Q3 2022 Textron Inc Earnings Call
Once fourth maritime site services that are expected to begin in 2023.
Moving to industrial we saw higher revenues in the quarter driven by higher volume at both <unk> and specialized vehicles and favorable pricing principally especially vehicles.
<unk> revenues were higher in the quarter as compared to the prior year, we continue to experience order disruptions related to the global auto OEM supply chain shortages.
Moving to aviation, we're seeing increased order activity for our training aircraft like the alpha trainer.
Which is the low cost pilot development platform in the future. We will look to expand the trading option to include various electro as we work to achieve and FAA.
Also last week at <unk>, we unveiled our new Nexus EV toll model aircraft RF data design reflects our ongoing investment in the underlying research and development supporting Textron's long term strategy to offer a family of sustainable aircraft for urban Air Mobility General aviation and cargo and special mission roles.
To wrap up we continue to see strong demand in our end markets and our teams are executing well in a challenging environment.
With that 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 of $1 2 billion were down $14 million from the third quarter of 2021, largely due to lower citation jet and pre owned volume, partially offset by favorable pricing and.
And higher aftermarket volume.
Segment profit was $139 million in the third quarter up $41 million from a year ago, largely due to favorable pricing net of inflation of $31 million.
Backlog in the segment ended the quarter at $6 4 billion.
Moving to Bell revenues were $754 million down $15 million from last year due to lower military revenues of 120 $112 million, primarily in the <unk> program due to lower aircraft and spares volume offset by higher commercial revenues of $97 million.
Segment profit of $85 million was down $20 million from last year's third quarter, primarily reflecting lower volume and mix, partially offset by favorable pricing net of inflation backlog in the segment ended the quarter at $4 9 billion.
At Textron systems revenues were $292 million down $7 million from last year's third quarter segment profit of $37 million was down $8 million from a year ago, primarily due to lower volume and mix backlog in the segment ended the quarter at $2 billion.
Industrial revenues were $849 million up $119 million from last year's third quarter, primarily due to higher volume and mix of $95 million and a $58 million favorable impact from pricing principally a specialized vehicles, partially offset by an unfavorable impact of $34 million from foreign exchange rate fluctuations.
Segment profit of $39 million was up $16 million from the third quarter of 2021, primarily due to higher volume and mix.
Textron Aviation segment revenues were $5 million and segment loss was $8 million in the quarter, which reflected the operating results of purposeful and costs for initiatives related to the development of sustainable Aviation solutions.
Finance segment revenues were $11 million and profit was $7 million.
Moving below segment profit corporate expenses were $14 million and net interest expense was $21 million.
Our manufacturing cash flow before pension contributions was $292 million in the quarter up $21 million from last year's third quarter year to date manufacturing cash flow before pension contributions totaled $810 million.
In the quarter, we repurchased approximately three 1 million shares returning $200 million in cash to shareholders year to date share repurchases totaled $639 million.
To wrap up we now expect our full year capital expenditures will be about $375 million and the full year tax rate to be about 16% for the full year, we're narrowing our earnings per share guidance to a range of $3 90 to $4 per share also we are increasing our full year manufacturing cash flow before pension contribution guidance.
<unk> to be in a range of $1 1 billion to $1 2 billion up $300 million from our prior outlook that concludes our prepared remarks. So Brad we can open the line for questions.
Of course, and our first question today comes from the line of Robert Stallard with vertical resources. Please go ahead.
Thanks, so much good morning, good morning.
Couple of questions from me, maybe my numbers are wrong, but it looks like revenues in <unk>.
Aviation and systems.
We are a bit lower than what we'd anticipated third quarter. I was wondering if you could perhaps go into a bit more detail.
<unk> in the quarter it was supply chain issues and whether this has pushed some deliveries to the right.
Yes, Robert I think thats safe to say.
We've been ramping up our production volumes through the course of the year.
Continue to do that but we have been hit by a number of supply chain challenges that have resulted in aircraft pushing out.
To the right and our guys are managing through that.
