Q2 2024 Textron Inc Earnings Call

Ladies and gentlemen, thank you for standing by. Welcome to the Textron Second Quarter 2024 Earnings Release Conference Call.

Operator: 34 Eurings Release Conference 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 one and zero. If you should require assistance starting the call, please press star, then zero. As a reminder, this conference is being recorded.

Operator: or Earnings Release conference 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. If you should require assistance during the call, please press star, then 0. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Vice President of Investor Relations, Mr. Dave Rosenberg. Please go ahead.

Speaker Change: At this time, all participants are in a listen-only mode.

Speaker Change: Later, we will conduct a question and answer session. If you would like to ask a question, please press 1 and 0.

Speaker Change: If you should require assistance during the call, please press star then zero.

David Rosenberg: I would now like to turn the conference over to your host, Vice President Investor Relations, Mr. Dave Rosenberg. Please go ahead.

Speaker Change: As a reminder this conference is being recorded. I would now like to turn the conference over to your host, Vice President Investor Relations, Mr. Dave Rosenberg. Please go ahead.

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

David Rosenberg: Thanks, Craig.

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

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

Speaker Change: These four 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: On the call today, we have Scott Donnelly, Textron's Chairman and CEO, and Frank Connor, our Chief Financial Officer. Our earnings call presentation can be found in the Investor Relations section of our website. Revenues in the quarter were $3.5 billion from $3.4 billion in last year's second quarter. During this year's second quarter, adjusted income from continuing operations was $1.54 per share compared to $1.46 per share in last year's second quarter. Manufacturing cash low before pension contributions, total $320 million in the quarter compared to $242 million in the second quarter of 2023.

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

David Rosenberg: Revenues in the quarter were $3.5 billion, up from $3.4 billion in last year's second quarter. During this year's second quarter, adjusted income from continuing operations was $1.54 per share, compared to $1.46 per share in last year's second quarter. Manufacturing cash flow before pension contributions totaled $320 million in the quarter, compared to $242 million in the second quarter of 2015.

Speaker Change: Revenues in the quarter were $3.5 billion, up from $3.4 billion in last year's second quarter.

Speaker Change: During this year's second quarter, adjusted income from continuing operations was $1.54 per share, compared to $1.46 per share in last year's second quarter. Manufacturing cash flow before pension contributions totaled $320 million in the quarter, compared to $242 million in the second quarter of 2023.

Scott Donnelly: With that, I'll turn the call over to Scott. Thanks, David. Good morning, everyone. Aviation has higher segment revenues of $1.5 billion, generating a profit of $195 million, up $24 million from the second quarter of 2023. We delivered $44 commercial turbo props, up from $37 last year, and $42 jets, down from $44 last year's second quarter, while aftermarket revenues grew 13%. Aviation continued to see strong demand across all product lines; backlog ended the quarter at $7.5 billion, up $18 million from the first quarter of this year. In the quarter, aviation began deliveries of the King Air 260 under the multi-engine training systems contract for the U.S. Navy.

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

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

Speaker Change: With that, I'll turn the call over to Scott.

Scott C. Donnelly: Aviation had higher segment revenues of $1.5 billion, generating a profit of $195 million, up $24 million from the second quarter of 2023. We delivered 44 commercial turboprops, up from 37 last year and 42 jets, down from 44 last year's second quarter, while aftermarket revenues grew 13%. Aviation continues to see strong demand across all product lines. Backlog ended the quarter at $7.5 billion, up $118 million from the first quarter of this

Scott C. Donnelly: We delivered 44 commercial turboprops up from 37 last year, and 42 jets down from 44 last year's second quarter, while aftermarket revenues grew 13%.

Scott C. Donnelly: Aviation continues to see strong demand across all product lines. Backlog ended the quarter at $7.5 billion, up $118 million from the first quarter of this year.

Scott C. Donnelly: In the quarter, Aviation began deliveries of the King Air 260 under the multi-engine training systems contract with the U.S. Navy. To date, we've been awarded 35 aircraft, with a possible 64 on the program. Also, during the quarter, Aviation certified a third variant of the Cessna Skycarrier. The Combi version allows operators to transport passengers and cargo simultaneously.

Scott C. Donnelly: In the quarter, aviation began deliveries of the King Air 260 under the multi-engine training systems contract with the U.S. Navy. To date, we've been awarded 35 aircraft, with a possible 64 on the program.

Scott Donnelly: To date, we've been awarded $35 aircraft to a possible $64 on the program. Also during the quarter, aviation certified a third variant of the Cessna Sky Currier. The Columbia version allows operators to transport passengers and cargo simultaneously. Combined with the previously certified passenger and cargo variants, this latest variant continues to demonstrate the first utility of the aircraft for our customers. June, Aviation completed the first flight of a system citation to send. The aircraft is the first conforming production flight test aircraft and represents a significant milestone for the program. To date, we have completed over 400 hours of flight testing.

Scott C. Donnelly: Also during the quarter, Aviation certified a third variant of the Cessna Skycarrier. The Combi version allows operators to transport passengers and cargo simultaneously.

Scott C. Donnelly: Combined with a previously certified passenger and cargo variant, this latest variant continues to demonstrate the versatility of the aircraft to our customers. In June, Aviation completed the first flight of a Cessna Citation Ascend. The aircraft is the first conforming production flight test aircraft and represents a significant milestone for the program. To date, we have completed over 400 hours of flight testing.

Scott C. Donnelly: Combined with a previously certified passenger and cargo variant, this latest variant continues to demonstrate the versatility of the aircraft to our customers.

Scott C. Donnelly: In June , aviation completed the first flight of a Cessna Citation Ascend. The aircraft is the first conforming production flight test aircraft and represents a significant milestone for the program. To date, we have completed over 400 hours of flight testing.

Scott Donnelly: At Bell, revenues and profit in the quarter were up as compared to the second quarter last year. On the commercial side, Bell delivered 32 helicopters, down from 35 and last year's second quarter. Moving to military, Bell completed the Florida Preliminary Design Review, while also continuing to release engine and drawings in place orders for longing material as the program continues to ramp. In quarter, Bell was down-selected as one of two companies for the next phase of DARPA's Speed and Runway Independent Technology's Explain program to create a prototype high-speed vertical take-off and landing aircraft for the US military.

