Q1 2024 Textron Inc Earnings Call

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Operator: Thank you for standing by. Welcome to the Textron First Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. If you would like to ask a question, please press 1, then 0 on your phone keypad. Should you require assistance, please press star, then 0. This conference is being recorded for digitized replay and will be available after 10 a.m. ET today through April 25, 2025. You may access the replay by dialing 866-207-1041 and entering the access code 854-6032. I would now like to turn the conference over to David Rosenberg, Vice President, Investor Relations. Please go ahead.

Speaker Change: Thank you for standing by welcome to the Textron first quarter 2024 earnings call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. If you would like to ask a question. Please press. The one then zero on your phone keypad should you require assistance.

Please press Star then zero. This conference is being recorded for digitize replay and will be available. After 10, a M. Eastern time today through April 25th of 2025, you may access the replay by dialing 8662071041 and <unk>.

Speaker Change: The access code 8546032, I would now like to turn the conference over to David Rosenberg, Vice President Investor Relations. Please go ahead.

David Rosenberg: Thanks, Leah, and good morning, everyone. Before we begin, I'd like to mention that 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.

David Rosenberg: Thanks, Leah and good morning, everyone before.

David Rosenberg: 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.

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. Revenue in the quarter was $3.1 billion, up from $3 billion in last year's first quarter. Segment profit in the quarter was $290 million, up $31 million from the first quarter of 2023. During this year's first quarter, adjusted income from continuing operations was $1.20 per share, compared to $1.05 per share in last year's first quarter. Manufacturing cash flow before pension contributions reflected a use of cash of $81 million in the quarter, compared to $104 million of cash provided in last year's first quarter.

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

David Rosenberg: Revenue in the quarter were $3 1 billion up from $3 billion in last year's first quarter.

Frank Thomas Connor: Profit in the quarter was $290 million up $31 million from the first quarter of 2023.

During this year's first quarter adjusted income from continuing operations was $1 20 per share compared to a $1 five per share in last year's first quarter.

Manufacturing cash flow before pension contributions reflected a use of cash of $81 million in the quarter compared to $104 million of cash provided in last year's first quarter.

Scott C. Donnelly: With that, I'll turn the call over to Scott.

Frank Thomas Connor: With that I'll turn the call over to Scott.

Scott C. Donnelly: Thanks, David. Good morning, everyone.

Thanks, David and good morning, everyone.

Scott C. Donnelly: In the first quarter, we saw higher segment profit at Aviation, Bell, and System. At Aviation, in the quarter, we delivered 36 jets, up from 35 last year, and 20 commercial turboprops, down from 34 last year. Aviation continues to see strong demand across our product lines. The result is a backlog growth of $177 million, ending the first quarter at $7.3 billion. Textron Aviation's fleet utilization remains strong in the quarter, contributing to aftermarket revenue growth of 6% as compared to last year.

In the first quarter, we saw higher segment profit in aviation Bell and systems at aviation in the quarter. We delivered 36 jets up from 35 last year 'twenty commercial turboprops down from 34 last year's first quarter.

Aviation continued to see strong demand across our product lines. The resulted in backlog growth of $177 million during the first quarter at $7 3 billion.

Frank Thomas Connor: Textron aviation, we utilization remains strong in the quarter contribute to aftermarket revenue growth of 6%.

Last year's first quarter.

Scott C. Donnelly: Throughout Q1, we saw continued improvements in our supply chain and hours attained in the factory, supporting delivery growth throughout the remainder of the year. Federal revenues of the quarter were up, driven by higher military volume, reflecting the continued ramp-up of the FLARA program. On the FAR program, we continue to progress through preliminary design reviews and expect to complete Milestone B, which allows for the entrance into the engineering and manufacturing development phase of the program later this summer.

Frank Thomas Connor: Throughout Q1, we saw continued improvements to our supply chain and hours attained in the factory supporting delivery growth throughout the remainder of the year.

Frank Thomas Connor: At Bell revenues in the quarter were up driven by higher military volume, reflecting the continued ramp of the floor program on the.

Frank Thomas Connor: <unk> program, we continue to progress through preliminary design reviews, and expect to complete milestone B, which allows for the interest into the engineering and manufacturing development phase of the program later this summer.

Scott C. Donnelly: Also during the quarter, Bell received an award for the production and delivery to Nigeria of 12 AH-1Z helicopters. V-22, the recently enacted FY24 budget, includes five additional aircraft scheduled for delivery in 2027. On the commercial side of Bell, we delivered 18 helicopters, down from 22 in last year's first quarter. During the quarter, we continued to progress toward FAA certification on the 525, expected later this year. Bell recently received its first order for 10 525 helicopters from Equinor, a Norwegian state energy company.

Frank Thomas Connor: Also during the quarter Bell received an award for the production and delivery to Nigeria of 12, H One Z helicopters.

Frank Thomas Connor: <unk> 22 of the recently enacted FY 'twenty for budget includes five additional aircrafts scheduled for delivery in 2027.

Frank Thomas Connor: On the commercial side of Bell, we delivered 18 helicopters down from 22 of last year's first quarter.

During the quarter, we continued to progress toward FAA certification on the 500 to five expected later this year.

Frank Thomas Connor: Recently received its first order for 10 525 helicopters from Ecuador, Norwegian State Energy company.

Scott C. Donnelly: Moving to Textron Systems, revenue was flat, and margin was up versus last year's first quarter. During the quarter, we received notification from our government customer of the termination of the shadow program. We are currently working with the Army on winding this program down. This decision reflects the Army's transition from shadow to future tactical UAS to fulfill the need for organic intelligence, surveillance, and reconnaissance. Earlier this month, we received notification that we were awarded options 3 and 4 of the FQAS program, and we remain one of two competitors for this Next Generation program.

Frank Thomas Connor: Moving to Textron systems revenue was flat and March was up versus last year's first quarter.

Frank Thomas Connor: During the quarter, we received notification from our government customer of the termination of the Shadow program. We are currently working with the army on Wining This program down.

Frank Thomas Connor: This decision reflects the army's transition for shadow to the future tactical UAS system to fulfill the need of organic intelligence surveillance and reconnaissance earlier.

Frank Thomas Connor: Earlier. This month, we received notification that we were awarded options three and four of the a curious program and we remain one or two competitors for this next generation program.

Scott C. Donnelly: Also in the quarter, Systems was downselected with one other competitor to design, develop, and manufacture a 30mm autocannon advanced reconnaissance vehicle prototype for the U.S. Marine Corps. Thanks to your effort, we'll develop an innovative combat vehicle that provides mobile protective firepower for the Marines. In addition, the Army's FY25 budget request funds the design of the XM-30 Ground Combat Vehicle in preparation for the prototype build and testing portion of Phases 3 and 4 in the program's development. Moving to industrial, we saw lower revenues in the quarter, largely driven by lower volume in mixed and specialized vehicles. Caltech's revenues were flat in the quarter.

Frank Thomas Connor: Also in the quarter systems was down selected with one other crops that are to design develop and manufacture a 30 millimeter autocad or an advanced reconnaissance vehicle prototype for the U S Marine Corps.

Frank Thomas Connor: As to your effort will develop an innovative combat vehicle that provides mobile protected firepower for the Marines.

Frank Thomas Connor: In addition, the army is FY 'twenty five budget request funds the design of the XM 30 ground combat vehicle.

Frank Thomas Connor: Preparation for the prototype build the testing portion of phases, three and four the program's development.

Moving to industrial we saw lower revenues in the quarter, largely driven by lower volume and mix and specialized vehicles.

Frank Thomas Connor: <unk> revenues were flat in the quarter. We are encouraged by recent trends in the hybrid space, where industry is experiencing increased customer demand and new OEM investments and hybrid platforms.

Scott C. Donnelly: We're encouraged by recent trends in the hybrid space, where the industry is experiencing increased customer demand and OEM investments in hybrid platforms. The aviation industry has a total of over 30 aircraft in the quarter, up from 13 in 2023. Also during the quarter, PEPSTOR was granted an airworthiness exemption by the FAA for its VELOS Electro-Trainer, which will allow U.S. flight schools to use this all-electric aircraft in their pilot training programs. With that, I'll turn the call over to Frank.

Frank Thomas Connor: Hey aviation vis total over 30 aircraft in the quarter up from 13 to 2023.

Frank Thomas Connor: Also during the quarter Pips trolls granted in an era, where this exemption by the FAA for its Dolph electro trainer, which will allow U S flight schools to use us all electric aircraft in their pilot training programs.

Frank Thomas Connor: With that I'll turn the call over to Frank.

Frank Thomas Connor: Thanks, Scott. Good morning, everyone.

Thanks, Scott and good morning, everyone, Let's review how each of the segments contributed starting with Textron aviation.

Frank Thomas Connor: Let's review how each of the segments contributed, starting with Textron Aviation. Revenues at Textron Aviation of $1.2 billion were up $39 million from the first quarter of 2023, reflecting higher pricing of $48 million and lower volume and mix of $9 million. Segment profit was $143 million in the first quarter, up $18 million from a year ago, reflecting a favorable impact from pricing, net of inflation of $14 million. Backlog for the segment ended the quarter at 7.3.