We will continue to work hard to make deliveries and we will continue to work on that ramp as we go into 2023 as well. So again, okay. So you had some very strong demand environment aftermarket is also very strong driven by high utilization, but for sure we're continuing to see.
Some difficulties around just getting parts labor ramp is I'd say picking up and doing reasonably well, but we've had some critical part index.
So does this impact your.
Division by Division guidance expectations for the year.
Well as we've said before on the last call. Robert I think we expect aviation probably is going to come in about $300 million below what we originally guided I think we're still on track to.
To do that.
I think we'll still make strong margin performance as the team has executed well as I said, it's a tough market but.
We're sort of a tough situation, but theyre executing very well so I think we will be.
Solid on the margin side, but a little bit light on the on the top line I think it systems. You also mentioned because this was a pretty closely.
<unk>, we still had a little bit of impact on that year over year from Afghanistan, but I think as we get into the fourth quarter here Youll start to see some.
Slight growth in that business and obviously, we expect that to continue into 2023.
Okay, and then just a technical one for Frank.
On the corporate and other big decline year on year, what sort of run rate should we expect on that line going forward.
Yes, I think we should probably think about $110 million or so for the year.
A higher level in the fourth quarter that we've been running at some of that depends obviously on share price, but in that zone.
Okay. That's great. Thank you very much.
Thank you.
And our next question comes from the line of David Strauss with Barclays. Please go ahead.
Thanks, Good morning, guys.
Scott could you maybe touch on your your manufacturing footprint in Europe , how you feel about things there from a from kind of an energy perspective, and also how we should think about obviously you in the quarter you had a pretty big FX impact there, how we should think about the FX.
Impact given the euro dollar parity at the moment.
Yes, the FX has been obviously quite a drag primarily in our in our <unk>.
<unk> business.
Obviously, we expect that to continue but we will manage our way through that I think on the factory front most of the impacts we've seen in that footprint in Europe had been driven really by auto OEM issues around hitting their volumes. It hasnt been energy related at this point.
Most of what I'm reading here lately is actually the energy situation seems to be a bit better than they expected heading into the winter. So we haven't had any indications yet that anyone's going to back off on their auto.
Although manufacturing based on that energy, it's really more of these other supply chain issues that theyre continuing to.
To see impacted and David.
So kind of by IHS data.
In terms of how we think about forecasting volumes going forward. So clearly the year has been.
Disappointing in terms of what was originally thought the volumes be achieved but right now it's looking like IHS is probably <unk>.
Forecasting.
Sort of a mid to high single digit growth.
Next year on top of some growth we saw this year so.
That's kind of how we.
Think about the volumes in the business, including the European footprint.
Got it thanks and.
Scott I guess your latest update on Florida, and the timing you're expecting now for a decision and what kind of incremental spending are you looking at for the rest of the year to kind of continue to carry on your effort. Thanks.
Sure. So what's the latest we're hearing is it's probably a November timeframe, obviously, we continue to work with the cusp.
Customer and we've got to make sure we've been working on this as you guys know for a very long time, we're not going to do anything thats other than supportive and doing the right thing for the program.
Making sure we keep the team together and keep making forward progress obviously, we still feel good about the program.
<unk>.
There's obviously still some uncertainty around this would be I mean, we don't know what exact date, but.
We're doing the right thing by the programs work by the people and while there is some uncertainty I would say that we're pretty comfortable that we've incorporated any impacts over the total year from where we were on our plan.
In our guidance. So I think that we're comfortable that we will lend inside that guidance.
Despite the impact you've seen on the Florida law.
Yes.
Thanks, very much sure.
Yes.
And our next question comes from the line of Sheila <unk> with Jefferies. Please go ahead.
Good morning, guys good morning.
Just a follow up on the last point, Scott how do you think about zelle without of Lora.
Sort of a scenario look like the bell.
Laura or potentially Barra and.
Maybe can you remind us of the R&D investment impacts by Florida.
2000 and terminal.
So I don't think about bell without Florida.
Hi.
Great.
Because I think we're in a good place we will look for for.