Scott C. Donnelly: The Bell revenues and profit in the quarter were up as compared to the second quarter last year. On the commercial side, Bell delivered 32 helicopters, down from 35 in last year's segment. Moving to the Military, Bell completed the FLORA Preliminary Design Review, while also continuing to release engineering drawings and place orders for long-unit material as the program continues to ramp. In the quarter, Bell was selected as one of two companies for the next phase of DARPA's Speed and Runway Independent Technologies X-Plane program to create a prototype high-speed vertical takeoff and landing aircraft for the U.S. military.

Speaker Change: At Bell, revenues and profit in the quarter were up as compared to the second quarter last year. On the commercial side, Bell delivered 32 helicopters, down from 35 in last year's second quarter.

Speaker Change: Moving to military, Bell completed the FLORA Preliminary Design Review, while also continuing to release engineering drawings and place orders for long-unit material as the program continues to ramp.

Speaker Change: In the quarter, Bell was down-selected as one of two companies for the next phase of DARPA's Speed and Runway Independent Technologies X-Plane program to create a prototype high-speed vertical takeoff and landing aircraft for the U.S. military. This program builds on Bell's success as the leader in tilt-rotor technology.

Scott Donnelly: This program builds on Bell's success as a leader until we're technology. Text-con systems realize higher revenues will continue to pursue new program opportunities in the quarter. Systems is awarded options three and four for the FTES program the second quarter. This award includes delivery of an aerosol and fiber quad system, the U.S. Army for test evaluation. As part of the Army's robotic combat vehicle competition, we announced a collaboration with Kodiak Robotics. Kodiak will integrate its industry-leading autonomous system into a Textron Systems purpose-filled, uncrewed military vehicle to demonstrate the autonomous operations later in 2024. When we do industrial, we experience lower revenues and operating profit in the quarter.

Scott C. Donnelly: This program builds on Bell's success as a leader in tilt river technology. Textron Systems realized higher revenues. We'll continue to pursue new program opportunities. This was awarded to Option 3 and 4 for the FTOES program in the second quarter.

Speaker Change: Textron Systems realized higher revenues. We'll continue to pursue new program opportunities in the quarter.

Speaker Change: Systems was awarded options 3 and 4 for the FTOES program in the second quarter.

Scott C. Donnelly: This award includes the delivery of an Aeroson Hybrid Quad System to the U.S. Army for test and evaluation. Additionally, as part of the Army's Robotic Combat Vehicle competition, we announced a collaboration with Kodiak Robotics. Kodiak will integrate its industry-leading autonomous system into a Textron Systems purpose-built uncrewed military vehicle to demonstrate autonomous operations later in 2025. Moving to the industrial sector, we experienced lower revenues and operating profit in the quarter. As expected, we continue to see softer demand in our consumer and automotive end markets.

Speaker Change: This award includes the delivery of an Aeroson Hybrid Quad System to the U.S. Army for test evaluation.

Speaker Change: As part of the Army's Robotic Combat Vehicle competition, we announced a collaboration with Kodiak Robotics. Kodiak will integrate its industry-leading autonomous system into a Textron Systems purpose-built uncrewed military vehicle to demonstrate the autonomous operations later in 2024.

Scott Donnelly: As expected, we continue to see softer demand in our consumer and all the more than markets. We continue to execute on our lower volume environment. As a result, we saw sequential margin improvement in Q2 and expect to see this improvement in the second half of 2024. Moving to aviation, during the quarter, we completed the acquisition of Amazilly Aerospace. The Amazilly team has expertise in digital flight controls, flight guidance, and vehicle management systems for manned and unmanned aircraft. We plan on integrating the products and capabilities in our new platform such as the Nuva and Surveyor. Nuva program reached a significant milestone with the completion of vehicle 1 assembly.

Speaker Change: Moving to industrial, we experienced lower revenues and operating profit in the quarter. As expected, we continue to see softer demand in our consumer and automotive end markets.

Scott C. Donnelly: We continue to execute on our cost reduction plan to position the cost structure for lower volume environments. As a result, we saw a sequential margin improvement in Q2 and expect to see further improvement in the second half of 2024. Moving to aviation, during the quarter, we completed the acquisition of Amazilia Aerospace. The Amazilia team has expertise in digital flight controls, flight guidance, and vehicle management systems for manned and unmanned aircraft. We plan on integrating the products and capabilities into our new platforms, such as the Nuva and Surveyor. The NUVA program reached a significant milestone with the completion of Vehicle 1 assembly. This prototype vehicle has entered ground testing, which supports anticipated hover flight later this year.

Speaker Change: We continue to execute on our cost reduction plan to position the cost structure for lower volume environment.

Speaker Change: As a result, we saw a sequential margin improvement in Q2 and expect to see this improvement in the second half of 2024.

Speaker Change: Moving to aviation, during the quarter we completed the acquisition of Amazilia Aerospace.

Speaker Change: The Amazilia team has expertise in digital flight controls, flight guidance, and vehicle management systems for manned and unmanned aircraft.

Speaker Change: We plan on integrating the products and capabilities into our new platforms such as the Nuva and Surveyor.

Scott Donnelly: The prototype vehicle has entered ground testing, which supports anticipated hover flight later this year.

Speaker Change: The NUVA program reached a significant milestone with the completion of Vehicle 1 assembly. The prototype vehicle has entered ground testing, which supports anticipated hover flight later this year.

Frank Connor: With that, I'll turn the call over to Frank. Thanks, Scott. Good morning, everyone. Let's review how each of the segments contributed, starting with Textron Aviation. Revenue to Textron Aviation of 1.5 billion, we're up 113 million from the second quarter of 2023, reflecting higher pricing of 57 million and higher volume and mix of 56 million. Segment profit was 195 million in the second quarter, up 24 million from a year ago, due to higher volume and mix of 35 million and favorable pricing net of inflation of 22 million, partially offset by an unfavorable impact from performance of 33 million.

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

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

Speaker Change: With that, I'll turn the call over to Frank.

Frank Thomas Connor: 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 $1.5 billion were up $113 million from the second quarter of 2023, reflecting higher pricing of $57 million and higher volume and mix of $56 million. Segment profit was $195 million in the second quarter, up $24 million from a year ago due to higher volume and mix of $35 million and favorable pricing net of inflation of $22 million, partially offset by an unfavorable impact from performance of $33 million.

Frank Thomas Connor: Revenues at Textron Aviation of $1.5 billion were up $113 million from the second quarter of 2023, reflecting higher pricing of $57 million and higher volume and mix of $56 million.

Frank Thomas Connor: Segment profit was $195 million in the second quarter, up $24 million from a year ago due to higher volume and mix of $35 million and favorable pricing net of inflation of $22 million, partially offset by an unfavorable impact from performance of $33 million.

