Q2 2021 Textron Inc Earnings Call
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Okay.
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Yes.
Ladies and gentlemen, thank you for.
And by and welcome to the Textron and second quarter earnings call 'twenty 'twenty 1.
At this time all participants are in a listen only mode.
Later, we will conduct a question and answer session.
If you wish to ask a question. Please press 1 then zero on your telephone keypad.
And if you should require assistance during the call police.
Please press Star then zero.
I would now like to turn the conference over to our host.
Mr. Eric Salander, Vice President of Investor Relations. Please go ahead Sir.
Thanks, Tony and good morning, everyone before we begin I'd like to mention.
And we will be discussing future estimates and expectations during our call. Today. These forward looking statements are subject to various risk factors, which are detailed in our SEC filings and also in today's press release on the call today, we have Scott Donnelly, Textron's, Chairman and CEO and Frank Connor, Our Chief Financial Officer, our earnings call presentation can be found and the investor.
Mr Relations section of our website.
Revenues in the quarter were $3.2 billion up from 2 and $5 billion and last year's second quarter. During this year's second quarter. We reported net income of 81 per share adjusted net income and non-GAAP measure was also 81 per share for the second quarter of 2021 compared to <unk> 13 per share.
And the second quarter of 2020 segment profit and the quarter was $289 million up from $82 million and the second quarter of 2020 manufacturing cash flow before pension contributions totaled $509 million up $294 million from last year's second quarter with that I'll turn the call over to Scott.
Thanks, Eric.
Morning, everyone. We had a strong second quarter with higher revenues across all of our manufacturing segments operating margins of 9.1% and strong cash generation.
At Bell revenues were up and the quarter on higher commercial revenues, partially offset by lower military revenues on.
And the commercial side at Bell, we delivered 47 helicopters up from 27 and last year's.
Eric and good order.
We continue to see strong commercial demand and solid order activity and the quarter across all our commercial models, both domestically and internationally and across multiple end markets, including corporate and private utility and MFS.
Moving to future vertical lift and June following 214 flight hours over 3 years Bell retard the V 280.
Valor demonstrator aircraft.
Over this 3 year period, the valor successfully demonstrated all key performance parameters from floor program, including low speed agility and long range cruise $305 not high speed floats autonomous flight and rapid mission systems integration.
On July 6 the army issued the Florida RFP.
<unk> program remains on track to the army schedule with bids due in September followed by a down select and award and the second quarter of 2022.
And <unk> about 45 per cent of the way through its build of a 360 invictus prototype.
And lastly, Bell announced plans for new systems integration lab, and Arlington to broad integration and verification and validation testing on aircraft and mission systems.
To meet the requirements for both our field programs.
Moving to Textron systems, we saw another strong quarter.
Execution with operating margins and 14, 4% up 310 basis points from last quarter.
We saw strong performance at <unk> from by increased flight activity.
Led by our F..1 fleet on the U S Air Force cap cash program.
We have made significant investments over the last few years.
June Z systems delivered the third ship to shore connector I'll check 100% of the U S Navy as.
And as development contract portion of this program continues to wind down through the remainder of 2021, we expect to see revenue growth and margin expansion on the program as we increase our activity on the production contract.
Also.
Systems literal and systems look to the fourth and final rips volume 5 vehicle to the U S Army for RCV medium program.
The customer will begin integration and testing and these vehicles and preparation for the 2022 soldier operational experiment.
And systems also unveiled the cottonmouth vehicle purpose built for the U S. Marine Corps advanced reconnaissance vehicle program and was.
And so and of course selected for further prototype development under an anticipated OTC contract Award.
Offsetting higher revenues and most of its operating units and the quarter. We did experience. Some top line pressure at air systems, largely related to the reduction in hours or fee for service activities due to the U S Army's Afghanistan withdrawal and impact of the sale of the true simulation business earlier this year.
And aviation revenues were up and the quarter on higher volumes per citation jets, and commercial turboprops as well as and our aftermarket business we.
We delivered 44 jets up from 23 last year and 33 commercial turboprops up from 15 and last year's second quarter.
