Q4 2023 Textron Inc Earnings Call

January 24, 2024

Yeah.

Thank you for standing by welcome to the Textron fourth quarter 2023 earnings call. At this time all participants are in a listen only mode. Later, we'll conduct a question and answer session. If you would like to ask a question. Please press. One then zero on your phone keypad should you require assistance. Please.

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Later, we will conduct a question and answer session

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Press Star then zero. This conference is being recorded for digital replay will be available. After 10, a M. Eastern time today through January 24th 2025 at Midnight you May access the replay service by dialing 866.

Speaker Change: Compton.

Speaker Change: This has been a production of WGBH.

Speaker Change: will be available after the break.

Speaker Change: January 24, 2025 at KELOLAND dot com.

Speaker Change: and many more.

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Speaker Change: 107-1041

He wrote 71041 and enter the access code 4065507, I would now like to turn the conference over to David Rosenberg, Vice President of Investor Relations. Please go ahead.

Speaker Change: Thank you for watching!

Speaker Change: 5-5

Speaker Change: I would now like to turn the conference over to David Rosenberg, Vice President of Investment

David Rosenberg: Go ahead.

David Rosenberg: Thanks Leah, and good morning everyone. Before we begin, I'd like to mention we will be discussing future estimates and expectations during our call today.

David Rosenberg: Thanks, Leah and good morning, everyone before we begin I'd like to mention we will be discussing future estimates and expectations during our call today.

David Rosenberg: These forward-looking statements are subject to various risk factors, which are detailed in our SEC filings and also in today's press release.

These forward looking statements are subject to various risk factors, which are detailed in our SEC filings and also in today's press release.

David Rosenberg: On the call today, we have Scott Donnelly, Textron's Chairman and CEO, and Frank Connor, our Chief Financial Officer.

David Rosenberg: On the call today, we have Scott Donnelly, Textron's, Chairman and CEO and Frank Connor, our Chief Financial Officer.

David Rosenberg: Our earnings call presentation can be found in the investor relations section of our website.

David Rosenberg: Our earnings call presentation can be found in the Investor Relations section of our website.

David Rosenberg: Revenues in the quarter were $3.9 billion, up $3.6 billion in last year's fourth quarter.

David Rosenberg: Revenues in the quarter were $3 9 billion up $3 6 billion in last year's fourth quarter.

David Rosenberg: Segment profit in the quarter was $384 million, up $78 million from the fourth quarter of 2022.

David Rosenberg: Segment profit in the quarter was 384 million up $78 million from the fourth quarter of 2022.

David Rosenberg: During this year's fourth quarter, adjusted income from continuing operations was $1.60 per share, compared to $1.23 per share in last year's fourth quarter.

David Rosenberg: During this year's fourth quarter adjusted income from continuing operations was $1 60 per share compared to $1 23 per share in last year's fourth quarter.

David Rosenberg: Manufacturing cash flow before pension contributions totaled $380 million in the quarter, up $12 million from last year's fourth quarter.

David Rosenberg: Manufacturing cash flow before pension contributions totaled $380 million in the quarter up $12 million from last year's fourth quarter for.

David Rosenberg: For the full year, revenues were $13.7 billion, up $814 million from last year.

David Rosenberg: For the full year revenues were $13 7 billion up $814 million from last year.

David Rosenberg: In 2023, segment profit was $1.3 billion, up $191 million from $22 billion.

David Rosenberg: In 2023 segment profit was $1 3 billion up $191 million from 'twenty to <unk>.

David Rosenberg: Adjusted income from continuing operations was $5.59 per share as compared to $4.45 per share in 22.

David Rosenberg: Adjusted income from continuing operations was $5 59 per share as compared to $4 45 per share in 'twenty two.

Speaker Change: Manufacturing cash flow before pension contributions was $931 million, down $247 million from 22. With that, I'll turn the call over to Scott. Thanks, David, and good morning, everyone.

Speaker Change: Manufacturing cash flow before pension contributions was $931 million down $247 million from 'twenty, two with that I will turn the call over to Scott, Thanks, David and good morning, everyone.

Scott C. Donnelly: Our business has closed out the year with another solid quarter with strong margin performance and cash generation.

Scott C. Donnelly: Our business is closed out the year with another solid quarter with strong margin performance and cash generation.

Scott C. Donnelly: Throughout the year, our teams work to mitigate supply chain challenges to deliver products to our customers.

Scott C. Donnelly: Throughout the year or teams worked to mitigate supply chain challenges to deliver products to our customers at aviation, while we entered the year with an expectation of a book to Bill of one to one solid order flow and customer demand across our product portfolio resulted in year end backlog of $7 2 billion, an increase of $782 million.

Scott C. Donnelly: At Aviation, while we entered the year with an expectation of a book-to-bill one-to-one, solid order flow and customer demand across our product portfolio resulted in year-end backlog of $7.2 billion and an increase of $782 million.

Scott C. Donnelly: Taxon Aviation Defense delivered 13 T-6 aircraft for the year, up 10 from a year ago.

Scott C. Donnelly: Aviation Defense delivered 13, two six aircrafts for the year ton from a year ago.

Scott C. Donnelly: During 2023, solid aircraft utilization within the Textron Aviation product portfolio resulted in a 6.5% growth in aftermarket revenue.

Scott C. Donnelly: During 2023 solid aircraft utilization within the Textron aviation product portfolio resulted in a six 5% growth in aftermarket revenues.

Scott C. Donnelly: At Bell, revenues in the quarter were up, driven by higher commercial and military revenues.

Scott C. Donnelly: Bell revenues in the quarter were up driven by higher commercial and military revenues.

Scott C. Donnelly: On the commercial side of Bell, we delivered 91 helicopters in the fourth quarter, up from 71 in last year's fourth quarter.

Scott C. Donnelly: On the commercial side of Bell, we delivered 91 helicopters in the fourth quarter up from 71 in last year's fourth quarter.

Scott C. Donnelly: For the full year, we delivered 171 helicopters in 2023, down from 179 in 2022.

Scott C. Donnelly: For the full year, we delivered 171 helicopters in 2023 down from $1 79 in 2022.

Scott C. Donnelly: The higher military revenues reflected the continued ramp on our flower program.

Scott C. Donnelly: Higher military revenues reflected the continued ramp on our Florida program.

Scott C. Donnelly: On the FAR program, Bell completed the installation of the ITEP engine on the 360 Invictus. The team continues to conduct integration activities and prepare the aircraft for initial ground runs in 2024.

Scott C. Donnelly: On the far program Bel completed the installation of the <unk> engine on the 360 Invictus. The team continues to conduct integration activities and prepare the aircraft for initial Ron runs in 2024.

Scott C. Donnelly: Moving to Textron Systems, revenue and margin were flat with last year's fourth quarter.

Scott C. Donnelly: Moving to Textron systems revenue and margin were flat with last year's fourth quarter.

Scott C. Donnelly: During the quarter, systems delivered the last detailed design and construction craft on the ship-to-shore connector program following its successful completion of acceptance trials.

Scott C. Donnelly: During the quarter systems delivered the west detailed design and construction craft on the ship to shore connector program. Following a successful completion of acceptance trials.

Scott C. Donnelly: Moving to industrial, we saw higher revenues in the quarter driven by higher volume at Caltechs and favorable pricing in specialized vehicles.

Scott C. Donnelly: Moving to industrial we saw higher revenues in the quarter, driven by higher volume at Caltech and favorable pricing and specialized vehicles.

Scott C. Donnelly: Moving to aviation, Pipstol delivered 135 aircraft during the year, up from 61 in 2022.

Scott C. Donnelly: In the aviation Pip still delivered 135 aircraft during the year up from 61 in 2022.

Scott C. Donnelly: Also at E-Aviation during the quarter, the pedestal of Ellis Electro was selected to participate for a trial period to explore operational and training uses for this all-electric aircraft as part of Agility Prime, the Air Force's vertical lift program.

Scott C. Donnelly: Also with the aviation during the quarter. The purpose real bolus electro was selected to participate for a trial period to explore operational and trading uses for this all electric aircraft as part of agility Prime Air Force's vertical lift program.

Scott C. Donnelly: Summary, in 2023, we had a strong year across all of our businesses.

Scott C. Donnelly: Summary, and 2023.

We had a strong year across all of our businesses.

Scott C. Donnelly: Continue to execute on our growth strategy of ongoing investments in new products and programs to drive organic growth and margin expansion.

Scott C. Donnelly: We continue to execute on our growth strategy of ongoing investments in new products and programs to drive organic growth and margin expansion.

Scott C. Donnelly: During the year aviation announced the new Cessna Citation ascend that E base and the Cessna Citation <unk> three Gen. Two <unk>.

Scott C. Donnelly: During the year, Aviation announced the new Cessna Citation Ascend at eBase and the Cessna Citation CJ-3 Gen 2 at NBAA.

Scott C. Donnelly: In May, aviation delivered the first passenger variant of the Cessna SkyCurrier to Lanai Airlines servicing the Hawaiian Islands. In the third quarter, aviation announced a new fleet agreement with NetJets for up to 1,500 aircraft over 15 years, including longitude, latitude, and the newly announced Ascend.

Scott C. Donnelly: And May aviation delivered the first passenger version of the <unk> Sky Courier Lanai Airlines servicing the Hawaiian Islands.

Scott C. Donnelly: Third quarter Aviation announced a new fleet agreement with net jets for up to 1500 aircrafts over 15 years, including longitude latitude and the newly announced ascend extending our 40 plus year relationship.

Scott C. Donnelly: Extending our 40-plus year relationship.

Scott C. Donnelly: In October, Aviation delivered the 100th Cessna Citation Launch Cessna Citation Launch.

Scott C. Donnelly: October aviation delivered the 100 system citation longitude.

Scott C. Donnelly: At Bell, we began work on the FLAR program in April. The team continues to increase activity on the program, ramping up engineering resources, contracting with key suppliers, and ordering long-lead materials.

Scott C. Donnelly: At Bell, we began work on the floor program in April the team continues to increase activity on the program ramping up engineering resources contracting with key suppliers and ordering long lead materials.

Scott C. Donnelly: At Textron Systems, we advance through the future tactical unmanned aircraft system competition and are now one of two remaining competitors down from the initial five.

Scott C. Donnelly: At Textron systems, we advanced with the future tactical unmanned aircraft system competition and are now one of two remaining competitors down from the initial thought.

Scott C. Donnelly: Systems also continued to win on land vehicle programs, advancing to the next phase of the Army's XM-30 program as part of Team Lynx, and was selected as one of four competitors to build RCV light prototypes for the Army.

Scott C. Donnelly: Systems also continued to win a land vehicle programs advancing to the next phase of the Army's 30 program as part of team links and was selected as one of four competitors to build RCV light prototypes for the army.

Scott C. Donnelly: With Textron Specialized Vehicles, we introduce the new Street Legal Easy-Go Liberty LSV, powered by our elite lithium-ion battery system.

Scott C. Donnelly: At Textron specialized vehicles, we introduced the new Street legal easy go Liberty OSV powered by our elite lithium ion battery system.

Scott C. Donnelly: Caltex in 2023, we announced the first pentatonic order from an automotive OEM for a thermoplastic composite underbody battery protection skid plate, establishing Caltex as a supplier to the expanding battery electric vehicle market.

Scott C. Donnelly: At <unk> in 2023, we announced the first pentatonic order from an automotive OEM for thermoplastic composite under body battery protection skid plate, establishing <unk> as a supplier to the expanding battery electric vehicle market.

Scott C. Donnelly: At E-Aviation during the year, we began system-level integration of the first NUVA prototype, our hybrid electric unmanned cargo VTOL aircraft, in preparation for first flight in 2024.

Scott C. Donnelly: The aviation during the year, we began system level integration of the boost newer prototype are harbored electric unmanned cargo VTOL aircrafts and preparation for first flight in 2024.

Scott C. Donnelly: As we closed out 2023, manufacturing performance was trending positively with improvements in labor productivity and supplier delivery.

Scott C. Donnelly: As we closed out 2023 manufacturing performance was trending positively with improvements in labor productivity on supplier deliveries.

Scott C. Donnelly: Looking to 2024 at Aviation, we're projecting growth driven by increased deliveries across all product lines and higher aftermarket volume.

Scott C. Donnelly: Into 2024 at aviation, we are projecting growth driven by increased deliveries across all product lines and higher aftermarket volume.

Scott C. Donnelly: At Bell, we're projecting revenue growth in 2024 on higher military revenues from the FLORA program and higher commercial revenues from increased delivery.

Scott C. Donnelly: At Bell, we're projecting revenue growth in 2024 on higher military revenues from the Florida program and higher commercial revenues from increased deliveries.

Scott C. Donnelly: Systems were expecting slightly higher revenue as new programs continue to ramp.

At systems, we're expecting slightly higher revenue as new programs continue to ramp at.

Scott C. Donnelly: At industrial, we're expecting flat revenues as growth in specialized vehicles is offset by lower than expected volume at Caltech.

Scott C. Donnelly: At industrial we're expecting flat revenues as growth in specialized vehicles is offset by lower than expected volume at Caltech.

Scott C. Donnelly: But the aviation we plan to continue investments in the development of technologies and products supporting sustainable flight solutions for unmanned cargo next generation electric trainers EV tall and general aviation.

Scott C. Donnelly: At eAviation, we plan to continue investments in the development of technologies and products supporting sustainable flight solutions for unmanned cargo, next-generation electric trainers, eVTOL, and general aviation.

Scott C. Donnelly: We also expect higher aircraft deliveries at PIVIS.

Scott C. Donnelly: We also expect higher aircraft deliveries of pivotal.

Scott C. Donnelly: This overall backdrop, we're projecting revenues of about $14.6 billion, up 7% from 2023.

Scott C. Donnelly: With this overall backdrop, we're projecting revenues of about $14 6 billion up 7% from 2023 protect.

Scott C. Donnelly: for Textron's 2024 fiscal year.

Scott C. Donnelly: For Textron's 2020 for fiscal year.

Scott C. Donnelly: Rejecting adjusted EPS in the range of $6.20 to $6.40.

Scott C. Donnelly: We're projecting adjusted EPS in the range of $6 20 to $6 40.

Scott C. Donnelly: Manufacturing cash flow before pension contributions is expected to be in the range of $900 million to $1 billion. 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.

Scott C. Donnelly: Manufacturing cash flow before pension contributions is expected to be in the range of $900 million to $1 billion with that I will turn the call over to Frank.

Frank T. Connor: Scott and good morning, everyone.

Frank T. Connor: To review how each of the segments contributed starting with Textron aviation.

Frank T. Connor: Revenues at Textron Aviation of $1.5 billion were down $58 million from the fourth quarter of 2022, reflecting lower volume and mix of $158 million, partially offset by higher pricing of $100 million. Segment profit was $193 million in the fourth quarter, up $23 million from a year ago, reflecting a favorable impact from pricing, net of inflation of $51 million, partially offset by lower volume and mix of $22 million.

Frank T. Connor: Revenues at Textron aviation of $1 5 billion were down $58 million from the fourth quarter of 2022, reflecting lower volume and mix of $158 million, partially offset by higher pricing of $100 million.

Frank T. Connor: Segment profit was $193 million in the fourth quarter up $23 million from a year ago.

Frank T. Connor: Reflecting a favorable impact from pricing net of inflation of $51 million, partially offset by lower volume and mix of $22 million backlog.

Frank T. Connor: Backlog in this segment, end of the quarter at 7.2%.

Frank T. Connor: Backlog in the segment ended the quarter at $7 2 billion.

Frank T. Connor: Moving to Bell, revenues were $1.1 billion, up $255 million from last year's fourth quarter, reflecting higher commercial revenues of $171 million, largely driven by increased deliveries, and higher military revenues of $84 million related to the FAR program.

Frank T. Connor: Moving to Bell revenues were $1 1 billion up $255 million from last year's fourth quarter.

Frank T. Connor: Selecting higher commercial revenues of $171 million, largely driven by increased deliveries and higher military revenues of $84 million related to the far program.

Frank T. Connor: Segment profit of $118 million.

Frank T. Connor: This is up 55 million from a year ago, primarily driven by higher volume and mix of 39 million.

Frank T. Connor: $55 million from a year ago, primarily driven by higher volume and mix of $39 million.

Frank T. Connor: Backlog in this segment, end of the quarter at 4.8%.

Frank T. Connor: Backlog in the segment ended the quarter at $4 8 billion.

Frank T. Connor: At Textron Systems, revenues were $314 million flat with last year's fourth quarter. Segment profit of $35 million was equal to last year's fourth quarter.

Frank T. Connor: At Textron systems revenues were $314 million flat with last year's fourth quarter.

Frank T. Connor: Net profit of $35 million was equal to last year's fourth quarter.

Frank T. Connor: Backlog in this segment, end of the quarter at $2 billion.

Frank T. Connor: Backlog in the segment ended the quarter $2 billion.

Frank T. Connor: Industrial revenues were $961 million, up $54 million from last year's fourth quarter, largely reflecting higher volume and mix at Caltechs and a favorable impact from pricing at Textron Specialized.

Frank T. Connor: Industrial revenues were $961 million up $54 million from last year's fourth quarter, largely reflecting higher volume and mix of <unk> and a favorable impact from pricing at Textron specialized vehicles segment.

Frank T. Connor: Segment profit of $57 million was up $14 million from the fourth quarter of 2022.

Frank T. Connor: Segment profit of $57 million was up $14 million from the fourth quarter of 2022, primarily due to higher pricing net of inflation of $18 million.

Frank T. Connor: primarily due to higher pricing, net of inflation of $18 million.

Frank T. Connor: Text on e-aviation segment revenues were $10 million, and the segment loss was $23 million in the fourth quarter of 23, which reflected the research and development costs for the initiatives related to the development of sustainable aviation.

Frank T. Connor: Textron Aviation segment revenues were $10 million and the segment loss was $23 million in the fourth quarter of 2003, which reflected the research and development cost for the initiatives related to the development of sustainable Aviation solutions.

Frank T. Connor: Finance segment revenues were $12 million and profit was $4 million.

Frank T. Connor: Moving below segment profit, corporate expenses were $45 million, net interest expense was $13 million, LIFO inventory provision was $21 million,

Frank T. Connor: Moving below segment profit corporate expenses were $45 million.

Frank T. Connor: Net interest expense was $13 million LIFO inventory provision was 21 million intangible asset amortization was $9 million and the non service components of pension and post retirement income was $60 million.

Frank T. Connor: Intangible asset amortization was $9 million, and the non-service components of pension and post-retirement income was $60 million.

Frank T. Connor: In November, we announced a restructuring plan that resulted in pre-tax special charges of $126 million in the fourth quarter. We anticipate the restructuring plan will be substantially completed in the first half of 2024, resulting in annualized cost savings of approximately $75 million.