Frank Thomas Connor: Backlog the segment ended the quarter at $7.5 billion, up $118 million from the first quarter. Moving to Bell, revenues were $794 million, up $93 million from last year, primarily due to higher military volume of $104 million as we continue to ramp the FLAR program.

Frank Connor: Backlog in the segment ended the quarter at 7.5 billion, up 118 million from the first quarter. When we get value, revenues were 794 million, up 93 million from last year, primarily due to higher military volume of 104 million, as we continue to ramp the flyer program. Segment profit of 82 million was up 17 million from last year's second quarter, largely due to a favorable impact from performance of 39 million, which included lower research and development cost, partially offset by mix. Backlog in the segment ended the quarter at 4.2 billion. that Textron Systems revenues were 323 million, up 17 million from last year's second quarter, largely due to higher volume of 14 million.

Frank Thomas Connor: Backlogging the segment end of the quarter at $7.5 billion, up $118 million from the first quarter.

Frank Thomas Connor: Moving to Bell, revenues were $794 million, up $93 million from last year, primarily due to higher military volume of $104 million as we continue to ramp the FLAR program.

Frank Thomas Connor: Segment profit of $82 million was up $17 million from last year's second quarter, largely due to a favorable impact from performance of $39 million, which included lower research and development costs, partially offset by MIP. Backlog the segment ended the quarter at $4.2 billion. At Textron Systems, revenues were $323 million, up $17 million from last year's second quarter, largely due to higher volume of $14 million. However, segment profit of $35 million was down $2 million from a year ago.

Frank Thomas Connor: Segment profit of $82 million was up $17 million from last year's second quarter, largely due to a favorable impact from performance of $39 million, which included lower research and development costs, partially offset by mix.

Frank Thomas Connor: Backlogging the segment end of the quarter at $4.2 billion.

Frank Thomas Connor: At Textron Systems, revenues were $323 million, up $17 million from last year's second quarter, largely due to higher volume of $14 million. Segment profit of $35 million was down $2 million from a year ago. Backlogged in the segment end of the quarter at $1.7 billion.

Frank Connor: Segment profit of 35 million was down 2 million from a year ago. Backlog in the segment ended the quarter at 1.7 billion. Industrial revenues were 914 million, down 112 million from last year's second quarter, mainly due to lower volume and mix of 190 million. Segment profit of 42 million was down 37 million in the second quarter of 2023, primarily due to lower volume and mix. Text on EABH and segment revenues were 9 million, and segment loss was 18 million in the second quarter of 2024, compared to a segment loss of 12 million in the second quarter of 2023.

Frank Thomas Connor: Backlog it in the segment ended the quarter at 1.7 billion. Industrial revenues were $914 million, down $112 million from last year's second quarter, mainly due to lower volume and mix of $119 million. Segment profit of $42 million was down $37 million in the second quarter of 2023, primarily due to lower volume in the mix. Textron E-Aviation segment revenues were $9 million, and the segment loss was $18 million in the second quarter of 2024 compared to a segment loss of $12 million in the second quarter of 2023.

Frank Thomas Connor: Industrial revenues were $914 million down $112 million from last year's second quarter, mainly due to lower volume and mix of $119 million.

Frank Thomas Connor: saying the profit of 42 million was down 37 million in the second quarter of 2023 primarily due to lower volume in the mix.

Frank Thomas Connor: Textron E-Aviation segment revenues were $9 million and segment loss was $18 million in the second quarter of 2024 compared to a segment loss of $12 million in the second quarter of 2023.

Frank Connor: Finance segment revenues were 12 million, and profit was 7 million. Moving below segment profit, corporate expenses were 17 million; net interest expense for the manufacturing group was 20 million. Lifeboat inventory provision was 27 million; intangible asset amortization was 9 million; special charges related to the previously announced restructuring were 13 million; and the non-service components of pension and post-retirement income were 66 million. In the quarter, we repurchased approximately 4.1 million shares for turning 358 million in cash to shareholders. Here to date we have repurchased approximately 7.7 million shares for turning 675 million in cash to shareholders.

Frank Thomas Connor: Finance segment revenues were $12 million, and profit was $7 million. Moving below segment profit, corporate expenses were $17 million, net interest expense for the manufacturing group was $20 million, LIFO inventory provision was $27 million, and intangible asset amortization was $9 million. Special charges related to the previously announced restructuring were $13 million, and the non-service components of pension and post-retirement income were $66 million. In the quarter, we repurchased approximately 4.1 million shares, returning $358 million in cash to shareholders. Year-to-date, we have repurchased approximately 7.7 million shares, returning $675 million in cash to shareholders. That concludes our prepared remarks, so Greg, we can open the line for questions.

Frank Thomas Connor: Finance segment revenues were $12 million and profit was $7 million.

Frank Thomas Connor: Moving below segment profit, corporate expenses were $17 million. Net interest expense for the manufacturing group was $20 million.

Frank Thomas Connor: LIFO inventory provision was $27 million, intangible asset amortization was $9 million, special charges related to the previously announced restructuring were $13 million, and the non-service components of pension and post-retirement income were $66 million.

Frank Thomas Connor: In the quarter, we repurchased approximately 4.1 million shares, returning $358 million in cash to shareholders.

Frank Thomas Connor: Near to date, we have repurchased approximately 7.7 million shares, returning $675 million in cash to shareholders.

Operator: That concludes from our prepared remarks of Greg. We can open the line for questions. Okay, ladies and gentlemen, if you'd like to ask a question, please press 1-0 on your telephone keypad. You may withdraw your question at any time by repeating the 1-0 command. If you're using a speaker phone, please pick up the handset before pressing the numbers. Once again, if you have a question, please press 1-0 at this time. And one moment, please, for your first question.

Operator: Okay, ladies and gentlemen, if you'd like to ask a question, please press 1 and 0 on your telephone keypad. You may withdraw your question at any time by repeating the 1-0 command. If you're using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question, please press 1 and 0 at this time. And one moment, please, for your first question. Your first question comes from the line of Peter Arment from Baird: please go ahead.

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

Greg: Okay, ladies and gentlemen, if you'd like to ask a question, please press 1 and 0 on your telephone keypad.

Speaker Change: You may withdraw your question at any time by repeating the 1-0 command.

Speaker Change: If you're using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you have a question, please press 1 and 0 at this time. And one moment, please, for your first question.