<unk> of our product stand and just kind of worked through the the process. Obviously the army is going through a very very rigorous process here. So, we'll we'll bear with him and let this thing play out but.
We're pretty bullish on that program.
I'll leave it at that I suppose.
You don't want 2022.
The R&D is actually been down a little bit because we've had more of the crusher activity both on the Florida program and the bar program.
So even with some of the impacts that we've seen on some of the delays.
Sure.
We'll be fine there, we're working our way through it.
Our program is going to continue to extend.
And like I say hopefully here.
Third all the years, we've been working on this thing for delays.
For the short period of time so.
Great that's helpful and then.
Think about zelle without Florida, but.
Yes.
When we look at year to date deliveries are light you mentioned supply chain, how long does that linger and how do we think about jet deliveries by 'twenty two are intertwined.
Does it linger until 'twenty three.
Sure look it's a good question I think.
The way, we're starting to lay out the year as you know we've been planning on ramping production all through the year, we've been achieving that I mean, we have been increasing the number of hours and.
The labor and the activity in the factory, we're clearly not going to get to the number just that we were originally hoping to based on some of these delays.
We're going to keep that ramping activity going through 2023. So when you look at the incremental volumes that we had in 2022.
Really to guide 23, yet, but it is not unreasonable expected we would see a similar increase in volumes in 2023 from what we saw from the 'twenty one to 'twenty two time frame.
Great. Thank you.
Sure.
And our next question comes from the line of Seth Sigman with J P. Morgan. Please go ahead.
Hey, good morning, everybody.
Yeah.
I guess just to follow up on that question Scott when you think about.
The strong backlog that you've been able to build here.
And you think about where deliveries might ultimately go I mean, I assume the aim would be to be back to kind of the 200 plus level.
Media in 2023.
Kind of the level that had been anticipated for 2022 before the the supply chain issues.
And then when you think about moving.
Moving higher from there.
Would it make more sense to kind of focus on keeping that backlog.
Expanding margins even further from this low double digit range.
And having it.
More steady delivery pace.
As we head toward toward mid decade.
Well first of all Seth I think youre thoughts on volume here in the near term are correct.
Obviously, we'd like to have had more.
In 'twenty two but.
Probably reasonable to think that what we have.
Hope to get in 'twenty, two we'll be there by the end of 'twenty three so we should back.
Back to that kind of 200 ish number.
In the 'twenty three time frame.
And that look we'll continue to watch demand in the marketplace continues to be strong as long as we see that kind of growing backlog.
In a strong environment and we will continue that ramp, but it's going to be.
A slow steady ramp right I mean, we certainly.
And we think it's better for you I think we've talked about it's better for our company is better for our customers, it's better for the whole market to be operating with better visibility around the backlog that's out there in that.
18 months kind of timeframe so.
Right now the demand continues to be very robust, we're seeing a lot of order activity as it's out in that.
18, plus sort of timeline and so we'll match production as we tend to.
To meet that if the market starts to ease back or slow down and obviously, we can taper off on the ramp, but I certainly don't see that being the case going through 2023.
Considering where the backlog is and where the demand environment. So.
Alright, okay great.
Just to follow up very strong cash this.
This year.
And when you think about next year.
Okay.
Other than what we might assume on the on the P&L.
Are there any.
Anything you would note about cash flow either headwinds or tailwind heading into 'twenty three.
So I think no.
Not really we've obviously we've had good working capital management again this year just like last year, we certainly benefited again from strong customer activity in deposits and so.
But there's nothing from a kind of working capital or other cash impacts that are.
That are kind of out of line with where we've been.
Okay, great. Thanks very much.
And our next question comes from the line of Pete Skibinski with Alembic Global. Please go ahead.
Hey, good morning, guys.
Yeah.
Hey, Scott just wanted to beat a dead horse a little bit on aviation just.
Because even at a little bit of a lower guidance number there it still implies a pretty good hockey stick in the fourth quarter.
I'm, just wondering kind of on the risk assessment fraud.
Do you have the engines in house already that you need.