We continue to see strong commercial demand and order activity for our aircraft, which resulted in <unk>.
<unk> growth of 689 million to $2.7 billion at quarter end.
Through the first half of the year, we recorded over $1.1 billion and backlog growth and aviation.
With the citation longitude and citation CJ for <unk>.
And to receive the Asa type certification and quarter. These certifications are expected to generate additional demand and opportunities for each of these.
Models.
On the new product front, Scott carrier aircraft certification program has now accumulated over 200 flight hours and continues to progress wells, we work towards entry into service targeted for later this year.
Moving to industrial revenues and margins were up at both <unk> and specialized vehicles from last year's second quarter, primarily due to higher.
And mix and each of the businesses.
At <unk>, despite the higher revenue as we've experienced order disruptions related to the global auto OEM supply chain shortages, which have directly impacted our production scheduling, resulting and intermediate line shutdowns and manufacturing efficiencies.
Our specialized vehicles, we saw higher revenues and improved operating performance from our strong retail pricing.
Volume and by continued high customer demand and our end markets.
While we've experienced continued strong retail demand for our products, we have been impacted by our supply chain and ability to fully meet this demand and we continue to work through these production challenges.
In summary, we continue to see increased <unk>.
Commercial order flow at aviation and Bell and solid execution and our military businesses strong.
<unk> Gill demand for our products the industrial segment and improved cash generation that all contributed to the second quarter performance and our improved EPS and cash outlook.
I'll turn the call over to Frank.
Thanks, Scott and good morning, everyone, Let's review how each of the segments contributed starting with Textron aviation.
Revenues at Textron aviation.
<unk> reached $1.2 billion were up $414 million from a year ago, largely due to higher citation jet volume of $174 million aftermarket volume of $98 million and commercial turboprop volume of $75 million.
Segment profit was $96 million and the second quarter up $162 million from last year.
Aviation quarter due to the higher volume and mix of $117 million, a favorable impact from performance of $34 million and favorable pricing net of inflation of $11 million.
<unk> fog in the segment ended the quarter at $2.7 billion.
Moving to Bell revenues were $891 million up 69.
$9 million from last year on higher commercial revenues of $99 million, partially offset by lower military revenues.
Segment profit of $110 million was down $8 million, primarily due to higher research and development costs in the quarter largely related to the future vertical lift programs.
Backlog in the segment ended the quarter at $4.8 billion.
And secondly at Textron systems revenues were $333 million up $7 million from a year ago segment profit of $48 million was up $11 million due to a favorable impact from performance.
Backlog in the segment ended the quarter at $2.3 billion.
Industrial revenues of $794 million or up.
$132 million from last year with $169 million from fuel systems, and functional components and $63 million from specialized vehicles, largely reflecting higher volume and mix.
Net profit was $32 million up $43 million from the second quarter of 2020, primarily due to the higher.
2 and mix at each of the businesses.
Finance segment revenues were $12 million and profit was $3 million move.
Moving below segment profit corporate expenses were $37 million and interest expense was $32 million.
With respect to our 2020 restructuring plan, we recorded a pretax charge of $4 million on spec.
<unk> are just lying.
We had another strong quarter of cash generation, reflecting our focus on working capital management across the segments and cash deposits from strong order activity at aviation.
Our manufacturing cash flow before pension contributions was $509 million $294 million higher than last.
Special checking quarter.
And the quarter, we repurchased approximately 3 million shares returning $96 million and cash to shareholders.
And we repaid at par $250 million of 595% notes with a stated maturity of September 2021.
Following these activities we ended the second quarter with <unk>.
<unk> $72.2 billion of cash on the balance sheet.
To wrap up we now expect our full year tax rate to be 16%, reflecting increased tax credits related to higher qualifying domestic investments in R&D. We are raising our expected full year guidance for adjusted EPS to a range of $3 to $3.20 per share up 20.
<unk> from our prior outlook.