Peter Arment: Your first question comes from the line of Peter Arment from Beard. Please go ahead.

Peter Arment: Good morning, Scott and Frank. Nice results.

Speaker Change: Your first question comes from the line of Peter Arment from Baird. Please go ahead.

Peter J. Arment: Good morning, Scott and Frank. Nice results. Scott, you've booked a bill for over one in aviation. Maybe you could just give us a little color on what you're seeing in the market environment and any color on pricing and what the aftermarket also looks like.

Scott Donnelly: If Scott, you book the bill over one, an aviation, maybe you could just give us a little color on what you're seeing in the market environment and any color on pricing and what aftermarket also did in the quarter. Sure, Peter, look, I think the end market continues to be robust. We're seeing strong demand and jets, turboprops. It's pretty much across all models and across the whole family of products, which is great. Strong response to a lot of the upgrades that we've done here recently in terms of existing models, and obviously we'll expect, as we go to the back half of the year, to see continued strength and new launches like the Ascend and such.

Peter J. Arment: Good morning, Scott and Frank. Nice results. Scott, you've booked a bill over one in aviation. Maybe you could just give us a little color of what you're seeing in the market environment and any color on pricing and what aftermarket also did in the course.

Scott C. Donnelly: Sure, Peter. Yeah, look, I think the end market continues to be robust. We're seeing strong demand for jets and turboprops, pretty much across all models and across the whole family of products, which is great. So, I would say, you know, again, as much as we've seen for the last couple of years, we're still sort of targeting that one-to-one area, but robust demand, which is great. Aircraft are flying, so we continue to see strength in the service business as well.

Scott C. Donnelly: Sure, Peter. Yeah, look, I think the end market continues to be robust. We're seeing strong demand in jets, turboprops.

Speaker Change: It's pretty much across all models and across the whole family of products, which is great.

Speaker Change: strong response to a lot of the upgrades that we've done here recently in terms of existing models and Obviously we'll expect you know as we go you know the back half of the year to see you know continued strength and new launches like the ascend and

Scott Donnelly: So I would say, again, as much as we've seen for the last couple of years, we're still sort of targeting that one-to-one area, but robust, robust demand, which is great aircraft for flying.

Speaker Change: And such. So I would say, you know, again, as much as we've seen for the last couple of years, we're still sort of targeting that one-to-one.

Scott Donnelly: We continue to see strength in the service business as well. 13% is particularly strong in the quarter, but we feel good about where that's been performing. So again, across I think the whole portfolio is going pretty good in terms of the end market.

Scott C. Donnelly: Thirteen percent is particularly strong, you know, in the quarter, but, you know, we feel good about where that's been performing, so, again, across, I think, the whole portfolio is going pretty well in terms of the end market.

Speaker Change: You know, we continue to see, you know, strength in the service business as well. Thirteen percent is particularly strong.

Speaker Change: but we feel good about where that's been performing. So, I think the whole portfolio is going pretty good in terms of the end market.

Peter Arment: That's great.

Frank Thomas Connor: That's great. And then just a quick one for Frank. Your CapEx, I think you're $140 million for the first half of the year. I think your guidance... 425 million. Just so, what are you coming in at a slower pace or then kind of the guidance or plans to step up, and outside of maybe Flora, what are the main drivers of the step up? Thanks.

Frank Connor: And then just a quick one for Frank. Your CAPX, I think, you're 140 million for the first half of the year. I think your guidance is 425 million.

Speaker Change: That's great. And then just a quick one for Frank. Your CapEx, I think you're $140 million for the first half of the year. I think your guidance is...

Frank Connor: So what are you coming in at a slower pace or then kind of the guidance or plans to step up and outside of maybe Florida, what are the main drivers of the step up? Thanks. Well, we'll continue to see growth in the second half of the year. Obviously, as you know, reflected in those numbers, we're a little slower in the first half than we expected. We tend to be a bit back and loaded in CAPX, though. So we will see growth in the second half. There's probably a little opportunity in that kind of full year number given the pace, but for now, you know, that's a number we'll stick with.

Speaker Change: 425 million just so what what is it are you coming in at a slower pace or then then kind of the guidance or plans to step up and outside of maybe Flora what are the main drivers of the step up thanks

Frank Thomas Connor: Well, we'll continue to see growth in the second half of the year, obviously, as reflected in those numbers. But we were a little slower in the first half than we expected. We tend to be a bit back-end loaded in CapEx, though, so we will see growth in the second half. There's probably a little opportunity in that kind of full-year number, given the pace, but for now, that's a number we'll stick with.

Frank Thomas Connor: Well, we'll continue to see growth in the second half of the year, obviously, as reflected in those numbers. We're a little slower in the first half than we expected. We tend to be a bit back end loaded in CapEx, though, so we will see growth in the second half. There's probably a little opportunity in that kind of full year number.

Speaker Change: Given the pace, but for now, you know, that's a number we'll stick with.

Peter Arment: Appreciate the color. Thanks, guys.

Peter J. Arment: I appreciate the call. Thanks, guys.

David Strauss: Your next question comes from the line of David Strauss from Barclays. Please go ahead. Thanks.

David Egon Strauss: Your next question comes from the line of David Strauss from Barclays. Please go ahead.

Speaker Change: Appreciate the call. Thanks, guys.

Speaker Change: Your next question comes from the line of David Strauss from Barclays. Please go ahead.

Scott C. Donnelly: Thanks, good morning. Morning, Scott, can you just give us an update on the supply chain at both Aviation and Bell?

Scott Donnelly: Good morning. Scott, can you just give us an update on supply chain at both Aviation and Bell? Sure, David.

David Egon Strauss: Thanks. Good morning.

David Egon Strauss: Scott, can you just give us an update on supply chain at both Aviation and Bell?

Scott C. Donnelly: I'm sure, David, look, it's still, you know, problematic. There are fewer problems probably than we used to have, but there are still parts that are, you know, from suppliers that continue to give us some heartache with late deliveries. And that does, you know, create some of these issues around, you know, All in the Factory, Reworked, and Out of Step Sequence kind of things.

Scott Donnelly: Look, it's still problematic. There's fewer problems probably than we used to have, but there are still parts that are from suppliers that continue to give us some partake with late deliveries, and that does create some of these issues around. Low in the factory and reworked and out of out-of-state sequence kind of things, but what we've been managing through that, and unfortunately now for a number of years it does continue to draw on our performance in the aviation business, and particularly the performance numbers continue to see factory deficiencies that we would like to get resolved. But I think the team all in all is working through that.