Frank Thomas Connor: Revenues at Textron aviation of $1 2 billion were up $39 million from the first quarter of 2023, reflecting higher pricing of $48 million and lower volume and mix of $9 million.

Segment profit was $143 million in the first quarter up $18 million from a year ago, reflecting a favorable impact from pricing net of inflation of $14 million.

Frank Thomas Connor: Backlog in the segment ended the quarter at $7 3 billion.

Frank Thomas Connor: Moving to Bell, revenues were $727 million, up $106 million from last year's first quarter, reflecting higher military volume of $95 million, primarily related to the FLARA program. This was partially offset by lower volume on the V-22 and H-1 programs.

Frank Thomas Connor: Moving to Bell revenues were $727 million up $106 million from last year's first quarter, reflecting higher military volume of $95 million primarily related to the Florida program. This was partially offset by lower volume on the V 22, and H one programs.

Frank Thomas Connor: Segment profit of $80 million was up $20 million from a year ago, primarily driven by a favorable impact from performance of $30 million, which includes $13 million of lower research and development costs. Backlog in the segment was at the end of the quarter at $4.5 billion. At Textron Systems, revenues were $306 million compared to last year's first quarter; segment profit was $38 million, up $4 million from last year's first quarter. Backlog The segment ended the quarter at $1.8 billion.

Frank Thomas Connor: Segment profit of $80 million was up $20 million from a year ago, primarily driven by a favorable impact from performance of $30 million.

Frank Thomas Connor: Which includes $13 million of lower research and development cost tax.

Frank Thomas Connor: Backlog in the segment ended the quarter at $4 5 billion.

Frank Thomas Connor: At Textron systems revenues were $306 million.

Frank Thomas Connor: With last year's first quarter segment profit was $38 million up $4 million from last year's first quarter backlog in the segment ended the quarter at $1 8 billion.

Frank Thomas Connor: Industrial revenues were $892 million down $40 million from last year's first quarter, largely reflecting lower volume and mix of $51 million principally in the specialized vehicles product line, partially offset by higher pricing of $16 million in this segment.

Frank Thomas Connor: Industrial revenues were $892 million, down $40 million from last year's first quarter, largely reflecting lower volume and mix of $51 million, principally in the specialized vehicles product line, partially offset by higher pricing of $16 million. Segment profit of $29 million was down $12 million from the first quarter of 2023, primarily due to lower volume and mix at Specialized Vehicles. Textron E-Aviation segment revenues were $7 million, and the segment loss was $18 million in the first quarter of 2024 compared with a segment loss of $9 million in the first quarter of 2023, primarily related to higher research and development costs. Finance segment revenues were $15 million, and profit was $18 million.

Frank Thomas Connor: Segment profit of $29 million was down $12 million from the first quarter of 2023, primarily due to lower volume and mix at specialized vehicles.

Frank Thomas Connor: Textron Aviation segment revenues were $7 million and segment loss was $18 million in the first quarter of 2024, compared with a segment loss of $9 million in the first quarter of 2023, primarily related to higher research and development costs.

Frank Thomas Connor: Finance segment revenues were $15 million and profit was $18 million.

Frank Thomas Connor: Below segment profit corporate expenses were $62 million net interest expense was $15 million LIFO inventory provision was 20 million intangible asset amortization was $8 million and the non service components of pension and post retirement income was $66 million.

Frank Thomas Connor: Moving below segment profit, corporate expenses were $62 million, net interest expense was $15 million, LIFO inventory provision was $20 million, intangible asset amortization was $8 million, and the non-service component of pension and post-retirement income was $66 million. In the first quarter of 2024, we incurred $14 million in special charges under the 2023 restructuring plan, largely related to headcount reductions to improve the cost structures of the Textron systems and Bell sites, in light of the cancellations of the shadow and farrow programs in the quarter.

Frank Thomas Connor: In the first quarter of 2024, we incurred $14 million in special charges under the 2023 restructuring plan.

Frank Thomas Connor: Largely related to head count reductions to improve the cost structures of the Textron systems and bell segments in light of the cancellations of the shadow and fall programs in the quarter.

Frank Thomas Connor: We expect to incur additional severance costs in the second quarter in the range of $25 million to $30 million largely related to head count reductions in the industrial segment.

Frank Thomas Connor: As a result, <unk> has expanded its 2023 restructuring plan from our previously announced range of $115 million to $135 million in pre tax special charges to a range of $165 million to $170 million.

Frank Thomas Connor: We expect to incur additional severance costs in the second quarter in the range of $25 to $30 million, largely related to headcount reductions in the industrial cycle. As a result, Textron has expanded its 2023 restructuring plan from a previously announced range of $115 to $135 million in pre-tax special charges to a range of $165 to $175 million. In the quarter, we repurchased approximately 3.6 million shares, returning $317 million in cash to shareholders.

Frank Thomas Connor: In the quarter, we repurchased approximately three 6 million shares returning $317 million in cash to shareholders to wrap up with guidance. We are reiterating our expected full year adjusted earnings per share to be in a range of $6 20 to $6 40 per share. We also expect full year manufacturing cash flow before pension contribution.

Frank Thomas Connor: <unk> of $900 million to $1 billion that concludes our prepared remarks, Sylvia we can open the line for questions.

Sylvia: Thank you for those asking questions. We ask that you. Please take yourself off speaker phone for the best sound quality and we'll start with David Strauss with Barclays. Please go ahead.

Frank Thomas Connor: To wrap up with guidance, we are reiterating our expected full-year adjusted earnings per share to be in a range of $6.20 to $6.40 per share. We also expect full-year manufacturing cash flow before pension contributions of $900 million to $1 billion. This concludes our prepared remarks, so Leah, we can open the line for questions.

Frank Thomas Connor: Yes.

David Egon Strauss: Hey, good morning, everyone.

David Egon Strauss: Hi, David.

David Egon Strauss: Scott, maybe if you could just dig in a little bit a little bit in the on the deliveries in the in the quarter I think.

David Egon Strauss: The mix was pretty strong, but relatively flat year over year and you build a lot of inventory so maybe just.

Operator: Thank you. For those asking questions, we ask that you please take yourself off the speakerphone for the best sound quality. And we'll start with David Strauss from Barclays. Please go ahead.

David Egon Strauss: Yes.

David Egon Strauss: Teens doing did you wanted to deliver more airplanes.

Speaker Change: I ended up Duane.

Speaker Change: How do we how do we think about how much deliveries could grow this year off of 168 last year.

David Egon Strauss: Thanks, good morning everyone. Scott, maybe if you could just dig in a little bit on the deliveries for the quarter. I think, you know, the mix was pretty strong but relatively flat year-over-year, and you build a lot of inventory. So, maybe just... You know, how the supply chain is doing. Did you want to deliver more airplanes than you ended up doing? And, you know, how do we think about how much deliveries could grow this year off of 168 last year? Thanks. Sure.

Sure David look I think that we certainly expect to see nice growth on a year over year basis. The.

Duane: The supply chain does continue to improve the number of hours that we were able to get in the factory in terms of labor hours that are productive hours.

Duane: Post training and whatnot does continue to improve so I think we feel pretty good about how things progressed through the quarter.

Duane: Look we always have a few aircraft that we would like to have gotten delivered do we definitely had some things that got late in the corner or just didn't.

Duane: To get to where they could transfer.

Duane: When time.

Scott C. Donnelly: Sure. Look, I think that we certainly expect to see nice growth on a year-over-year basis. The supply chain does continue to improve. The number of hours that we're able to get in the factory in terms of labor hours that are productive hours, you know, post-training and whatnot, does continue to improve. So I think we feel pretty good about how things progressed, you know, through the quarter. Look, we always have a few aircraft that we would like to have gotten delivered, and we definitely had some things that got late in the corner or just didn't, you know, get to where they could transfer, you know, in time.

For sure the trend in terms of productivity and efficiency and throughput in the factory improved as we worked our way through the quarter. So.

Duane: A little bit lighter than we probably would have liked but not no not.

Duane: Not a big number and I think again the momentum is good and we certainly are still feeling very good about our guide in terms of.

Duane: A nice increase in volume on a year over year basis.

Speaker Change: Great. Thanks very much.

Speaker Change: Next we go to the line of Robert <unk> with vertical research. Please go ahead.

Robert: Thanks, so much good morning.

Robert: Good morning.

Robert: Scott, maybe we'll start with industrial.

Scott C. Donnelly: But for sure, the trend in terms of productivity and efficiency and throughput in the factory improved as we worked our way through the quarter. So, a little bit lighter than we probably would have liked, but not a big number. I think, again, the momentum is good and we certainly are still feeling very good about our guide in terms of a nice increase in volume on a year-over-year basis.

Softness there in Q1.

Robert: It is a tough division to forecast given the short cycle nature, but are we finally seeing the U S consumer rolling over here.

Well look I think we talked last year, Robert towards the end of the year and our guide that we expected to see the sort of high end consumer dollars.

Robert: So a recreational personal transportation stopped soften.

Robert: And we're seeing that it's probably even a little bit softer than we would've expected.

Scott C. Donnelly: Great, thanks very much.

Robert Alan Stallard: Next, we go to the line of Robert Stallard with Vertical Research. Please go ahead.

Robert: Automotive segment is pretty stable, which is which is fine.