We're also raising our outlook for manufacturing cash flow before pension contributions to a range of $800 million to $900 million up $200 million from our prior outlook with planned pension contributions of $50 million that concludes our prepared remarks. So operator, we can open the line for questions.
And.
Proximate. Thank you. Our first question comes from the line of Sheila <unk>.
And with Jefferies. Please go ahead.
To bill of 1.6 times and the quarter I guess, Scott what are you hearing from your customers. How do you think about the sustainability of this growth and do you think theres.
Ladies and consumer behavior.
Well, Sheila I think we agree with.
<unk> order quarter for sure.
Q will come out Youll see that we had services was about aftermarket was about 31%.
I think when you account for that and your account for used aircraft sales or book to Bill actually probably is closer to 2.
In terms of new equipment.
Net order activity continues to be strong here as we've gone through the end of the quarter. So I think.
And the sustainability of it appears to be quite strong as well.
And we've seen through the course of the year, we have an awful lot of new customers coming into the market, which I think is great. We've got very.
And used.
Used aircraft available for sale I mean, it's become sort of a record low level. So.
And people that are coming into the market, there's not a whole lot to be had out there in terms of quality relatively new and used aircraft and that's driving a lot of strength and the new side I think.
From everything we're seeing is it appears to be quite sustainable demand as.
As they're flying if you look to that is at the highest levels, we've seen and a very long time in terms of deal utilization.
So I think demand if you look at sort of the macro level everything from charter to a club fractional to whole ownership.
It's very strong it's very U S centric in terms of jet.
Right now, although we're starting to see some pickup and the South American and European markets, particularly on the turboprop side, we're starting to see more activity and.
South America as you know that those international markets tend to be.
The dominant part of our turboprop market and they haven't been just because they're a little slower so I think and youll.
Look at the demand that we're seeing and then you start thinking about South America, and the European markets starting to come back and frankly, just corporate and we're I think we're talking about a lot of.
High net worth individuals and small businesses things like that are really driving it and so far.
And the addition, I think as.
Further into the year and start to see more corporate activity.
We will help to make it a sustainable demand environment.
Thanks for that color and then maybe 1 more on Bell you mentioned in your prepared remarks about.
The R&D impact is that more and borrow or flora and kind of how do we think about that progression of.
Company funded R&D.
And it's both but Florida frankly at this point is the bulk of it although we're seeing obviously some pick up here on the E&P spending as we are preparing a flower proposal.
But this year.
Lions share of it is around the.
The final program and he is making great progress as I said.
And we're progressing really well in terms of the design and the assembly of the first aircraft for the for the first flight test activity.
But youll see this composite or higher.
Higher R&D spending associated principally with those FBL programs.
And through 2022.
Great. Thank you.
Thank you. Our next question comes from the line of Peter Arment with Baird. Please go ahead.
Yes, Thanks, good morning, Scott and Frank.
Good morning, Scott.
Scott just following up on your aviation.
Comments.
And environment, obviously, it sounds like it's really broad based and across the board.
The original plan was.
And get back 50 per cent of the recovery of your previous 2020 production plant just how are you thinking about that and managing it.
This environment I think we're on track for that Peter and I know it because we go into the end of the year, obviously, we've been raising.
We're raising our production rates.
We expected did not only accomplished that this year, but as we kind.
Kind of give color around 2022 to get us back to those.
2019 levels. So I think that's that's going well and obviously you don't.
Strong demand makes us feel pretty good about continuing to bring those rates up as we go through this year and into 2022.
Okay, and just as a quick follow up on just the margin performance I mean, I think year to date here.
And a 7% versus guidance of 5.5%. So it's just the the guidance increase that youre, giving today, obviously, you're just you're forecasting.
Strong margin performance at aviation and second half.
And for color on aviation given the strength of the market, we're probably going to be guiding up a couple of hundred million dollars of revenue was the.
Is the way to think of it and probably a couple of hundred basis points of better margin.
Terrific. Thanks, so much Scott.
Yeah.
Thank you. Our next question comes from the line of Pete Sobecki with Alembic.
Alembic Global please go ahead.