Scott C. Donnelly: Sure, David, look, it's still, you know, problematic. There's fewer problems probably than we used to have, but there are still parts that are, you know, from suppliers that continue to give us, you know, some some heartache with late deliveries and that does, you know, create some of these issues around, you know,

Scott C. Donnelly: But, you know, we've been managing through that, unfortunately, now for a number of years. It does continue to drag on our performance, you know, in the... in the aviation business, and particularly, you know, the performance numbers, continuous C factory deficiencies that we would like to get resolved. But I think the team, all in all, is working through that. We're still able to drive higher revenue and, you know, higher profit margins.

David Egon Strauss: All in the Factory, and Rework, and out-of-house sequence kind of things, but you know, what we've been managing through that, unfortunately, now for a number of years, it does continue to drag on our performance, you know, in the...

David Egon Strauss: you know, in the aviation business particularly, you know, the performance numbers, continue to see factory inefficiencies that we would like to...

Scott Donnelly: We're still able to drive higher revenue and higher profit margins, so I think all in all the business is performing well despite what's still a tough environment.

David Egon Strauss: To get resolved, but I think the team you know all in all is working through that We're still able to drive higher revenue, and you know higher profit margins So I think you know all in all the business is performing well despite

Scott C. Donnelly: So I think, all in all, the business is performing well despite, you know, it's still a tough environment. I think you see most companies reporting and continuing to see some challenges in the supply chain. Still a lot of new people, a lot of training inefficiencies and things like that, but we're working our way through it. Same thing at Bell.

Scott Donnelly: I think you see most companies reporting and continue to see some challenges and supply chains, still a lot of new people, a lot of training and efficiencies and things like that, but we're working our way through it. Same thing at Bell, we have a number of deliveries that we miss. We're missing some key components for working with those suppliers, and as I said, the number of them are getting smaller. But in this industry, every part is important, so we're continued to have to work our way around some late deliveries of parts come in. But because I said, I think all in all our teams operational are fighting through that and getting most of their deliveries done and continue to drive good margins. So we'll keep our heads down and keep fighting through that through the course of the year I think.

David Egon Strauss: You know, it's still a tough environment. I think you see most companies reporting and, you know, continue to see some challenges in the supply chain. Still a lot of new people, a lot of training inefficiencies and things like that, but we're working our way through it.

David Egon Strauss: You know, we have a number of deliveries that we miss. We're missing some, you know, key components, but we're working with those suppliers. And as I said, the number of them is getting smaller, but in this industry, every part's important. So, you know, we're continuing to have to work our way around some late deliveries of parts coming in. But as I said, I think all in all, our team is operational or is fighting through that and, you know, getting most of their deliveries done and continuing to drive good margins. So we'll, you know, keep our heads down and keep fighting through that throughout the course of the year.

Speaker Change: Same thing at Bell, you know, we have a number of deliveries that...

David Egon Strauss: [inaudible]

David Egon Strauss: All in all, our team's operational or are fighting through that and getting most of their deliveries done and continue to drive good margins, so we'll keep our heads down and keep fighting through that through the course of the year, I think.

Scott C. Donnelly: Okay, thanks for that. And, you know, your first half jet deliveries were relatively flat year over year. Are you still expecting higher, you know, higher jet deliveries for the year? And can you maybe comment on latitude, and specifically the deliveries were lighter year over year there, which was a bit surprising.

Scott Donnelly: Okay, thanks for that, and you know your first half jet deliveries are welcomed with flat year over year. Are you still expecting higher, you know, higher jet deliveries for the year, and could you maybe comment on latitude and specifically the deliveries were lighter year over year, which was a bit surprising. Thanks. Oh, okay, I think we'll we are still expecting to have higher unit deliveries in 24 than we had in 23. I would say for sure, David, we're a little behind where we would like to be on a couple of these models. Latitude is one in particular where we had a few deliveries, you know, towards the end of the quarter that we didn't get out.

David Egon Strauss: Okay, thanks for that.

Speaker Change: Your first half jet deliveries are relatively flat year over year. Are you still expecting higher, you know, higher jet deliveries for the year? And can you maybe comment on latitude and specifically the deliveries were lighter year over year there, which was a bit surprising. Thanks.

Scott C. Donnelly: I think we are still expecting to have higher unit deliveries in 24 than we had in 23. But I would say for sure, David, we're a little behind where we would like to be on a couple of these models. Latitude is one in particular where we had a few deliveries towards the end of the quarter that we didn't get out. They've now gone, but we're working those lines hard and addressing some of the issues.

Speaker Change: Oh look, I think we are still expecting to have higher unit deliveries in 24 than we had in 23.

Speaker Change: I would say, for sure, David, we're a little behind where we would like to be on a couple of these models.

Scott Donnelly: They've now gone, but you know, we're working those lines hard and addressing some of the issues. Latitude specifically, you know, had one item that we had to kind of manage our way through, and I do think we'll improve performance on that line through the balance of the year.

David: is one in particular where we had a few deliveries towards the end of the quarter that we didn't get out. They've now gone.

Scott C. Donnelly: Latitude specifically had one item that we had to kind of manage our way through, and I do think we'll see improved performance on that line through the balance of the year. The bottom line is that we will have higher unit deliveries and, I think, overall, a good mix in the performance of the business. Despite all that, we'll show strong margin performance on a year-over-year basis.

David: We're working those lines hard and addressing some of the issues, latitude specific.

Scott Donnelly: So bottom line is that we will still we will have higher unit deliveries and I think overall good mix and performance of the business, you know, despite all that we'll show, you know, strong margin performance on your real basis.

Speaker Change: Unit deliveries and I think overall good mix and performance of the business, you know, despite all that will will show, you know strong margin performance on a year-over-year basis

Sheila Kahyaoglu: Great, thanks very much. Sure.

David Egon Strauss: Great. Thanks very much.

Sheila Kahyaoglu: Your next question comes from the line of Sheila Kaya Google from Jeffries. Please go ahead. Good morning, guys. Thank you so much. That maybe to start on aviation, aviation profitability has been really good 13.2 in the quarter. I think 150 basis points of net price.

Sheila Karin Kahyaoglu: Your next question comes from the line of Sheila Kahyaoglu from Jeffries. Please go ahead.

Speaker Change: Great, thanks very much.

Speaker Change: Sure.

Speaker Change: Your next question comes from the line of Sheila Kahyaoglu from Jeffries. Please go ahead.