Scott C. Donnelly: Scott, maybe we'll start with industrials. A bit of softness there in Q1. I know this is a tough division to forecast given its short cycle nature, but are we finally seeing the US consumer rolling over here?

Robert: Certainly some pieces in the vehicle business that are doing fine, but those high dollar.

Robert: As Christian noted items has certainly softened as you know those are often financed finance costs are certainly higher than they have been so we expected it to be.

Robert: So after our pay TV business, which has been a great business for us as was a little bit softer than we would've expected.

Scott C. Donnelly: Well, look, I think we talked last year, Robert, towards the end of the year and in our guide, you know, that we expected to see the sort of high-end consumer dollars, you know, sort of recreational, personal transportation, you know, stuff, soften. And we're seeing that. It's probably even a little bit softer than we would have expected.

Robert: Part of what well have to do some additional restructuring on top of our initial plan too.

Robert: To dial that in and avoid a situation, where we put too much inventory out in the field.

Speaker Change: Alright, and then maybe one for Frank.

Frank Thomas Connor: On the revised restructuring plan do you how do you expect the cash impact of that to flow through and do you expect the savings to be roughly equivalent to the restructuring charge.

Scott C. Donnelly: The automotive segment is pretty stable, which is fine. There are certainly some parts in the vehicle business that are doing fine, but those high-dollar discretionary items have certainly softened. As you know, those are often financed. Finance costs are certainly higher than they have been.

Yes, I think.

The savings will be ultimately in the area of $185 million or so.

Frank Thomas Connor: Kind of on a run rate basis and that.

We will realize a fair amount of that.

Frank Thomas Connor: By the end of 2024, but that will roll into 'twenty five as well the.

Scott C. Donnelly: So we expected it to be... After our PTV business, which has been a great business for us, was a little bit softer than we would have expected. And, you know, that's part of what we'll have to do is some additional restructuring on top of our initial plan to, you know, dial that in and, you know, avoid a situation where we put too much inventory out.

The incremental cash is about $20 million 24 for.

Frank Thomas Connor: The additional restructuring and we'll just absorb that into our cash guidance.

Frank Thomas Connor: And overall cash for the restructuring for 'twenty four is in the area of $60 million to $65 million, so, but additional $20 million versus where we had been.

Speaker Change: That's great. Thanks, Frank.

Speaker Change: Next we move on to Sheila <unk> with Jefferies. Please go ahead.

Sheila: Thank you Hey, Morningstar ranking data.

Frank Thomas Connor: And then maybe one for Frank. On the revised restructuring plan, how do you expect the cash impact of that to flow through, and do you expect the savings to be roughly equivalent to the restructuring charge? Yeah, I think, you know...

Sheila: Sure let me start off.

Correct.

Speaker Change: Got it.

Sheila: Margins expanded 130 basis points about 11% at the site and will be $180 million contribution on the top line. So how do we think about the moving pieces.

Frank Thomas Connor: Yeah, I think, you know, the savings will be ultimately in the area of $185 million or so, kind of on a run rate basis, and that it'll realize a fair amount of that by the end of 2024, but that'll roll into 25 as well. The incremental cash is about $20 million in 24 for the additional restructuring, and we'll just absorb that into our cash guidance. And overall cash for the restructuring for 24 is in the area of 60 to 65 million. So, but an additional 20 million versus where we had been.

Sheila: For the year.

Sheila: Pardon.

Speaker Change: Well I think we will probably still end up in that range.

Speaker Change: We had a strong.

Speaker Change: Q1, obviously.

Speaker Change: We did have as we noted there a settlement on our on our intellectual.

Speaker Change: Intellectual property related lawsuit that gave us a little bit of a boost in the quarter, but I would say the team is performing well as you know we did restructuring actions to try to deal with the loss of the <unk> program, we were able in a.

Speaker Change: A number of cases to take some of the appropriate engineering talent and got over the Florida program, which helped to short ramp that program up.

Speaker Change: But we also had to take some cost actions both in the as a result of the loss of the far program as well as well.

Sheila Karin Kahyaoglu: Next, we move on to Sheila Kahyaoglu with Jeffreys. Please go ahead.

Scott C. Donnelly: Thank you. Good morning, Scott, Frank, and David. Can we start off with maybe Bell? Scott, if we look at margins, they expanded by 130 basis points at Bell to 11% despite maybe $180 million of lower contribution on the top line. So how do we think about the moving pieces to profitability for the year to get to $9.5 to $10.5?

Speaker Change: Some of the lower.

Speaker Change: Production quantities, obviously, it will certainly help us as we start to see some.

Speaker Change: Flow of the of the Nigerian H, one order that gets that line back up and going again, the extra five on V 22, which is above the original program of record.

Speaker Change: Is certainly a nice add and we'll start to see some of that flow through in the latter part of the year. So.

Speaker Change: I think bill had a strong quarter, we're continuing to focus very much on on cost to deal with the mix issues there but.

Scott C. Donnelly: Well, I think we'll probably still end up in that range, Sheila. We had a strong Q1, obviously. We did have, as we noted there, a settlement on an intellectual property-related lawsuit that gave us a little bit of a boost in the quarter. But I would say the team is performing well.

Speaker Change: Well clearly end up towards the high side of guidance on on Bill I think they are performing well.

Speaker Change: Great and then if I could ask one on Olson orders held up pretty well book to Bill above one time, maybe if you could provide any color on what youre seeing from your customers. One of your competitors noted interest rates potentially prohibiting orders if you could just comment on that.

Scott C. Donnelly: As you know, we took restructuring actions to try to deal with the loss of the FAR program. We were able, in a number of cases, to take some of the appropriate engineering talent and move that over to the FAR program. Which helped us ramp that program up, but we also had to take some cost actions, both as a result of the loss of the FAR program and, you know, some of the lower production quantities.

Speaker Change: Shall we continue to see real good strength across pretty much all the product lines in the business. So we're feeling pretty good about the order flow.

Speaker Change: Again, a lot of these actually be a lot of these aircraft are going to deliver a couple of years from now so from a financing standpoint, I don't know we don't I guess here is as much about that but the the order activity was.

Speaker Change: Staying pretty strong positive.

Speaker Change: Great. Thank you.

Speaker Change: Sure.

Speaker Change: Next we'll go to Myles Walton with Wolfe Research. Please go ahead.

Scott C. Donnelly: Obviously, it will certainly help us as we start to see some, you know, flow of the Nigerian H1 order that gets that line back up and going again. The extra five on V22, which is above the original program record, is certainly a nice add, and we'll start to see some of that flow through in the latter part of the year. So I think Bell had a, you know, a strong quarter. We're continuing to focus very much on cost to deal with the mix issues there. But, you know, we'll clearly end up, you know, towards

Speaker Change: Thanks.

Myles Alexander Walton: Scott I was wondering if you could touch on the <unk> the supply chain within Bell, obviously, the <unk> seasonally light usually for the commercial kilos, but down year on year and then also the comment you made on the 505 certification at year end I know that one of your business has had been quoted as it's getting more confident on that into the year end could you.

Myles Alexander Walton: I'll also comment on your confidence level of that certification.

Scott C. Donnelly: Great, and then if I could ask one on aviation, orders held up pretty well, booked a bill above once, maybe if you could provide any color on what you're seeing from your customers, one of your competitors noted interest rates are potentially prohibiting orders, if you could just comment.

Myles Alexander Walton: Sure look the bell supply chain continues to I would say improve we always have a number of parts that are are are sort of problem children were continuing to work that.

Myles Alexander Walton: But in general I think we are able to manage our way through that and I don't think theres anything anything new or surprising that would in any way affect.

Our guide as we think about.

Scott C. Donnelly: You know, sure, we continue to see real good strength across pretty much all the product lines in the business, so we're feeling pretty good about the order flow. You know, a lot of these aircraft are going to deliver a couple of years from now, so from a financing standpoint, I don't know, we don't, I guess, hear as much about that, but the order activity was staying pretty strong, very positive.

Bell commercial volumes through the course of the year. We did have a very strong Q4, obviously on the commercial deliveries and so a little lighter maybe than we expected Q1, but I think we're in good shape and order activity. There also remains very healthy. So I think those are in a good place 525 flight test is going very well the FAA flight testing.

Myles Alexander Walton: We're well into that.

We have a few more.

Myles Alexander Walton: Performance flight tests, and then we go through.

Myles Alexander Walton: What they call ethanol, which is about 150 hours of just durability reliability flying and obviously as you guys know we've been flying the aircraft for a long time, it's proven to be very durable reliable aircraft. So I don't think we'll have any issues going through there. So we will we should wrap up flight testing here as we get to mid year.

Myles Alexander Walton: Next, we go to Myles Walton with Wolf Research. Please go ahead.

Scott C. Donnelly: Thanks. Scott, I was wondering if you could touch on the supply chain within Bell. Obviously, the 1Q seasonalally light, usually for the commercial HELOS, but down year on year. And then also the comment you made on the 525 certification at year end. I know that one of your business heads was quoted as getting more confident on that into the year end. Could you also comment on your confidence level in that certification? Thanks.

Myles Alexander Walton: As you know Theres a fair bit of.

Myles Alexander Walton: Paperwork processing and final documents and all that kind of stuff to go before the final certification but.

Myles Alexander Walton: I would say at this point, we feel pretty good about where it is.