Hey, good morning, guys nice quarter.
Scott maybe.
And maybe to follow up on the UAV fee for service as the U S continues to pull troops out of Afghanistan, and I think maybe even more out of Iraq.
Maybe you can quantify how much of a headwind that program was in the quarter for you and kind of how much we're expecting it to be to negatively impact our full year.
And we don't we don't go into that level of detail, probably but just.
I guess from our point is it is we're seeing growth and a lot of the other pieces of that business and the opt in.
Issue is holding some of that back I think the margin performance continues to be strong and book I think we're fairly optimistic that we will redeploy.
And assets and.
Utilize them in.
And other applications, but that's probably something that will be more of a 2022 impact it takes a while for for that to happen. So I don't think its not a horrible story, it's just the reality of the.
And the pullback in Afghanistan and.
We have been.
Conservative in terms of how we manage those assets.
The team has done a great job with that so it's.
It's not a bottomline problem right now and I think and I do think a lot of those assets will get redeployed into other opportunities, but it is getting a little bit of a top line headwind. So when you look at systems I think we're really happy with the performance there.
And we will probably see margins a couple hundred basis points better than what we originally were.
And you guys.
But we're not we're probably just kind of on track to the revenue line because of some of the pressures on that.
Cash and pulled out.
Okay last 1 from me also net systems. They are bidding on some pretty pretty meaningful ground vehicle programs right on that.
Team and the Marine Corps program.
And.
How do you guys ensure that you guys get an adequate return on those programs.
And it's pretty it's in order of magnitude bigger than I think most of the things that they've done there.
I think about the return you get just in light of you know the type of returns you got and the <unk> program.
Well.
Thanks Peter.
So look this.
Graham.
Look these programs.
We'll not be structured in a way where you're taking on.
<unk> program and also committing.
The full life of production at a fixed price contract so.
And I get your point I think the business.
<unk> learned a lot about that and certainly we would never put ourselves in a and.
Contracting situation, where we had that kind of exposure. So these could be phenomenal programs that could be rate programs. I think our guys are technically were and are.
Good placements him and the way I mean, there is a long way to go obviously on things like oil and Murphy, but.
They are huge opportunities and it's going to take some time for them to come to fruition.
But yes certainly.
And we're not going to look at our contract situation, where we have the kind of exposures that we have on tap fee.
Got it great. Thanks, guys.
Thank you. Our next question comes from the line of Carter Copeland with Melius Research. Please go ahead.
Hey, good morning, guys good morning.
Good morning.
2 quick ones, 1 Scott I'm wondering specifically if you could just speak to what you saw.
And you continue to see in terms of trade and activity just given the used inventory.
Dynamic that you talked about.
What youre seeing in that regard and then a second 1.
And for Frank on the.
The performance and APAC and systems. It was there anything sort.
Sort of onetime in nature in that regard that we should be aware of or.
Anything we should think about that in that regard. Thanks.
Look on the used our activities reflect what's going on and the market rates are I think.
1 our used aircraft and <unk>.
Inventory is quite low aircrafts.
Aircraft of.
Have have largely sold out of our book.
The need for trade and is down dramatically as you guys know, we do run what we call market assist program. So we will help customers with the resale of.
There.
And our aircraft ideally not given there were putting it onto our book and we continue to try to do that and frankly.
And frankly as the as the backlog builds and that time timeframe.
From someone deciding to buy new aircraft they have a much longer window for.
The remarketing of the aircraft and what we saw.
When there was a.
Lesser backlog and shorter and shorter cycle sales so.
I would say that the dynamic of the used aircraft has been.
Reflected and our own used aircraft department and so.
And let's say all positive.
So on the on the systems mix no there was nothing kind of unusual.
Per quarter overall consolidated net program reviews were a positive $15 million.
And I think it just again reflects as Scott said.
<unk> performance across the systems businesses and the expectation of a.
A couple of hundred basis points, better and what our original guide was for the year.
Okay, great. Thanks for the color Jen <unk>.
Yep.