Frank T. Connor: In November we announced a restructuring plan that resulted in pre tax special charges of $126 million in the fourth quarter. We anticipate the restructuring plan will be substantially completed in the first half of 2024, resulting in annualized cost savings or cost of approximately $75 million.

Frank T. Connor: Our manufacturing cash flow before pension contributions was $380 million in the quarter.

Frank T. Connor: Our manufacturing cash flow before pension contributions was $380 million in the quarter for the year manufacturing cash flow before pension contributions totaled $931 million down $247 million from the prior year.

Frank T. Connor: For the year, manufacturing cash flow before pension contributions totaled $931 million, down $247 million from the prior year.

Frank T. Connor: In the quarter, we repurchased approximately 3.7 million shares, returning $283 million in cash to shareholders.

Frank T. Connor: In the quarter, we repurchased approximately three 7 million shares returning $283 million in cash to shareholders.

Frank T. Connor: For the full year, we repurchased approximately 16.2 million shares, returning $1.2 billion in cash to shareholders.

Frank T. Connor: For the full year, we repurchased approximately $16 2 million shares returning $1 2 billion in cash to shareholders.

Frank T. Connor: Turning now to our 2024 outlook on slide 7, we're expecting adjusted earnings per share to be in the range of $6.20 to $6.40 per share. We're also expecting manufacturing cash flow before pension contracts.

Frank T. Connor: Turning now to our 2020 for outlook on slide seven we're expecting adjusted earnings per share to be in the range of $6 20 to $6 40 per share. We're also expecting manufacturing cash flow before pension contributions to be about $900 billion to $1 billion.

Frank T. Connor: It would be about $900 to $1 billion.

Frank T. Connor: Moving to segment outlook on slide eight and beginning with Textron aviation, we're expecting revenues of about $6 billion segment margin is expected to be in the range of approximately 12% to 13%.

Frank T. Connor: Looking to Bell, we expect revenues of about $3.5 billion.

Frank T. Connor: Looking to Bell, we expect revenues of about $3 5 billion.

Frank T. Connor: We're forecasting a margin in the range of 9.5% to 10.5%.

Frank T. Connor: We're forecasting a margin in the range of nine 5% to 10, 5%.

Frank T. Connor: At Systems, we're estimating revenues of about $1.25 billion, with a margin in the range of about 11% to 12%.

Frank T. Connor: At systems, we're estimating revenues of about 1.25 billion with a margin in the range of about 11% 12% at.

Frank T. Connor: At industrial, we're expecting segment revenues of about $3.8 billion and a margin in a range of 6% to 7%.

Frank T. Connor: At industrial we're expecting segment revenues of about $3 8 billion and a margin in a range of 6% to 7%.

Frank T. Connor: At eAviation, we're expecting revenues of $50 million and a segment loss of $25 million, reflecting our continued investment in sustainable aviation.

Frank T. Connor: At aviation, we're expecting revenues of $50 million and a segment loss of $25 million, reflecting our continued investment in sustainable aviation solutions.

Frank T. Connor: At Finance, we're forecasting segment profit of about $30 million.

Frank T. Connor: Looking to slide eight, we're projecting about $160 million of corporate expense.

Frank T. Connor: Looking to slide eight we are projecting about $160 million of corporate expense. We're also projecting about $90 million of net interest expense of $110 million of LIFO inventory provision $35 million of intangible asset amortization and $265 million of non service pension income.

Frank T. Connor: We're also projecting about $90 million of net interest expense, $110 million of LIFO inventory provision,

Frank T. Connor: 35 million of intangible asset amortization and 265 million of non-service pension in the United States.

Frank T. Connor: We expect a full-year effective tax rate of approximately 17.5%.

Frank T. Connor: We expect a full year effective tax rate of approximately 17, 5%.

Frank T. Connor: Turning to slide 10, R&D is expected to be about $550 million down from $570 million last year.

Frank T. Connor: Turning just like 10, R&D is expected to be about $550 million, down from $570 million last year.

Frank T. Connor: We're estimating CapEx will be about $425 million, up from $402 million in 2023.

Frank T. Connor: Estimated capex will be about $425 million up from $402 million in 2023.

Frank T. Connor: Our outlook assumes an average share count of about 191 million shares in 2025.

Frank T. Connor: Our outlook assumes an average share count of about 191 million shares in 2024.

Speaker Change: That concludes our prepared remarks, so Leah, we can open the line for questions.

Speaker Change: That concludes our prepared remarks, Sylvia we can open the lines for questions.

Sylvia: As a reminder for those asking questions. We ask that you. Please take yourself off speakerphone.

Sylvia: Yes.

Leah: Thank you.

Speaker Change: And I would now like to start with Sheila.

Leah: Thank you.

Sheila: Please go ahead.

Speaker Change: Thank you for watching!

Speaker Change: Good morning Scott, Frank, and welcome David. Scott, maybe first one for you. How do we think about 2024 aviation deliveries?

Sheila: Good morning, Scott Rankin welcome David.

Sheila: Scott maybe first one for you.

Scott: Do we think about 2020 for aviation deliveries.

Speaker Change: Book to Bill in the context of you guys.

Scott: Book to Bill in the context of your guidance.

Scott C. Donnelly: Sure, I think we'll continue to see a ramp on the production side. As I noted, I think we did

Speaker Change: Sure Sheila look I think we will.

Speaker Change: <unk> to see a ramp on the production side as I noted I think we did.

Scott C. Donnelly: You know, in the fourth quarter, start to see some improved productivity in the line. There are still some supplier issues, but, you know, a number of parts coming into PO are improving somewhat. So I think that will help us continue to increase volume here as we go through into 2024. So I certainly see unit deliveries being up.

Speaker Change: In the fourth quarter start to see some improved productivity in line there are still some supplier issues, but.

Speaker Change: Parts coming into P O are improving somewhat.

Speaker Change: So I think that will help us continue to increase volume here as we go through into 2024, So I certainly see unit deliveries being up you don't want a year over year basis. The market is still strong I mean, obviously our book to Bill covers.

Scott C. Donnelly: You know, on a year-over-year basis, the market is still strong. I mean, obviously, our book-to-bill, you know, covers, you know, 24 deliveries quite well. But I think, you know, our expectation, as we said, coming into the year was kind of targeting a one-to-one book-to-bill. We did better than that, obviously, in 2023. But our assumption as we go into 2024 is that we'll see a one-to-one book-to-bill. So the market is still good. I think we're seeing nice stimulation and, you know, some of the new products coming out, like the CJ3 Gen 2 has been really well-received. Ascend, I think, will start to also drive strong demand. And overall, the product lineup is in good shape. So I think, you know, market-wise, we're good. And we will see, you know, obviously, to get to the guide of around $6 billion on the aviation side, we will see continued, you know, volume on both aircraft production as well as aftermarket.

Speaker Change: 24 deliveries quite well, but I think our expectation as we said coming into the year was kind of targeting a one to one book to Bill we did better than that obviously in 2023, but our assumption as we go into 2024 is that we will see a one to one book to bill So.

Speaker Change: The market is still there's still good I think we're seeing nice stimulation and so on.

On the new products coming out like C. C. J three a two stage III. Gen. Two has been really well received ascend I think we will start to also drive strong demand and overall the product lineup is in as good shape. So I think market wise. We are good and we will we will see obviously to get to the guide of around $6 billion on the aviation side, we will.

Speaker Change: You'll see continued volume on both aircraft production as well as aftermarket growth.

Speaker Change: When we get to about 200 deliveries in 'twenty, four and do you think that suite.

Scott C. Donnelly: Can we get to about 200 deliveries in 24?

Google.

Scott C. Donnelly: As you know, we don't put a number out there, but it will be increased from 2023.

Speaker Change: We are as you know, we don't put a number out there, but it will be increased from 2023.

Speaker Change: And if I could ask one on FLARA, just, you know, good progress on the program with ITEP, but I think revenues were about $175 million in 2023, fell short of our expectations, and how do we think about 2024? We have about $850 million of FLARA according to the budget, so how's that?

Speaker Change: Got it and if I could ask one on Florida just.

Speaker Change: Good progress on the program with <unk>.

Speaker Change: I think revenues were about $175 million in 2023.

Speaker Change: <unk> fell short of our asset our RF.

Speaker Change: And how do we think about 2024, we have about $850 million of Florida. According to the budget.

Speaker Change: I think.

Speaker Change: For sure. I think our revenues were higher than that on FLARA probably for the year. We won't break out all the details, but it was certainly just south of a few hundred million dollars. But we do expect, as we go into 2024, the program is ramping very nicely. As you know, the number was lighter than we originally expected just because of the delay with the protest in the early part of the year. But the ramp, as we've ramped after the contract award, is going really well. So I would expect a number closer to the $900 million range in 2024 on the FLARA program.

Speaker Change: For sure sure I think our revenues were higher than that on Florida, probably for the year, we won't break out all the details but it was.

It was certainly just south of a few hundred million dollars, but we do expect as we go into 'twenty for the program is ramping very nicely as you know like the number was lighter than we originally expected just because of the delay with the protest in the early part of the year, but the ramp is as we've ramped after the contract award has gone really well so I would expect a number.

Operator: Standing by. Transcript Emily Beynon, Thank you for your time. Later, we will conduct a question and answer session. I'd like to ask a question. Press 1, then 0 on your phones.

Speaker Change: We're closer to the $900 million range in 2024 on the Florida program.

Operator: Require assistance? Press star, then, Compton. This has been a production of WGBH, and will be available after the break. January 24, 2025 at KELOLAND dot com, and many more. Service by Diocese.

Speaker Change: Thank you.

Speaker Change: Sure.

Speaker Change: Next we go to a question.

Speaker Change: Next we go to a question from Peter Arment with Baird. Please go ahead.

Speaker Change: Peter Arment with the Baird, please go ahead.

Peter J. Arment: Yes, good morning, Scott right David.

Peter J. Arment: Yeah, good morning, Scott, Frank, David.

Peter J. Arment: Maybe just circle back just a

Peter J. Arment: Just maybe you could just circle back just on.

Speaker Change: and how you're doing.

Peter J. Arment: How youre thinking about.

Speaker Change: March

Peter J. Arment: The margin leverage in aviation.

David Rosenberg: 107-1041, Thank you for watching! 5-5. I would now like to turn the conference over to David Rosenberg, Vice President of Investment. Go ahead. Thanks Leah, and good morning everyone. Before we begin, I'd like to mention 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.

Speaker Change: Scott when you think about just because you called out some of the prices

Speaker Change: Scott when you think about just because you called out some of the pricing that you've continued to get how are we thinking about just kind of that flowing through I mean, just given the margin outlook of 12%, 13% kind of at the low end of the range, it's flat, but at the upper end, obviously, a 100 basis points, just how you're thinking about that.

Speaker Change: How are we thinking about it?

Scott C. Donnelly: That's flowing through. I mean, just given the margin outlook at 12th,

Scott C. Donnelly: at the low end

Speaker Change: How are you thinking?

Speaker Change: Sure, look, Peter, I think we definitely expect to continue to see price, you know, net of inflation as a positive for us. It won't be as significant as it was in 2023, but we still have good pricing, you know, in the backlog. And I think it will be a tailwind for us. So if you look at the guide and the numbers, Peter, you're right. Look, I mean, we're, as I said, I think we saw some improved performance in Q4 on the manufacturing, you know, conversion side. So, you know, we're bringing, we're certainly baking some of that in as we go into 2024. But, you know, as you move towards the high side of the guidance, you know, you get up into that 20 plus percent conversion, which is where we historically like the business to be. So it's, you know, it's something we got to work on. Obviously, we still have some of those headwinds that we faced all this year on the, on the operating side. But the combination of improved performance and continued price over inflation as a positive, while it's not as big a positive, I think, will help us get towards that 20 plus range.

Scott: Sure Peter I think we definitely expect to continue to see price.

Scott: Net of inflation is a positive for us.

Scott: It won't be as significant it was it was in 2023, but we still have good pricing in the backlog and I think it will be a tailwind for us. So if you look at the guide and the numbers Peter you're right look I mean, we're as I said I think we saw some improved performance in Q4 on the <unk>.

David Rosenberg: Our earnings call presentation can be found in the investor relations section of our website. Revenues in the quarter were $3.9 billion, up $3.6 billion from last year's fourth quarter. Segment profit in the quarter was $384 million, up $78 million from the fourth quarter of 2022. During this year's fourth quarter, adjusted income from continuing operations was $1.60 per share, compared to $1.23 per share in last year's fourth quarter. Manufacturing cash flow before pension contributions totaled $380 million in the quarter, up $12 million from last year's fourth quarter.

Scott: On the manufacturing conversion side, so we're bringing we're certainly baking some of that in as we go into 2024.

Scott: As you move towards the high side of the guidance you get up into that 20, plus percent conversion, which is where we historically like the business to be so it's something we got to work on obviously, we still have some of those headwinds that we faced all this year on the on the operating side.

Scott: The combination of improved performance and continued price over inflation as a positive.

Scott C. Donnelly: For the full year, revenues were $13.7 billion, up $814 million from last year. In 2023, segment profit was $1.3 billion, up $191 million from $22 billion. Adjusted income from continuing operations was $5.59 per share as compared to $4.45 per share in 22. Manufacturing cash flow before pension contributions was $931 million, down $247 million from 22. With that, I'll turn the call over to Scott. Thanks, David, and good morning, everyone.

Scott: Whilst not as big a positive I think will help us get towards that 20 plus range.

Speaker Change: Got it. That's helpful. And then just trying quickly, the interest expense increase?

Got it that's helpful. And then just trying quickly the interest expense increased just maybe what's going on there specifically thanks.

Speaker Change: Maybe what's going on there specifically?

Speaker Change: Yeah, we've got slightly higher borrowing costs from the bond deal that we did last year. So that's a little bit of a rollover on the financing. It assumes slightly lower cash balances and a little bit of conservatism around the interest rate that we earn on that excess cash.

Speaker Change: Oh, well, yes little.

Speaker Change: We've got slightly higher borrowing costs from the.

Speaker Change: The bond deal that we did last year, so that's a little bit of a rollover on the financing it assumes slightly lower cash balances.

Speaker Change: And a little bit of conservatism around the interest rate that we earn on that excess cash.

Scott C. Donnelly: Our business closed out the year with another solid quarter with strong margin performance and cash generation. Throughout the year, our teams work to mitigate supply chain challenges to deliver products to our customers. At Aviation, while we entered the year with an expectation of a book-to-bill one-to-one, solid order flow and customer demand across our product portfolio resulted in a year-end backlog of $7.2 billion, an increase of $782 million. Taxon Aviation Defense delivered 13 T-6 aircraft for the year, up 10 from a year ago.

Speaker Change: Thank you.

Speaker Change: Thanks again, thanks, Greg.

Speaker Change: and

Speaker Change: And next we go to David Strauss with Barclays. Please go ahead.

Speaker Change: David Strauss with Barclays, please go ahead.

Speaker Change: Thanks for watching!

Speaker Change: Thanks. Good morning, everyone. Good morning, David. Good morning. Scott, I wanted to ask about the...

David Strauss: Thanks, Good morning, everyone.

David Strauss: Scott wanted to ask about the <unk>.

David Strauss: 22 ground mean.

Speaker Change: Grounding, does that impact Bell at all?

David Strauss: Does that impact bell at all and you'll get a pretty big aftermarket business on the on the V 22.

Speaker Change: Stop.

Speaker Change: on the V22.

David Strauss: Yeah.

Speaker Change: Uh, no, David, I don't think it's a material impact. You know, the services, you know, frankly, are using the opportunity of the grounding to continue to do their maintenance activities and, you know, get aircraft ready to fly. So, um, we probably can't say much more about that situation than that, but no, I don't expect it to be a material impact.

Speaker Change: No David I don't think it has a material impact the services frankly or are using the opportunity of the grounding to continue to do their maintenance activities in <unk>.

Scott C. Donnelly: During 2023, solid aircraft utilization within the Textron Aviation product portfolio resulted in a 6.5% growth in aftermarket revenue. At Bell, revenues in the quarter were up, driven by higher commercial and military revenues. On the commercial side of Bell, we delivered 91 helicopters in the fourth quarter, up from 71 in last year's fourth quarter. For the full year, we delivered 171 helicopters in 2023, down from 179 in 2022. The higher military revenues reflected the continued ramp-up on our flower program. On the FAR program, Bell completed the installation of the ITEP engine on the 360 Invictus.

Speaker Change: Good aircraft ready to fly so we.

Speaker Change: We probably can't say much more about that situation on that but no I don't expect it to be a material impact.

Speaker Change: Okay. And, um, Frank, free cash flow, um,

Speaker Change: Okay and.

Speaker Change: Frank free cash flow.

Speaker Change: For flat.

Speaker Change: I know you had a pretty big inventory build

Speaker Change: I know you had a pretty big inventory build in AR in 'twenty three but you also had positive advances what are you assuming for working capital.

Speaker Change: 23, but you also had positive.

Speaker Change: What are you assuming for working capital?

Speaker Change: In terms of the Adjust the UPS Guide, what are you baking in as far as share count and share repo in 24?

Speaker Change: And in terms of the just the EPS guide what are you baking in as far as share count and share repo in 'twenty four.

Scott C. Donnelly: The team continues to conduct integration activities and prepare the aircraft for initial ground runs in 2024. Moving to Textron Systems, revenue and margin were flat with last year's fourth quarter. During the quarter, Systems delivered the last detailed design and construction craft on the ship-to-shore connector program following its successful completion of acceptance trials. Moving to industrial, we saw higher revenues in the quarter driven by higher volume at Caltechs and favorable pricing in specialized vehicles. Moving to aviation, Pipstol delivered 135 aircraft during the year, up from 61 in 2022. Also, at E-Aviation during the quarter, the pedestal of the Ellis Electro was selected to participate for a trial period to explore operational and training uses for this all-electric aircraft as part of Agility Prime, the Air Force's vertical lift program.

Speaker Change: Yeah, from a cash standpoint, you know, we obviously are anticipating volume growth in the year. So that's going to put a little continued pressure on inventory levels as we look, you know, kind of to 24 and 25 volume growth, not a lot. There is a little bit of working capital pressure with the timing of some customer payment activity, particularly on the military side. Bell in particular had a very good year in 23 in terms of the timing of payment activity that puts a little bit of headwind on cash flow. And then, you know, as you heard, a little higher CapEx guidance, you know, kind of in terms of the spend there. So it's not any one item. It's, you know, kind of a little bit of headwinds on working capital associated with the things I mentioned and a little bit higher levels of investment.

Speaker Change: Yes from a cash standpoint.

Speaker Change: We obviously are anticipating volume growth in the year so.

Speaker Change: That's going to put a little continued pressure on inventory levels as we look to 'twenty four and 'twenty five volume growth.

Speaker Change: Not a lot.

Speaker Change: There is a little bit of working capital pressure with the timing of some customer payment activity, particularly on the military side Bell in particular had a very good year in 'twenty three in terms of the timing of payment activity that puts a little bit of headwind on cash flow and then I heard a little higher capex guidance kind of.