And if it if it were certified what would be sort of the production rate that you'd target you know over the next few years, we haven't we haven't released the production rate on the on the 500 to five.

Scott C. Donnelly: Sure. Look, the Bell supply chain, you know, continues to, I would say, improve. We always have, you know, a number of parts that are sort of problem children. We're continuing to work on that. But, you know, in general, I think we are able to manage our way through that, and I don't think there's anything new or surprising that would, in any way, affect our guide as we think about Bell commercial volumes through the course of the year. We did have a very strong Q4, obviously, on commercial deliveries, and so, you know, very healthy. So I think Bell's in a good place.

Speaker Change: Alright, thank you.

Speaker Change: And our next question comes from Peter Arment with Baird. Please go ahead.

Yes, good morning, Scott Frank.

Peter J. Arment: Hey, Scott.

Peter J. Arment: Could you quantify what the settlement was in the bill that affected the margins this quarter.

Scott C. Donnelly: No we didn't.

Scott C. Donnelly: 525 flight testing is going very well. The FAA flight testing portion, we're well into that. We have a few more, you know, performance flight tests, and then we go through a sort of what they call FNR, which is about 150 hours of flight. Just durability and reliability of flying. And obviously, as you guys know, we've been flying that aircraft for a long time. It's proven to be a very durable, reliable aircraft. So I don't think we'll have any issues going through there.

Scott C. Donnelly: A huge number of Peter but it's enough.

Help the margin rate a little bit quarter.

Okay. Okay I just wanted to clarify that and then just a quick wondering Frank we expected that you would have higher corporate expenses in Q1, just wondering just from a modeling perspective calibrate the rest of the street or we think more evenly spread for the balance of the year for your $160 million target.

Frank Thomas Connor: Yes, as you know that bounces around depending on where the share prices, but kind of we.

Scott C. Donnelly: So we should wrap up flight testing here as we get to mid-year. And as you know, there's a fair bit of paperwork processing and final documents and all that kind of stuff that have to go before final certification. But I'd say at this point, we feel pretty good about where it is.

Frank Thomas Connor: We expect that it certainly will not be as volatile.

Frank Thomas Connor: Not be as volatile for the rest of the year, So we'll see but but yet we're still sticking with the same target for the full year.

Speaker Change: I appreciate it thanks guys.

Speaker Change: Sure.

Scott C. Donnelly: And if it were certified, what would be the sort of production rate that you'd target that we haven't released into production?

Cai von Rumohr: Next we have a question from Cai von <unk> with TD Cowen. Please go ahead.

Cai von Rumohr: Yes so.

Cai von Rumohr: Your competitors, Gulfstream and Embraer basically had higher biz jet deliveries and we're kind of closer to where they expected to be in yet.

Scott C. Donnelly: Yeah, we haven't we haven't released a production rate on the 524.

Peter J. Arment: And our next question comes from Peter Arment with Baird. Please go ahead.

Cai von Rumohr: You guys continue to struggle is part of that related to geography that you guys are in Wichita, and you have to fight with spirit to get people because they're trying to ramp to.

Scott C. Donnelly: Yeah, good morning, Scott and Frank. Hey Scott, nice results. Did you quantify what the settlement was in the bill that affected the margins this quarter?

Scott C. Donnelly: Uh, no we didn't. I mean, it's not a huge number, Peter, but it's enough that it, you know, helped the margin rate a little bit in the quarter.

Cai von Rumohr: And that therefore, this is going to be a longer slog than maybe others are going to see.

Speaker Change: Oh Jeez I don't know I mean, I thought we feel pretty good about our deliveries, we always would like to get another couple jets here and there, but I think we are.

Frank Thomas Connor: Okay, okay. I just wanted to clarify that. And then I have just a quick one for you, Frank.

Speaker Change: Doing pretty good and feeling good about where we are on the labor front, we're where we expect it to be so I don't see.

Frank Thomas Connor: We expected that you would have higher corporate expenses in Q1. Just wondering, just from a modeling perspective, how do we compare with the rest of the street? Are we thinking more evenly spread for the balance of the year for your $160 million target?

Speaker Change: A problem with our labor situation in which starts I think everybody has been challenged by higher turnover rates just in terms of the amount of churn and that's really been one of the biggest impact to us on.

Speaker Change: Productivity efficiency side as the number of people that come in and and.

Frank Thomas Connor: Yeah, as you know, that bounces around depending on where the share price is, but, you know, kind of us... We expected it, it certainly will not be as volatile or may not be as volatile for the rest of the year. So we'll see, but yeah, we're still sticking with the same target for the full year.

Speaker Change: And rotate back out, but I think most companies in all industries, frankly, youre seeing that.

Speaker Change: But no I don't think we have we certainly don't feel like we have.

Speaker Change: Macro unsolvable problem. It's it's improved significantly the number of employees is where we needed to be and I expect we will as I said, we will continue to see a ramp on deliveries as we go through the year.

Frank Thomas Connor: I appreciate the details. Thanks, guys.

Speaker Change: Great and sort of maybe going back to Myles is question. So energy prices are up 525 is clearly.

Cai von Rumohr: Next, we have a question from Cai Von Rumohr with P.D. Cohen. Please go ahead.

Scott C. Donnelly: Yes, so your competitors Gulfstream and Embraer basically had higher bizjet deliveries and were kind of closer to where they expected to be, and yet, you guys continue to struggle. Is part of that related to geography, that you guys are in Wichita, and you have to fight, you know, with spirit, to get people because they're trying to ramp up, too, and that, therefore, this is going to be a longer slog than maybe you know others are going to see?

Speaker Change: Targeting that market <unk> got an order for 10 due delivery start relatively early next year. So could we start to see some pretty good build on that program.

Speaker Change: Well, we're already ramping up the production side of the program to start to meet deliveries, but I suspect those deliveries will be in the late 'twenty five.

Speaker Change: A timeframe.

Scott C. Donnelly: Uh, geez, I don't know, Cai. I mean, I think we feel pretty good about our deliveries. We always would like to get another couple of jets here and there, but I think we're, um, doing pretty good and feeling good about where we are on the labor front. We're where we expected to be.

Speaker Change: I think we're in a very good place in terms of the cycle as you allude to obviously Akron or as an energy company and those are for oil and gas offshore applications and we have <unk>.

Speaker Change: Several of the customers who are more in I'd say positive latter stage negotiations that are primarily aimed at the oil and gas market right now so it's it certainly.

Speaker Change: A favorable time to be getting these things through certification.

Scott C. Donnelly: So I don't see a problem. I think everybody has been challenged by higher turnover rates, just in terms of the amount of churn. And that's really been one of the biggest impacts on us on the productivity efficiency side, the number of people that come in and rotate back out. But I think most companies, in all industries, are seeing that. But no, I don't think we have a... We certainly don't feel like we have a macro unsolvable problem. It's improved significantly. The number of employees is where we need it to be. And I expect we'll, as I said, continue to see a ramp-up on deliveries as we go through the year.

If it's a nice place in that that end market.

Speaker Change: Terrific. Thank you.

Speaker Change: Sure.

Speaker Change: Next we go to Seth <unk> with Jpmorgan. Please go ahead.

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

Seth: I guess, Scott you called out the contribution to EBIT growth.

Seth: From pricing at aviation and we'll see.

Seth: About the other components in the queue.

It looks like the compares for pricing get somewhat tougher from here.

Speaker Change: Should we think about I know you probably have some visibility into the backlog here should we think about the $14 million of year on year pricing.

Scott C. Donnelly: Great. And sort of maybe going back to Myles's question.

Scott C. Donnelly: So, you know, energy prices are up 525 is clearly targeting that market, you've got an order for 10, will delivery start relatively early next year? So could we start to see, you know, some pretty good build on that program?

Speaker Change: Being a relatively high level compared to what we're likely to see for the rest of the year given that those compares get harder.

Speaker Change: Yeah.

Speaker Change: Yes.

Scott C. Donnelly: Well, we're already ramping up the production side of the program to start to meet deliveries, but I suspect those deliveries will be in the late 25th, you know, sort of timeframe. I think we're in a very good place in terms of the cycle, as you alluded to.

Speaker Change: I think it kind of is pretty stable through the course of the year. I mean, we do have obviously very good visibility to the pricing side of things because they're all in the backlog.

Speaker Change: Obviously, what's important to us is to maintain that spread of net pricing over inflation and so thats really most of the work as we go through the course of the year, it's just managing the inflation numbers around.

Scott C. Donnelly: Obviously, Equinor is an energy company, and you know, those are for oil and gas offshore applications. And we have several other customers who were in, you know, I'd say positive later stage negotiations that are, you know, primarily aimed at the oil and gas market right now. So it's certainly a favorable time to be getting these things through certification, and I think it fits a nice place in that end market.

Speaker Change: Supply base and things like that so, but I would expect to see positive price over inflation through the course of the year.

Speaker Change: Right. Okay. Okay. Thanks, and then just a follow up I think you talked earlier about potentially some upside at bell.

Scott C. Donnelly: Terrific. Thank you.

Speaker Change:

Seth Michael Seifman: Next, we go to Seth Seifman with JPMorgan. Please go ahead.