Thank you. The next question comes from the line of Ron Epstein with Bank of America. Please go ahead.
Great Good morning, guys.
Alright, Scott could you give us a little bit of a breakdown and maybe that customer demographic.
How much of it is.
And wealthy individuals versus corporates.
And who you're seeing coming back to the market.
I don't know if we can give a super big breakdown, Ron but as I said it was it's largely driven by when we talk about high net worth individuals usually folks who have family businesses small.
All businesses private companies, which is the core of our historically the core of R. R.
And our customer base and I think that's where a lot of demand is coming and as you look at.
Larger way, particularly with the longitude out there and the latitude where we have products that have a stronger appeal, we think to the corporates.
And those folks are just starting to come.
And as corporate edition Department start to fly more I think we will see more activity, particularly.
Particularly and those those classes of aircraft and that and that corporate world, but in the meantime it.
It is that.
And that customer base that we've historically seen youre, just seeing new customers of that same demographic I guess as you referred to it.
And they are coming in.
And back.
Got it got it and then your cash levels are.
Relatively high versus history.
Pre COVID-19 and I call it.
PC.
Are you still interested in industry consolidation and how are you thinking about deploying that capital.
Well look at this point, Ron we're we kind of watch opportunities as we always do I don't think theres anything pending and we'll certainly let you guys know when that happens, but and the <unk>.
Meantime, we continue to allocate the bulk of our of our cash and stock buyback and.
And I suspect, we'll continue to do that as Frank said we.
And we made a couple of them.
Debt payments here and in the quarter, we don't have any more corporate payments until the 2020.4 time frame. So I think we have a lot of flexibility around around cash but at this point.
Our principal allocation of that is towards share buyback.
Great. Thank you very much true.
Thank you our next question.
Comes from the line of Noah <unk> with Goldman. Please go ahead.
Hi, good morning, everybody.
No.
Questions on the guidance revisions.
In order to get into the middle of the new EPS range.
And the third and fourth quarter would have to be essentially exactly.
<unk> flat from the second quarter actually technically down slightly.
And seasonally the business usually ramps through the year and you have and markets that are improving through the year. So.
If you could just walk me through how that happens and then the earnings raise is it looks like 45.50 million.
And net income and then you've taken the free cash up $200 million. If you could just bridge that difference.
Yeah.
I'm not sure how much detailed modeling.
And do on the on the call and all but look I think we are seeing a little bit of linearity as you guys know when we came through the <unk>.
The Covid period, obviously.
And there was a lot of inventory reductions across the company, we're trying to be more linear.
And how we do that I mean, I think aviation is a good example, where not having.
Some of the historical where you because there's a big inventory build through the first couple of quarters and most bleeds off on 3 and 4 were Mercer and seeing.
And a little more linearity is stronger delivery here in the in Q.
2 and.
And it's happening helping to.
Give us some more linear and better manage working capital I would say so.
In terms of the modeling around EPS and as I kind of helped a little bit here is.
And you don't think about aviation being up a couple hundred million and revenue and a couple of hundred basis points of better margin versus the guide.
Systems, a couple of hundred million dollars Im sorry, a couple of hundred basis points of.
Better margin versus our initial guide.
And I don't think bells Bell is about where we expect it to be they're performing well, but they are performing more or less to the.
To the guide and I think and in.
Industrial will probably be around and that same area right I mean.
I would have liked to thought we could have some upside we probably are going to be a little bit softer just because of the challenges on some of the supply chain, but again strong performance.
And certainly on year over year revenue as margins are up but.
It's a little more challenged in terms of capitalizing on some of that and market demand, but the opportunities are there so okay I understand.
<unk> and <unk>.
Scott Your response earlier to the question around that.
Prior Cessna jet production plan.
And recovering half of the the 20 decline and then getting back to 19% and 22.
It sounded like Youre sort of just reiterating that despite the.
The strength and the market and maybe that's just because.
It's been strong but for a short relatively short period of time, you want to see that sustain and you don't want to get ahead of yourself, but I wondered also how much of that is that you are looking at pricing over volumes and you had the experience of having to reduce price and then.