Sheila Karin Kahyaoglu: Good morning, guys. Thank you so much.

Sheila Karin Kahyaoglu: Good morning, guys. Thank you so much. Thought maybe to start on aviation. Aviation profitability has been really good. 13.2 in the quarter. I think 150 basis points of...

Scott Donnelly: So how do we think about the puts and takes as we go into the second half, and is this sort of low teams a new level for aviation profitability? Well, what shall I do? I think the team is performing well, right? I mean, we've got revenues up, margins up, backlog is up, so we feel pretty good about where the business is. As I said, I answered the Davis question. You know, it's not always easy. We're still dealing with challenges and supply chain, and you know, things of that nature, but I do think that we'll see, you know, continued, you know, strong margins on your real basis as we go through the balance of the year.

Sheila Karin Kahyaoglu: Net price. So how do we think about the puts and takes as we go into the second half? And is this sort of low teams a new level for aviation profitability?

Scott C. Donnelly: I thought maybe I would start on aviation. Aviation profitability has been really good, 13.2 in the quarter, I think 150 basis points of net price. So how do we think about the puts and takes as we go into the second half? And is this sort of low teens a new level for aviation profitability?

Speaker Change: I do think the team is performing well. We've got revenues up, margins up, backlog is up. We feel pretty good about where the business is. As I said in my answer to David's question, it's not always easy. We're still dealing with challenges in the supply chain.

Scott C. Donnelly: Oh, I do think the team is performing well, right? I mean, we've got revenues up, margins up, and backlog is up, so we feel pretty good about where the business is. But, as I said in my answer to David's question, it's not always easy.

Scott C. Donnelly: We're still dealing with challenges in the supply chain and things of that nature, but I do think that we'll see continued strong margins on a year-over-year basis as we go through the balance of the year. And again, we're feeling good about where the business is. I wish it was easier. It's not, but the guys are working through it, and I do think that we'll see strong margins. I think we still feel good about our guide.

Douglas Goldstein: You know, things of that nature, but I do think that we'll see...

Speaker Change: You know, continued, you know, strong margins on a year-over-year basis as we go through the balance of the year.

Scott Donnelly: And again, we're feeling good about where the business is. I wish it was easier. It's not, but the guys are working through it, and I do think that we'll see, you know, strong margins. I think we still feel good about our guide. We still think this is probably a $6 billion business this year. I think we'll be well, you know, well within the guide on the margin front. As we said earlier in the year, I think the price inflation spread; you'll see that getting smaller as the year goes on, but again, that'll be in part offset by the fact that we'll continue to drive better efficiencies and performance through the factory.

Speaker Change: Again, we're feeling good about where the business is. I wish it was easier. It's not, but the guys are working through it, and I do think that we'll see strong margins. I think we still feel good about our guide. We still think this is probably a $6 billion business this year. I think we'll be well within the guide on the margin front.

Scott C. Donnelly: We still think this is probably a $6 billion business this year. I think we'll be well within the guide on the margin front. As we said earlier in the year, I think the price inflation spread will get smaller as the year goes on, but again, I think that'll be, you know, in part offset by the fact that we'll continue to drive better efficiencies and performance through the factory.

Speaker Change: As we've said earlier in the year, I think the price inflation spread, you'll see that getting smaller as the year goes on, but again, I think that'll be, you know, in part offset by the fact that we'll continue to drive better efficiencies and performance through the factory.

Scott C. Donnelly: Great. And then maybe one on Bell and just the military portfolio there outside of FLARA. What do you think about V-22 and opportunities there or elsewhere in the military?

Scott Donnelly: Great, and then maybe one on Bell and just the military portfolio there outside of flora. How do you think about the 22 and opportunity there elsewhere in the military side? So I think the balance of the military business outside of Flora is, you know, doing well, right? I mean, we did add the H1s from Nigeria, so that's 12, you know, aircraft. We're able to start ramping that, you know, here this year. We saw some benefit of that, you know, in the quarter, as that program starts to ramp up. You know, Be 22 production is still going along.

Speaker Change: Great. And then maybe one on Bell and just the military portfolio there outside of FLARA. How do you think about V-22 and opportunities there or elsewhere in the military side?

Scott C. Donnelly: So I think the balance of the military business outside of FLORA is, you know, doing well, right? I mean, we did add the H-1s from Nigeria, so that's 12, you know, aircraft. We're able to start ramping that, you know, here this year. We saw some benefit of that, you know, in the quarter as that program starts to ramp up. You know, V-22 production is still going on. Obviously, the five aircraft that were in FY24 have now been, you know, added. So we look at that, you know, as adding a little bit of base.

Speaker Change: So I think the balance of the military business outside of Flora is, you know, doing well, right? I mean, we did add the H-1s from Nigeria, so that's 12.

Speaker Change: You know, aircraft, we're able to start ramping that, you know, here this year. We saw some benefit of that, you know, in the quarter as that program starts to ramp up.

Scott Donnelly: Obviously, the five aircraft that were in FY 24 have now been, you know, added. So we look at that, you know, is adding a little bit of base sell improvement program continues to go. I think we'll see broader adaptation of our acceptance of that.

Speaker Change: V-22 production is still going along, obviously the five aircraft that were in the FY-24 have now been added, so we look at that.

Scott C. Donnelly: The cell improvement program continues to go on. I think we'll see broader adaptation or acceptance of that here as we go into the future. So I think there's, you know, work going on in the FY25 budget and beyond that will provide some upgrade opportunities for V-22 as well as H-1. We saw the announcements around SIPU. So I do think, you know, while the production unit volumes obviously will continue to ramp down, we will see some, you know, good flow of upgrade and modernization efforts on both the H-1 and the V-22 lines. It will help to keep that solid as we start to ramp up and really move towards a production mode of the FLARA program.

Speaker Change: You know, it's adding a little bit of base, cell improvement.

Speaker Change: Our program continues to go. I think we'll see broader adaptation or acceptance of that.

Scott Donnelly: Here's, we're going to do the future. So I think there's work going on in FY 25 budget and beyond that will provide some upgrade opportunities on V22 as well as H1 saw the announcements around CPU. So I do think, you know, well, the production unit volumes, obviously, we'll continue to ramp down. We will see some, you know, good flow of upgrade and modernization efforts on both the H1 to be 22 lines. It will help to make that, you know, keep that solid as we start to ramp it really more towards a production mode of the, of the flora.

