business process and continue to happen at all levels in the organization. We are taking actions to mitigate any cost risk arising from the Middle Eastern war. We are also reviewing the evolving tariff landscape, adjusting our mitigation actions as appropriate, and pursuing refunds when available. Our pricing activities are ensuring that we are fairly compensated for the value we create for our customers. Now turning to the full year.
We've updated our guidance for fiscal 2026 to reflect our excellent performance in the first half and a more positive market outlook. We've increased sales and adjusted diluted earnings per share and held adjusted operating margin and free cash flow conversion unchanged. With this updated guidance, FY 2026 will be a year of solid double-digit year-over-year sales growth, further expansion in adjusted operating margin, even stronger double-digit growth in adjusted diluted earnings per share, and improved free cash flow conversion. This represents substantive achievement against our Investor Day goals, outperforming on sales growth and operating margin, excluding tariffs. With that, let me hand over to Jennifer for a detailed breakdown on the quarter and our updated fiscal 2026 guidance.
Thanks, Pat. Before I get into our financial performance, I wanted to describe the refinancing activities we successfully completed this quarter. First, we amended our $1.1 billion revolving credit facility and our $250 million term loan, extending maturities of each out to five years. We also issued $500 million of 5.5% senior notes maturing in 8.5 years. We used the proceeds to call our 4.25% notes that were coming due in under two years, redeeming them just after quarter end. We're pleased to have extended and staggered our debt maturities and achieved tight pricing on the new notes. We had contemplated refinancing activities in our previous guidance, so there are no material updates to the guidance we're providing today related to these activities. I'll now turn to the financial performance of our business. It was another outstanding quarter.
Sales were robust and adjusted operating margin was strong, resulting in adjusted earnings per share well above our guidance. We also generated free cash flow in excess of earnings. We took $3 million of charges in the second quarter that we've adjusted out of the operating profit numbers that we'll describe. These charges were largely associated with simplification activities, in particular, continuing activities related to footprint rationalization. I'll now talk through our second quarter results excluding these charges. Sales in the second quarter of $1.1 billion were 13% higher than last year's second quarter. Sales increased nicely in each of our segments. The largest increase in segment sales was in space and defense. Sales were $314 million, up 16% over the second quarter last year, reflecting broad-based defense demands. Demand was particularly strong for space vehicles and missile controls.
Commercial aircraft sales of $247 million increased 15% over the same quarter a year ago. The increase was driven by higher volume and pricing on some of our major production programs. In military aircraft, sales of $235 million were up 10% over the second quarter last year. Activity continued to increase on the MV-75 program, reaching peak levels for the current development phase earlier than we had planned.
Industrial sales were $256 million in the quarter, up 9% over the same quarter a year ago. The expanding data center cooling market fueled our sales growth, and we also benefited from foreign currency effects. We'll now shift to operating margins. Adjusted operating margin in the second quarter was 13.4%, up 90 basis points from the second quarter a year ago. We achieved these results despite 100 basis points of pressure from tariffs.
Excluding this pressure, all of our segments were up nicely, reflecting operating strength. Space and Defense operating margin was 14.6% in the second quarter, up 200 basis points. The increase was driven by profitable sales growth, offset partially by increased product development, business capture, and operational readiness investments. The margin expansion drivers have been consistent over the past several quarters. Military Aircraft operating margin was 13.7% in the second quarter, up 170 basis points from the second quarter last year. We benefited from profitable sales growth. Commercial Aircraft operating margin was 11.9%, just above that of the second quarter last year. Operating margin expanded from pricing benefits and was pressured from tariffs. Industrial operating margin was 13.2%, just below that of the same period. $0.64, up 40% compared to last year's second quarter.