Changing the strategy to hold firm on price instead of chasing volume and I'm wondering if you could just speak to how youll handle that now that the market is stronger can we expect.
A bigger focus on price over volume, even as demand increases or how and how youre going to handle that.
Alex It's a good question and I do think.
And part of the dynamic here is that as you know we've gone through a very long period of time, where.
Book to Bill was just the backlog just wasn't strong enough to support.
And.
And I'll say.
6 to 9 month order delivery window, there was too much short cycle sales going on us.
It's particularly challenging.
The factory and to do that to load things the right way to not have rework when people buy on short cycle and you're Reconfiguring and.
Tailoring and aircrafts too late and that manufacturing cycle. So.
There is no doubt that this business I think this industry is healthier when you've got more like a 6 to 9 month backlog and.
LNG. It gives you a better visibility, it's I think it's better for the customer and the and in terms of the ability to customize and.
And I get the configuration of the aircraft straight so.
That's a lot of what we look at so obviously, we are increasing the <unk>.
And consistent with what our expectations were for the year and.
Obviously youre feeling good about that.
And increased rate as we go into next year, given the backlog, but for sure we want to be cautious here and not.
Increased volume and get back to a situation, where you just got too much short cycle sales going on.
Okay.
Excellent. Thank you.
Thank you our next question comes from.
David Strauss with Barclays. Please go ahead.
Thanks, Good morning.
Good morning.
Hi, Scott.
Scott.
And can you talk about where we're head count levels are and and started to add back where you where you think head count and needs to go and whether your.
<unk> seen a channel.
And in terms of getting the.
The work force that you need.
So we are increasing head count commensurate with the increase and the production volume as we've gone through the year, we started hiring programs probably about.
A month or so ago to bring folks and to ramp back up again, obviously.
And number of those folks are people that have been.
And laid off and will come back into the company, but we're having to do additional hiring beyond that and.
Look it's a it's I think everybody in the country is having the same challenge with some of the.
Programs that are out there, but those programs should wind down as we get I think into that labor day timeframe. So we are hiring.
It.
And I Wonder I think hiring will get easier as the year goes on and we get off some of these unemployment programs that are frankly, creating huge disincentives for people and have to work.
Okay, and I guess, the big bigger picture question.
Can you talk about.
<unk> will play.
It is a true.
E B world.
Penetration continues to pick up and the future Howe.
That business.
Potential for that business to transform itself and participate in that thanks sure sure look theres 2 steps to this.
EV World and <unk>, the first which.
And already participating on and frankly is very.
A good business for us is the move from straight gas.
A lot of the hybrid vehicles right. So the fuel systems have some unique technologies for those hybrid applications and we've done well in that space and the volume of that frankly continues to grow and it's growing even faster.
And now sort of post.
Covid the than even it was on pre COVID-19. So our participation on those platforms is very good and a good part of our business and a growing part of the business on a pure be EV world.
I think that we will see a transition just as we saw.
And frankly, <unk> became and context, because you move from metal gas tanks to <unk>.
Plastic or composite gas tanks, and we think the same opportunities there for battery and closures and we're working with.
A lot of the Oems right now.
On opportunities and to.
And to move from these.
<unk> metal.
Battery and closure systems to our composite and closure system, it's lower weighted it's lower cost. So it is very beneficial to the OEM and the platform and we're working through qualifications of those technologies as we speak.
Great appreciate the color thanks sure.
Thank you. Our next question comes from the line of Seth Sigman with Jpmorgan. Please go ahead.
Alright, thanks very much.
Morning.
I Wonder if Scott if you could talk a little bit more about that.
Aftermarket and <unk>.
And it sounds like it was up.
About.
And for 30% and the quarter, we see really high activity.
Is that something where.
And it's still accelerating as we head into the back of the year and what kind of growth you expect for.
For 2021 there.
Yes. It is it's up.
Around that number on a year over year basis.
About double digit on a on a sequential basis. So you know what's happening except as they run.
And so you know the utilization of the aircraft.