And the parts and the labor trained up.
Or is there still some risk to that number do you think.
Even the ramp.
Well look I would say, there's always some risk to the number right, but I think we're all.
Obviously, you guys are working the heck out of US every day, they're tracking all of the critical components. So I think kind of that number I gave you guys were probably a few hundred million dollars under our original guide is still holding is there some risk to it yes.
Challenges is that we.
You get supplier issues that pop up every day I think we're in good shape in terms of labor and the things we can control.
Pops up we get all over it.
I think we've got a.
A pretty good shot at getting to the number that we that we told you.
If we miss something that would be a few aircraft around the particular part that pops up between.
Here and there. So you guys are working on it every day.
I think it's a good guide.
There is some risk in the environment, we live in shirt, but.
I think we are.
Our folks are all over it.
Okay No I appreciate it and just one follow up on the same segment kind of post MBIA. How are you guys feeling about kind of the health of your of your customer base in aviation, how the conversations go and obviously I'm sure the macro backdrop.
Part of the conversations down there I'm, just wondering kind of what your assessment is.
So very positive I think.
We're continuing to see some new people coming into the market. We're seeing some of our historical corporate customers that are doing fleet refreshes theyre, putting aircraft orders in which obviously are.
Deliveries are ways output.
They're refreshing their fleets obviously the.
Level of flight activity in the industry continues to have kind of charter and fractional customers.
Motivated to bring additional assets online so I would say all in all it's really strong Pete and I can also put against the backdrop of <unk>.
Hardly a bubble right I mean, we're talking about.
Jet delivery volumes that are.
Kind of back even still maybe below historical norms.
I don't think there is this.
Euphoric bubble burst, but people are.
Our refreshing fleets are in investing in their in their aircrafts.
We don't we don't see this being pulling right. It's just the market is strong.
Following a strong which is a.
Critical I was going to say your exposure to Europe is still is still fairly limited like it used to be I think it was only I don't know 20% 25% of your citation volume is that that's still the case.
Yes, I mean look we're seeing kind of a norm relatively normal from what we've seen historically jets are probably 80%.
Roughly U S 20% international.
The King Air Turboprops lines are typically the other way around and Thats what were seeing were seeing maybe like 40% U S 6% International.
So in terms of the good news here is that the demand across pretty much all the models are strong and we're seeing <unk>.
Mix in terms of international versus domestic.
Fleet operations that are kind of what we've normally seen historically.
Okay, great. Thank you.
And our next question comes from the line of Noah <unk> with Goldman Sachs. Please go ahead.
Hey, good morning, everyone.
No.
Yes.
Sorry, Scott So what are you planning for 2022 units.
Oh, no we never give a specific number I.
From the top line Youre looking at probably about $300 million off of our original guide.
Virtually all of that is all of that is jet deliveries really so.
Okay. Okay. So we can back into that and then you are saying do I have it correctly youre, saying.
Think about that growth rate in units, but that employers were 22 repeating in 'twenty three approximately yes, that's good.
Okay, and then how much visibility do you have beyond 'twenty three.
Well pretty good visibility I mean, its most of the aircrafts I mean, we have.
Larger aircraft frankly, we're out in 2025 right now.
Sure.
Although the mix of lighter.
Mid size or certainly.
323, well into 2004 towards the end of 2004. So this backlog is obviously very helpful to us in terms of having the kind of visibility we need to.
To run the operations.
Obviously, we'd like to do them, a little more efficiently without some of the supply chain challenges, but I think we're we're in a pretty good place best we've had in a very long time, obviously in terms of the visibility of the business.
Okay.
So I guess, that's all positive.
Really kind of a major structural change in the business.
But where the bookings are running.
They hang around in Brazil, and that they are at now.
<unk> to run the bookings pretty far in excess of the revenue.
And just which we build the backlog even further so.
When do we when do you get to the point.
That's going too far and customers are going elsewhere or have to wait too long or is it just with the macro level supply chain bottlenecks.
But he is in the same boat.
And every OEM kind of has to do the same thing.
Okay.