Speaker Change: You talked about being in good shape at aviation I mean, when we think about where industrial came in in the first quarter and where the guidance says it looks like theyre going to probably have a tough time getting to that guidance and then maintaining the overall guidance for the company have aviation and bell to fill in those gaps.

Seth Michael Seifman: Thanks very much. Good morning, everyone.

Scott C. Donnelly: I guess, Scott, you called out the contribution to EVA growth from pricing and aviation, and we'll see, you know, more about the other components in the queue. But it looks like the comparisons for pricing get somewhat tougher from here. Should we think about, and I know you probably have some visibility into the backlog here, should we think about the $14 million in year-on-year pricing being a relatively high level compared to what we're likely to see for the rest of the year, given that those comparisons get harder?

Speaker Change: Alright.

Speaker Change: Yes, I think look the industrial business, we would anticipate the revenue being a little bit lower than probably our original guide I think will probably hold in the in the margin range.

Speaker Change: But I think we have sufficient upside in terms of the performance and how we're doing on the aviation and the Bell front that which is why we're comfortable holding our guide for the overall company.

Speaker Change: Great. Thank you very much.

Speaker Change: Yeah.

Okay.

Speaker Change: Okay.

Many of you there.

Leah.

Speaker Change: No you go ahead with it.

Speaker Change: Sorry about that we will next go to the line of Noah <unk> with Goldman Sachs. Please one moment here. Please go ahead.

Scott C. Donnelly: Yeah, I think it kind of stays pretty stable through the course of the year. I mean, we do obviously have very good visibility on the pricing side of things because they're all in the backlog. Obviously, what's important to us is to maintain that spread of net pricing over inflation. And so that's really, you know, most of the work as we go through the course of the year is just managing, you know, the inflation numbers around, you know, the supply base and things like that. So, but I would expect to see positive price over inflation, you know, through the course of the year.

Hey, good morning, everyone.

Noah: Good morning.

Noah: Hey, Scott.

Noah: Staying on the aviation margin I mean, it's a pretty good incremental in the quarter I think it was a little bit of an easier compare.

Noah: We kind of have kind of a sense of what units and price Youre doing I think you had.

Noah: Cost input inflation, but you've also cited just kind of supply chain and some internal operating performance.

Noah: Maybe that's been a hurdle is that behind you now is that.

Noah: Is that no longer an issue as you move through 2020 boring is that a tailwind year over year.

Scott C. Donnelly: Okay, okay, thanks. And then just to follow up, I think, you know, you talked earlier about potentially some upside at Bell. They talked about being in good shape at aviation. I mean, when we think about where Industrial came in in the first quarter and where the guidance is, it looks like they're gonna probably have a tough time getting to that guidance and then maintaining the overall guidance for the company of aviation and Vell to fill in those gaps.

Noah: No I think youll still see some pressure in second quarter. No remember lot of these aircraft are our inventory a lot of that cost is inventory. So it usually takes the first half of the year to bleed out.

Noah: The performance levels and productivity levels that we saw in the back half.

Noah: Of the previous year in 2023 in this case so.

Noah: Don't think we see some pressure for that but let's say the good news is that the when we look at the metrics and the factory in the efficiencies productivity and things of that nature.

Scott C. Donnelly: I think that for the industrial business, we would anticipate revenue being a little bit lower than probably our original guide. I think we'll probably hold in the margin range, but I think we have sufficient upside in terms of the performance and how we're doing on the aviation and the belt front, which is why we're comfortable holding our guide for the overall company.

Noah: We are starting to see some of the benefits that we expect to see in a more stable production environment and less supplier disruption fewer onboarding.

Noah: So less impact on the training there is a lot of things the business is doing to try to address.

Noah: Some of those issues. So I do think that we will have margin rates that do continue to improve over the course of the year, but youre still going to have some drag of the of that.

Scott C. Donnelly: Great, thank you very much.

Operator: Next, next, next, Leigh Ann.

Noah Poponak: Sorry about that. We will next go to the line about Noah Poponak with Goldman Sachs. Please, one moment here. Please go ahead.

Noah: Inventory release, particularly as you get through Q2.

Scott C. Donnelly: Hey, Scott, Frank, just staying on that aviation margin. I mean, it's a pretty good incremental gain in the quarter. I think it was a little bit of an easier comparison. You know, we kind of have a sense for what units and prices are doing. I think you've had cost input inflation, but you've also cited just kind of supply chain and some internal operating performance. You know, maybe that's been a hurdle. Is that behind you now? Is that no longer an issue as you move through 2024? And is that a tailwind year over year?

Speaker Change: Okay that makes sense.

Speaker Change: And then I guess, just a follow up on the Bell margin.

Speaker Change: I know.

Speaker Change: Florida is still ramping and what kind of exit the year at a different revenue run rate achieved in the first quarter, but.

Speaker Change: It is also ramped a decent amount and I think this year, you'll get pretty close to what the.

Speaker Change: Run rate is in the sort of medium term.

Speaker Change: And this bell margin just keeps outperforming.

Speaker Change: Amount of margin compression.

Scott C. Donnelly: Oh, I think you'll still see some pressure in the second quarter, Noah. Remember, you know, a lot of these aircraft are, you know, are inventoried. A lot of that cost is inventoried, so it usually takes, you know, the first half of the year to bleed out the performance levels and productivity levels that we saw in the back half of the previous year, in 2023, in this case. So I still think we see some pressure on that.

Speaker Change: Discussed out there in the market I guess in the medium term is that.

Speaker Change: Kind of off the table or I guess, how do you see this margin hanging in 'twenty 456, just in the medium term as you continue to ramp boral.

Well look I mean, I think yes.

Speaker Change: Team is performing well, we're doing everything we can on the cost front to deal with the lower production levels things like the <unk>.

Scott C. Donnelly: But let's say the good news is that when we look at the metrics in the factory and the efficiencies, productivity, and things of that nature, we are starting to see some of the benefits that we expect to see in a more stable, you know, production environment, less supplier disruption, you know, fewer onboarding, you know, so less, you know, impact on training. There are a lot of things the business is doing to try to address, you know, some of those issues.

Speaker Change: Nigeria in order the additional five years 'twenty twos. These things are all helpful.

Speaker Change: I guess I would also note when you may have seen if you look at the FY 'twenty budget request, one of our allocations of sort of the elimination of fr and where that money in the out years goes.

Speaker Change: There is over $200 million of FY 'twenty five money on flora above what was originally in the fight up so I do think that.

Scott C. Donnelly: So I do think that we'll have, you know, margin rates that do continue to improve over the course of the year, but you're still going to have, you know, some drag from that inventory release, particularly as you get through Q2.

Speaker Change: We're going to we're ramping quite nicely on Florida will actually probably see that increase in terms of the number of revenues on Florida as we get into 2025 above what we might have originally expected.

Scott C. Donnelly: Okay, that makes sense. And then I guess just to follow up on the Bell margin. You know, I know, the floor is still ramping and will kind of exit the year at a different revenue run rate than it achieved in the first quarter, but it's also ramped up a decent amount. And I think this year, you'll get pretty close to what the run rate is in the sort of medium term. And this bell margin just keeps outperforming.

Speaker Change: <unk> so that's.

Speaker Change: Another couple of hundred million dollars, probably revenue step as we get into next year. So look we'll continue to stay very focused on the cost side and executing and performing.

Speaker Change: Against all of these programs and I will just add.

Speaker Change: I think that will drive us to the higher side of the revenue guide.

Sorry, the margin.

Speaker Change: Guide for this year.

Scott C. Donnelly: I mean, the amount of margin compression that was discussed out there in the market, I guess, in the medium term, is that kind of off the table, or I guess, how do you see this bell margin hanging in 24, 5, 6, just in the medium term as you continue to ramp up?

We will certainly get back to you on the <unk>.

Speaker Change: FY 'twenty five guide sometime in January February.

Speaker Change: Okay.

Speaker Change: Frank.

Frank Thomas Connor: I guess.

Frank Thomas Connor: Decent amount or a lot of the items below segment manufacturing segment EBIT.

Frank Thomas Connor: We're pretty different in the quarter compared to what the full year implied on a quarterly.

Scott C. Donnelly: Well, look, I mean, I think the team is performing well. We're doing everything we can on the cost front, you know, to deal with the lower production levels. Things like the Nigerian order, the additional five E-22s, these things are all helpful. I guess I would also note, you know, and you may have seen if you look at the FY25 budget request, one of the allocations of sort of the elimination of FAR and where that money goes in the following years, there is over $200 million of FY25 money on FLORA above what was originally, you know, in the FYDEP.

Frank Thomas Connor: Run rate.

Frank Thomas Connor: If I look at what aviation finance debt.

Frank Thomas Connor: Tax rate core Brett.

Frank Thomas Connor: Steven is it worth updating those on a full year basis or are they all just kind of.

Brett: Looking like that land in the range of what you had originally embedded in the earnings guidance.

Well I think that finance.

It will be in the range of what we had thought we talked about corporate expense was significantly higher this first quarter due to share price performance.

Brett: But we will kind of stick with that type of range I think interest expense.

Scott C. Donnelly: So, I do think that, you know, we're going to, we're ramping quite nicely on FLORA. We'll actually probably see an increase in terms of the number of revenues on FLORA as we get into 2025 above what we might have originally expected on the FYDEP. So, that's probably another couple hundred million dollars in revenue step as we get into the next year. So, look, we'll continue to stay very focused on the cost side and executing and performing, you know, against all these programs.