Scott C. Donnelly: Summary, In 2023, we had a strong year across all of our businesses. We continue to execute on our growth strategy of ongoing investments in new products and programs to drive organic growth and margin expansion. During the year, Aviation announced the new Cessna Citation Ascend at eBase and the Cessna Citation CJ-3 Gen 2 at NBAA. In May, Aviation delivered the first passenger variant of the Cessna SkyCurrier to Lanai Airlines, servicing the Hawaiian Islands.

Speaker Change: In terms of the spend there so it's not any one item that's kind of a little bit of headwinds on working capital associated with the things I mentioned in a little bit higher levels of investment.

Speaker Change: But we still think we're, you know, very, still very solid cash flow performance for the year. In terms of the share count, we talked about 191 million average share. So, you know, kind of roughly 5% or so reduction in average share count.

Speaker Change: But we still think there is still very solid cash flow performance for the year.

Speaker Change: In terms of the share count we talked about 191 million average shares so kind of roughly 5% or so.

Speaker Change: Reduction in average share count for the year.

Scott C. Donnelly: In the third quarter, aviation announced a new fleet agreement with NetJets for up to 1,500 aircraft over 15 years, including longitude, latitude, and the newly announced Ascend, extending our 40-plus year relationship. In October, Aviation delivered the 100th Cessna Citation Launch. At Bell, we began work on the FLAR program in April. The team continues to increase activity on the program, ramping up engineering resources, contracting with key suppliers, and ordering long-lead materials. At Textron Systems, we advance through the future tactical unmanned aircraft system competition and are now one of two remaining competitors down from the initial five. Systems also continued to win on land vehicle programs, advancing to the next phase of the Army's XM-30 program as part of Team Lynx, and was selected as one of four competitors to build RCV light prototypes for the Army. With Textron Specialized Vehicles, we introduced the new Street Legal Easy-Go Liberty LSV, powered by our elite lithium-ion battery system.

Speaker Change: Thank you.

Speaker Change: We go to Jason.

Speaker Change: Next we'll go to Jason Gursky with Citi. Please go ahead.

Jason: With all due respect, I'd like to take this opportunity to thank all of you for joining us today.

Speaker Change: Go ahead.

Yes, good morning, everybody.

Speaker Change: Good morning, everybody.

Scott C. Donnelly: Scott Donnelly

Speaker Change: Scott.

Scott C. Donnelly: Scott, is there a way you could just spend a few more minutes on systems and talk about the pipeline of opportunities there

Jason Gursky: Wondering if you could just spend a few more minutes on systems and talk about the pipeline of opportunities there and the and the timing of potential awards.

Scott C. Donnelly: Timing of potential awards

Scott C. Donnelly: and the backdrop of what's going

Jason Gursky: With the backdrop of what's going on with the budget in mind and weather.

Scott C. Donnelly: with the budget in mind and whether

Jason Gursky: Like continuing resolutions that go out half a year have any impact on kind of your expectations around this.

Scott C. Donnelly: and continuing resolutions to go out.

Scott C. Donnelly: Any impact on kind of your...

Scott C. Donnelly: So the CR situation right now doesn't really worry me very much on the system side of things. As we indicated, Jason, we're going to be relatively flattish on the revenue in 2024. I'd say the pipeline is very strong. You look at some of these down selects on FTOS, the ARV program, what used to be the OMFV program, Nexum 30.

Jason Gursky: So the CR situation right now it doesn't really worry would be very much on the system side of things as we indicated Jason we're going to be relatively flattish on.

Jason Gursky: On the revenue in 2020 for I'd say the pipeline is very strong you look at some of these down select on <unk>, Yes, ARV program.

Jason Gursky: It used to be they want Murphy program next 30 probes.

Scott C. Donnelly: program you know a lot of these things are you know

Jason Gursky: Program a lot of these things are.

Speaker Change: Thank you for watching.

Jason Gursky: Significant opportunities for us that are really important down selects that we achieved last year, we will execute on those and they're not big growth program. So they don't really have a CR.

Scott C. Donnelly: Caltex In 2023, we announced the first pentatonic order from an automotive OEM for a thermoplastic composite underbody battery protection skid plate, establishing Caltex as a supplier to the expanding battery electric vehicle market. At E-Aviation, during the year, we began system-level integration of the first NUVA prototype, our hybrid electric unmanned cargo VTOL aircraft, in preparation for its first flight in 2024. As we closed out 2023, manufacturing performance was trending positively with improvements in labor productivity and supplier delivery. Looking to 2024 at Aviation, we're projecting growth driven by increased deliveries across all product lines and higher aftermarket volume. At Bell, we're projecting revenue growth in 2024 on higher military revenues from the FLORA program and higher commercial revenues from increased delivery. Systems were expecting slightly higher revenue as new programs continue to ramp up. At Industrial, we're expecting flat revenues as growth in specialized vehicles is offset by lower than expected volume at Caltech. At eAviation, we plan to continue investments in the development of technologies and products supporting sustainable flight solutions for unmanned cargo, next-generation electric trainers, eVTOL, and general aviation.

Jason Gursky: You know impacted I'm too concerned about and they're virtually all programs that will have their next significant contractual award down select in 2025. So that's why you see as kind of flattish. We had I think 2023 was hugely important year for the down select on those really important programs execute this year and you'll start to see.

Speaker Change: So that's why you see us kind of flattish. I think 2023 was a hugely important year for the down selects on those really important programs executed this year, and you start to see the revenue growth driven by ultimately being the final selection awards, EMD programs that award in 2025.

Jason Gursky: The revenue growth driven by Ulta.

Jason Gursky: Ultimately being final selection awards AMD programs that award in 2025.

Speaker Change: Okay, great. Thank you. And then just quickly on e-aviation, we've got, you know, whitening profitability losses that are projected.

Speaker Change: Okay, great. Thank you and then just quickly on EMEA E aviation.

Speaker Change: We've got you know widening profitability losses their projected for 24 on.

Speaker Change: for

Speaker Change: I was wondering if you could just kind of

Speaker Change: Higher revenue I was wondering if you can just kind of give us a broad brush.

Speaker Change: Give us a broad brush stroke update on the plans for that business.

Speaker Change: Update on the plans for that business and what point does.

Speaker Change: at what point does, you know, the revenue...

Speaker Change: The revenue potentially pick up here in may begin to see those.

Speaker Change: and many more.

Speaker Change: We see those profitability losses.

Speaker Change: It's profitability losses begin to to contract and kind of your overall vision for that business over the next I don't know three to five years.

Speaker Change: and your overall vision for that business over the next three to five years.

Speaker Change: Sure, absolutely. Look, you know, keep in mind there's two things going on in that e-aviation segment, right? There's Pipistrel, which is, you know, our current, you know, it's a real business, real sales, you know, roughly doubling the volume of aircraft sales.

Speaker Change: Sure absolutely.

Speaker Change: Keep in mind, there is two things going on in that your aviation segment right Theres purpose role, which is our current.

Speaker Change: It's a real business real sales.

Speaker Change: Roughly doubling of volume of aircraft sales.

Speaker Change: From 22 to 23, you know, roughly doubling 23 to 24. So I think, you know, the product lineup at Pipistrel is doing quite well. We're expanding distribution channels. You know, look, it's a relatively small business, but it's doing well. What's driving the losses is these investments in R&D, particularly around the Nexus program. You know, that's something that won't generate revenue probably for several years. And, you know, investment on, say, the Nuva 300, which is our, you know, hybrid unmanned cargo, which, again, this is a few years from revenue. And so that's, you know, part of why just we broke this thing out, right, so that you guys see these investments.

Speaker Change: 20% to 23, roughly doubling 23 to 24, so I think.

Speaker Change: The product lineup at pivotal role is doing quite well, we're expanding distribution channels look it's a relatively small business, but it's doing well what's driving the losses as these investments in R&D, particularly around the Nexus program, that's something that won't generate revenue probably for for several years and investment on say the new <unk> 300, which is R.

Scott C. Donnelly: We also expect higher aircraft deliveries at PIVIS. Against this overall backdrop, we're projecting revenues of about $14.6 billion, up 7% from 2023, for Textron's 2024 fiscal year, and rejecting adjusted EPS in the range of $6.20 to $6.40. Manufacturing cash flow before pension contributions is expected to be in the range of $900 million to $1 billion. With that, I'll turn the call over to Frank.

Speaker Change: Hybrid unmanned cargo, which again this is a few years from revenue and so that's part of why we broke this thing out right. So that you guys see these investments.

Speaker Change: You know, which are, you know, frankly, not dependent or tied to the revenue within that segment. So the two big moving pieces in there in terms of the investment side are the are the NUVA on the unmanned cargo and the

Speaker Change: Which are frankly, not dependent or tied to the revenue within that segment. So the two big moving pieces in there in terms of the investment side or the or the <unk> on the unmanned cargo and the.

Speaker Change: The Nexus on the EVTOL side, which, again, I don't think that has to be necessarily dependent to urban air mobility, but just GA in general. Both those teams are making great shape. I think we'll see first flight of the NUVA in 2024. We've also begun the assembly and wings and fuselage build on the Nexus program in Wichita. So both programs are making very good progress, but they're both technology investments.

Speaker Change: The nexus on the sort of the EV Tal side, which again I don't think that this has to be necessarily dependent to urban air mobility, but just in.

Speaker Change: In general that both of those teams are making great shape I think we will see first flight of the <unk> in 2024.

Frank T. Connor: Thanks, Scott, and good morning, everyone. Let's review how each of the segments contributed, starting with Textron Aviation. Revenues at Textron Aviation of $1.5 billion were down $58 million from the fourth quarter of 2022, reflecting lower volume and mix of $158 million, partially offset by higher pricing of $100 million. Segment profit was $193 million in the fourth quarter, up $23 million from a year ago, reflecting a favorable impact from pricing, net of inflation of $51 million, partially offset by lower volume and mix of $22 million. Backlog in this segment ended the quarter at 7.2%. Moving to Bell, revenues were $1.1 billion, up $255 million from last year's fourth quarter, reflecting higher commercial revenues of $171 million, largely driven by increased deliveries, and higher military revenues of $84 million related to the FAR program. Segment profit of $118 million. This is up 55 million from a year ago, primarily driven by higher volume and mix of 39 million. Backlog in this segment ended the quarter at 4.8%. At Textron Systems, revenues were $314 million, flat with last year's fourth quarter.

Speaker Change: We've also begun the assembly and wings and fuselage build on the next program in which to also booked both programs are making.

Speaker Change: Very good progress, but theyre, both technology investment programs.

Speaker Change: Okay, great. Thanks.

Speaker Change: Sure.

Speaker Change: Next we go to the line of Noah <unk> with Goldman Sachs. Please go ahead.

Speaker Change: Hey, good morning, everyone.

Noah: Hey, good morning, everyone.

Speaker Change: Well, you know.

Noah: No.

Noah: Scott we've heard some discussion in the business jet end market that even though 2023 was it was a decent order year that theres actually maybe some pent up demand because it was so consensus that there was going to be a recession or something like that.

Speaker Change: Scott, we've heard some discussion in the business jet end market that even though 2023 was a decent order year, that there's actually maybe some pent-up demand because

Speaker Change: It was so consensus that there was going to be a recession or something like it.

Speaker Change: and you know that in 2024 if we're having an inflation decel and rate cuts and some version of a soft landing that

Noah: And you know that in 2020 four if if we're having an inflation D cell and rate Cogs and some version of a soft landing that you could have your normal underlying demand plus antibody that differed from 'twenty three and so I'm curious if you hear that from your customers or your sales.

Speaker Change: Thank you for watching.

Speaker Change: And so I'm curious if you hear that from your customers or your sales force and there's an upside case for bookings or is that too aggressive and just stick with Book Develop One?

Noah: Force and there's an upside case for bookings or is that too aggressive and just stick with book to bill of one <unk>.

Speaker Change: Well, look, Noah, I think, as I said at the beginning, we feel good about the end market. Customer dialogues are robust, you know. You know, frankly, the only headwind that I see we run into is just on availability, right? People would like to get aircraft.

Well I think as I said at the beginning we feel good about the end market customer dialogues are robust.

Frank T. Connor: Segment profit of $35 million was equal to last year's fourth quarter. Backlog in this segment was at $2 billion at the end of the quarter. Industrial revenues were $961 million, up $54 million from last year's fourth quarter, largely reflecting higher volume and mix at Caltechs and a favorable impact from pricing at Textron Specialized. Segment profit of $57 million was up $14 million from the fourth quarter of 2022, primarily due to higher pricing, net of inflation of $18 million. Text on e-aviation segment revenues were $10 million, and the segment loss was $23 million in the fourth quarter of 23, which reflected the research and development costs for the initiatives related to the development of sustainable aviation. Finance segment revenues were $12 million, and profit was $4 million.

Noah: Frankly, the only headwind I see would run through is just on availability right people would like to get aircraft.

Speaker Change: You know, sooner. So, you know, we're, I think our sales folks are out there working hard. There's no doubt there's demand. I think that's, as I said earlier, helped by the fact that we've got some new models that are coming out that are going to be really well received in the market. So, look, all in all, as we talked about, you know, the book-to-bill number can change a little bit quarter to quarter, but I think we feel very good about the end market. I think we'll stick at this point with our kind of one-to-one and our base.

Noah: Sooner. So we're I think our sales folks are out there working hard there is no doubt. There is there is demand I think that as I said earlier were helped by the fact that we've got some new models that are coming out that are are are going to be really well received in the market. So.

Noah: All in all as we talked about it a little.

Noah: The book to Bill number can change a little bit quarter to quarter, but I think we feel we feel very good about the end market.

Noah: I think we'll stick at this point with our kind of one to one in our base.

Speaker Change: Assumption, as we did in 2023, and if the market remains, you know, that robust, we can exceed that number, which would be great. So, look, I think the market, you know, remains strong. We feel good about it.

Noah: Assumption as we did in 2023 and if the market remains robust we can we can exceed that number which would be great. So look I think our market the market to.

Noah: It remains strong.

Noah: We feel good about it.

Speaker Change: Okay.

Noah: Okay.

Speaker Change: And I wondered if you could just maybe discuss a little more just how much better is supply chain labor, your ability to get airplanes out the door. You know, the delivery number was down in 23 despite all the demand, kind of to your point there on availability. Whatever the 24 delivery plan is, it's got to be up a lot to get to that revenue guidance. Do you feel like you really have that hitting the ground running in January here? And then as that pertains to the margin, why would price net of inflation not be better if that, you know, if pricing is still good, I know the rate of change matters, but if the cost inflation and disruption.

Noah: And I wondered if you could just maybe discuss a little more.

Noah: Just how much better is supply chain labor your ability to get airplanes out the door.

Frank T. Connor: Moving below segment profit, corporate expenses were $45 million, net interest expense was $13 million, LIFO inventory provision was $21 million, Intangible asset amortization was $9 million, and the non-service components of pension and post-retirement income were $60 million. In November, we announced a restructuring plan that resulted in pre-tax special charges of $126 million in the fourth quarter. We anticipate the restructuring plan will be substantially completed in the first half of 2024, resulting in annualized cost savings of approximately $75 million. Our manufacturing cash flow before pension contributions was $380 million in the quarter. For the year, manufacturing cash flow before pension contributions totaled $931 million, down $247 million from the prior year.

The delivery number it was down in 'twenty three despite all the demand kind of to your point there on availability.

Whatever the 24 delivery plan as it it's got to be up a lot to get to that revenue guidance do you feel like you really have that hitting the ground running in January here, and then as that pertains to the margin.

Noah: Why would price net of inflation.

Noah: Not be better if that if pricing is still good I know the rate of change matters, but if that if the cost inflation and disruption piece settles down significantly for you.

Speaker Change: Settles down significantly for you.

Speaker Change: Well, look, I don't know how to quantify the exact number for you, Noah, but there's a couple dynamics here that make us feel good about it. Again, we saw better labor productivity.

Noah: Well look I'd say I don't know how to quantify the exact number for an all but theres a couple of dynamics here that make us feel good about it again, we saw better labor productivity.

Speaker Change: You know, all of the metrics we track in terms of, you know, training hours, you know, charging to interact, all those sorts of things, applied hours.

Noah: All of the metrics, we track in terms of training hours direct charging to interact all those sorts of things applied hours were.

Speaker Change: We're positive in the quarter. We do track number of parses that are late to PO. These numbers are getting better.

Frank T. Connor: In the quarter, we repurchased approximately 3.7 million shares, returning $283 million in cash to shareholders. For the full year, we repurchased approximately 16.2 million shares, returning $1.2 billion in cash to shareholders. Turning now to our 2024 outlook on slide 7, we're expecting adjusted earnings per share to be in the range of $6.20 to $6.40 per share. We're also expecting manufacturing cash flow before pension contracts. It would be about $900 million to $1 billion.

Noah: We're positive in the quarter, we do track number of parcels are late to Po.

Noah: These numbers are getting better.

Speaker Change: Plus, I think as you look at the 23 to 24, we have net less hiring we need to do to hit the ramp.

Noah: So I think as you look at the 23 to 24, we have net less hiring we need to do to hit the ramp.

Speaker Change: Last year was a big year in terms of onboarding new people. As you can imagine, that's very disruptive. It's a lot of training that takes not just the new people, but it takes a lot of our capable people to help train and develop them. We made a lot of investments in 2023 around new training facilities, but the absolute number, we still need to onboard new people for sure, but the number of them is less than what it was in 2023, and that should be helpful. The supply chain thing, as I said, it is getting better. But it's still susceptible to the wrong part, not being available, right? I mean, I think it's going to help us do less out-of-station work, but we still have suppliers we're keeping a close eye on because a lack of delivery on their part can hold up an aircraft. So we're still being cautious about how we work through that, but it is improving. Like I said, there is less hiring. I think most of our lines are flowing better as a result of all the things I just talked about. So we do factor that into our billing. We do factor that into our ability to hit that larger number of aircraft deliveries in 2024, and I think we'll get there.

Noah: Last year was a big year in terms of Onboarding new people as you can imagine that's very disruptive you know it's a lot of training that takes not just the new people, but it takes a lot of our capable people to help train and develop them.

Noah: Made a lot of investments in 2023 around new training facilities.

Noah: But the absolute number.

Noah: We still need to onboard new people for sure but.

Noah: The number of them is less than what it was in 2023 and that should be.

Noah: Helpful. The supply chain thing as I said it is getting better.

Noah: But it is still susceptible to the wrong part not being available right. I mean, I think it's going to help us do less out a station work.