I think I think you just said it everybody's in the same boat right I mean so.
I don't know where that equilibrium point is right when it when it gets out too far but this is not there's not like some other supplier OEM that says hey, I've got aircraft sitting around so I think this is an industry dynamic as opposed to just being unique.
Do you need to us I mean, obviously I feel great about how our guys performed from a profitability standpoint.
I mean look this businesses has been fabulous condition right.
Okay, great backlog good visibility, it's generating very strong margins that generated very strong cash flow.
Don't think Theres a lot not alright.
Every day is hard with these supply chain issues and stuff like that but our guys are are fighting through it every day.
I'm not sure we'll be apologetic for these kind of margins in this kind of cash and stock.
Backlog in the guys I'm not sure what else I would ask them to do there.
They are driving it hard everyday and performing really really well.
Great.
Lastly on price in the business.
Are you actually now increasing price more in terms of a year over year rate of change than you were 12 to 18 months ago when the market first strengthen I get the sense.
The price increases early in the strong demand environment.
That big because you wanted to build the backlog and now that you've done so.
Can actually accelerate the pricing is that a fair assessment.
I guess, yes.
I'm not sure I would do it.
I'll do the first derivative on the pricing everyday but look I think for sure. This market has changed over the last 18 months or so as it's gotten stronger in competitive market, obviously, so pricing and what competition is doing matters, but I think everybody I mean, the whole industry has seen.
Stronger pricing. So again, we look at this kind of on a model by model basis, and whats going on with the competitive environment.
It's not.
It's not as I'm not sure if you've just simple answer on the on the slope of the curve, but it's.
Strong and I would say we continue to obviously very much focused on making sure we're getting price.
<unk> inflation, we think about this a lot when you start thinking about.
Obviously, we're we're picking contracts on aircraft that are in 'twenty, three and 'twenty four 'twenty.
<unk> 25, and so you've got to make appropriate assumptions in terms of inflation between here and there and it makes your pricing accordingly, and I think that we are.
Yeah.
Okay. Thank you.
And our next question comes from the line of Peter Arment with Baird. Please go ahead.
Yes, Thanks, Good morning, Scott Frank Good morning.
It's got you've been talking about supply chain disruptions, obviously all year.
A lot of kind of experience and engines.
Engines for you still in aviation the biggest.
Shortage or there are other components like chips or the other.
Things that you would call out and just maybe any color you could provide on the engine shortfalls.
Pier It isn't I mean look engines are strained and as everybody knows there's one particular model that's important to us that have had an issue that kind of stems back to this.
Washington Ukrainian.
Sanctions, but I think thats in recovery mode. So we feel good about that.
Back.
But.
I think the frustrating part for our folks Peter is it just sort of.
Everywhere right so happens it's I'd.
I'd say that overall, our avionic suppliers have done a really nice job.
Garment is critical to us they've they've been able to meet deliveries.
So they're managing the way that that would be the area probably most highly concentrated in terms of semiconductor risks. So I think they've done a nice job.
But it's this is the problem in this business right every part is important.
It's.
There are certainly some things like the engine was an issue I think that will resolve itself here in the next.
Six nine months or so, but this just things pop up every week or so.
Where we live in and our guys are kind of used to it. They just keep working at it and they go manage each thing that pops up.
Okay. That's helpful color and just Frank just quickly could you tell us what the aftermarket was up in the quarter and any comments on pricing.
Yes aftermarket remains strong it was it was up 18% year over year of 37% of total volume for the quarter. So really kind of continued as Scott said to see strong flying activity and therefore strong volumes in the business.
Terrific. Thanks.
Okay.
And our next question comes from the line of Cai von <unk> with Cowen. Please go ahead.
Yes, thanks, so much so.
How much of the goodness in cash flow that $300 million came.
It came from.
Deposits on aircraft and thinking about next year you've.
<unk> had such a big crusher from that source. This year, how should we think about cash flow and book to Bill It goes back to about one point.