Brett: Relative to I don't know, what we didn't really guided interest expense, but our I guess, we were probably a little better on interest expense excuse me relative to the 90, depending on what interest rates do.

Brett: For the year, our investment in cashes.

Brett: <unk> is a little better than we had thought given the continuing higher interest rates, so theres probably benefit there.

Brett: But the other stuff is kind of in the range of what we had talked about.

Speaker Change: Okay. Thank you.

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

Scott C. Donnelly: And, as I said, I think that will drive us to the higher side of the revenue guide or, I'm sorry, the margin, you know, guide for this year. And we'll... We'll certainly get back to you on the FY25 guide sometime in January or February.

Douglas Stuart Harned: Alright, Thank you and good morning.

Douglas Stuart Harned: I wanted to I wanted to go back to your discussion around pricing at <unk>.

Douglas Stuart Harned: <unk>.

Ben: This is Ben.

Douglas Stuart Harned: Great story with continuing to be able to get pricing ahead of inflation, but when you. When you look at this and then I'd say outside of what you have in them in the order book right now when you try and plan longer term is this something you can expect to continue.

Frank Thomas Connor: Okay, and Frank, I guess a decent amount or a lot of the items below manufacturing segment EBIT were pretty different in the quarter compared to what the full year implied on a quarterly run rate. If I look at what deviation did, finance did, tax rate, corporate interest, even, is it worth updating those on a full year basis? Or are they all just kind of still looking like they'll land in the range of what you had originally embedded in the earnings guide? Well, I think that

Or do you have to look at this is eventually pricing is going to come back and kind of converge with inflation rates.

Oh Jeez I don't know.

Douglas Stuart Harned: Honestly I would say at a macro level generally speaking over very long periods of time price inflation, probably end up pretty close I think we certainly went through a number of years in this industry where prices were.

Frank Thomas Connor: Well, I think that finance will be in the range of what we had thought. We talked about corporate expense being, you know, kind of significantly higher this first quarter due to share price performance. But we'll kind of stick with that type of range. I think interest expense relative to, I don't know what, we didn't really guide interest expense, but I guess we're probably a little better on interest expense, excuse me, relative to the 90, depending on what interest rates are due for the year.

Douglas Stuart Harned: The products were way under price I mean, it just doesn't make sense. So I mean, we had a significant.

Douglas Stuart Harned: Catch up in price I think got them back to much closer to where they should be and obviously our expectation is youre going to continue to see inflation on a go forward basis, and we expect to see.

Douglas Stuart Harned: Increasing on a go forward basis, and then we're seeing pricing so pricing in the market is solid and.

Douglas Stuart Harned: Beyond that I'm not sure how to <unk>.

Frank Thomas Connor: You know, our investment in cash is a little better than we had thought given the continuing higher interest rates, so there's probably a benefit there. But the other stuff is kind of in the range of what we had talked about.

Douglas Stuart Harned: Our cast over a long period of time, but.

Douglas Stuart Harned: We still think demand is strong and on the price environment is.

Douglas Stuart Harned: It is also doing well as I said I think when we guided we talked about the fact that you wouldn't see as significant.

Douglas Stuart Harned: Next, we have a question from Doug Harned about Bernstein. Please go ahead.

Scott C. Donnelly: Thank you. Good morning. I wanted to go back to your discussion around pricing at aviation, and this has been a great story of continuing to be able to get pricing ahead of inflation, but when you look at this, and I'd say outside of what you have in the order book right now, when you try and plan longer term, is this something you can expect to continue, or do you have to look at this as, eventually, pricing is going to come back and kind of converge with inflation

Douglas Stuart Harned: Rice absolute price increase as you saw in the last couple of years, but you also see some inflation starting to come down as well so anyway for us what's important is that we net.

Douglas Stuart Harned: Pricing.

Douglas Stuart Harned: Positive over inflation.

Speaker Change: Okay, and then and then just switching over to <unk> for a moment on that.

Speaker Change: Again on margins.

Speaker Change: You've talked in the past and I think as one would expect initially flora is that is the way it is.

Speaker Change: But when you look at that trajectory now that youre moving forward, you're headed towards milestone b.

Scott C. Donnelly: So, you know, geez, I don't know. I mean, obviously, I would say at a macro level, generally speaking, over very long periods of time, price inflation probably ends up pretty close. I think we certainly went through a number of years in this industry where the prices were, where the products were way underpriced. I mean, it just doesn't make sense.

Speaker Change: I would expect long term.

Speaker Change: Very accretive program once you're in full rate production can you give us a sense of how you expect kind of the timeline as far as contribution to margins to two.

Scott C. Donnelly: So, I mean, we've had a significant catch-up in prices, but I think we got them back to, you know, much closer to where they should be. And obviously, you know, our expectation is that you're going to continue to see inflation on a going forward basis. And, you know, we expect to see, you know, pricing increasing on a going forward basis. And then we're seeing that. I mean, I think the pricing in the market is solid. And, you know, beyond that, I'm not sure how to forecast over a long period of time. But

Speaker Change: Proceed.

Speaker Change: Well I mean, I think that as you described that's kind of what you would nominally expect for any of these large defense contract programs.

Speaker Change: Florida is a very big program right. So the AMD phase of this thing goes out through.

Speaker Change: In the 2030 now Youll start to see I would suspect initial production loss, we have eldoret deliveries that happen out in 2028, but youll start to see some of the follow on production lots.

Speaker Change: <unk> out in that timeframe, but certainly the next several years is very much dominated by the AMD program.

Scott C. Donnelly: We still think demand is strong and the price environment is also doing well. As I said, I think when we guided you, we talked about the fact that you wouldn't see as significant a price, absolute price increase as you saw in the last couple of years, but you also see some inflation starting to come down as well. So anyway, for us, what's important is that we net, you know, have pricing, you know, positive over inflation.

Speaker Change: Okay and that would be dilutive in that period, yes, correct, yes.

Speaker Change: Okay very good thank you.

Speaker Change: Sure.

Speaker Change: Next we'll go to the line of Jason Gursky with Citigroup. Please go ahead.

Hey, good morning, everybody.

Jason Michael Gursky: Good morning, Scott I was wondering if you could spend a little bit of time on E aviation.

Speaker Change: Hmm.

Jason Michael Gursky: Maybe provide us a little bit of an update on how things are going in that business and the development that you've got going on there.

Scott C. Donnelly: Okay, and then just switching over to Kempel for a moment, again on margins, you've talked in the past, and I think, as one would expect, initially, FLARA is dilutive, but when you look at that trajectory now that you're moving forward, you're headed toward milestone B, I would expect, long-term, this is a very accretive program once you're in full rate production. Can you give us a sense of how you expect the timeline of FLARA's contribution to margins to proceed?

Jason Michael Gursky: You know kind of what the next couple of years look like for you all on.

Jason Michael Gursky: Product development revenue and EBIT is going to trend for us here over the next few years.

Jason Michael Gursky: Given that backdrop.

Speaker Change: Sure. So look I think there's.

Speaker Change: Obviously, a couple of pieces that are in here right. There is the <unk> business, which I think is doing well, we're seeing we saw a significant increase in number of deliveries.

Scott C. Donnelly: Well, I mean, I think that, you know, as you described it, that's kind of what you would nominally expect for any of these large, you know, defense contract programs. [inaudible] several years is very much dominated by the EMD program.

Speaker Change: Here in Q1, I think demand for those products is strong.

Speaker Change: So we feel pretty good about where that is as I mentioned, we did get.

Speaker Change: And FAA exemption on the ability to do flight training on the Gulf electro which is fundamentally.

Scott C. Donnelly: Okay, and that would be dilutive during that period. Yes.

Scott C. Donnelly: Yes, correct.

Speaker Change: The aircrafts, so I think that'll help us pick up volume.

Scott C. Donnelly: Okay, very good. Thank you.

Scott C. Donnelly: Hey, good morning, everybody. I was wondering if you could spend a little bit of time on EA Aviation. Maybe provide us with a little bit of an update on how things are going in that business and the developments that you've got going on there and, you know, kind of what the next couple of years look like for you all in terms of new product development, revenue, and how EBIT's going to trend for us here over the next few years, given that backdrop.

Speaker Change: As we can now sell those and use those for training in the U S.

Speaker Change: Domestic market has already been accepted and we've seen nice growth in the international markets.

Speaker Change: We have a couple of new products that are in that in that product line that I think will do well. So I think we feel very good about how the pivotal guys are doing and how that's performing on the R&D, which is really the.

Speaker Change: The dominant piece of what's driving the financials in that segment. We have the next program, which is progressing well we're doing the full integration and testing of the first.

Scott C. Donnelly: Sure. So, look, I think there's, you know, there's, you know, obviously a couple pieces that are in here, right? There's the Pipistrel business, which I think is doing well. We're seeing, a significant increase in the number of deliveries, you know, here in Q1. I think demand for those products is strong, so we feel pretty good about where that is. As I mentioned, we did get an FAA exemption on the ability to do flight training on the VELUS Electro, which is, you know, fundamentally a training aircraft, so I think that will help us pick up volume as we can now sell those and use those for training in the U.S. domestic market.