Frank T. Connor: Moving to segment outlook on slide 8, and beginning with Textron Aviation, we're expecting revenues of about $6 billion. Segment margin is expected to be in the range of approximately 12% to 13%. Looking to Bell, we expect revenues of about $3.5 billion, and we're forecasting a margin in the range of 9.5% to 10.5%. At Systems, we're estimating revenues of about $1.25 billion, with a margin in the range of about 11% to 12%. At Industrial, we're expecting segment revenues of about $3.8 billion and a margin in the range of 6% to 7%. At eAviation, we're expecting revenues of $50 million and a segment loss of $25 million, reflecting our continued investment in sustainable aviation.

Noah: But we still have suppliers, we're keeping a close eye on because the lack of deliver on their part can hold up in aircraft. So we're still being cautious about how we work through that but it has improved and like I said there is less hiring I think most of our lines are flowing better as a result of all the things I just talked about so.

Noah: We do factor that into our ability to hit that that.

Noah: And that larger number of aircraft deliveries in 'twenty four and then I think we'll get there.

Speaker Change: Okay, that's good. I'm just going to ask one more. The bell margin, you know, pretty strong in the quarter, closed 23 well ahead of the initial plan.

Speaker Change: Okay. That's good.

Speaker Change: I'm just going to just going to ask one more on the bell margin.

Speaker Change: You know pretty strong in the quarter closed 23, well ahead of the initial plan. This 24 guide nine five to 10 and a half.

Speaker Change: 24 Guide 9.5 to 10.5

Speaker Change: Kind of flat year over year.

Speaker Change: It kind of flat year over year.

Frank T. Connor: At Finance, we're forecasting segment profit of about $30 million. Looking to slide eight, we're projecting about $160 million of corporate expense. We're also projecting about $90 million of net interest expense, $110 million of LIFO inventory provision, 35 million of intangible asset amortization, and $265 million of non-service pension in the United States. We expect a full-year effective tax rate of approximately 17.5%.

Speaker Change: There was a view that this was going to 7-8% as you ramped flora. You're ramping flora, that's not happening.

Speaker Change: You know there was there was a there was a view that this was going to seven 8% as you ramped flora.

Speaker Change: You're ramping flora that that's not happening can you talk about how youre outperforming there in absorbing the Florida ramp is 24, the trough or does that still need to go down some number of hundreds of basis points before then going back up.

Speaker Change: Can you talk about how you're outperforming there and absorbing the flora ramp? Is 24 the trough, or does that still need to go down?

Speaker Change: Some number of hundreds of basis points before then going back.

Speaker Change: Oh, look, no, I think, like, the team is doing everything they can to manage costs, you know, control, you know, do the right cost actions here as we see the ramp down on some of these military production programs, and we continue to do that. Those were certainly better mixed than, you know, a big cost plus.

Speaker Change: I think look the team is doing everything they can to manage cost control.

Frank T. Connor: Turning just like 10, R&D is expected to be about $550 million, down from $570 million last year. We're estimating CapEx will be about $425 million, up from $402 million in 2023. Our outlook assumes an average share count of about 191 million shares in 2025. That concludes our prepared remarks, so Leah, we can open the line for questions. Thank you. Thank you for watching!

Speaker Change: Getting to the right cost actions here as we see the ramp down on some of these military production programs and we continue to do that.

Speaker Change: Those were those were certainly better mix then.

Speaker Change: Our big cost plus deep.

Speaker Change: You know, EMD program, so we still, you know, we'll have some pressure around the margin rate.

Speaker Change: <unk> program, so we still.

Speaker Change: We'll have some pressure around the margin rate.

Speaker Change: But as we talked about that, you know, the growth benefit of seeing this program ramp up, you know, we believe will still generate accretive, you know, not dollars. So even if we see some pressure on the margin rate, the business will still be contributing, you know, positively to the overall dollars and therefore EPS for the business.

Speaker Change: But as we've talked about that the growth benefit of seeing this program ramp up.

Speaker Change: We believe we will still generate accrued accretive KNOP.

Operator: Good morning Scott, Frank, and welcome David. Scott, maybe the first one for you. How do we think about 2024 aviation deliveries? Book to Bill in the context of you guys. Sure, I think we'll continue to see a ramp on the production side. As I noted, I think we did, you know, in the fourth quarter start to see some improved productivity on the line. There are still some supplier issues, but, you know, a number of parts coming into PO are improving somewhat. So I think that will help us continue to increase volume here as we go into 2024. So I certainly see unit deliveries being up. You know, on a year-over-year basis, the market is still strong. I mean, obviously, our book-to-bill covers, you know, 24 deliveries quite well. But I think, you know, our expectation, as we said, coming into the year, was kind of targeting a one-to-one book-to-bill. We did better than that, obviously, in 2023.

Speaker Change: <unk> dollars, so even if we see some pressure on the margin rate the business will still be contributing pas.

Speaker Change: Positively to the overall.

Speaker Change: Dollars and therefore EPS for the business.

Speaker Change: Okay. All right, thanks.

Speaker Change: Okay.

Speaker Change: Thanks Kurt.

Speaker Change: Next we go to the line of Myles Walton with Wolfe Research. Please go ahead.

Speaker Change: to the line of Myles Walton.

Myles Walton: Thanks. Good morning. I was hoping to circle on aviation. In the last few quarters, there's been more discussion of this performance as a negative variance to the profit walk. That wasn't part of the conversation. It was clearly price offset by a little bit of volume. Is it fair to think that that bucket of performance that you all cite has materially become non-material?

Thanks, Good morning.

Myles Walton: Hoping to circle around the aviation in the last few quarters. There's been more discussion of this performance is a negative variance to the profit walk that wasn't part of the conversation. It was a it was.

Myles Walton: Clearly price offset by a little bit of volume. So is it fair to think that that that bucket. If performance that you all cite is materially.

Myles Walton: You know become non material.

Myles Walton: Well I wouldn't say non material.

Speaker Change: Well, I wouldn't say non-material, but I would say, Myles, in 2023, we had...

Myles Walton: I would say miles and looked in 2023, we had.

Speaker Change: Pretty significant price over inflation benefits, and I think we did talk through the course of the year that that did help to offset some of the performance issues that were driven by these labor inefficiencies and supplier impacts and stuff like that. So I think as you look at 2024, we're expecting improved margins. We're absolutely expecting significantly improved revenue and therefore operating profit in the business.

Myles Walton: Pretty significant price over inflation benefits and I think we did talk through the course of the year that that did help.

Myles Walton: To offset some of the performance issues that were driven by these labor inefficiencies and supplier impacts and stuff like that so I think as you look at 2024, we're expecting improved margins.

Scott C. Donnelly: But our assumption as we go into 2024 is that we'll see a one-to-one book-to-bill. So the market is still good. I think we're seeing nice stimulation, and, you know, some of the new products coming out, like the CJ3 Gen 2, have been really well-received. Ascend, I think, will start to drive strong demand.

Myles Walton: We are absolutely expecting significantly improved revenue and therefore.

Myles Walton: Operating profit in the business.

Speaker Change: But the, you know, the trade you're going to see is there's probably still positive price over inflation, but not as big a number, but you're going to have less performance issue to have to cover, you know, with that number, because we do expect to see better efficiencies in the factories and lesser impact from the supply. So, you know, so, you know, none of all this stuff, I mean, there's a different dynamic, I believe, in 2024. That's how we're going to get there than 2023. But, you know, the bottom line is you're going to see significant, you know, revenue growth and significant operating profit, including expanding margin in 2024.

Myles Walton: But the trade youre going to see is there is probably still positive price over inflation, but not as big a number but youre going to have less performance issue to have to cover.

Scott C. Donnelly: And overall, the product lineup is in good shape. So I think, you know, market-wise, we're good. And we will see, obviously, to get to the guide of around $6 billion on the aviation side, we will see continued volume on both aircraft production as well as aftermarket. Can we get to about 200 deliveries in 24?

Myles Walton: That number because we do expect to see better efficiencies in the factories and lesser impact from the supply so so.

Myles Walton: So net of all this stuff I mean, there's a different dynamic I believe in 2024, that's how we're going to get there than 2023 but the bottom line is youre going to see significant revenue growth and significant operating profit, including expanding margin in 2024.

Speaker Change: And then on the restructuring program you executed, I think about 60% maybe was directed at Bell. Of the 75 gross savings you talk about, how much net savings is Bell getting in 24 and also is Bell getting most of the lower R&D?

Scott C. Donnelly: As you know, we don't put a number out there, but it will be increased from 2023. And if I could ask one on FLARA, just, you know, good progress on the program with ITEP, but I think revenues were about $175 million in 2023, fell short of our expectations, and what do we think about 2024? We have about $850 million in FLARA according to the budget, so how's that? For sure. I think our revenues were higher than that on FLARA probably for the year. We won't break out all the details, but it was certainly just south of a few hundred million dollars.

Myles Walton: And then on the restructuring program, we executed I think about 60% maybe it was directed at Bell of the 75 gross savings you talk about how much net savings as bell getting in in 'twenty four and also is bell getting most of the lower R&D benefit.

Speaker Change: Oh, well, look, I mean, we don't, we're probably not going to break that all the way down. But certainly part of why, you know, the discussion I just had with Noah around, you know, why are we seeing some, you know, better margins and, you know, holding in there on the margin rates at Bell is, this is part of why we took that restructuring action to control cost and manage our way as we reduce the volume in some of these, you know, historic military production programs. And so that's part of what's helping to sustain, you know, a better margin rate, even as we see those programs ramped out, we just have to take the cost out of the business in the areas that were largely supporting, you know, these big, you know, military production programs. So

Speaker Change: Oh, well look I mean, we don't we're probably not going to break that all the way down, but certainly part of why the discussion I just had with no around why are we seeing some.

Better margins and holding in there on the margin rates at Bell is this is part of why we took out restructuring action to control costs and manage our way as we reduce the volume and some of these historic military production programs and so that's part of what's helping to sustain.

Scott C. Donnelly: But we do expect, as we go into 2024, the program is ramping up very nicely. As you know, the number was lighter than we originally expected just because of the delay with the protest in the early part of the year. But the ramp-up, as we've ramped up after the contract award, is going really well. So I would expect a number closer to the $900 million range in 2024 for the FLARA program. Thank you. Next, we go to a question. Peter Arment with the Baird. Please go ahead.

A better margin rate, even as we see those programs ramped out we just have to take the cost out of the business in the areas that were largely supporting these big military production program. So.

Speaker Change: I won't put the exact number in there, but that's the dynamic that's helping to improve that, you know, improve that margin.

Speaker Change: Put the exact number in there, but that's the dynamic that is helping to improve that.

Speaker Change: Improve that margin.

Speaker Change: And is R&D dropped there mostly in Bell? Yeah, it is. I mean, as you know, we don't break that all the way out. But look, we still had, as you recall, the delay of the FLAR program in 2023. We had more of our own costs still sustaining and supporting that program in the earlier part of the year. Obviously, as that has ramped and become a full-blown contract, that's helping to reduce that number. The overall gross R&D of the business is still growing significantly. As FLARA ramps, but the net number in terms of the IRAD side is certainly shifted from that IRAD into the contract.

Speaker Change: And as R&D dropped.

Speaker Change: Drop there mostly in bell.

Speaker Change: Yes.

Speaker Change: It is I mean, as you know we don't break out all the way out but look we still had as you recall the delay of the Florida program. In 2023, we had more of our own costs still sustaining and supporting that program.

Speaker Change: In the earlier part of the year, obviously as that has ramped and become a full blown contract.

Peter J. Arment: Yeah, good morning, Scott, Frank, David. Maybe just circle back just a bit and tell me how you're doing. March, Scott, when you think about just because you called out some of the prices, how are we thinking about it? That's flowing through. I mean, just given the margin outlook at 12th, at the low end, how are you thinking? Sure, look, Peter, I think we definitely expect to continue to see price, you know, net of inflation, as a positive for us. It won't be as significant as it was in 2023, but we still have good pricing, you know, in the backlog. And I think it will be a tailwind for us. So if you look at the guide and the numbers, Peter, you're right.

Speaker Change: That's helping to reduce that number the overall gross R&D of the business is still growing significantly.

Speaker Change: Flora ramps, but the net number in terms of the IRA side has certainly shifted from that I read into the contract program makes sense. Thank you.

Speaker Change: Thank you.

Speaker Change: Yes.

Speaker Change: Thanks for watching!

Speaker Change: And the next question we have is from.

Speaker Change: Christine.

Christine: Please go ahead.

Christine: Christine.

Speaker Change: Thank you.

Christine: She has disconnected we will move on to the next line of Robert Stallard with vertical research. Please go ahead.

Speaker Change: Go ahead.

Robert Stallard: Thanks, so much good morning.

Speaker Change: Robert

Robert Stallard: Hi, Robert.

Robert Stallard: Scott I just want to follow up on that question about the supply chain in the <unk>.

Speaker Change: Scott, I'd say just...

Robert Stallard: And behind at the moment are there any specific areas, where youre seeing any problems I can tell me is that a holding things up.

Robert Stallard: Yeah.

Speaker Change: Nothing that I would comment on.

Speaker Change: on a call. We all have our problem children.

Speaker Change: On our call there's we.

Speaker Change: We all we all have our problem children.

Speaker Change: Yep understood.

Speaker Change: And then secondly.

There's been some press reports at Textron has been looking at some M&A competitions in recent months I don't expect you to comment on that but I wonder if you could maybe reiterate your priorities for capital deployment as we start 2024.

Speaker Change: and many more.

Scott C. Donnelly: Obviously, we still have some of those headwinds that we faced all this year on the operating side. But the combination of improved performance and continued price over inflation as a positive, while it's not as big a positive, I think, will help us get towards that 20 plus range. Got it. That's helpful. And then just trying quickly, the interest expense increase? Maybe what's going on there specifically?

Speaker Change: Sure. Nope, we definitely would not comment on that. And look, I think what we've talked about and, you know, Frank's, you know, indication on the share count of $191 million obviously indicates that our priority continues to be share buyback.

Speaker Change: Sure No we definitely would not comment on that and look I think what we've what we've talked about in Franks.

Speaker Change: <unk> on the share count of $191 million, obviously indicates that our our priority continues to be a share buyback and that makes we think at this point a pretty significant.

Speaker Change: and that makes, we think at this point, a pretty significant benefit for our shareholders and that's what we expect to continue to do in 2024.

Speaker Change: Benefit for our shareholders and Thats, what we expect to continue to do in 2024.

Frank T. Connor: Yeah, we've got slightly higher borrowing costs from the bond deal that we did last year. So that's a little bit of a rollover on the financing. It assumes slightly lower cash balances and a little bit of conservatism around the interest rate that we earn on that excess cash. Thank you, and David Strauss with Barclays, please go ahead. Thanks for watching!

Speaker Change: Okay, that's great. Thanks, Scott.

Speaker Change: And our next question is from Seth Sigman with J P. Morgan. Please go ahead.

Speaker Change: Thank you.

Seth M. Seifman: Okay, Thanks, very much and good morning, everyone.

Speaker Change: Thanks very much. Good morning, everyone. I guess just asking about the performance at aviation and kind of the improvement in productivity and parts availability that you started to see in the fourth quarter. Does that mean that in the first quarter, you know, we can expect to see kind of a nice increase in deliveries and something that would kind of, you know, affirm the, you know, the notion of being on track for the revenue guide for the year?

Seth M. Seifman: I guess.

Seth M. Seifman: Just asking about the performance at aviation and kind of the improvement in productivity and parts availability that that you started to see in the fourth quarter.

David Strauss: Thanks. Good morning, everyone. Good morning, David. Good morning, Scott. I wanted to ask about the... grounding, does that impact Bell at all?

Seth M. Seifman: Does that mean that in the first quarter.

Seth M. Seifman: We can expect to see a kind of a nice increase in deliveries and something that would kind of.

Seth M. Seifman: Our firm.

Seth M. Seifman: The notion.

Scott C. Donnelly: Stop on the V22. Uh, no, David, I don't think it's a material impact. You know, the services are, you know, frankly, using the opportunity of the grounding to continue to do their maintenance activities and, you know, get aircraft ready to fly. So, um, we probably can't say much more about that situation than that, but no, I don't expect it to be a material impact. Okay.

Seth M. Seifman: As being on track for further revenue guide for the year.

Speaker Change: Well, we're not going to get into quarterly guidance for sure, but you certainly should expect to see a nice progression in terms of the revenue on a quarter-to-quarter basis over 2023, consistent with the guide of $6 billion of revenue for the total year.

Seth M. Seifman: Well we're.

Seth M. Seifman: We're not going to get into quarterly guidance for sure.

Seth M. Seifman: I mean, you certainly you should expect to see.

Seth M. Seifman: A nice progression in terms of the revenue on a quarter to quarter basis over 2023 consistent with.

David Strauss: And, um, Frank, free cash flow, um, I know you had a pretty big inventory build, 23, but you also had positive cash flow. What are you assuming for working capital? In terms of the Adjust the UPS Guide, what are you baking in as far as share count and share repo in 24?

Seth M. Seifman: The guide of $6 billion of revenue for the total year.

Speaker Change: Okay, Okay, great and then.

Speaker Change: Okay. Okay. Great. And then maybe just following up a little bit different twist on Rob's question, I know you probably won't comment on specific M&A reports, but the reports that we have read tend to deal mainly with the space and market. I wonder if you'd comment on, you know,

Seth M. Seifman: Maybe.

Speaker Change: Just following up a little bit different twist on Rob's question I know you probably won't comment on specific M&A airports.

Frank T. Connor: Yeah, from a cash standpoint, we obviously are anticipating volume growth in the year. So that's going to put a little continued pressure on inventory levels as we look, you know, kind of to 24 and 25 volume growth, not a lot. There is a little bit of working capital pressure with the timing of some customer payment activity, particularly on the military side.

Speaker Change: But there are reports that we have red.

Speaker Change: Tend to deal mainly with the space end market.

Speaker Change: I Wonder if you can comment on.

Speaker Change: Do you view that as an important and or attractive end market into which to invest?

Speaker Change: Do you view that as an important <unk> attractive end market into which to expand.

Speaker Change: I wouldn't comment.

Speaker Change: Fair enough.

Speaker Change: Alright, I'll stick to those. Thank you very much.

Speaker Change: Alright.

Okay.

Frank T. Connor: Bell in particular had a very good year in 23 in terms of the timing of payment activity that puts a little bit of a headwind on cash flow. And then, you know, as you heard, a little higher CapEx guidance, you know, kind of in terms of the spend there. So it's not any one item.

Speaker Change: Thank you very much.

Speaker Change: Thank you.

Speaker Change: Next we go to the line of Christine.

Speaker Change: Excuse me with Morgan Stanley. Please go ahead.

Speaker Change: Hey guys, can you hear me okay? Yep, we can hear you fine.

Christine: Hey, guys can you hear me Okay, Yes, we can hear you fine.

Christine: Great He is coming back.

Christine: Dave Thanks on your restructuring actions can you provide more details on what youre doing and what your expectations are for the timing and the size of the payback from your investments.