Well, we're not going to breakout separately the cash items offsetting the yes, the deposit activity as we have seen a little bit of inventory growth as we've had these supply chain issues and we've seen some kind of slowdown in our ability to deliver so there has been some offset but kind of with a book to bill.
<unk>, one and strong commercial aviation strong commercial demand at Bell.
Benefited from that frankly, we benefited also from strong cash performance on the military programs at Bell. So it hasn't been all that we've talked in the past about kind of generally the business.
Over time, what's to be around one to one cash flow to profitability right. So so we certainly have benefited this year and last year from strong cash performance relative to that and.
It will depend on lots of factors.
When we get to a slower.
Kind of booking rate, but it will migrate back towards that one to one as we do that.
Yes.
I would emphasize that we're conscious of this right.
<unk>.
You enjoy a benefit here with strong commercial deposits at aviation.
Some of you also on the Bell commercial business, which has also seen very strong demand here.
But you don't change anything else should do in terms of managing the business and making sure that we're fundamentally managing working capital and.
And Capex and all those things so.
For sure Youre getting a benefit of this but I think we're delivering well over one to one and thats because the businesses are doing a good job of managing their.
Our cash and enjoying the benefits of customer deposit activity on top of that so that's.
The nature of where we are right now.
Terrific and given this extra cash goodness.
How are you thinking about deploying the cash.
Well same as we've talked about we as we said we've been an active re purchaser of stock we bought about $640 million year to date, that's up from last year's year to date number last year, we ended up kind of low $900 million of share repurchase and so.
We would expect similar types of rates.
Kind of for us for the year and at.
At least as we sit here today on a go forward basis, we've been we've been buying back about 5% of our stock on an annual basis and so.
That type of rate is a good rate to be thinking about.
Thank you very much.
Okay.
And our next question comes from the line of Rob Spingarn with Melius Research. Please go ahead.
Hi, good morning.
Wanted to turn to a couple of the other segments for a moment, but in the past you've talked about systems being a low double digit margin business, but it's been outperforming that last year and this year. So can we talk a little bit about the trend there or is it going to stay more in the mid teens.
Okay.
Yes.
A good question I mean, yes, we're not quite ready to guide for next year, but I think that that business.
Performs really well I mean, it's it's.
It's always has some components of it.
For instance, I think Youll still see this everywhere right, where there is fixed price government contracts at Yahoo, which you can't reprice those so there'll be some pressure on inflation on that front.
But there's also a constant flow of new programs and I think overall strong execution, which has helped us deliver.
Strong double digit margins that I would expect that to continue.
Okay, and Scott sticking with these other businesses industrial was clearly strong and I think you've called that specialty vehicles could we talk about the forward trends there.
Sure I think that the specialized vehicle business is doing well there.
Obviously, there were some segments of that business, it's a real hits through the.
The COVID-19 periods around support equipment and things like that that are seeing robust order activity come back into those markets as well.
Also achieving strong pricing.
Our golf and.
Specialized ptv's and whatnot is very strong I think we have a great product lineup and that team has done a nice job.
Obviously in that business, we also see.
Supply chain challenges all the time, but the teams work through it and I think we will continue to see that on a steady improvement.
And you haven't really seen any evidence of this recessionary fears hitting that that business I would imagine that business is somewhat sensitive.
Some some are more sensitive than others, so, but absolutely I think particularly when you look at the power sports World, We keep a very close eye on that.
Inventory levels are still very much lower than they typically are in those channels because of supply chain.
Challenges. So I think you need to get those to a healthy level, but absolutely. We watch very very carefully because I think that that particular piece, which is a relatively small piece for us obviously.
Is he is very recession sensitive, but I think when you look at a lot of the municipal stuff.
Ground support equipment golf look these things have historically been pretty resilient in terms of how they perform.
And in a recessionary period, and I think we're well positioned in those in those markets, which are a much larger piece of the business for us.
Of course, thank you very much.
Okay.
And our next question comes from the line of George Shapiro with Shapiro Research. Please go ahead.
Yes good.
Good morning, Scott on the on the supply chain issues. It seems like it's affecting your business more than say like Gulfstream at the high end is there any differentiation you can.