The increase, which we achieved despite the pressure from tariffs, reflects both higher operating margins and sales. Let's shift over to cash flow. In the second quarter, we generated nearly $100 million of free cash flow, bringing our year-to-date performance into solid positive territory and better than we had projected. Strong earnings contributed to our cash generation. Despite our strong sales growth, we held working capital relatively constantly. Growth in physical inventories associated with sales growth was largely offset by customer advances. Capital expenditures were somewhat below the quarterly average from the past year and are expected to pick up in the rest of the year. We continue to invest in our facilities to support our strong growth opportunities. In particular, we'll invest to support secured growth within space and defense and operational initiatives within commercial aircraft.
Our leverage ratio was 1.8x as of the end of the second quarter, putting us just below the target leverage of 2-3x . Our capital deployment priorities center around organic growth, and we'll pursue strategic acquisitions to complement our existing portfolio. We strive to have a balanced capital deployment strategy over the long term. We'll now shift over to our updated guidance for the year. We're increasing 2026 guidance for sales and adjusted earnings per share from what we provided a quarter ago, and we're reaffirming our guidance on adjusted operating margin and free cash flow conversion. We're increasing our sales guidance for the year, reflecting the strong second quarter, as well as further sales growth later in the year. We're increasing our sales guidance for three of our segments and lowering it for one.
In Space and Defense, we're increasing our guidance by $35 million to reflect broad-based defense demands. We're increasing guidance for Industrial by $30 million, reflecting a strengthened order book, including for data center cooling pumps. We're also increasing guidance for Military Aircraft with an additional $25 million of growth, largely associated with accelerated activity on the MV-75 program.
For Commercial Aircraft, we're decreasing our sales guidance by $20 million to reflect our decision to slow the rate of incoming inventory on certain narrow-body platforms. We're pleased to report that we're raising our adjusted operating margin in FY 2026 at 13.4%, despite growing tariff pressure. We're now expecting 110 basis points of pressure from tariff in FY 2026, up 30 basis points from our previous guidance. Increased activity within our Industrial segment is causing this additional pressure, and we continue to work on our tariff mitigation plan.
Our underlying business is performing well such that we're able to compensate for the increasing tariff pressure. At the segment level, we're increasing operating margin and space and defense on second quarter strength, partially offset by higher levels of research and development that we'll make in the second half of the year. We're decreasing operating margins in commercial aircraft on mix. We're holding operating margins for military aircraft and industrial. Within industrial, we're fully offsetting increased tariff pressure with benefits associated with higher sales growth. We're increasing our FY 2026 adjusted earnings per share guidance by $0.40 to $10.60 ± $0.20. We're reflecting our second quarter EPS, additional operating profit we're now expecting in the back half of the year in lower non-operating costs, which are partially offset by higher tariff pressure.
For the third quarter, we're forecasting earnings per share to be $2.65 ± 0.10. Finally, turning to cash. We're still projecting free cash flow conversion to be about 60% with some changes within our guidance from a quarter ago. We'll use more cash for growth in physical inventories, and this will be offset by an increase in customer advances that we've secured, as well as reduced capital expenditures as we align our spend with growth areas and adjust our timing to our needs. With respect to physical inventories, it has taken us longer to address existing operational challenges, and we continue to focus on resolving those. We have made progress, however, on rescheduling material receipts within commercial aircraft, as Pat described earlier. Next quarter, we expect to generate free cash flow conversion at about 100%.
We won't consume cash for changes in working capital, though we'll increase our investments in capital expenditures. Fiscal year 2026 is shaping up to be another great year. We'll achieve a record level of sales, further expand our operating margin, and make meaningful progress towards generating strong free cash flow. Now I'll turn it back to Pat.
Thank you. We've delivered outstanding second quarter financial results. We increased our guidance based on the continuing strong performance within robust markets. With that, let me open it up to the floor for questions.
We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line, Jon Tanwanteng from CJS Securities. Your line is open. Please go ahead.
Hi, good morning, and thank you for taking my questions, and nice job on the quarter and the outlook. I was wondering if you could start with the
Good morning, Jon.
Morning, Pat. I was wondering if you could start with the missile business and if there's any update to the 20% growth outlook we've seen there, number one. Number two, can the industry and yourself grow faster than that if asked by the government, and are you being asked to do that?