Frank T. Connor: It's, you know, kind of a little bit of headwinds on working capital associated with the things I mentioned and a little bit higher levels of investment. But we still think we're, you know, still very, very solid cash flow performance for the year. In terms of the share count, we talked about 191 million average shares. So, you know, kind of a roughly 5% or so reduction in the average share count. Thank you. We will go to Jason.

Speaker Change: Well, Kristine, you know, as we kind of put out there, there's a sizable piece that's going into Bell, and that's, you know, really aligning our cost structure with the lower production rates on some of the historic military programs like H-1 and V-22.

Christine: Okay.

Christine: As we kind of put out there there is a sizeable piece that's going into bell and that's you don't really aligning our cost structure with the lower production rates on some of the historic military programs like H, one and V 22.

Speaker Change: You know, that's a very, in terms of cost and the mix of people within the business, you know, the ramp obviously is net positive, but it's largely in the engineering, you know, program side of the flower program. So it's a necessary action to align cost with the old historic production programs.

Christine: That's a very that in terms of costs and the mix of people within the business.

Operator: With all due respect, I'd like to take this opportunity to thank all of you for joining us today. Good morning, everybody. Scott Donnelly, Scott, is there a way you could just spend a few more minutes on systems and talk about the pipeline of opportunities there, the timing of potential awards, and the backdrop of what's going on with the budget in mind and whether and continuing resolutions will go out. Any impact on the kind of your...

Christine: The ramp obviously is net positive, but it's largely in the engineering.

Christine: You don't program side of the flower program. So that's a necessary action to align costs with the with the old historic production programs.

Speaker Change: As we also indicated, we're aligning some of our plants on the auto side to understand where's demand around the world and rationalizing where we think it's appropriate to keep that business healthy with a high return and strong cash flow.

Christine: As we also indicated we're just we're aligning some of our our plants on on the auto side to understand where is demand around the world and rationalizing where we think it's appropriate to keep that business healthy with a high return and strong cash flow. So.

Speaker Change: You know, it's just, you know, there's bits in a number of other places, but, you know, we believe on a run rate basis, it's going to be about a $75 million a year, you know, positive impact to the business. And so that's, I think, a good return and why we decided to proceed with the program.

Christine:

Christine: There is there is there is bits in a number of other places but.

Scott C. Donnelly: So the CR situation right now doesn't really worry me very much on the system side of things. As we indicated, Jason, we're going to be relatively flattish on revenue in 2024. I'd say the pipeline is very strong. You look at some of these down selects on FTOS, the ARV program, what used to be the OMFV program, Nexum 30, program you know a lot of these things are, Thank you for watching. So that's why you see us kind of flattish.

Christine: We believe on a run rate basis, it's going to be about a $75 million a year.

Christine: Positive impact to the business and so that's I think a good return and why we decided to proceed with the program.

Speaker Change: Great, thanks for the color. And maybe on aviation, if I could do a follow-up, you know, $100 million in pricing power for new aircraft is very healthy. And so if we're seeing, if you're continuing to see bottlenecks in new aircraft production, can you talk about the demand environment for aircraft services then? And what's the pricing power in services, especially with the lack of, you know, new airplanes coming into the market?

Speaker Change: Great. Thanks for the color and maybe on aviation if I could do a follow up you know a $100 million and pricing power for new aircraft is very healthy and so if we're seeing if you continue to see bottlenecks on new aircraft production can you talk about the demand environment for aircraft services.

And what's the pricing power and services, especially with the lack of new airplanes coming into the market.

Scott C. Donnelly: I think 2023 was a hugely important year for the down selects on those really important programs executed this year, and you start to see the revenue growth driven by, ultimately, being the final selection awards, EMD programs that will be awarded in 2025. Okay, great. Thank you.

Speaker Change: Look, I think, you know, what we saw this year, which was, you know, strong growth, six and a half percent on the services side. Obviously, that's a, you know, a mixture between volume and pricing. I expect we'll continue to see good demand on that side. We certainly have that baked into our forecast. Aircraft are flying. Our customers are running the aircraft. They're doing the necessary maintenance. So, you know, I think it'll continue to be a healthy part. Certainly, what we've incorporated in the guide for next year is good growth in the service business, both, you know, our service centers as well as the parts. And as always, that's going to be a, you know, function of both, you know, volume increases as well as, you know, annual expected pricing in the aftermarket side.

Speaker Change: Look I think what we saw this year, which was strong growth six 5% on the on the services side.

Obviously, that's a mixture between volume and pricing I expect we will continue to see.

Speaker Change: Good demand on that side, we certainly have that baked into our forecast aircraft are flying our customers are running the aircraft they're doing it necessary maintenance. So I think it will continue to be a healthy part certainly what we've incorporated in the guide for next year is as good growth in the service business both of our service centers as well as the parts and as always that is.

Scott C. Donnelly: And then just quickly on e-aviation, we've got, you know, whitening profitability losses that are projected. For I was wondering if you could just kind of give us a broad brushstroke update on the plans for that business, at what point does revenue..., and many more as we see those profitability losses and your overall vision for that business over the next three to five years. Sure, absolutely.

Speaker Change: B.

Speaker Change: Function of both volume increases as well as <unk>.

Speaker Change: Annual expected pricing.

And the aftermarket side.

Speaker Change: Great. Thanks, Scott.

Speaker Change: Great, thanks Scott.

Speaker Change: Next we'll go to the line of George Shapiro with Shapiro Research. Please go ahead.

Speaker Change: Can we go to the lineup?

Speaker Change: Shapiro with Shapiro.

Speaker Change: Yeah.

Shapiro: Yes, good morning. George.

Speaker Change: Okay.

George D. Shapiro: Yes, good morning.

George D. Shapiro: Georgia.

Shapiro: Scott, I was just curious. You were saying that the supply chain seems better, yet the deliveries in the fourth quarter were a lot lighter than what most of us were looking for.

Scott C. Donnelly: Look, you know, keep in mind there are two things going on in that e-aviation segment, right? There's Pipistrel, which is, you know, our current, it's a real business, real sales, roughly doubling the volume of aircraft sales from 22 to 23, you know, roughly doubling 23 to 24.

George D. Shapiro: Scott I was just curious you were saying that the supply chain seems better yet the deliveries in the fourth quarter were a lot lighter than what most of US were looking for so if you could kind of just connected two dots there.

Shapiro: kind of

Shapiro: Connect the two dots there.

Scott C. Donnelly: As you know, it takes many months to build an aircraft. So, you know, the improvements in both the labor side and the parts side takes a while to push through the system. So the higher cost and a lot of the impacts that we kind of saw through the course of the year, you know, are, you know, were full year impacts. So, but I do feel like, you know, as we look at the numbers, you know, and what we experience on a, you know, on a day-to-day basis, we did see improvements. And I think that's, as a result, you'll start to see that improvement, you know, as you get into the next year. 2024.

Scott: Oh, George as you know it takes many months to build an aircraft. So the improvements in both the labor side and the and the parts side. It takes a while to push through the system.

Scott C. Donnelly: So I think, you know, the product lineup at Pipistrel is doing quite well. We're expanding distribution channels. You know, look, it's a relatively small business, but it's doing well. What's driving the losses is these investments in R&D, particularly around the Nexus program. You know, that's something that won't generate revenue for several years.

Scott: So the higher cost and a lot of the impacts that we kind of saw through the course of the year.

Scott: Our full.

Scott: Full year impacts, so, but I do feel like as we look at the numbers and.

Scott: And what we experience on a on a day to day basis, we did see improvements and I think thats as a result, you'll start to see that improvement as.

Scott: As you get into 2024.

Scott C. Donnelly: And, you know, investment in, say, the Nuva 300, which is our, you know, hybrid unmanned cargo, which, again, is a few years from revenue. And so that's, you know, part of why we broke this thing out, right, so that you guys see these investments. You know, which are, you know, frankly, not dependent or tied to the revenue within that segment. So the two big moving pieces in there in terms of the investment side are the NUVA on the unmanned cargo side and the Nexus on the EVTOL side, which, again, I don't think that has to be necessarily dependent on urban air mobility, but just GA in general. Both those teams are in great shape.

Speaker Change: One other one. The book to bill in the quarter was, you know, 0.9 and the orders were like only 1.4 billion. So that was really down a lot from last year as well as from the third quarter. Now, I guess you're just looking at as timing or it have anything to do with Noah's comment that people concerned about a recession in the fourth quarter. We get a pickup this year, but you just comment on that as well.

Scott: And then one other one the book to Bill in the quarter was <unk> nine and the orders were like the only one 4 billion. So that was really down a lot from last year as well as from the third quarter now I guess, you're just looking at as timing or would have anything to do with no. Its comment that people concerned about a recession in the fourth quarter.

Scott: Get a pick up this year, but if you could just comment on that as well.

Speaker Change: George, I think it's largely timing. You know, we always have a little bit of lumpiness in, you know, in terms of when deposits are coming in on, you know, some of our larger customers, but there's, I don't think there's anything concerning there. We've said all along, we expect there's going to be some quarters where it's going to be, you know, below one to one, probably some quarters where it's above one to one. But again, our assumption, you know, full year going all the way back through 23 was one to one. We did better than that. Our assumption in 2024 is it's going to be one to one. And, you know, obviously, we'll see how the market plays out. But I still think we feel we feel good about the end market. We feel good about demand. And I think it's healthy.

Scott: George I think it's largely timing, we always have a little bit of Lumpiness in terms of when deposits are coming in on some of our larger customers, but there is I don't think theres anything concerning there. We've said all along we expect there's going to be some quarters, where it's going to be.

Scott: Below one to one I will probably be some quarters, where it's above one to one but again, our assumption full year going all the way back through 'twenty. Three was one to one we did better than that our assumption in 2024 is its going to be one to one and obviously.

Scott C. Donnelly: I think we'll see the first flight of the NUVA in 2024. We've also begun the assembly and wings and fuselage build for the Nexus program in Wichita. So both programs are making very good progress, but they're both technology investments. Hey, good morning, everyone.

Scott: Obviously, we will see how the market plays out but I still think we feel we feel good about the end market, we feel good about demand and.

Scott: I think it's.

Scott: It's healthy.

Speaker Change: And one last one. The strong Bell margin in the quarter, I mean, does that just really reflect the commercial delivery strength, which has much higher margins, more than offsetting the drag from the lower margin flora program?

Speaker Change: And one last one the strong bell margin in the quarter. I mean is that just really reflect the commercial delivery strength, which has much higher margins more than offsetting the drag from the lower margin, Florida programming.

Scott C. Donnelly: Well, you know Scott, we've heard some discussion in the business jet end market that even though 2023 was a decent order year, that there's actually maybe some pent-up demand because it was so consensus that there was going to be a recession or something like it, and you know that in 2024 if we were having an inflation decel and rate cuts and some version of a soft landing that, Thank you for watching. And so I'm curious if you hear that from your customers or your sales force, and there's an upside case for bookings, or is that too aggressive and we should just stick with Book Develop One? Well, look, Noah, I think, as I said at the beginning, we feel good about the end market. Customer dialogues are robust, you know. Frankly, the only headwind that I see we run into is just availability, right? People would like to get an aircraft. You know, sooner.

<unk>.

Speaker Change: If that would continue next year, the margins would probably be somewhat higher than what you've guided to.

Speaker Change: If that would continue into next year with the margins would probably be somewhat higher than what you've guided to.

Speaker Change: Well George I think we're continuing to see good margins on our military business. Obviously, you know outside of the Florida.

Speaker Change: George, I think we're continuing to see good margins on our military business. Obviously, outside of the FLORA side, it certainly helps to have higher commercial deliveries. I think we'll get some benefit of higher commercial deliveries, as we talked about, in 2024. But look, there's going to continue to be some pressure on the margin just because we're seeing significant growth in the FLORA program. The reason we did the cost actions and did the restructuring was to try to shore up the profitability of the business on the legacy production programs. And so part of the guide is obviously we continue to see some benefit of that. But again, there will be overall margin rate pressure going into the future. But I think, as we talked about, even with that and the growth of the FLORA program, we're going to see significant revenue growth. And we're going to see absolute profit increases and accretion depreciation. So I think, as we work through a transition from legacy production to a new EMD program, I think we can manage our way through that well. And obviously, long term, it's going to be a great story for us.

Speaker Change: It certainly helps to have higher commercial deliveries, we I think we'll get some benefit of higher commercial deliveries as we as we've talked about in 2024.

Speaker Change: Well look there's going to continue to be some pressure on the margin just because we're seeing significant growth in the Florida program.

Speaker Change: The reason, we did the cost actions and do the restructuring was to try to to shore up the profitability of the business on the legacy production programs and so.

Speaker Change: Part of the guide is obviously, we continue to see some benefit of that but again, there will be overall margin rate pressure going into the future, but I think as we've talked about the.

Scott C. Donnelly: So, you know, we're, I think our sales folks are out there working hard. There's no doubt there's demand. I think that's, as I said earlier, helped by the fact that we've got some new models that are coming out that are going to be really well received in the market. So, look, all in all, as we talked about, the book-to-bill number can change a little bit quarter to quarter, but I think we feel very good about the end market. I think we'll stick at this point with our kind of one-to-one and our base.

Speaker Change: You know, even with that and the growth of the <unk> program, we're going to see significant revenue growth and we're going to see absolute profit increases in accretion in EPS for the business. So I think.

Speaker Change: As we work through a transition from legacy production to a new M. D program I think we can manage our way through that well and obviously long term.

Speaker Change: It's going to be a great story for bill.

Scott C. Donnelly: Assumption, as we did in 2023, and if the market remains, you know, that robust, we can exceed that number, which would be great. So, look, I think the market, you know, remains strong. We feel good about it. Okay.

Speaker Change: Okay, thanks very much.

Speaker Change: Okay. Thanks very much.

Speaker Change: Sure.

Speaker Change: Next one.

Speaker Change: <unk> with Alembic Global Please go ahead.

Speaker Change: Thank you.

Speaker Change: Yeah, hi, good morning guys.

Speaker Change: Yes, hi, good morning, guys.

Speaker Change: Scott, can you expand on your opening comments regarding Caltechs and your expectations there in 2024? It sounds like you think you might be a little bit weak there. Just was wondering what the drivers were.

Speaker Change: Scott can you expand on your opening comments regarding <unk> Didnt youre expectations are in 2024, it sounds like you think might.

Scott C. Donnelly: And I wondered if you could maybe discuss a little more just how much better supply chain labor is, your ability to get airplanes out the door. You know, the delivery number was down by 23 despite all the demand, kind of to your point there on availability. Whatever the 24-hour delivery plan is, it's got to be up a lot to get to that revenue guidance. Do you feel like you really have that hitting the ground running in January here? And then as that pertains to the margin, why would price net of inflation not be better if that, you know, if pricing is still good? I know the rate of change matters, but if the cost inflation and disruption settles down significantly for you.

Speaker Change: It might be a little bit weak there just was wondering what the drivers were.

Scott C. Donnelly: Sure, Pete. Look, you know, that's one business where we really, you know, depend on sort of industry customer forecasts, you know, so our guide reflects that.

Speaker Change: Sure.

That is one business, where we really.

Speaker Change: It depend on sort of industry customer forecasts so.

Speaker Change: Our guide reflects that.

Scott C. Donnelly: We don't really apply a whole lot of our own judgment to that. We really go with where the industry tells us they're going, and we've got to see how the year plays out. I think we feel good about the business. Some of the restructuring we did was reflective of where the volume growth is and where the volume growth isn't. But the business is in a healthy place, and the margins have been doing better as we've come out of all the post-COVID world, and the volumes will be obviously consistent with global auto OEM numbers.

We don't we don't really play a whole lot of our own our own judgment to that we'd really go with where the industry tells us they are going.

Speaker Change: We got to see how the year plays out I think we feel good about the business. So the restructuring did was reflective of where where the volume growth is and where the volume growth isn't.

Speaker Change: But the business is in a healthy place and the margins have been doing better as we've come out of all of those sort of a post COVID-19 world and the volumes will be.

Scott C. Donnelly: Well, look, I don't know how to quantify the exact number for you, Noah, but there are a couple of dynamics here that make us feel good about it. Again, we saw better labor productivity. You know, all of the metrics we track in terms of, you know, training hours, charging to interact, all those sorts of things, applied hours. We're positive about the quarter. We do track the number of parcels that are late to PO.

Speaker Change: Obviously consistent with global.

Auto OEM numbers.

Speaker Change: Okay, and then I had a couple questions on aviation. Are you expecting caravan sales deliveries to be up in 24? I know you deliver a lot of them to Asia and we're seeing some some softness in China. So just wonder what you're seeing there.

Speaker Change: Okay got it and then you add a couple of questions on aviation.

Speaker Change: Are you expecting caravan sales deliveries to be up in 'twenty four I know you deliver a lot of them to Asia and we're seeing some softness in China. So I'm just wondering what youre seeing there.

Speaker Change: Well, look, Pete, I mean, we're not going to get into model by model, but I would say, you know, net of everything, the turboprop market.

Speaker Change: Well, Peter I mean, we're not going to get into a model by model, but I would say you know net of everything that to remark turboprop market.

Scott C. Donnelly: These numbers are getting better. Plus, I think as you look at 23 to 24, we have net less hiring we need to do to hit the ramp. Last year was a big year in terms of onboarding new people. As you can imagine, that's very disruptive.

Speaker Change: is doing really, really well. As you know, that does tend to be a little bit more international. I think we usually give the numbers, you know, roughly 60%, you know, international versus the jet side is 80. But I think our turboprop business is in a really good place. I think caravans will do well. I think King Airs are going to be strong. We continue the ramp on the Sky Carrier. So, you know, we tend to get mostly questions around jet. But, look, I think the turboprop business is in a very good place. And we certainly, you know, net expect to see that business continue to grow in 2024.

Speaker Change: Is doing really really well as you know that that does tend to be a little bit more international.

Speaker Change: You didn't give the numbers.

Speaker Change: 60% international versus the jet side is 80.

Scott C. Donnelly: It's a lot of training that takes not just new people, but it takes a lot of our capable people to help train and develop them. We made a lot of investments in 2023 around new training facilities, but the absolute number, we still need to onboard new people for sure, but the number of them is less than what it was in 2023, and that should be helpful. The supply chain thing, as I said, is getting better. But it's still susceptible to the wrong part being unavailable, right?

Speaker Change: But I think our turbo business is in a really good place I think caravans will do well I think in years are going to be strong. We continue the ramp on the sky Courier. So.

Speaker Change: We tend to get most of the questions around Jeff, but look I think the turboprop businesses and are isn't a very good place and we certainly net expect to see that business.

Speaker Change: To grow in 2024.

Speaker Change: Okay, great. Thank you.

Speaker Change: And next we go to a question from Cai von <unk> with TD Cowen. Please go ahead.

Speaker Change: Go to a question from Cai Von Rumor with T.D. Cohen. Please go ahead.

Speaker Change: Yes, thanks so much.