Speaker Change: Here as we go into the future, so I think there's work going on in the FY25 budget and beyond that will provide some upgrade opportunities on B-22 as well as H-1, saw the announcements around SIPU.

Speaker Change: So, I do think, you know, while the production unit volumes, obviously, will continue to ramp down, we will see some, you know, good flow of upgrade and modernization efforts on both the H-1 and the B-22 lines.

Speaker Change: It will help to make that, you know, keep that solid as we start to ramp it and really more move towards a production mode of the flour program.

Sheila Kahyaoglu: Great. Thank you.

Myles Walton: Your next question comes from the line of Miles Walton from Wolf Research. Please go ahead. Thanks.

Myles Alexander Walton: Your next question comes from the line of Myles Walton from Wolf Research. Please go ahead.

Speaker Change: Great, thank you.

Speaker Change: Your next question comes from the line of Myles Walton from Wolf Research. Please go ahead.

Myles Alexander Walton: Thanks. Good morning. I was wondering, Scott, if you could talk about the aftermarket growth you mentioned, 13%, which is, you know, pretty good acceleration given utilization is decelerating. Was there anything, or is there anything that's driving that, whether that's non-typical on the military side or mandates or anything of that nature?

Myles Walton: Good morning. I was wondering, Scott, if you could talk about the aftermarket growth. You mentioned 13%, which is, you know, pretty good acceleration given utilization is decelerating. Was there anything or is there anything that's driving that, whether that's non-typical on the military side or mandates or anything of that nature? Well, I think all in all, miles were continuously, you know, good growth in the aftermarket business. The management is just strong. Aircraft are flying. You know, we have, we did have a strong military, quarter in particular, as we, you know, build the spares pool around the Metz program for, you know, the Navy contract, but it's, it's just in general, strong on the aftermarket side.

Myles Alexander Walton: Thanks, good morning. I was wondering, Scott, if you could talk about the aftermarket growth. You mentioned 13%, which is a pretty good acceleration given utilization is decelerating. Was there anything or is there anything that's driving that, whether that's non-typical on the military side or mandates or anything of that nature?

Scott C. Donnelly: I think, all in all, Myles, we're continuing to see good growth in the aftermarket business. Demand continues to be strong, and aircraft are flying. We did have a strong military quarter in particular as we built the spares pool around the METS program for the Navy contract, but it's just, in general, strong on the aftermarket side. The demand is there. Again, people are flying, so consumption is up. People are doing shop visits. I think we feel we're in a very good place in terms of the aftermarket overall.

Scott C. Donnelly: I think all in all, Myles, we're continuing to see, you know, good growth in the aftermarket business. Demand continues to be strong. Aircraft are flying.

Speaker Change: You know, we did have a strong military, you know, quarter in particular as we, you know, build the spares pool around the METS program for...

Speaker Change: the Navy contract, but it's just, in general, strong on the aftermarket side. Demand is there, again, people are flying, so consumption is up, people are doing shop visits, so I think we feel we're in a very good place in terms of the aftermarket overall.

Scott Donnelly: The demand is there. Again, people are flying. So consumption is up. People are doing shop business.

Scott Donnelly: So I think we feel, you know, in a, you know, we're in a very good place in terms of the aftermarket overall.

Myles Alexander Walton: Okay, and then I guess on the performance disclosure, the $33 million drag. I know this can get a little bit of an apples-to-oranges comparison, but does that imply that performance actually deteriorated sequentially or didn't improve as much as you had in your baseline plan?

Scott Donnelly: Okay. And then I guess on the, on the performance disclosure, the 33 million drag. I know this can get a little bit apples to oranges comparison. But does that imply that performance actually deteriorate sequentially or didn't improve as much as you had in your baseline plan? Well, you know, miles like the performance category is a messy one, as you know, right? So there's a lot of stuff in there for sure. Some of it is just some of the efficiencies that we talked about, right? I mean, we're still not at our standard cost where we'd like to be, so part of that number for sure reflects some manufacturing variance.

Speaker Change: And then I guess on the performance disclosure, the $33 million drag,

Speaker Change: I know this can get a little bit apples-to-oranges comparison, but does that imply that performance actually...

Scott C. Donnelly: Well, you know, Myles, the performance category is a messy one, as you know, right? So there's a lot of stuff in there. For sure, some of it is just some of those efficiencies that we talked about, right? I mean, we're still not at our standard cost where we would like to be, so part of that number, for sure, reflects some manufacturing variance. But, as you know, there's also a lot of other stuff in there, right?

Speaker Change: deteriorate sequentially or didn't improve as much as you had in your baseline.

Speaker Change: Blaine.

Blaine: Well, you know, Myles, look, the performance category is a messy one, as you know, right? So there's a lot of stuff in there.

Blaine: For sure, some of it is just some of those inefficiencies that we talked about, right? I mean, we're still not at our standard cost where we would like to be, so part of that number for sure reflects some manufacturing variance.

Scott Donnelly: But, as you know, there's also a lot of other stuff in there, right? I mean, the business continues to grow. So if you look at, you know, on a year-over-year basis, SGNA, IRAD, you know, these numbers, which are in line on a percent of sales basis, but those actual dollar values on a year-over-year basis also go through that performance line. So there's natural growth in SGNA. There's natural growth in IRAD. IRAD. What there was a legal settlement in there this quarter, you know, so there's always, you know, lots of 3, 4, 5 million dollar things that go through there, you know, most of which you would kind of expect in a business that's growing and continuing to invest.

Scott C. Donnelly: I mean, the business continues to grow. So, if you look at, on a year-over-year basis, SG&A, IRAD, you know, these numbers, which are in line on a percent of sales basis, but those actual dollar values on a year-over-year basis also go through that performance line. So there's natural growth in SG&A, there's natural growth in IRAD. What, there was a legal settlement in there this quarter, you know, so there's always..., you know, lots of, http://TheBusinessProfessor.com

Myles Alexander Walton: Okay, I got it. Thanks so much.

Blaine: But as you know, there's also a lot of other stuff in there, right? I mean, the business continues to grow. So if you look at, you know, on a year-over-year basis, SG&A, IRAD, you know, these numbers, which are in line on a percent of sales basis, but those actual dollar values...

Blaine: on a year-over-year basis also go through that performance line. So there's natural growth in SG&A, there's natural growth in IRAD.

Speaker Change: There was a legal settlement in there this quarter.

Speaker Change: 3, 4, 5 million dollar things that go through there, you know, most of which you would kind of expect in a business that's growing and continuing to invest.

Myles Walton: Okay, got it.