Say as to why.
I Havent George.
I have a list of all the parts we are missing right now like a call Mark I guess to see if he has some extra ones but.
[laughter].
No I don't I mean.
Look I think this is the world we live in right. We have the challenges I think our guys have done a nice job through this I think what we will have a strong fourth quarter its not without some risk on our part popping up here and there but it's.
I don't know how to explain the difference between the commentary with the.
Some of the high end stuff versus where we are but.
<unk>.
So.
It's something we're going to manage our way through it will be fine.
Okay and.
Frank can you.
Provide some comments on what you see for pension next year, given the big changes, we're seeing in Dr and asset returns.
Yes, we don't expect it to be a headwind.
Obviously, we've got a lot of work to do in the fourth quarter and calculating the numbers and everything but it should not be a headwind for us.
Okay and then.
One last one Scott you have been saying that the delay in Florida has been.
Our cost to you in terms of carrying all the people can you quantify at all how much of that cost it was to bell in the quarter because the margin at balance still look pretty good this quarter.
Yeah, well look bill had a very strong quarter on the commercial side and I think.
Continue to see strong commercial business and we've talked a lot about aviation. Obviously, you guys asked but the commercial helicopter business is also seeing very robust demand.
And those guys are performing well.
Obviously offsetting the.
Historical military programs, which continue to ramp down a little bit, but look I think on the Florida, Georgia.
It's.
Obviously it was our original guide that's why we're we're certainly seeing.
Lower absorption, we expect it to be kind of under contract at.
At this stage of the game, but.
It's something we're managing our way through and like I said, I think we can quantify or wouldn't quantify exactly the number but.
Suffice to say that we can live within our guidance based on and I think where we are and our expectations for the four announcement towards the latter part of this year.
Okay. Thanks very much.
Hey, good morning.
Yes.
Yes.
You mentioned pretty strong.
And they're pretty strong orders and incremental interest you're seeing from corporate buyers.
Book to Bill looks pretty solid at one five times.
From your conversations with your customers and potential customers.
The key emphasis or the incremental order is it replacement capacity increase or new customers. The biz jet and how sensitive are they from the financing environment.
Well, it's a bit of all of the above Christine hanneman. So I mean, obviously, we have some corporate customers out there that in the quarter.
Placed orders because theyre going to replenish.
I'll turn over their fleets of aircraft that is.
I know the corporate.
We're used to sort of looking out in that.
18 month, two year or so timeframe as they plan their fleet refreshes so.
The lead times that are there right now arent.
You know something that they're not accustomed to and that kind of fits in their plan. So we are seeing that activity. We are still seeing some.
Some new activity and again, we continue to see a lot of there are certainly new people are coming in more than normal that are buying a whole aircraft, but we also see just the demand of new people coming into the market that are using either a fractional or.
Charter operations and so we continue to see strong demand from those customers as well. So it really is across the board, which is I think.
Again very healthy for the.
For the industry.
Thank you for the color and maybe put some yes.
Scott in the past.
This is rob from exposure, albeit only report on the past few years.
No longer production will have limited the European owner of your stock.
Now that you're completely out of the sensor fuzed weapon.
And it looks like you're completely out of support to all we have the only electric aircraft certified per passenger.
Thanks.
March Rob Damron and ESG data.
Are you seeing any recognition of the portfolio.
And are you seeing incremental interest from European.
Asset manager.
And vessel on how do you think of that evolution.
Well, it's a good trust Kristina and I don't know specifically those funds that have historically not wanted to invest in the company.
Large part because of the SFW exposure and as you know that doesn't exist anymore. So I think thats not.
Not an issue on the look on the overall ESG front without a doubt there youre going to see.
Certain funds out there that are going to be more oriented towards companies. They think are investing in the future in terms of particularly electric transportation and I think we have a very good story I mean, obviously aviation is an area we're investing.
And frankly, particularly as a result of a pivotal deal are a leader in that field and were also very strong in electric side in terms of our vehicle businesses right.