Jon, could you repeat which piece of the business you were asking about at the very beginning?
The missile controls business.
Oh, yeah. Okay. Yeah. As you can see with what's going on in the world currently, the demand is obviously increasing and the urgency of that demand. I talked about changing procurement strategies from the government, and you saw that reflected in seven-year agreements with the primes on ramping up their capacity by significant amounts, I mean, quadrupling or tripling the rate of production.
If you take PAC-3 to go from 650 missiles per year up to a level of 2,000 per year. We've been in discussions with our customers over the last year or more about these increasing demands. It was becoming obvious that the arsenal was depleted and that production rates needed to increase, and we've been preparing ourselves for that, Jon. At our Salt Lake City facility, that's where we do a lot of these control actuation systems that go onto the missiles.
We have freed up floor space within that facility by the transitioning of other products out of that building. We are investing in the facility with some new capabilities to support this growth in the missiles program, and we feel that we have the facility space available and the capabilities to increase our rate at the level that's being asked for.
Okay, great. Thank you. Then on the commercial aircraft side, how should we think about the impact of the war on your airline customers' demand? Is that fully reflected in your outlook today? Does your wide-body focus provide more relative insulation just due to, you know, the airplane economics, or maybe does the impact on Mideast customers maybe shift that the other direction? Just help us understand how you're thinking about that demand picture going through the next year.
Yeah. We have reflected our current thinking into the guidance. There is some impact on flight patterns. I mean, the flights in and out of the Middle East are down, obviously. We have two forward stocking locations in the Middle East where we hold product for aircraft on the ground servicing. Obviously, we shut those down as a consequence of what was going on, and we're servicing those from other parts of the world at present. A lot of airlines are suffering from higher aviation fuel, and therefore, they're making decisions on number of flights on routes. That, we believe, also switches their focus over to more fuel-efficient aircraft, and we would regard 787, A350 to be in that class. You could expect more hours on those types of aircraft.
When we look at it in balance then, we see our business sustaining on the aftermarket side for the rest of the year, roughly the rate, our rough run rate. It's in the guidance. We think it's a fair reflection on where we are today. On the OE production side, we're continuing to support the customers' interest in increasing their run rate and their longer-term aspirational goals within our own plans. Thank you for taking the second question, Jon, because we're not limiting it to one question per.
Okay, great. Thank you.
Thank you. Yes, as we move forward in the Q&A, we welcome you to ask more than one question today, and please, a reminder to pick up your handset when asking a question. The next question comes from Kristine Liwag. Your line is open. Please go ahead.
Hey, good morning, everyone. Pat, Jennifer, Aaron, I just wanted to ask on the defense environment. It seems like we're just in a completely different trajectory versus different cycles. The White House is asking for $1.5 trillion for fiscal year 2027. Now, whether or not that materializes or not, it seems like the general direction for that fiscal 2027 number is still higher than fiscal 2026, meaningfully so, maybe at least 20%.
I was wondering, when you look at your outlook for your defense business, how is Moog positioned to capitalize on this potentially meaningful growth ahead? Because, when you look at your core capabilities over the years, you guys have transformed from a component manufacturer to really providing more systems and solutions that are in greater need. Just want to understand what that looks like, and what's kind of embedded in your base case. If we look out a few years, I mean, how meaningfully higher could revenue be?
Thank you for the question, Kristine. Good to hear from you. Our business is continuing to expand as a consequence of this, and yet, whether it's a 50% step-up next year or a 20%, it's business that we are well-positioned to secure. I think that's from two perspectives. It's our operational effectiveness as a business, and it's the technical capabilities we have. Let me explain both of those. The operational efficiency side, our delivery performance on the missiles has been 100/100. That's 100% on time, 100% quality to our customers. That is winning more business. When we announced our orders on PAC-3, that was a partial takeaway from one of our competitors. Our operational performance wins us additional business, especially in an environment where the primes are struggling to get capacity.