Speaker Change: Kraft will probably see.

Speaker Change: And we're already started doing ground testing and evaluation already will price at flight test later on.

Speaker Change: This year on the Nexus front.

Speaker Change: That program is also I'd say progressing well most of the supplier selections are done purchase coming in we're starting to build the first airframe with it.

Speaker Change: Expectations that we would probably fly that sometime next year. So that's really what drives the financial side I would say that.

Speaker Change: We're the level of investment that we're making right now into those programs is probably.

Scott C. Donnelly: It's already been accepted, and we've seen nice growth in the international market. We have a couple new products that are in that product line that I think will do well. So I think we feel very good about how the Pitbull guys are doing and how that's performing.

Speaker Change: I'm going to level off so we saw as a as.

Speaker Change: As we've guided we saw a significant increase.

Speaker Change: From 'twenty to 'twenty, three 'twenty three to 'twenty four.

Scott C. Donnelly: On the R&D side, which is really the dominant piece of what's driving the financials in that segment, we have the Nexus program, which is progressing well. We're doing the full integration and testing of the first craft. We'll probably see, you know, um, we're already sort of doing ground testing and evaluation already. We'll probably see flight tests later on this year on the Nexus front. That program is also, I'd say, progressing well.

Speaker Change: And those that level of spending is probably going to level out going forward. So we'll start to see some EBIT increased contribution on the on the <unk> product sales side. So.

Speaker Change: I think that's clearly a segment that the investments in Nexus in the in the newer program, we're going to continue to have us in a loss position, but it probably stabilizes going out the next few years.

Speaker Change: Mhm and as you think about the size of the market that youre going after putting investment dollars against.

Scott C. Donnelly: Most of the supplier selections are done, and you know, parts are coming in. We're starting to build the first airframe, you know, with an expectation that we would probably fly that, you know, sometime next year. So that's really what drives the financials. Now, I would say that the level of investment that we're making right now into those programs is probably, [inaudible] You know, I think that's, you know, clearly a segment that the investment in Nexus and in the newer programs are going to continue to have us in a lost position, but it probably stabilizes going out.

Speaker Change: Would you.

Speaker Change: We expect to be volumes.

Speaker Change: So I'm just kind of curious.

Speaker Change: When do you expect.

Speaker Change: The payback period to start on these investments that you're making.

Speaker Change: Okay. So I think this is a very much an unknown.

Speaker Change: Theres plenty of studies out there and a lot of other.

Speaker Change: Noise in this industry that when you look at the <unk> side of things that it's a it's a mega market to the exact timing of that I think is still a little bit to be determined there is still plenty of work to do on the technical front from our perspective technical work regulatory work.

Scott C. Donnelly: Mm hmm. And as you think about, you know, the size of the market that you're going after putting investment dollars against, you know, what you expect to be volumes. And so I'm just kind of curious, when do you expect the payback period to start on these investments that you're making?

Speaker Change: To make sure that there is viable products to meet that mission. So.

Speaker Change: Yeah, again, I think theres plenty of independent third party.

Speaker Change: Data out there thats, how his perspectives about how how huge that market could be keeping in mind guys are spending here is relatively modest I think we're taking advantage of lot of cost and cost structure and talent and capability that we already have in the company. So.

Scott C. Donnelly: Well, guys, I think this is very much an unknown. You know, there are plenty of studies out there and, you know, a lot of other noise in this industry that say, you know, when you look at the eVTOL side of things, that it's a megamarket. But the exact timing of that, I think, is still a little bit to be determined.

Scott C. Donnelly: There's still plenty of work to do on the technical front from our perspective, technical work, regulatory work, you know, to make sure that there are viable products to meet that mission. You know, again, I think there's plenty of independent third-party data out there that has opinions about how huge that market could be. You know, keep in mind, guys; our spending here is, you know, relatively modest. I think we're taking advantage of a lot of cost and cost structure and talent and capability that we already have in the company. You know, if the market proves to be what, you know, third parties would say the market would prove to be, it's going to be a massive return on investment.

Speaker Change:

Speaker Change: If it if the market proves to be what third parties would say the market would prove to be a it's going to be a massive return on investment.

Speaker Change: Okay, great. Thank you very much.

Speaker Change: Sure.

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

Speaker Change: Yes.

Speaker Change: <unk>.

George D. Shapiro: Hi, Good morning, George.

George D. Shapiro: The incremental margin in aviation as people were talking about.

George D. Shapiro: 46% and I recognize the revenue differences are small so the numbers can get somewhat distorted, but given that you set in place you know probably pretty much be somewhat similar to the.

Scott C. Donnelly: Okay, great. Thank you very much.

George D. Shapiro: Next, we go to George Shapiro with Shapiro Research. Please go ahead.

Scott C. Donnelly: Yes, good morning. Bye. Bye, George. Scott, the incremental margin in aviation, as people were talking about, was, I mean, 46%, and I recognize that revenue differences are small, so the numbers can get somewhat distorted, but given that you said inflation will probably be somewhat similar to the price benefit that you got this quarter, why won't those incrementals for the rest of the year run somewhat higher than your objective of 20%?

Speaker Change: Price benefit that you got this quarter why werent those incrementals for the rest of the year run somewhat higher than kind of your objective of 20%.

Speaker Change: George look I mean, I think when we look at the young the cost and whats going to come out of inventory and what the margin rates are going to look like.

Speaker Change: <unk>.

George D. Shapiro: Do think Youre right, we did have a higher conversion on on Q1.

George D. Shapiro: But that's certainly I think.

George D. Shapiro: Certainly higher than we would expect through the course of the year. So I think at this point as we look at it.

Scott C. Donnelly: Well, George, look, I mean, I think when we look at the, you know, the cost and you know, what's going to come out of inventory and what the margin rates are going to look like, it's I do think, you know, right, we did have a higher conversion on Q1, but that's certainly, I think, you know, certainly higher than we would expect in the course of the year. So I think at this point, as we look at it, you know, our expectations in terms of, you know, what inflation is going to look like, what plant performance is going to look like, which as I said, is for sure improving through the course of the year, you know, as we get towards the high side of guide there, it's that 20% kind of range, which is, you know, Measurement for the business, and I think that's where we'll be.

George D. Shapiro: Our expectations in terms of what inflation is going to look like what plant performance is going to look like which as I said this is for sure improving through the course of the year.

George D. Shapiro: No.

George D. Shapiro: As we get towards the high side of guide there, it's 20% kind of range, which as you know.

George D. Shapiro: Generally what we've guided is a long term.

George D. Shapiro: Measurement for the business I don't know I think that's where we'll be.

George D. Shapiro: Okay and one quick one for you Frank you bought a lot of stock in the first quarter like one 8% of the outstanding.

Frank Thomas Connor: Yes, it was pretty opportunistic or do we expect that you might buy more than 5%.

Frank Thomas Connor: This year.

Frank Thomas Connor: Well, we talked about kind of 5% was in our guidance, but we also talked about the fact that we have a strong liquidity position and we're going to return excess capital. So I think that kind of we.

Frank Thomas Connor: Okay, and one quick one for you, Frank. You bought a lot of stock in the first quarter, like, you know, 1.8% of the outstanding. I guess it was pretty opportunistic, or do we expect that you might buy more than 5% this year?

Frank Thomas Connor: We get a fair amount in the first quarter, we will continue to buy from here will probably be.

Frank Thomas Connor: On the higher side of that 5% for the year.

Frank Thomas Connor: Well, we talked about kind of 5% in our guidance, but we also talked about the fact that we have a strong liquidity position and we're going to return excess capital. So I think that, you know, we did a fair amount in the first quarter, we'll continue to buy from here, and we'll probably be on the higher side of that 5% for the year.

Speaker Change: Okay. Thanks very much.

Frank Thomas Connor: Next we go to the line of Ron Epstein with Bank of America. Please go ahead.

Ronald Jay Epstein: Yeah, Good morning, guys.

Ronald Jay Epstein: Good morning.

Ronald Jay Epstein: Just maybe circling back.

Ronald Jay Epstein: On the defense business.

Ronald Jay Epstein: Supplemental that just got passed yesterday.

George D. Shapiro: Okay, thanks very much.

Ronald Jay Epstein: Next, we go to the line of Ron Epstein with Bank of America. Please go ahead.

Ronald Jay Epstein: Is there stuff in there for you guys. I mean have you look at obviously you've looked at it.

Scott C. Donnelly: I'm just maybe circling back on the defense business in the supplemental that just got passed yesterday. Is there stuff in there for you guys? I mean, have you looked at it? Obviously you have looked at it, but can you give us a sense of, you know, potentially what's in there for systems or Bell?

Ronald Jay Epstein: Can you give us a sense.

Ronald Jay Epstein: You can see what's in there for.

Ronald Jay Epstein: Systems or thereabout.

Speaker Change: No there's not I mean, we really haven't been in the <unk>.

Speaker Change: And the guns and bullet business. So most of that stuff is not replenishment of things that we have.

Scott C. Donnelly: No, there's not. I mean, we really haven't been in the guns and bullets business. So most of that stuff is, you know, not replenishments of things that we have. I do think there are opportunities in Ukraine over time when you look at things that are possibilities for balance among other things and systems, but not something that's directly tied to these supplementals.