Cai von Rumohr: Yes, thanks, so much so.

Speaker Change: Scott, at Bell, are you...

Cai von Rumohr: Scott.

Scott C. Donnelly: I mean, I think it's going to help us do less out-of-station work, but we still have suppliers we're keeping a close eye on because a lack of delivery on their part can hold up an aircraft. So we're still being cautious about how we work through that, but it is improving. Like I said, there is less hiring.

Cai von Rumohr: Bell.

Cai von Rumohr: Are you.

Cai von Rumohr: Looking for.

Speaker Change: Looking for...

Cai von Rumohr: You know as part of our profit.

Scott C. Donnelly: You know, he's part of the profit.

Scott C. Donnelly: Strength this year, 24, coming from closeouts on...

Cai von Rumohr: Strength this year 24.

Cai von Rumohr: Coming from Closeouts on the V 22, and the H, one and secondly is there any risk to flora volume from an extended CR.

Scott C. Donnelly: I think most of our lines are flowing better as a result of all the things I just talked about. So we do factor that into our billing. We do factor that into our ability to hit that larger number of aircraft deliveries in 2024, and I think we'll get there. Okay, that's good. I'm just going to ask one more. The bell margin, you know, pretty strong in the quarter, closed 23 well ahead of the initial plan. 24 Guide 9.5 to 10.5, Kind of flat year over year, but there was a view that this was going to 7-8% as you ramped up flora. You're ramping up flora, that's not happening.

Scott C. Donnelly: and the H1 and secondly is there any risk to flora volume from an extended

Operator: More information about the Flower Program Thank you. Next, we go to a question. Peter Arment with the Baird.

Peter J. Arment: Yeah, good morning, Scott, Frank, David. Hey, just maybe just circle back just on how you, March. Scott Donnelly, how are we thinking about that flowing through? I mean, just given the margin outlook at 12, kind of at the low end. How do you think?

Speaker Change: So, Cai, you know, look, I think the 2024, you know, we'll, we obviously will see some contracts come to an end and there will be some MR release when you do that. But, look, I think we can, you know, execute well on that performance. I mean, I think Q4 is a good example, Cai. We had about $8 million total in the company of EACs. That's not a particular material number and it's flat on a year-over-year basis. So, do I think we'll have some, you know, some reserve release next year? Sure, we will. I mean, we normally do as we perform through these.

Speaker Change: So Cai you know look I think the 2024.

Speaker Change: We'll we'll obviously, we'll see some contracts come to an end and there will be some MLR released when you do that but look I think we can.

Speaker Change: Execute well on that perform I mean, I think Q4 is a good example, we had about $8 million total in the company of <unk> is that not a particularly material number is flat on a year over year basis. So.

Scott C. Donnelly: Sure. Well, Peter, I think we definitely expect to continue to see price, you know, net of inflation, as a positive for us. It won't be as significant as it was in 2023, but we still have good prices, you know, in the backlog. And I think it will be a tailwind for us. So if you look at the guide and the numbers, Peter, you're right.

Speaker Change: Do I think we'll have some some reserve release next year sure. We will I mean, we normally do is we performed through these programs, but I think the cost out activity that we've been driving.

Speaker Change: But I think the cost out activity that we've been driving, the absorption and growth on both the commercial revenue side as well as the flora revenue side will all help to contribute to preserving and getting a good margin rate for 2024.

Scott C. Donnelly: Can you talk about how you're outperforming there and absorbing the Flora ramp? Is 24 the trough, or does that still need to go down by some number of hundreds of basis points before coming back?

Speaker Change: The absorption and growth on both the commercial revenue side as well as the Florida <unk>.

Speaker Change: Revenue side will all help to contribute to preserving and getting a good margin rate for 2024.

Scott C. Donnelly: Oh, look, no. I think the team is doing everything they can to manage costs, you know, control, you know, do the right cost actions here as we see the ramp down on some of these military production programs, and we continue to do that. Those were certainly better mixed than, you know, a big cost plus. You know, EMD program, so we still, you know, we'll have some pressure around the margin rate. But as we talked about that, the growth benefit of seeing this program ramp up, we believe will still generate accretive, not dollars. So even if we see some pressure on the margin rate, the business will still be contributing, you know, positively to the overall revenue and, therefore, EPS for the business. All right, thanks, for the line by Myles Walton. Thanks. Good morning.

Scott C. Donnelly: Look, I mean, as I said, I think we saw some improved performance in Q4 on the manufacturing, you know, conversion side. So, you know, we're bringing some of that in as we go into 2024. But, you know, as you move towards the high side of the guidance, you get up into that 20 plus percent conversion, which is where we historically like the business to be. So it's, you know, it's something we got to work on, obviously. We still have some of those headwinds that we faced all this year on the operating side. But the combination of improved performance and continued price over inflation as a positive, while it's not as big a positive, I think will help us get towards that 20 plus range. I got it.

In terms of.

Speaker Change: In terms of the CR, I think we're okay. You know, I mean, as we talked about before, if the CR goes all the way through a full year,

Speaker Change: I'm sorry in terms of the CR.

Speaker Change: I think we're okay, you know what I mean.

Speaker Change: As we've talked about before if the CR goes all the way through a full year.

Speaker Change: That could put some pressure, for sure. I think the Army probably has backup plans they're trying to work in terms of how they would move money around. Obviously, FLAR is a very high priority, very important program to them as well. So this whole thing would be a heck of a lot easier if Congress would just pass a budget, for sure. But right now, I think we're okay. And unless it really goes to a full year, I think we'll collectively return ourselves and the Army will be able to manage through it.

Speaker Change: That could put some pressure for sure I think the army probably has you know.

Speaker Change: Backup plans they are trying to work in terms of how they would move money around obviously, Florida is a.

Speaker Change: It is a very high priority very important program to them as well. So one thing would be a heck of a lot easier if congress just passed a budget for sure.

Speaker Change: But right now I think we're okay, unless it really goes to a full year I think will collectively between ourselves and the army be able to manage through it.

Speaker Change: Got it and last one at aviation can you give us some color in terms of where the order strength is in terms of fractionals versus high net worth versus corporate.

Speaker Change: Got it. And last one, at aviation, can you give us some color in terms of where the order strength is in terms of fractionals versus high net worth versus?

Scott C. Donnelly: I was hoping to focus on aviation. In the last few quarters, there's been more discussion of this performance as a negative variance to the profit walk. But that wasn't part of the conversation.

Speaker Change: It's pretty stable, Kai. We aren't really seeing a change from where we were. We don't break all that out, obviously, but the demand has been...

Speaker Change: Yes, it's pretty stable Cai, we arent really seeing a change from from where we were we don't break all that out obviously, but it's.

Scott C. Donnelly: It was clearly price offset by a little bit of volume. Is it fair to think that that bucket of performance that you all cite has materially become non-material? Well, I wouldn't say non-material, but I would say, Myles, in 2023, we had...

Frank T. Connor: That's helpful. And then just trying quickly, the interest expense increase, maybe what's going on there specifically. Yeah, a little.

Speaker Change: The demand is brynn.

Speaker Change: You know, pretty strong. In terms of mix, as you know, the jet stuff tends to be more, you know, domestic.

Speaker Change: Pretty strong in terms of mix as you know are the the jet stuff tends to be more domestic roughly 80 20. The turboprop is more like 60 40 international.

Frank T. Connor: We've got slightly higher borrowing costs from the bond deal that we did last year, so that's a little bit of a rollover on the financing. It assumes slightly lower cash balances and, you know, a little bit of conservatism around the interest rate that we earn on that excess cash. Thank you, and many more. David Strauss with Barclays, please go ahead.

Speaker Change: roughly 80-20, the turboprop is more like 60-40 international.

Scott C. Donnelly: Pretty significant price over inflation benefits, and I think we did talk through the course of the year that that did help to offset some of the performance issues that were driven by these labor inefficiencies and supplier impacts and stuff like that. So I think as you look at 2024, we're expecting improved margins. We're absolutely expecting significantly improved revenue and, therefore, operating profit in the business. But the, you know, the trade you're going to see is there's probably still a positive price over inflation, but not as big a number, but you're going to have less performance issues to have to cover with that number, because we do expect to see better efficiencies in the factories and a lesser impact from the supply. So, you know, so, you know, none of all this stuff. I mean, there's a different dynamic, I believe, in 2024. That's how we're going to get there than in 2023.

Speaker Change: We haven't seen big changes in that. We haven't seen big changes in the mix between what goes through the fractional world and what goes through the whole aircraft side.

Speaker Change: We haven't seen big changes in that we haven't seen big changes in the mix between what goes through the fractional world and what goes through the.

Speaker Change: Whole aircraft side.

Speaker Change: End demand continues to be, we think, pretty strong across the board.

Speaker Change: And demand continues to be we think pretty strong across the board.

Speaker Change: Thank you very much.

Speaker Change: and go to...

Speaker Change: Next we go to a question from Doug Harned with Bernstein. Please go ahead.

Douglas Stuart Harned: Douglas Harned

Douglas Stuart Harned: Go ahead.

David Strauss: .. Thanks. Good morning, everyone. Morning, Dave. Good morning, Scott. I wanted to ask about the grounding. Does that impact Bell at all?

Douglas Stuart Harned: Good morning. Thank you.

Douglas Stuart Harned: Good morning, Thank you.

Douglas Stuart Harned: Scott, in the past, you'd commented on the supply chain that you'd actually seen more challenges at Bell than you had in aviation. And given the strong margins at Bell, I mean, can you comment on where that stands today?

Douglas Stuart Harned: Scott.

Douglas Stuart Harned: In the past you'd commented on the supply chain that you had actually seen more challenges at bell than than you had in aviation and given the strong margins at Bell I mean can you comment on where that stands today.

Scott C. Donnelly: on the V-22. Uh, no, David; I don't think it's a material impact. You know, the services are, you know, frankly, using the opportunity of the grounding to continue to do their maintenance activities and, you know, get aircraft ready to fly. So, um, we probably can't say much more about that situation than that. But no, I don't expect it to have a material impact. Okay, and Frank, free cash flow, live. I know you had a pretty big inventory build-in, 23, but y'all said positive.

Douglas Stuart Harned: Well look I. This is the challenge of the World we're living in right. I mean, we had some pretty significant impacts of bell in the earlier part of the year around a very small number of.

Scott C. Donnelly: This is the challenge of the world we're living in, right? I mean, we had some pretty significant impacts at Bell in the earlier part of the year around a very small number of suppliers. A couple of those suppliers, you know, either got healthier or in some cases we brought stuff inside and exited those suppliers. So, you know, when you do that, you know, we had a situation at Bell with a couple of the aircraft models where we had very specific.

Douglas Stuart Harned: Of suppliers a couple of those suppliers.

Douglas Stuart Harned: Healthier or in some cases, we brought stuff inside and exited those suppliers. So when you do that.

Douglas Stuart Harned: Had a situation of bell with a couple of aircraft models, where we had very specific.

Scott C. Donnelly: But, you know, the bottom line is you're going to see significant revenue growth and significant operating profit, including an expanding margin in 2024. And then on the restructuring program you executed, I think about 60%, maybe, was directed at Bell. Of the 75 gross savings you talk about, how much net savings is Bell getting in 24 and also is Bell getting most of the lower R&D? Oh, well, look, I mean, we're probably not going to break that all the way down.

Scott C. Donnelly: of supply issues that were ever resolved. And as a result, Q4 had a pretty strong delivery number on a year-over-year basis. So again, this is the challenge. So while the absolute number of parts might be getting less,

Douglas Stuart Harned: Supply issues that we were able to resolve and a result as a result Q4 had a.

Frank T. Connor: What do you see me for working capital? And in terms of the Adjust the UPS Guide, what are you baking in as far as share count and share repo are concerned in 24? Yeah, from a cash standpoint, you know, we obviously are anticipating volume growth in the year. So that's going to put a little continued pressure on inventory levels. As we look, you know, kind of to 24 and 25 volume growth, not a lot. There is a little bit of working capital pressure with the timing and some customer payment activity, particularly on the military side. Bell, in particular, had a very good year in 23, in terms of the timing of payment activity that puts a little bit of a headwind on cash flow. And then, you know, as you heard a little higher CapEx guidance, you know, kind of in terms of the spend there. So it's not just any one item.

Douglas Stuart Harned: A pretty strong delivery number.

Douglas Stuart Harned: On a year over year basis. So again. This is this is the challenge so while the absolute number of parts might be getting less Hugh.

Scott C. Donnelly: We can still have a part problem that has a significant impact. So that's just the nature of the beast and what our guys work through every day. So I think we did resolve a couple of critical issues in the latter part of the year at Bell that enabled those higher deliveries and obviously we've got to keep working it.

Douglas Stuart Harned: You can still have a a part problem that has a significant impact. So that's just the nature of the Beast and what our guys work through every day. So I think we did resolve a couple critical issues in the latter part of the Europe Belden enabled those higher deliveries and obviously, we've got to keep working on it.

Douglas Stuart Harned: And then if I if I go back to the aviation side and in the end market.

Scott C. Donnelly: And then if I go back to the aviation side and the in-market, one of the things we've seen is more pre-owned airplanes out there for sale, higher percentage. We're still not back at kind of historical norms, but you were commenting that you're seeing a little bit less pricing benefit relative to inflation. Are you seeing any potential pressure here from pre-owned as you look at your market?

Douglas Stuart Harned: One of the things we've seen is more pre owned airplanes out there for sale higher percentage were still not back at kind of historical norms, but you.

Scott C. Donnelly: But certainly part of why, you know, the discussion I just had with Noah around, you know, why are we seeing some, you know, better margins and, you know, holding in there on the margin rates at Bell is that this is part of why we took that restructuring action to control costs and manage our way as we reduce the volume in some of these, you know, historic military production programs. And so that's part of what's helping to sustain, you know, a better margin rate, even as we see those programs ramped out; we just have to take the cost out of the business in the areas that were largely supporting these big, you know, military production programs. So, I won't put the exact number in there, but that's the dynamic that's helping to improve that, you know, improve that margin. And is R&D dropped there mostly in Bell? Yeah, it is.

Douglas Stuart Harned: You were commenting that you are seeing a little bit less pricing benefit relative to inflation.

Douglas Stuart Harned: Are you seeing any.

Frank T. Connor: It's, you know, kind of a little bit of headwinds on working capital associated with the things I mentioned in a little bit higher levels of investment. But we still think we're, you know, there's still very solid cash flow performance for the year. In terms of the share count, we talked about 191 million average shares.

Douglas Stuart Harned: <unk> pressure here from pre owned and as you look at your market.

Speaker Change: No, we're not. Look, I think it's a, you know, look, first of all, as you noted, it's up versus where it was, which was at ridiculously low levels. It's still at historically, you know, lower levels than normal. And, you know, look, we keep a very close eye on this. They're mostly much older aircraft, right? So the phenomenon that people kind of refer back to says, geez, you know, do you have aircraft competing with new aircraft sales? Obviously, there was a time, going back a number of years ago now, where you had relatively new aircraft that were, you know, coming onto the market. And we're just, we're not seeing that dynamic. You know, when we look at what's out there, what's available for sale in the used market, the number is increasing, but they are...

Speaker Change: No were not look I think it's a look first of all as you noted it's up versus where it was which was a ridiculously low levels.

Speaker Change: It's still a historically lower levels than the normal.

Jason Gursky: So, you know, kind of a roughly 5% or so reduction in average share count. Thank you. Here we go to Jason Gursky, with. Go ahead. Good morning, everybody. Scott Donnelly.

Speaker Change: Look we keep a very close eye on this there are mostly much older aircrafts right. So the.

Speaker Change: The phenomenon that people kind of refer back to says Geez, you have aircraft competing with new aircraft sales.

Speaker Change: Obviously, there was a time going back a number of years ago, now where you have relatively new aircrafts that were coming onto the market and we're just we're not seeing that dynamic when we look at what's out there what's what's available for sale in the US market. The number is increasing but they are considerably.

Scott C. Donnelly: I mean, as you know, we don't break that all the way out. But look, we still had, as you recall, the delay of the FLAR program in 2023. We had more of our own costs still sustaining and supporting that program in the earlier part of the year. Obviously, as that has ramped up and become a full-blown contract, that's helping to reduce that number. The overall gross R&D of the business is still growing significantly.

Scott C. Donnelly: Scott, I was wondering if you could just spend a few more minutes on systems and talk about the pipeline of opportunities there. Timing of potential awards, the backdrop of what's going on, with the budget in mind, and whether continuing resolutions to go out have any impact on kind of your So, the CR situation right now doesn't really worry me very much on the systems side of things. As we indicated, Jason, we're going to be relatively flattish, you know, on revenue in 2024. I'd say the pipeline is very strong. You know, you look at some of these downselects on FTOAS, the ARB program, what used to be the OMFV program, NEXM-30, you know, a lot of these things are, you know. We have some really significant opportunities for us, there are really important down-selects that we achieved last year, we'll execute on those, and they're not big growth programs, so they don't So that's why you see us kind of flattish.

Speaker Change: and many more.

Speaker Change: Considerably older and in large part out of production.

Speaker Change: Aircrafts. So so no we're not really seeing an.

Speaker Change: An impact of used aircraft out there that are competing with new aircraft.

Scott C. Donnelly: As FLARA ramps up, but the net number in terms of the IRAD side is certainly shifted from that IRAD into the contract. Thank you. Thanks for watching!

Speaker Change: Sales.

Speaker Change: Okay, very good. Thank you.

Speaker Change: Okay very good thank you.

Speaker Change: And next we go to Gavin Parsons with UBS. Please go ahead.

Speaker Change: Kevin

Speaker Change: Yes, please go ahead.

Operator: Thank you. Go ahead. Robert, Scott, I'd say just... Nothing that I would comment on in a call. We all have our problem children, and many more.

Gavin Parsons: Thank you good morning.

Kevin: Thank you.

Gavin Parsons: Alright, good morning.

Kevin: I'm going to circle back to industrial markets.

Gavin Parsons: Just wanted to circle back to industrial margins and just get a better sense for what's driving that given I think context had been the section under segments underperforming.

Scott C. Donnelly: Sure. Nope. We definitely would not comment on that. And look, I think what we've talked about and, you know, Frank's, you know, indication on the share count of $191 million obviously indicates that our priority continues to be share buyback, and that is, we think, at this point, a pretty significant benefit for our shareholders, and that's what we expect to continue to do in 2024. Thank you. Thanks very much. Good morning, everyone.

Kevin: a better sense for what's driving that.

Kevin: and the rest.

Gavin Parsons: And then just thoughts on it seems like in TSV. Some of your recreational vehicle competitors are having headwinds, what's driving the margins and growth there.

Speaker Change: Well, look, I mean, every...

Speaker Change: Well look I mean every route.

Speaker Change: So I always look we have we've we've we look at those end markets, albeit in the auto side or in the in the.