We have an opportunity, not just with the uplift on existing programs, but our ability to displace competitors on other programs. The technical side gives us an ability to increase our scope of supply. We're actively pursuing opportunities where we can add to the solutions that we deliver for the customers. I'd say they're the important factors that feed into a growing strengthening of not just the business, the market itself, but our business within that market.
Super helpful. We're also seeing multi-year agreements for the defense primes to increase capacity. When it comes down to where you are in your tier of a supplier, how do you anticipate that capacity spend going to be supported? Do you expect more customer advances to support some of that incremental working capital or CapEx? Or would you have to invest your own money to be able to meet some of those demand signals? How do we think about that balance?
I think there's a mix in there. We are in the process of discussions with our customers about that ramp that's in front of us. If you reflect on the PAC-3 orders that we got in some of our prior couple of quarters over the last year, that was reflective of current production volumes of 650 units per year. Obviously, there's a significant ramp, and we're in negotiations with each of our customers on how we support that ramp with them over that extended period of time. We are prepared to invest in the business. We think that's the right thing to do. Jennifer has consistently said that we have a balanced capital investment plan, and supporting the organic growth in pieces of the business that we excel at, it makes a lot of sense for us.
For instance, on the missile side, I talked about Salt Lake City facility. We're putting in a circuit card assembly line there that specifically supports those missile programs. We are making internal investments on it. We are looking to our customers and the government to say, well, how can they help us accelerate things if we need to, but that's all ongoing discussion.
Great. Switching gears to space. You called out the Artemis II mission. Your presence in legacy space companies are pretty clear with the manned space exploration in Mercury, Gemini, Apollo, and then previously historically with Space Shuttle, now Artemis. Can you talk about the environment for that? What's your presence in terms of the newer space companies? How do you see the dollars shifting from legacy space versus the new space innovators, and what's your presence between the two?
Yeah. Thanks for highlighting the rich heritage in space exploration. We've been in that from the beginning, as I stated in the notes. A piece of Moog hardware flies into space every week, which is a remarkable fact. It's not just the legacy programs that we're involved in. I think, Kristine, you know that we are involved in thrust vector actuation on many of the launch vehicles themselves. As the commercialization and growing defense presence in space drives demand, we get exposure to that on the thrust vector control side of launch vehicles. Our investment in what we call Plant 27 here in the East Aurora campus is around avionics and actuation that goes right into those launch vehicles themselves, and we've been ramping our capacity there.
Our exposure in space also extends to the space vehicles, and as you know, with space as the new war-fighting domain, as it was described last year in Space Symposium, there is a lot of interest on the defense side in our space capabilities, and we see growth in that as well. Jennifer called it out, I think, as space vehicle strength within the space and defense group in the second quarter.
Great. By the way, not having limits on questions may be a bad thing, but I'll push my luck here with one more. You guys have given a multi-year outlook on margins and where they could be in a trajectory, and you've been executing on that. I was thinking about all these opportunities. All your end markets are experiencing significant growth. You have changed your pricing mechanism across the business.
I was wondering how conservative is the previous three-year guidance you've given on margin now with how well you've been able to execute so far, and when you look at the quality of the things that you're providing and the lack of other available options, really, where do you see the maximum limit on margin? It could be in reference to your three-year outlook or over time. Just want to understand the earnings power of Moog going forward.
Well, I'm incredibly proud of the success we've achieved to date, Kristine, in delivering on those long-term goals we set out back in 2023. This comes up to the tail end of that period now, 2026, and as I said, we're delivering substantively on what we committed to in that we are due to give an update on what comes beyond this. We're looking forward to having the opportunity to do another investor day. It's maybe later in our calendar year. We'll announce a date at some point in the future. I look forward with a high degree of optimism to our future, Kristine. Do you want to say something, Jennifer, on that?