And is up as high as we've seen it and a long time. So people are flying the aircraft are being utilized and that obviously correlates to service and parts consumption. So.
So we have seen it ramping up nicely as aircraft have gone back into service and we do expect it to continue to grow through the balance of the year.
Alright, okay, Okay and.
And then just.
And I get your comments earlier that focus on share repurchases from now.
And which makes sense.
And when you think about opportunities for M&A.
And you think at all about the defense side of the business and we see this major focus at the Pentagon.
Chad <unk> and is there a need.
In terms of thinking about the future of the defense business too.
And more focused on communications technology and.
Might that at some point become and <unk>.
And for M&A.
Well look I think I guess I would say.
Broadly suffered the indie space is primarily where we look on the M&A side.
And I guess I wouldn't talk about any specific technology or obviously, particularly.
Particular opportunity but.
That is.
Base, where we tend to be.
To be looking so and from a from a cash standpoint look I think our balance sheets and very good shape, we will continue to do so.
Share buybacks and there was something out there that we needed to do I think we have plenty of access.
Catherine.
Cash from our balance sheet or or financing through that so I think from a cash standpoint, we will continue to do the buyback without being too concerned about our ability if we need to do M&A, but I would say that the.
And we talk specifically around communications, but certainly the A&D spaces, where we look.
Okay, great. Thanks very.
Thank you. Our next question comes from the line of Robert Stallard with vertical research. Please go ahead.
Thanks, so much good morning.
Okay.
Scott just wanted to follow up on that comment you made earlier about the 6 to 9 month window for aviation lead times are you actually in that window, yet or is it still and I hope it's a show.
And you would like.
Well I think we're in that window.
Okay, that's nice and easy.
And then secondly, again on aviation.
<unk> of Ron's question earlier are you starting to see more interest from the fleet buyers or are you actually kind of happy like going with these individuals.
Shorter than was generally get better pricing on them.
Yeah.
Or you know I mean, our our fleet sort of activity tends to be centered really around not just obviously which is.
A very important.
Customer for awesome, and that's sort of fleet obviously.
Okay.
Net net sales level that's individual.
Customers volume share soy.
That's the bulk of what we looked at on.
On.
And I think what you would kind of call fleet I mean, obviously there is other opportunities out there, where we have customers that want to buy and numbers of aircrafts.
It does all the announcement around the world.
And the caravan deal.
Obviously, we've had programs will risk eicher for instance, and Fedex, which are large.
Aircraft acquisitions, but I don't think we've seen anything different or unique going on are.
The difference between fleet or retail and our bias 1 way or the other.
If theres a good fleet opportunity and that will.
And compete hard for that but the bulk of our sales when you look at this.
And the order book and what's going on our individual aircraft sales.
Right and that makes sense, okay. Thanks, so much.
Yeah.
Thank you. Our next question comes from the line of George Shapiro with Shapiro.
<unk> research. Please go ahead.
Good morning.
And Scott I wanted to pursue you said that you have.
Comfortable with getting jet deliveries halfway back from there.
The last couple of years, but that would imply like if it's 165 and 170 not much of an increase.
Q3, or Q4, and usually Q3 is kind of maybe a little bit better than Q2, but Q4 is usually at least 20 airplanes above the prior quarters, which would suggest that deliveries should get back more to like 180 or 190, So I'm just curious as to.
Since my math is wrong.
Right.
George I would say that if you look at what we're trying to do and I kind of referred to this earlier, we're trying to get to a much more.
When you are.
And your delivery flow. So when you look at again, considering the demand environment.
We're able to flow this thing and a lot.
Smoother fashion and the order book the backlog supports that so that we don't have.
And the this extreme spike when you get into fourth quarter, which has been delivered by our driven historically by later sales in the year. So I think.
When you look at the order book, what's happening and user getting a more.
Linear operation and Youre getting a lot more backlog and longer lead time on aircraft and that lets us be.
A lot more linear in terms of our deliveries through the course of the year.
Okay, So you're obviously not expecting that big bounce and.