Speaker Change: Look, we look at those end markets, be it in the auto side or in the vehicle side, and our view is, as I said, I think overall the industrial will be pretty flat, but with improved margins, and that's largely, again, based on just industry forecasts. We think Caltech's volumes will be down somewhat, although we think margins will continue to improve in that business. On the vehicle side, I think we'll see modest growth, and that is because we do factor in some of these higher dollar discretionary items. We don't expect to see growth in that area, but net of all of that, the business will probably still see some modest growth and, again, continue to have performance on the margin line. So those things that you guys might aggregate and look at in terms of other guys in that market are completely consistent with what we're seeing. But, again, that is absolutely factored.

Speaker Change: And the vehicle side and.

Scott C. Donnelly: You know, we had, I think 2023 was a hugely important year for the downselects on those really important programs that execute this year, and you start to see the revenue growth driven by, you know, ultimately, being final selection awards, EMD programs that award in 2025. Okay, great. Thank you.

Speaker Change: Our view is as I said I think overall, the industrial will be pretty flat, but with improved margins and thats largely again based on just industry forecast, we think capex volumes will be.

Scott C. Donnelly: I guess just asking about the performance at aviation and kind of the improvement in productivity and parts availability that you started to see in the fourth quarter. Does that mean that in the first quarter, we can expect to see kind of a nice increase in deliveries and something that would kind of, you know, affirm the notion of being on track for the revenue guide for the year? Well, we're not going to get into quarterly guidance for sure, but you certainly should expect to see a nice progression in terms of revenue on a quarter-to-quarter basis over 2023, consistent with the guidance of $6 billion in revenue for the total year. Okay. Okay. Great.

Speaker Change: Down somewhat although we think margins will continue to improve in that business on the vehicle side I think we will see modest growth and that is because we do factor in some of these higher dollar.

Scott C. Donnelly: And then just quickly on eAviation, we've got, you know, widening profitability losses. They're projected for, see you around, higher revenue. I just want to be just kind of, give us a broad stroke update on the plans for that business. At what point does, you know, the revenue see those profitability losses? Sure, absolutely.

Speaker Change: Discretionary items, we don't expect to see growth in that area, but net of all of that the business probably still see some some modest growth and again continued performance on the margin line. So.

Are those things that you guys might aggregate and look at in terms of other guys in that market are completely consistent with what we're seeing but again that is absolutely factored into our guide.

Operator: And then maybe just following up a little bit on Rob's question, I know you probably won't comment on specific M&A reports, but the reports that we have read tend to deal mainly with the space and market. I wonder if you could comment on, you know, Do you view that as an important and or attractive end market into which to invest? I wouldn't comment.

Speaker Change: Yeah.

Speaker Change: And maybe just circling back to the net jets 1500 over over 15 years, I think typically they firm up about a year out.

Speaker Change: I'm just circling back to the

Scott C. Donnelly: Look, you know, keep in mind there are two things going on in that aviation segment, right? There's Pipistrel, which is, you know, our current, it's a real business, real sales, roughly doubling the volume of aircraft sales from 22 to 23, you know, roughly doubling 23 to 24. So I think, you know, the product lineup at Pipistrel is doing quite well. We're expanding distribution channels. You know, look, it's a relatively small business, but it's doing well. What's driving the losses are these investments in R&D, particularly around the Nexus program.

Speaker Change: Typically, they've...

Speaker Change: But on average, that would be 100.

Speaker Change: But on average that would be 100 deliveries a year is that something you'd need more visibility from them on over that decade of orders.

Speaker Change: is that's

Speaker Change: More visibility from them on?

Speaker Change: Thank you for that deck.

Speaker Change: Well, we don't, and you're right. So the way we treat the backlog is when those firm up, and that is roughly 12 months, where they actually put deposits down, that's the point at which we move those aircraft into actual backlog.

Speaker Change: Well, we don't on your right.

Operator: Fair enough. Alright, I'll stick to those. Thank you very much. Hey guys, can you hear me okay?

Speaker Change: The way we treat the backlog is when those when those firm up and that is roughly 12 months.

Scott C. Donnelly: Yep, we can hear you fine. Well, Kristine, as we kind of put out there, there's a sizable piece that's going into Bell, and that's, you know, really aligning our cost structure with the lower production rates on some of the historic military programs like H-1 and V-22. You know, that's a very, in terms of cost and the mix of people within the business, the ramp obviously is net positive, but it's largely on the engineering, you know, program side of the flower program. So it's a necessary action to align cost with the old historic production programs.

Speaker Change: Where they actually put deposits down if that's the point at which we move those aircraft into actual backlog.

Speaker Change: In terms of, you know, looking out beyond that, we do absolutely work closely with them on forecasting what that demand is going to look like, even outside of that one year, you know, firm up period. So, you know, we certainly have very, very good dialogue and working with them to, you know, collectively anticipate what that demand is going to be on the fractional side. But then we don't firm up and put into that actual backlog number until roughly, as you said, that one year window.

Speaker Change: In terms of looking out beyond that we do absolutely work closely with them on forecasting what that demand is going to look like even outside of that one year.

Scott C. Donnelly: You know, that's something that won't generate revenue probably for several years, and, you know, investment in, say, the Nuva 300, which is our, you know, hybrid unmanned cargo, which, again, is a few years from revenue. And so that's, you know, part of why, Jason, we broke this thing out, right, so that you guys see these investments. You know, which are not, you know, frankly, dependent or tied to the revenue within that segment. So the two big moving pieces in there in terms of the investment side are the NUVA on the unmanned cargo side and the Nexus on the sort of the eVTOL side, which again, I don't think that has to be necessarily dependent on urban air mobility, but just GA, you know, in general, that both of those teams are in great shape. I think we'll see the first flight of the Nuva in 2024.

Speaker Change: From a period. So we certainly have very very good dialogue.

Speaker Change: Working with them to collectively.

Speaker Change: What that demand is going to be on the on the fractional side, but then we don't firm up and put into that actual backlog number until roughly as you said that one year window.

Scott C. Donnelly: As we also indicated, we're aligning some of our plants on the auto side to understand where there is demand around the world and rationalizing where we think it's appropriate to keep that business healthy with a high return and strong cash flow. You know, it's just, you know, there's bits in a number of other places, but, you know, we believe on a run rate basis, it's going to be about $75 million a year, positive impact on the business. And so that's, I think, a good return and why we decided to proceed with the program. Great, thanks for the color.

Speaker Change: That's helpful that makes sense. Thank you.

Speaker Change: Thank you.

Speaker Change: Sure.

Speaker Change: And ladies and gentlemen, as a reminder, this conference is available.

Speaker Change: Thank you.

Speaker Change: Replay and will be.

Speaker Change: <unk>.

Speaker Change: A M eastern time today through <unk>.

Speaker Change: 24, 2020, you may access the replay by dialing 866.

Operator: We've also begun the assembly and, you know, wings and fuselage build on the Nexus program in Wichita. So both programs are making, you know, very good progress, but they're both technology investments. Hey, good morning, everyone.

Speaker Change: 71041, and enter the access code of four.

Speaker Change: 65507, and that does conclude your conference for today. Thank you for your participation you may now disconnect.

Scott C. Donnelly: And maybe on aviation, if I could do a follow-up, you know, $100 million in pricing power for new aircraft is very healthy. And so if we're seeing, if you're continuing to see bottlenecks in new aircraft production, can you talk about the demand environment for aircraft services then? And what's the pricing power in services, especially with the lack of, you know, new airplanes coming into the market?

Scott C. Donnelly: There you go. Scott, we've heard some discussion in the business jet end market that even though 2023 was a decent order year, that there's actually maybe some pent-up demand because it was so consensus that there was going to be a recession or something like it, and you know that in 2024, if we were having an inflation decel and rate cuts and some version of a soft landing, you could have your normal underlying demand plus anybody that deferred And so I'm curious if you hear that from your customers or your sales force, and there's an upside case for bookings, or is that too aggressive and you should just stick with book to bill of one? Well, look, no, I think, as I said at the beginning, we feel good about the end market, customer dialogues are robust, you know, you know, frankly, the only headwind I see we run into is just availability, right? People would like to get our craft, you know, sooner. So, you know, we're, I think our sales folks are out there working hard. There's no doubt there's demand.

Scott C. Donnelly: Look, I think, you know, what we saw this year, which was, you know, strong growth, six and a half percent on the services side. Obviously, that's a mixture between volume and pricing. I expect we'll continue to see good demand on that side. We certainly have that baked into our forecast. Aircraft are flying.

Scott C. Donnelly: Our customers are running the aircraft. They're doing the necessary maintenance. So, you know, I think it'll continue to be a healthy part. Certainly, what we've incorporated in the guide for next year is good growth in the service business, both in our service centers as well as for parts. And as always, that's going to be a function of both volume increases as well as annual expected pricing on the aftermarket side. Great, thanks Scott. Can we go to the lineup? Shapiro with Shapiro. Yes, good morning, George.

Speaker Change: We're sorry your conferences ending now please hang up.

Speaker Change: We're sorry, your conference is ending now. Please hang up.

Scott C. Donnelly: I think that's, as I said earlier, helped by the fact that we've got some new models that are coming out that are going to be really well received in the market. So all in all, as we talked about, your book to bill number can change a little bit quarter to quarter, but I think we feel, we feel very good about the end market. I think we'll stick at this point with our kind of one to one and our base assumption, as we did in 2023.

Operator: Scott, I was just curious. You were saying that the supply chain seems better, yet the deliveries in the fourth quarter were a lot lighter than what most of us were looking for. Kind of connect the two dots there. As you know, it takes many months to build an aircraft. So, you know, the improvements on both the labor side and the parts side take a while to push through the system. So the higher cost and a lot of the impacts that we kind of saw through the course of the year, you know, were full year impacts. So, but I do feel like, as we look at the numbers, you know, and what we experience on a day-to-day basis, we did see improvements. And I think that as a result, you'll start to see that improvement, you know, as you get into the next year. 2024. One other one.

Scott C. Donnelly: And if the market remains, you know, that robust, we can exceed that number, which would be great. So, I think the market, the market to, you know, remain strong, it's, we feel good about it. Okay.

Scott C. Donnelly: And I wondered if you could maybe discuss a little more just how much better supply chain labor is, your ability to get airplanes out the door, you know, the delivery number was down in 23 despite all the demand, kind of to your point there on availability, that whatever the 24 delivery plan is, it's got to be up a lot to get to that revenue guidance. Do you feel like you really have that hitting the ground running in January here? And then as that pertains to the margin, why would price net of inflation not be better if that, you know, pricing is still good?

Scott C. Donnelly: The book to bill in the quarter was, you know, 0.9, and the orders were only 1.4 billion. So that was really down a lot from last year as well as from the third quarter. Now, I guess you're just looking at timing, or does it have anything to do with Noah's comment that people are concerned about a recession in the fourth quarter. We get a pickup this year, but you just commented on that as well. George, I think it's largely timing.

Scott C. Donnelly: I know the rate of change matters, but if that cost inflation and disruption settles down significantly for you, well, look, I don't know how to quantify the exact number for you, Noah, but there are a couple of dynamics here that make us feel good about it. Again, we saw better labor productivity. All of the metrics we track in terms of training hours, charging to interact, all those sorts of things, applied hours.

Scott C. Donnelly: You know, we always have a little bit of lumpiness in terms of when deposits are coming in on, you know, some of our larger customers, but there's, I don't think there's anything concerning there. We've said all along that we expect there's going to be some quarters where it's going to be below one to one, probably some quarters where it's above one to one. But again, our assumption, you know, full year going all the way back through 23 was one to one. But we did better than that.

Scott C. Donnelly: We're positive in the quarter, you know; we do track the number of parts that are late for PO, you know; these, these numbers are getting better. Plus, I think as you look at the 23 to 24, we have net less hiring we need to do to hit the ramp. You know, last year was a big year in terms of onboarding new people. As you can imagine, that's very disruptive.

Scott C. Donnelly: You know, it's a lot of training that takes not just the new people, but it takes a lot of our capable people to help train and develop them. We made a lot of investments in 2023 around new training facilities. So, but the absolute number, you know, we still need to onboard new people for sure, but the number of them is less than what it was in 2023. And that should be helpful. The supply chain thing, as I said, is getting better. But it's still susceptible to the wrong part being unavailable, right?

Scott C. Donnelly: Our assumption in 2024 is that it's going to be one to one. And, you know, obviously, we'll see how the market plays out. But I still think we feel good about the end market. We feel good about demand. And I think it's healthy.

Scott C. Donnelly: The strong Bell margin in the quarter, I mean, does that just really reflect the commercial delivery strength, which has much higher margins, more than offsetting the drag from the lower margin Flora program? If that would continue next year, the margins would probably be somewhat higher than what you've guided to. George, I think we're continuing to see good margins on our military business. Obviously, outside of the FLORA side, it certainly helps to have higher commercial deliveries.

Scott C. Donnelly: I mean, I think it's going to help us do less out of station work. But we still have suppliers we're keeping a close eye on because the lack of delivery on their part, you know, can hold up an aircraft. So, you know, we're still being, you know, cautious about how we work through that. But it is improving. Like I said, there is less hiring.

Scott C. Donnelly: I think most of our lines are flowing better as a result of all the things I just talked about. So, you know, we do factor that into our ability to hit that larger number of aircraft deliveries in 24. And I think we'll get there. Okay, that's good.

Scott C. Donnelly: I think we'll get some benefit of higher commercial deliveries, as we talked about, in 2024. But look, there's going to continue to be some pressure on the margin just because we're seeing significant growth in the FLORA program. The reason we did the cost actions and did the restructuring was to try to shore up the profitability of the business on the legacy production programs.

Operator: I'm just gonna ask one more question. The bell margin, you know, pretty strong in the quarter, closed 23 well ahead of the initial plan. 24 Guide, 9 12 to 10 12, you know, kind of flat year over year, you know there was a view that this was going to seven eight percent as you ramped up flora, but you're ramping up flora, so that's not happening. Can you talk about how you're outperforming there and absorbing the floor ramp is 24 the trough or does that still need to go down? Some number of hundreds of basis points before then going back.

Scott C. Donnelly: And so part of the guide is obviously we continue to see some benefit from that. But again, there will be overall margin rate pressure going into the future. But I think, as we talked about, even with that and the growth of the FLORA program, we're going to see significant revenue growth, and we're going to see absolute profit increases and accretion depreciation. So I think, as we work through a transition from legacy production to a new EMD program, I think we can manage our way through that well. And, obviously, long term, it's going to be a great story for us. Okay, thanks very much. Thank you. Yeah, hi, good morning guys. Scott, can you expand on your opening comments regarding Caltech and your expectations there in 2024? It sounds like you think you might be a little bit weak there. I just was wondering what the drivers were.

Scott C. Donnelly: So we still, you know, we'll have some pressure around the margin rate. But as we talked about that, the growth benefit of seeing this program ramp up, we believe will still generate accrued, accretive NOP dollars. So even if we see some pressure on the margin rate, the business will still be contributing, you know, positively to the overall revenue and, therefore, EPS for the business. All right. Thanks for the line by Myles Walton. Thanks. Good morning.

Scott C. Donnelly: Sure, Pete. Look, that's one business where we really, you know, depend on sort of industry customer forecasts, you know, so our guide reflects that. We don't really apply a whole lot of our own judgment to that. We really go with where the industry tells us they're going, and we've got to see how the year plays out. I think we feel good about the business. Some of the restructuring we did was reflective of where the volume growth is and where the volume growth isn't. But the business is in a healthy place, and the margins have been doing better as we've come out of the post-COVID world, and the volumes will be obviously consistent with global auto OEM numbers. Okay, and then I had a couple questions on aviation. Are you expecting caravan sales deliveries to be up in 24? I know you deliver a lot of them to Asia, and we're seeing some some softness in China. So just wonder what you're seeing there.

Myles Walton: I was hoping to focus on aviation. In the last few quarters, there's been more discussion of this performance as a negative variance to the profit walk. But that wasn't part of the conversation.

Myles Walton: It was clearly priced offset by a little bit of volume. Is it fair to think that the bucket of performance that you all cite has materially become non-material? Well, I wouldn't say non-material, but I would say, Myles, look, in 2023, we had... you know, pretty significant price over inflation benefits. And I think we did talk through the course of the year that that did help, you know, to offset some of the performance issues that were driven by these labor inefficiencies and supplier impacts and stuff like that. So I think, as you look at 2024, we're expecting improved margins, you know, we're absolutely expecting significantly improved revenue, and therefore, operating profit in the business. But the trade you're going to see is there's probably still a positive price over inflation, but not as big a number, but you're going to have fewer performance issues to have to cover, you know, with that number, because we do expect to see better So, you know, of all the stuff, I mean, there's a different dynamic, I believe, in 2024. That's how we're going to get there than in 2023.

Scott C. Donnelly: Well, look, Pete, we're not going to get into model by model, but I would say, net of everything, the turboprop market is doing really, really well. As you know, that does tend to be a little bit more international. I think we usually give the numbers, you know, roughly 60%, you know, international versus the jet side is 80.

Scott C. Donnelly: But I think our turboprop business is in a really good place. I think caravans will do well. I think King Airs are going to be strong.

Scott C. Donnelly: We continue the ramp on the Sky Carrier. So, you know, we tend to get mostly questions around the jet. But, look, I think the turboprop business is in a very good place. And we certainly, you know, net expect to see that business continue to grow in 2024. Okay, great. Thank you.

Operator: Please go ahead. Yes, thanks so much. Scott, at Bell, are you... Looking for? You know, he's part of the profit.

Scott C. Donnelly: Strength this year, 24, coming from closeouts on... and the H1 and secondly, is there any risk to flora volume from an extended, So, Cai, you know, look, I think the 2024, we'll obviously will see some contracts come to an end, and there will be some MR release when you do that. But, look, I think we can, you know, execute well on that performance. I mean, I think Q4 is a good example, Cai.

Scott C. Donnelly: But, you know, the bottom line is you're going to see significant revenue growth and significant operating profit, including an expanding margin in 2024. And then on the restructuring program you executed, I think about 60%, maybe, was directed at Bell. Of the 75 gross savings you talk about, how much net savings is Bell getting in 24? And also, is Bell getting most of the lower R&D? Well, look, I mean, we don't, we're probably not going to break that all the way down.

Scott C. Donnelly: We had about $8 million total in the company of EACs. That's not a particularly material number, and it's flat on a year-over-year basis. So, do I think we'll have some, you know, some reserve release next year? Sure, we will. I mean, we normally do as we perform through these.

Scott C. Donnelly: But certainly part of why, you know, the discussion I just had with Noah around, you know, why are we seeing some, you know, better margins and, you know, holding in there on the margin rates at Bell is that this is part of why we took that restructuring action to control costs and manage our way as we reduce the volume in some of these, you know, historic military production programs. And so that's part of what's helping to sustain, you know, a better margin rate, even as we see those programs ramped out. We just have to take the cost out of business in the areas that we're largely supporting, you know, these big, you know, military production programs. I won't put the exact number in there, but that's the dynamic that's helping to improve that, you know, improve that margin. And is R&D dropped there mostly in Bell? No, it is not.