Yes. I would say for our guidance this year, we feel that we've got a balanced approach to our guidance. Like what we did for EPS, we did increase that by $0.40, and we did beat our guidance by about that same $0.40. What we are seeing is we're reflecting that strong Q2 in our guidance, and we are also projecting some benefit in the second half as well. Operating profits specifically in space and defense is going to continue to contribute, so we have adjusted for that. We're also now making additional investments in R&D because we've got such great opportunities as we are just discussing, some also lower non-operating expenses. We do have tariff pressure that is increasing that is offsetting that as well.
We want to make sure that we're staying balanced in some of the things that we're doing to reflect the strong operational performance of the business. We're also continuing to invest at higher rates, too, to secure and to ensure we're positioned great for new business opportunities.
Great. Thank you very much, guys.
Thanks, Kristine.
Your next question comes from the line of Gautam Khanna from TD Securities. Your line is open. Please go ahead.
Hi. Good morning, guys.
Morning.
wanted to make sure I understood. On the commercial aircraft guidance revision, what's driving that? Because it sounds like demand's pretty strong. Just curious.
Yeah. Overall demand is strong for our commercial business. When we talk about the guidance, we are making a deliberate decision so that we are not bringing in materials ahead of when we need it, and that does have some downward pressure for us on our guidance. It's not to say that there's any long-term substantial changes in anything that we're doing from an outlook. It's just us managing our inventory to align with the timing of deliveries that we need to do and not building up excess cash for that. It's really a timing thing that is incorporated into that guide.
Just to be clear, is that due to cost accounting or meaning what you expect to ship is no different?
Yeah, we're bringing in lower amounts of material, and those material otherwise would have been absorbed into the cost-to-cost accounting and been reflected in sales and operating margin. We're simply delaying that somewhat.
Got you. Does that have a equal impact to benefit cash flow by the same amount?
It does. It does, it benefits our cash flow, and you can see that our cash flow, we're kind of holding the same. Some of the things that we're seeing on the cash flow side is, from a short-term perspective, we are pushing out material receipts. That has a benefit.
Mm-hmm.
That's what we're talking about here. There's also operational execution, things like getting shipments out that we continue to work. It's managing our customer demand, and transitions also fall into that as well.
Okay. That's very helpful. I was curious if you could give us some flavor for if demand has changed on some of the major commercial aircraft production programs like the A350, 787. Does that explain some of the.
No.
Of the change?
I would say no, the demand has not changed. Sometimes it's just a timing of when we are doing the work that can impact when we're recognizing the sales.
Okay. The OEM.
T here's strong demand for the aircraft.
Yeah.
Yeah. There's strong demand for the aircraft. We're seeing that on the wide body platforms that we've got significant content. We're seeing that on the narrow body platforms as well. Overall, the business is very robust, and these things only reflect on timing.
Timing by Moog, not by the OEM customer.
By Moog.
It is.
Yeah. By Moog.
Got you.
W e're not gonna bring in- material prior to that so that we can manage cash flow, manage the business for cash.
Okay. That's helpful. I was curious also, a quarter ago, there was a more urgent order for V-22 parts. I was curious, are you seeing other pockets of more urgent demand? I know you've mentioned missiles, but elsewhere in the defense business?
Not to that extent. That one was definitely one that stood out. That's why we called it out because it's basically demand that we had expected for a year that it was all captured in one quarter. There has not been anything significant that stands out like that. However, the overall growth of the business is significant, and that's why we've beat on our sales, and we are also raising our guidance on the sales as well because there is just that underlying business performance, not necessarily on any one program or acceleration of any one program, but just overall strength in our defense businesses.
Great. I know you did discuss tariffs and the impact. Could you just maybe elaborate on what changed from the first quarter with respect to tariff impacts for the year? Because I remember you were moving product flows and helping the airlines file for duty drawback and the like. Is that still happening? What explains the variance on tariff relative to what you thought a quarter ago?
I would, Gautam, I would describe it as a pretty fluid situation still. The IEEPA tariffs were struck down in the quarter. The Section 121 tariffs were imposed then on other countries from outside the U.S., and that has a 90-day validity, and then we're moving over to Section 301 tariffs for the balance of the year. We anticipate as the administration continues to focus on tariffs as a revenue-generating mechanism. We assume that we have tariffs on an ongoing basis, and it's in our guidance. I think what has changed for us is the level of business, in some of the parts of our organization that are particularly sensitive to the tariffs.