Pioneered over the years, a lot of that electrification and frankly thats spreading out across.
Business in a big way, including ground support equipment and turf care equipment.
That trend is going to continue to happen so I can't speak specifically to the European <unk>.
But I absolutely consciously obviously on our part we think we're on.
Gauging and strategies that will help make us more attractive to funds that have ESG criteria.
Great. Thank you Scott.
And our next question comes from the line of Ron Epstein with Bank of America. Please go ahead.
Hey, good morning, Rob.
There's been a ton of focus on Florida for obvious reasons, but could you walk through some of the opportunities.
<unk>, Florida.
And then the Navy is looking for some helicopters down the road as the Air Force.
You guys talked about it a bit.
At USA, but not everybody was there. So I was wondering if you could kind of walk through some of those other opportunities that are beyond Clara.
Sure absolutely Ron look I mean, you're right everybody asked a lot about Florida, we're obviously very very interested in the outcome of a floor but.
That was hardly a one trick pony right I mean, there's a lot of other stuff going on.
I think when you look to think about the maritime strike an orally active.
AOA activity going on right now in the.
In the department of the Navy thinking about what they do with their future of aircraft replacement programs.
Obviously, we think that our offering which isn't that tilt rotor.
Space is very attractive to them.
These are services that obviously today operate V 20, twos and they need aircrafts and assets that can keep up with V 22. So it's.
We feel like the tilt rotor solution is.
Good answer in that space. These programs are relatively early on lets say theyre doing their analysis alternatives and that will lead to more.
Acquisition activity here.
In the next couple of two three years, so we're very close to those programs obviously.
You Air Force has been fairly public is talking about what they want to do for <unk>.
Frankly higher speed Vitol right, so even beyond the kinds of speeds that we see today.
'twenty two we're going to be 280 class of aircraft were highly engaged with.
With the Air force on those those sorts of program. So.
I think there is no doubt that.
What we're seeing with the army.
That's a huge opportunity to replace that sort of the Blackhawk class of aircraft that you will see similar programs in the Navy Marine Corps.
And the Air force in one form or fashion and archives or.
Haile.
Engaged in those program opportunities.
Got it got it and then maybe shifting gears back to assess that.
Bigger picture question. When you look at the portfolio assessment airplanes is there any place that you think you need to do a refresh or not.
Are you thinking about new product development given that.
The businesses.
Healthier place than it was just a couple of years ago.
Yes look I think we have a very robust set of refresh programs. We've launched a couple of these gen. Two gen. One mod programs, we have more of that in the works. We think it's really really critical to two.
Rolling those out on a fairly regular frequency. So we have a couple that are in the works right now that we haven't yet announced but obviously the work is going on.
On the clean sheet front, we've been Denali program, which is still under development. So.
I think if you look at both jet and turboprop theres a robust level of activity I mean, all of our product lineup right now I think the longitude latitude obviously you've been.
Homeruns in the market the Sky Courier is just getting.
Kind of getting the right in production with great demand I think that's going to be a homerun products Denali will similarly, I think be a great product for us.
The line is be sprinkled with.
A couple of these.
Refresh programs here in the coming years.
Got it thank you.
Sure.
Okay.
And our next question comes from the line of David Strauss with Barclays. Please go ahead.
Thanks for taking the follow up.
Just wanted to ask about the D. H, one and how that how that kind of rolls off from here and what sort of headwind, we should be thinking about to bell.
As that program runs off.
Sure location, one is about to wrap up.
Graham a record in terms of the U S sales, we have some fms programs that are our cylinder production, but those clearly we will be ramping down here over the next couple of years.
Service programs.
Continue to run.
But no.
No question, David that program will we will continue to ramp down here in the next couple of years.
And Scott could you quantify how much in revenue each one currently accounts for.
No we don't breakout the individual programs David but.
Look obviously our plan is largely based on the fact that youll see a ramp up in and flora program activity that will.
Largely to replace what we're seeing in the and the ramp down on the H One program.
Got it thank you.
Okay, Brad that completes the call.
Okay.
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