Speaker Change: I do think there's opportunities in Ukraine over time, when you look at things that are possibilities for bell and some other things in systems, but not something that is directly tied to these supplemental.

Speaker Change: Got it got it and then kind of back to aviation.

Scott C. Donnelly: Got it, got it. And then kind of back to aviation. Broadly, how's the supply chain doing? One of the things I've heard, oddly enough, is like window screens, you know, windshields for airplanes, or there's a shortage of those. I mean, is there other stuff like that that's just kind of random stuff that's just kind of short in supply?

Ronald Jay Epstein: Aviation.

Ronald Jay Epstein: Broadly how's the supply chain doing isn't that one of the things I've heard oddly announces.

Ronald Jay Epstein: Window screens windshields for airplanes or there's a shortage of those.

Ronald Jay Epstein: Many of the other stuff like that that's just kind of random substance.

Speaker Change: Sure and supply.

Scott C. Donnelly: Well, as we said, the randomness is part of what drives us crazy, right? And they change over time, but you're absolutely right.

Speaker Change: Well look Ron as we've said.

Speaker Change: The randomness is part of what drives us Crazy right.

Speaker Change: And that change over time, but.

Speaker Change: Youre absolutely right.

Scott C. Donnelly: Windshields have been... a problem now for several years, and it's, I say, probably getting better. But it's been a big problem. It's been a problem for us in terms of production builds. And frankly, it's been a big problem for us. In terms of our customers, you know, if somebody has a damaged windscreen, and it's been an area of a lot of dissatisfaction in the industry, not just for the OEMs like us, but also for our ability to provide, you know, spares and service, it certainly has been and remains one of the top problem items, you know, by category.

Speaker Change: Windshields have been.

Speaker Change: Now for several years and.

Speaker Change: So you're probably getting better, but it's been a big problem. That's been a problem for us in terms of production builds and frankly, it's been a big problem for us.

Speaker Change: In terms of our customers you know if somebody has a damaged windscreen and it's been an area of.

Speaker Change: A lot of dissatisfaction in the industry not just for the Oems like us, but also for our ability to provide spares and service. It's a it is certainly has been and remains one of the top.

Speaker Change: Problem items by category.

Scott C. Donnelly: Yeah, when I heard that, I was astonished, but yeah, I guess the current supplier shut down the other supplier, so whatever. All right, cool. Thanks, guys. Have a good one. Next we go to Kristine Liwag with Morgan Stanley. Please go ahead. Hey Scott, earlier you mentioned industrials and how you're seeing incremental growth.

Speaker Change: Yeah, when I heard that I was astonished, but yeah I guess, the current supplier shut down the other supplier whatever.

Speaker Change: Alright cool thanks, guys have a.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: Next we'll go to Kristine <unk> with Morgan Stanley. Please go ahead.

Kristine: Hey, Scott earlier, you mentioned on industrial how youre seeing incremental weakness in the high end consumer.

Kristine Tan Liwag: Next, we go to Kristine Liwag with Morgan Stanley. Please go ahead. Hey, Scott, earlier you mentioned...

Kristine: Can you talk about the customer profile of those buyers and if there are similarities.

Kristine: The customer profiles with products like <unk> and to our pistons.

Speaker Change: Okay years at aviation.

Scott C. Donnelly: Um, so I don't know exactly in terms of categorization of that customer per se. But, um, I think that if you look at, you know, demand for, you know, all the way down to PISTNet, right, you know, Cessna 172s, the demand remains, you know, very strong and, you know, we expect to have, you know, strong deliveries even this year, but availability, you know, the demand environment is very strong for that kind of stuff. And, you know, M2 is strong.

Kristine: So I don't know exactly in terms of categorization of that of that customer per se, but.

Kristine: I think that if you look at demand for all the way down to the business right. Now is just on 170 twos the.

Kristine: The demand remains very strong and we expect to have strong deliveries even over last year, but.

Kristine: But availability the demand environment is very strong for that kind of stuff.

Speaker Change: And.

Speaker Change: <unk> strong I mean these are.

Scott C. Donnelly: I mean, you know, these are products that we see strength in terms of demand across the product line. I don't think they're the same customer, maybe, or the same consumer, perhaps, but I think if you look, certainly what we're seeing, and we look at other companies, if you're in the business of doing... boats, RVs, recreational vehicles, PTVs, you know, that that consumer has clearly slowed down.

Speaker Change: These are products that we see strength in terms of demand across the product line.

Speaker Change: I don't.

Speaker Change: I think there were the same customer may be are the same consumer perhaps but I think if you look.

Speaker Change: What we're seeing and we look at other companies if youre if youre in the business of doing.

Speaker Change: Boats rvs recreational vehicles P T v's.

Speaker Change: That that consumer has clearly.

Scott C. Donnelly: They slowed down last year and, you know, we did make some adjustments based on that, but we've seen, you know, further slowing of that. But, yeah, I don't know how to categorize whether it's the same customer or not, but certainly those product categories have slowed down, and, you know, everything from pistons up into light jets, you know, has not. And, of course, that's a much bigger, much more important business to us, which is good, I suppose. Great. Thanks, Scott. I'll keep it. Go to www.gavinparsons.com for more information.

Speaker Change: Slow down they slow down last year, and we did make some adjustments based on that but we've seen further slowing of that but yes, I don't I don't know how to categorize whether it's the same customer or not but certainly those product product categories have slowed down in everything from just ends up into light jets has not.

Speaker Change: And of course, that's a much bigger much more important business to us, which is which is good I suppose.

Speaker Change: Okay, great. Thanks, Scott I'll keep it to one.

Speaker Change: Okay.

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

Gavin Eric Parsons: Thanks, Good morning.

Gavin Eric Parsons: Great.

Gavin Eric Parsons: Just wanted to confirm if I heard the restructuring savings are expected at 185, given I think the initial plan was 75 and just what is what's driving the better number there.

Gavin Eric Parsons: Next, we go to Gavin Parsons with UBS. Please go ahead. Thanks, morning. [inaudible] I just want to confirm if I heard you correctly.

Gavin Eric Parsons: Yes.

Frank Thomas Connor: Yeah, that's a full kind of run rate when we get through it all, and it's really driven by the addition of headcount reductions. The unanticipated Shadow, Pharah, and then the additional actions at Industrial are really focused on headcount where the original restructuring had some asset impairment in it, and so we're getting a much bigger run rate savings as a result of those reductions to kind of right-size those activities.

Gavin Eric Parsons: That's a full kind of run rate when we get through it all and it's really driven by the addition of head count reductions.

Gavin Eric Parsons: The unanticipated shadow far and then the additional actions at industrial are really focused on head count where the original restructuring has some asset impairment.

Gavin Eric Parsons: And it and so we're getting.

Gavin Eric Parsons: Much bigger run rate savings as a result of those.

Gavin Eric Parsons: Reductions to kind of rightsize those activities.

Scott C. Donnelly: Well, look, I think that's still a little bit to be determined. When the Army canceled the shadow program, they did say they wanted to move more aggressively on FTUAS. You know, we have seen that in the awards now of option three and four, which is good.

Gavin Eric Parsons: Okay.

Gavin Eric Parsons: What is the transition from shadow to after U S look like in terms of revenue and margins over what timeframe.

Gavin Eric Parsons: Well look I think that's still a little bit to be determined when the when the army canceled the shadow program that did say they wanted to move more aggressively on FTE UAS.

Scott C. Donnelly: There aren't, I don't think, formally published dates. But the dates that we hear about in terms of when they'll put a RFP out on the street for the ultimate EMD production decisions, sounds like they're probably pulling that forward to where that RFP could come out as early as even late this year, which would lead to, you know, an early 25 calendar year award, which would be great. So the exact size and scope and, therefore, the revenue and the margin are, you know, we just don't have visibility into that at this point.

Gavin Eric Parsons: We have seen that in the in the awards now of option three and four which is good.

Gavin Eric Parsons: There arent I don't think formally published dates.

Gavin Eric Parsons: But the data that we hear about in terms of when they'll put a RFP out on the street for the ultimate.

Gavin Eric Parsons: <unk> production decisions sounds like they are probably pulling that forward to where that RFP could come out as early as even late this year, which would lead to an early 'twenty five calendar year award, which would be which would be great. So.

Scott C. Donnelly: This conference is being recorded for digitized replay and will be available after 10 a.m. Eastern Time today through April, 2025. You may The Bulletproof Executive 2013, And that will conclude our conference. You may now disconnect.

Gavin Eric Parsons: The exact size and scope and therefore, the revenue and the margin is we just don't have visibility to that at this point.

Gavin Eric Parsons: Yes.

Speaker Change: That's helpful. Thanks.

Speaker Change: This conference is being recorded for digitize replay and will be available. After 10, a M. Eastern time today through April 22025, you may access the replay by dialing 8662071041 and enter the access code eight five.

Operator: This conference is being recorded for digitized replay and will be available after 10 a.m. Eastern Time today through April 25, 2025. You may access the replay by dialing 866-207-1041 and entering the access code 8546032.

Speaker Change: 46032, and this does conclude our conference for today. Thank you for your participation you may now disconnect.

Operator: This does conclude our conference for today. Thank you for your participation. You may now disconnect. We're sorry, your conference is ending now. Please hang up.

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