We have greater volume of business going through on the industrial side that's attracting tariffs, and so the amount of dollars we're expending on tariffs has increased as a consequence of that sort of mix shift, if you like.
Okay. I know I'm asking a lot of questions, but I appreciate the invitation to do so. Just curious also, is there any kind of direct Middle East impact that you could foresee in the business? I'm not talking just demand-wise, but supply chain or input costs or any other kind of more diffuse impacts that we could see?
Yeah. Well, maybe a couple of things that come to front of mind. I mentioned earlier that we had 2 forward stocking locations in the Middle East. Their activities have wound down completely because of the war that's going on. We've redirected where that work goes. Obviously, fuel, the cost of fuel has increased, and we see that in some parts of the world already at maybe even an escalated or an elevated level relative to what you see here in the U.S. In the Philippines, we see fuel costs have increased quite significantly because it's all imported fuel. We've reflected those in our thinking as well for the quarter. They're some of the direct impacts. Indirect, changing of flight patterns, changing of aircraft flying and routes.
We think we've integrated into our guidance as best we can at this point, and we'll see how that unfolds. It all depends on the duration and depth of the impact that comes from the war, and that is highly dependent on the duration.
Got you. The fuel impacts are already reflected in your guidance?
Yep.
You've already marked to market?
Yep.
Assuming for the full year, we stay at this level. Okay.
Well, what I'm describing in Philippines are transportation costs and stuff like that. They're direct input costs that we have. We've reflected what we expect those to be for the full year.
Perfect. I just wanted to ask, I know it's three and a half weeks into the quarter, you have not seen any indications of demand weakness incrementally from what you saw in the March quarter?
No, nothing.
Terrific. Thank you very much.
You're welcome. Thanks, Gautam.
Your next question comes from Jon Tanwanteng from CJS Securities. Your line is open. Please go ahead.
Welcome back, Jon.
A reminder to please unmute for your question.
Can you hear me? Hello?
Yes.
Yes.
Okay, perfect. I was wondering if you could give us a little bit more color on the FLRAA V-280 program, how much that is pulled in by, and how that impacts your, I guess, revenue and profitability run rate in the out years, not specifically this year?
In this year, what we were reflecting in the high level of activity in quarter two was getting up to the level of activity at an earlier point in the year. We expected to get to that level of activity, which Jennifer described as peak activity. We expected that to come in the third quarter, I believe, and we got there in the second quarter. Because of the focus on the program from both our customer and the government, we brought forward some of the work we were doing.
We're at the peak run rate as we see it for the activities themselves. That continues throughout the EMD phase, engineering manufacturing development phase of the program. There are conversations between our customer, Bell, and the government about getting towards flight earlier than was originally planned, so getting into early-stage production more quickly.
Those conversations are active, and we are supporting them.
Okay, great. Thank you. Second, how should we think about the potential for Congress to change or flip this fall? How does that impact your expectation on the defense spending in general, and if that could bleed through to specific programs like munitions or aircraft or in the space arena?
Yeah. Whatever the total level of spending is, it really comes down to your exposure to different programs, and we believe that we're exposed to a set of programs that are in priority areas, the replenishment being one specific example. There's a need there that'll have to be satisfied no matter what is agreed as the total budget for the defense forces. Then there are a number of priority programs, and we believe that our exposure is across many of those, and even if one or other goes by the wayside, we think we have a good, solid, growing business based on what's happening.
Okay. Thank you.
Thank you very much.
Thank you. There are no further questions at this time. We have reached the end of the Q&A. I will now pass the call back over to Pat for closing remarks.
That concludes our earnings call. I appreciate you taking the time to listen to our update on the business, and I look forward to providing an update again next quarter. Thank you.
This concludes today's call. Thank you for attending. You may now disconnect.