Scott C. Donnelly: But I think the cost-cutting activity that we've been driving, the absorption and growth on both the commercial revenue side as well as the flora revenue side will all help to contribute to preserving and getting a good margin rate for 2024. In terms of the CR, I think we're okay. You know, I mean, as we talked about before, if the CR goes all the way through a full year, That could put some pressure on the Army, for sure. I think the Army probably has backup plans they're trying to work out in terms of how they would move money around. Obviously, FLAR is a very high priority, very important program to them as well. So this whole thing would be a heck of a lot easier if Congress would just pass a budget, for sure.

Scott C. Donnelly: But right now, I think we're okay. And unless it really goes to a full year, I think we'll collectively return ourselves and the Army will be able to manage through it. Got it. And last one, at aviation, can you give us some color in terms of where the order strength is in terms of fractionals versus high net worth versus? It's pretty stable, Kai.

Scott C. Donnelly: I mean, as you know, we don't break that all the way out. But look, we still had, as you recall, the delay in the Flour program in 2023; we had more of our own costs, you know, still sustaining and supporting that program in the earlier part of the year, obviously, as that has ramped up and become a, you know, a full-blown contract. You know, that's helping to reduce that number. The overall gross R&D, the business is still growing significantly as Flour ramps up, but the net number in terms of the IRAD side is certainly, you know, shifted from that IRAD into the contract. Thank you.,,, Thank you.

Scott C. Donnelly: We aren't really seeing a change from where we were. We don't break all that out, obviously, but the demand has been... You know, pretty strong. In terms of mix, as you know, the jet stuff tends to be more, you know, domestic, roughly 80-20; the turboprop is more like 60-40 international.

Scott C. Donnelly: We haven't seen big changes in that. We haven't seen big changes in the mix between what goes through the fractional world and what goes through the whole aircraft side. End demand continues to be, we think, pretty strong across the board. Thank you very much, and go to... Douglas Harned. Go ahead. Good morning.

Operator: We have, Go ahead, or whoever. Scott, I say to the caller, Nothing that I would comment on on a call. We all have our problem children.

Scott C. Donnelly: Sure. No, we definitely would not comment on that. And look, I think what we've talked about, and Frank's, you know, indication on the share count of 191 million, obviously indicates that our priority continues to be share buyback. And that makes, we think, at this point, a pretty significant benefit for our shareholders. And that's what we expect to continue to do in 2024. Thank you. Thank you. Thank you. Thanks very much. Good morning, everyone.

Thank you. Scott, in the past, you've commented on the supply chain that you've actually seen more challenges at Bell than you have in aviation. And given the strong margins at Bell, I mean, can you comment on where that stands today? This is the reality of the world we're living in, right?

Scott C. Donnelly: I mean, we had some pretty significant impacts at Bell in the earlier part of the year around a very small number of suppliers. A couple of those suppliers, you know, either got healthier, or in some cases, we brought stuff inside and left those suppliers. So, you know, when you do that, you know, we had a situation at Bell with a couple of the aircraft models where we had very specific supply issues that were never resolved. And as a result, Q4 had a pretty strong delivery number on a year-over-year basis. So again, this is the challenge.

Operator: I guess just asking about the performance at aviation and kind of the improvement in productivity and parts availability that you started to see in the fourth quarter. Does that mean that in the first quarter, we can expect to see kind of a nice increase in deliveries and something that would kind of, you know, affirm the notion of being on track for the revenue guide for the year? Well, we're not going to get into quarterly guidance for sure. So I mean, you certainly should expect to see, you know, a nice progression in terms of revenue on a quarter-on-quarter basis over 2023, consistent with, you know, the guide of $6 billion in revenue for the total year. Okay, okay, great. And then maybe just following up with a little bit different twist on Rob's question.

So while the absolute number of parts might be getting less, we can still have a part problem that has a significant impact. So that's just the nature of the beast and what our guys work through every day. So I think we did resolve a couple of critical issues in the latter part of the year at Bell that enabled those higher deliveries, and obviously, we've got to keep working on it. And then if I go back to the aviation side and the in-market, one of the things we've seen is more pre-owned airplanes out there for sale, a higher percentage. We're still not back at kind of historical norms, but you were commenting that you're seeing a little bit less pricing benefit relative to inflation.

Operator: I know you probably won't comment on specific M&A reports, but the reports that we have read tend to deal mainly with the space and market. I wonder if you'd comment on, you know, Do you view that as an important and or attractive end market into which to invest? I wouldn't comment.

Are you seeing any potential pressure here from pre-owned as you look at your market? No, we're not. Look, I think it's a, you know, look, first of all, as you noted, it's up versus where it was, which was at ridiculously low levels. But it's still at historically, you know, lower levels than normal. And, you know, look, we keep a very close eye on this. They're mostly much older aircraft, right? So the phenomenon that people kind of refer back to says, geez, you know, do you have aircraft competing with new aircraft sales? Obviously, there was a time, going back a number of years ago now, where you had relatively new aircraft that were, you know, coming onto the market. And we're just not seeing that dynamic.

Operator: Fair enough. Alright, I'll stick to this. Thank you very much.

Kristine Tan Liwag: Hey guys, can you hear me okay? Yep, we can hear you fine. Okay, great. Hey, Scott, Frank, Dave, thanks. On your restructuring actions, can you provide more details on what you're doing and what your expectations are for the timing and the size of the payback from your investment? Well, Kristine, as we kind of put out there, there's a sizable piece that's going into Bell, and that's, you know, really aligning our cost structure with the lower production rates on some of the historic military programs like H-1 and V-22. You know, that's a very, in terms of cost and the mix of people within the business, the ramp obviously is net positive, but it's largely on the engineering, you know, program side of the flower program. So it's a necessary action to align cost with the old historic production programs.

Scott C. Donnelly: You know, when we look at what's out there, what's available for sale in the used market, the number is increasing, but they are... and many more sales. Okay, very good. Thank you. Kevin. Yes, please go ahead.

Operator: Thank you. I'm going to circle back to industrial markets, get a better sense for what's driving that, and the rest. Well, look, I mean, every end market, be it in the auto side or in the vehicle side, and our view is, as I said, I think overall industrial will be pretty flat, but with improved margins. And that's largely, again, based on just industry forecasts. We think Caltech's volumes will be down somewhat, although we think margins will continue to improve in that business. On the vehicle side, I think we'll see modest growth, and that is because we do factor in some of these higher dollar discretionary items. We don't expect to see growth in that area, but net of all of that, the business will probably still see modest growth and, again, continue to perform on the margin line. So those things that you guys might aggregate and look at in terms of other guys in that market are completely consistent with what we're seeing. But, again, that is absolutely factored in. I'm just circling back to the, Typically, they've... But on average, that would be 100, is that more visibility from them on?

Scott C. Donnelly: As we also indicated, you know, we're just aligning some of our plans on the auto side where there is demand around the world and rationalizing where we think it's appropriate to keep that business healthy with a high return and strong cash flow. So, you know, there's bits in a number of other places, but, you know, we believe on a run rate basis, it's going to be about $75 million a year, positive impact on the business, and so that's, I think, a good return and why we decided to proceed with the program. Great, thanks for the color.

Kristine Tan Liwag: And maybe on aviation, if I could do a follow-up, you know, $100 million in pricing power for new aircraft is very healthy. And so if we're seeing if we're continuing to see bottlenecks and new aircraft production, can you talk about the demand environment for aircraft services then? And what is the pricing power and services, especially with the lack of, you know, new airplanes coming into the market?

Scott C. Donnelly: Thank you for that deck. Well, we don't, and you're right. So the way we treat the backlog is when those firm up, and that is roughly 12 months, where they actually put deposits down, that's the point at which we move those aircraft into the actual backlog. In terms of, you know, looking out beyond that, we do absolutely work closely with them on forecasting what that demand is going to look like, even outside of that one year, you know, firm up period. So, you know, we certainly have very, very good dialogue and work with them to collectively anticipate what that demand is going to be on the fractional side. But then we don't firm up and put in that actual backlog number until roughly, as you said, that one-year window.

Scott C. Donnelly: Well, I think, you know, what we saw this year, which was, you know, strong growth of 6.5% on the services side, obviously, that's a mixture between volume and pricing. I expect we'll continue to see good demand on that side. We certainly have that baked into our forecast.

Scott C. Donnelly: Aircraft are flying, our customers are running the aircraft, they're doing the necessary maintenance. So, you know, I think it'll continue to be a healthy part, certainly, what we've incorporated in the guide for next year is good growth in the service business, both, you know, our service centers as well as the parts. And as always, that's going to be a function of both, you know, volume increases as well as, you know, annual expected pricing in the aftermarket side. Great. Thanks, Scott, go to the line. Shapiro with Shapiro, Yes, good morning. George.

Operator: Thank you. Sure. Thank you. We're sorry, your conference is ending now. Please hang up.

George D. Shapiro: Scott, I was just curious, you were saying that the supply chain seems better, yet the deliveries in the fourth quarter were a lot lighter than what most of us were looking for. Connect the two dots there. George, as you know, it takes many months to build an aircraft. So, you know, the improvements on both the labor side and the parts side take a while to push through the system. So the higher cost and a lot of the impacts that we kind of saw through the course of the year are, you know, we're looking at full year impacts. So, but I do feel like, you know, as we look at the numbers and what we experience on a day to day basis, we have seen improvements.

George D. Shapiro: And I think that as a result, you'll start to see that improvement, you know, as you get into 2024. And one other one, the book to bill in the quarter was, you know, 0.9, and the orders were only 1.4 billion, so that was really down a lot from last year as well as from the third quarter. Now, I guess you're just looking at timing, or does it have anything to do with Noah's comment that people are concerned about a recession in the fourth quarter, we get a pick-up this year, but if you could just comment on that as well? George, I think it's largely timing.

Scott C. Donnelly: We always have a little bit of lumpiness in terms of when deposits are coming in on some of our larger customers, but I don't think there's anything concerning there. We've said all along we expect there's going to be some quarters where it's going to be below 1 to 1, probably some quarters where it's above 1 to 1. But again, our assumption, full year, going all the way back through 2023, was 1 to 1. We did better than that.

Scott C. Donnelly: Our assumption in 2024 is that it's going to be 1 to 1. Obviously, we'll see how the market plays out, but I still think we feel good about the end market. We feel good about demand, and I think it's healthy. And one last one, the strong bell margin in the court, do you really think that just really reflects the commercial delivery strength, which has much higher margins, more than offsetting the drag from the lower margin floor program?

Scott C. Donnelly: If that continues next year, the margins would probably be somewhat higher than what you've guided to. George, I think we're continuing to see good margins on our military business, obviously, outside of the Flora side. It certainly helps to have higher commercial deliveries. We think we'll get some benefit from higher commercial deliveries, as we talked about in 2024. But look, there's going to continue to be some pressure on the margin just because we're seeing significant growth in the Flora program. The reason we did the cost actions and did the restructuring was to try to shore up the profitability of the business on the legacy production programs.

Scott C. Donnelly: And so part of the guide is obviously we continue to see some benefit from that. But again, there will be overall margin rate pressure going into the future. But I think, as we talked about, even with that and the growth of the FAR program, we're going to see significant revenue growth, and we're going to see absolute profit increases and accretion DPS of the business. So I think, as we work through a transition from legacy production to a new EMD program, I think we can manage our way through that well. And, obviously, in the long term, it's going to be a great story. Okay, thanks very much, you with Olympic Global. Please go ahead. Yeah, hi. Good morning, guys. Scott, can you expand on your opening comments regarding Caltech and your expectations there in 2024? It sounds like you think you might be a little bit weak there. I just was wondering what the drivers were.

Scott C. Donnelly: Sure, Pete. That's one business where we really, you know, depend on sort of industry customer forecasts, you know, so our guide reflects that. We don't really apply a whole lot of our own judgment to that. We really go with where the industry tells us they're going. And we've got to see how the year plays out.

Scott C. Donnelly: I think we feel good about the business. Some of the restructuring we did was reflective of where the volume growth is and where the volume growth isn't. But the business is in a healthy place, and the margins have been doing better as we've come out of the post-COVID world. And the volumes will be obviously consistent with global auto OEM numbers.

Scott C. Donnelly: Okay. And then I had a couple questions on aviation. Are you expecting caravan sales deliveries to be up in 24 hours? I know you deliver a lot of them to Asia, and we're seeing some softness in China. So just wondering what you're seeing there. Well, look, Pete, I mean, we're not going to get into model by model.

Scott C. Donnelly: But I would say, net of everything, the turbo prop market is doing really, really well. As you know, that does tend to be a little bit more international. I think we usually give the numbers, you know, roughly 60%, you know, international versus the jet side is about 80. But I think our turboprop business is in a really good place. I think caravans will do well. I think King Airs are going to be strong.

Scott C. Donnelly: We continue the ramp on the Sky Courier. So, you know, we tend to get mostly questions around the jet. But look, I think the turboprop business is in a very good place. And we certainly net expect to see that business continue to grow in 2024. Okay, great, thank you. Now we go to a question from Cai Von Rumohr with T.D. Cohen.

Cai von Rumohr: Please go ahead. Yes, thanks so much. Scott at Bell, REU, looking for

Operator: You know, he's part of the profit. Strength this year, 24, coming from closeouts on... to. So, Cai, you know, look, I think in 2024, we'll, we'll, we obviously will see some contracts come to an end, and there will be some MR release when you do that. But look, I think we can, you know, execute well on that performance. I mean, I think Q4 is a good example, Cai.

Scott C. Donnelly: We had about $8 million total in the company of VACs. That's not a particularly material number, and it's flat on a year-over-year basis. So, do I think we'll have some, you know, some reserve release next year? Sure, we will. I mean, we normally do as we perform through these programs.

Scott C. Donnelly: But I think the cost-out activity that we've been driving, the absorption and growth on both the commercial revenue side as well as the flora revenue side will all, you know, help to contribute to preserving and getting a good margin rate for 2024. In terms of the CR, OK, I think we're OK. You know, I mean, as we've talked about before, if the CR goes all the way through a full year... You know, that could put some pressure on sure. I think the Army probably has, you know, backup plans.

Scott C. Donnelly: They're trying to work out in terms of how they would move money around. Obviously, FLAR is a very high priority, very important program, you know, to them as well, so this whole thing would be a heck of a lot easier if Congress would just pass a budget for sure. But right now, I think we're okay, and unless it really goes to a full year, I think we'll, you know, collectively between ourselves and the Army, be able to manage through it. And last one.

Scott C. Donnelly: At Aviation, can you give us some color in terms of where the order strength is in terms of fractionals versus high net worth versus. It's pretty stable; we aren't really seeing a change from where we were. We don't break all that out, obviously, but the demand has been pretty strong in terms of mix, you know, or the, you know, the jet stuff tends to be more, you know, domestic. Roughly 80-20; the turboprop is more like 60-40 international.

Douglas Stuart Harned: We haven't seen big changes in that. We haven't seen big changes in the mix, you know, between what goes through the fractional world and what goes through the, you know, whole aircraft side. You know, and demand continues to be, you know, we think pretty strong across the board. Thank you very much. I will go to Doug Harned. Go ahead. Good morning.

Scott C. Donnelly: Thank you. Scott, in the past, you've commented on the supply chain that you've actually seen more challenges at Bell than you have in aviation. And given the strong margins at Bell, I mean, can you comment on where that stands today? Well, okay, this is the challenge of the world we're living in, right?

Scott C. Donnelly: I mean, we had some pretty significant impacts at Bell in the earlier part of the year around a very small number of suppliers; a couple of those suppliers, you know, either got healthier, or in some cases, we brought stuff inside and left those suppliers. So, you know, when you do that, you know, we had a situation at Bell with a couple of the aircraft models where we had very specific, but can still have a part problem that has a significant impact. So that's just the nature of the beast and what our guys work through every day.

Scott C. Donnelly: So I think we did resolve a couple of critical issues in the latter part of the year at Bell that enabled those higher deliveries, and obviously, we gotta keep working at it. And then if I go back to the aviation side and the in-market, one of the things we've seen is more pre-owned airplanes out there for sale, a higher percentage. We're still not back at kind of historical norms, but you were commenting that you're seeing a little bit less pricing benefit relative to inflation. Are you seeing any potential pressure here from pre-owned as you look at your market? No, we're not. Look, I think it's a, you know, look, first of all, as you noted, it's up versus where it was, which was at ridiculously low levels. It's still, historically, you know, lower levels than normal.

Scott C. Donnelly: And, you know, we keep a very close eye on this. They're mostly much older aircraft, right? So the phenomenon that people kind of refer back to says, geez, you know, do you have aircraft competing with new aircraft sales? Obviously, there was a time going back a number of years ago now where you had relatively new aircraft that were, you know, coming onto the market. And we're just not seeing that dynamic.

Scott C. Donnelly: You know, when we look at what's out there, what's available for sale in the used market, the number is increasing, but they are, They're considerably older, and, in large part, out of production aircraft. So no, we're not really seeing an impact of used aircraft out there that are competing with new aircraft sales. Okay, very good. Thank you. Gavin.

Operator: Thank you. I'm going to circle back to the Industrial Market, get a better sense for what's driving that, and, Uh, well, look, I mean, every, every... Sorry.

Scott C. Donnelly: Look, we look at those end markets, be it in the auto side or in the vehicle side, and our view is, as I said, I think overall industrial demand will be pretty flat, but with improved margins. And that's largely, again, based on just industry forecasts. We think Caltex volumes will be down somewhat, although we think margins will continue to improve in that business. On the vehicle side, I think we'll see modest growth, and that is because we do factor in some of these higher dollar discretionary items. We don't expect to see growth in that area, but net of all of that, the business probably still sees modest growth and, again, continued performance on the margin line. So those things that you guys might aggregate and look at in terms of other guys in that market are completely consistent with what we're seeing, but again, that is absolutely factored into our guide. We're just circling back to the, Typically, they've... But on average, that would be 100. Is that something you'd need more visibility on from them? Well, we don't, and you're right.

Scott C. Donnelly: So we, you know, the way we treat the backlog is when those firm up, and that is roughly 12 months where they actually put deposits down, that's the point at which we move those aircraft into the actual backlog. In terms of looking out beyond that, we do absolutely work closely with them on forecasting what that demand is going to look like, even outside of that one-year firm-up period. So we certainly have very good dialogue in working with them to collectively anticipate what that demand is going to be on the fractional side, but then we don't firm up and put in that actual backlog number until roughly, as you said, that one-year window.

Operator: Thank you. Thank you. Thank you. Thank you. We're sorry, your conference is ending now. Please hang up.

Q4 2023 Textron Inc Earnings Call

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