And the fourth quarter likely traditionally seen.
No look I think it's always a little bit stronger and the rest of the year, but nowhere near as non linear as you've seen for the last day.
Okay.
And given and Scott given the backlog that you see and how do deliveries next year get above the 2000.
And 19 level.
We're probably not quite ready to guide.
And next year, but its certainly.
Regarding the pillar, we are trying to aim to get that back into that 2000.
19 range.
Plus or minus a few aircraft will will probably give that guidance in January.
And could you tell us what.
What percentage of the orders this quarter, where net jets or other fleet providers.
No, we don't break that down Georgia.
Okay, I figured I'd try thanks.
It's a good try.
It was really close to giving it to you by serial number but.
Yes.
Okay. Thanks.
Alright.
Yes.
Thank you. Our next question comes from the line of Cai von rumor with Cowen. Please go ahead.
Yes, Thanks, a lot and good results guys.
And so could you comment a little bit about pricing both bell.
At deviation.
And you know kind of if you get the good orders and better pricing I mean, I assume that would start to show up more and the next couple of quarters.
And.
Oh, well, yeah, I mean, you'll you'll see it and the Q.
And that.
And you look at <unk>, particularly.
Solid pricing, probably 11 million net.
Net of inflation, so again I think the pricing environment is certainly.
Stronger than it has been and.
And we will continue to press on that.
And Theres no doubt, we feel like the margins and this.
And we need to be to be better and.
Volume and productivity and efficiency are all part of it but prices has to be part of that as well so.
And we don't usually get into it and you kind of price discussion around bell. So I don't think we need to do that but I would suffice to say that we're pleased with the commercial.
Side of the business the order activity much like what we've.
Business is about on the on the Textron aviation side of things is strong.
Got it and so I was a little surprised by the vigor of the margins and bell given that most of.
And the volume came from commercial where the margins tend to be lower and the R&D was still strong.
And talking to some color and the margin is going to be level or as we go on.
With the R&D for Fireeye and Florida.
Could there be more margin pressure.
Alright, and we did put obviously the pressures of the our increased R&D spending and the field programs.
<unk>.
Can you give us and I think we're.
And we're pretty comfortable that we're on track to hit that guy even with those R&D pressures.
Excellent. Thank you very much sure.
Thank you. Our next question comes from the line of Christine.
<unk> with Morgan Stanley.
Our guidance.
Hi, Good morning, everyone. Good morning, Frank.
Scott.
And.
Is there a net 60 month backlog window right now if we continue to see strong order activity can be seen and bring forward some of this.
Please go ahead in 2021 and it sounds great production.
The lead times of the aircraft make it difficult to have much movement. I mean, you can always do and aircraft or 2 depending on what that <unk>.
And demand looks like but.
Inside of 6 months, it's pretty hard.
And to adjust that.
Just given the long cycle nature of particularly some of our supplier components.
And so if we see the quarter activity, let's say book to Bill strong through the rest of the year. That's really more of a 2022 story then yes. That's correct yeah, we would incorporate that production.
Ramp and what would end up being 2000.
Volume deliveries for sure.
Great and then also on aftermarket.
And we're seeing strong visit utilization also we see that with takeoff and landings and a 12 year high.
Much of a pricing upside do you have and aftermarket and how do we think about the margin differential between.
Aftermarket and new aircraft deliveries and aviation.
Well, we don't break out those margins I mean, but it's the fact that we're seeing increased demand on the aftermarket side in general that tends to be good margin.
Business for us and so it's it's generally.
Good mix, but I don't think there is a.
Sequential a real material.
Change and what that's doing for the business, it's highly dependent on a as you said that we're seeing.
At least and modern time record levels of utilization via takeoff and landing cycles average daily utilization and Thats going to continue to drive aftermarket growth, which is which is certainly good for the overall mix of the margin and the business.
Thank you.
Okay.
Okay.
And I believe thats, all the questions and the queue at this time.
Yes that is correct.
Okay.
Okay could you announce the replay.
Number.
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Yeah.
Yeah.
Yeah.