Doug Harned: Thanks so much. Your next question comes from the line of Doug Harned from Bernstein. Please go ahead.

Speaker Change: Okay, got it. Thanks so much.

Douglas Stuart Harned: Your next question comes from the line of Doug Harned from Bernstein. Please go ahead.

Speaker Change: Sure.

Speaker Change: Your next question comes from the line of Doug Harned from Bernstein. Please go ahead.

Scott Donnelly: Well, good morning. Thank you. You know, on the ascend, you introduced the ascendant eBay, and I thought that was interesting. Europe's only about, I think, about 7% of aviation revenues. You know, how are you looking at international markets, particularly Europe, Asia? Do you see those for aviation as potentially offering a bigger share of your total revenues? So Doug, I don't know if it will change dramatically that overall share of revenue. You know, the Jeff business obviously has always been more North American centric. South America has usually been our second biggest market, than Europe, you know, third behind that.

Douglas Stuart Harned: Well, good morning. Thank you. You know, on the Ascend, you introduced the Ascend at eBase, and I thought that was interesting. Europe is only about, I think, about 7% of aviation revenues. How are you looking at international markets, particularly Europe and Asia? Do you see those for aviation as potentially offering a bigger share of your total revenues?

Douglas Stuart Harned: Good morning. Thank you.

Speaker Change: On the Ascend, you introduced the Ascend at eBase.

Douglas Stuart Harned: And I thought that was interesting, Europe's only about 7% of aviation revenues. How are you looking at international markets, particularly Europe , Asia? Do you see those for aviation as potentially offering a bigger share of your total revenues?

Scott C. Donnelly: So, Doug, I don't know if it will dramatically change that overall share of revenue. You know, the jet business obviously has always been more North American-centric. South America has usually been our second biggest market, then Europe, you know, third behind that.

Speaker Change: So, Doug, I don't know if it will change dramatically that overall share of revenue. The jet business, obviously, has always been more North American-centric. South America has usually been our second-biggest market, then Europe , third behind that.

Scott Donnelly: So specifically, as you look at the ascend, I think we'll see a similar, you know, spread of share, much as we saw over many years with the XLS family. You know, this really, you know, the ascendants takes that historical product, which has been a home run for us, probably the most popular business jet in the world. And you know, modernizes it, gives us great new cockpits, you know, a little bit of thrust bump in the engine side, a much better cabin with flat floor and larger windows. I mean, everything. I think customers will love everything about that aircraft, from cruise to passengers, performance.

Scott C. Donnelly: So specifically, as you look at Ascend, I think we'll see a similar spread of shares, much as we saw over many years with the XLS family. This really, the Ascend, in essence, takes that historical product, which has been a home run for us, probably the most popular business jet in the world, and modernizes it, gives us great new cockpits, a little bit of thrust bump on the engine side, a much better cabin with a flat floor, and larger windows, everything.

Speaker Change: So, specifically, as you look at Ascend, I think we'll see a similar, you know, spread of share, much as we saw over many years with the XLS family. You know, this really, you know, the Ascend...

Speaker Change: In essence takes that historical product which has been a home run for us probably most popular business ship in the world

Speaker Change: [inaudible]

Scott C. Donnelly: I think customers will love everything about that aircraft, from crews to passengers, performance, but I would expect we will see sort of this, you know, the same kind of share because it really is the product that is hugely strong in that mid-size business jet market, but that is still largely a North American market, and then secondarily South American, and then European. So I would expect we'll see that same kind of share position across all those key segments with the Ascend as we used to see with the XLS family.

Scott Donnelly: But I would expect we will see sort of the same kind of share because it really is the product that is hugely strong in that mid-sized business jet market. But that is still largely a North American market, and then secondarily South American, and then European. So I would expect we'll see that same, you know, kind of share position across all those key segments with the Ascendant as we see with the XLS family.

Speaker Change: but I would expect we will see sort of this, you know, the same kind of share because it really is the product that is hugely strong in that mid-sized business market, but that is still largely a North American market.

Speaker Change: and then secondarily South American and then European. So I would expect we'll see that same, you know, kind of share position across all those key segments with the Ascend, as we used to see with the XLS family.

Scott C. Donnelly: And then on SkyCourier, I mean, SkyCourier seems to be, you're sort of expanding the envelope in which it can serve. How do you ultimately see that market in terms of scale? And how large could that, the SkyCourier fleet, ultimately be?

Scott Donnelly: And then on Sky Courier, I mean, Sky Courier seems to be, you're excited to expanding the envelope in which it can serve. How do you ultimately see that market in terms of scale and how large could that, the Sky Courier fleet ultimately be? Well, I think it's going to be a very big market. You know, I mean, if you look at, you know, the acceptance of that product, I mean, right now we're just trying to make them as fast as we can make them. But the demand has been really strong, and I mean, it's been great to see that it gets everything from the pure cargo version.

Speaker Change: And then on SkyCourier, I mean SkyCourier seems to be, you're sort of expanding the envelope in which it can serve. How do you ultimately see that market in terms of scale and how large could that, the SkyCourier fleet ultimately be?

Scott C. Donnelly: Oh, I think it's going to be a very big market, you know. If you look at the acceptance of that product, I mean, right now, we're just trying to make them as fast as we can make them. The demand has been really strong, and I mean, it's been great to see delegates everywhere from the pure cargo version. I mean, this thing is a beast. In terms of the movement of cargo around the world, we're seeing a lot of acceptance on sort of small regional airlines, 19-pack.

Speaker Change: Oh, I think it's going to be a very big market, you know, I mean, if you look at the acceptance of that product, I mean, right now, we're just trying to make them as fast as we can make them. The demand has been really strong and, I mean, it's been great to see delegates everything from the pure cargo version, I mean, this thing is a beast.

Scott Donnelly: I mean, this thing is a beast in terms of moving cargo around the world. We're seeing a lot of acceptance on, you know, sort of small regional airlines, 19 packs seating. And then obviously what we did here most recently with the Kombi is you have a lot of markets where, you know, they knew to move packs. But they also knew to move cargo, and that's exactly what the Kombi was aimed at. So, you know, right now, I think, you know, both, you know, domestic international markets, cargo packs, now the Kombi, you know, the issue for us with sky couriers has continued to ramp up.

Speaker Change: In terms of movement of cargo around the world, we're seeing a lot of acceptance on small regional airlines, 19-packs.

Speaker Change: [inaudible]

Scott C. Donnelly: You know, domestic, international markets, cargo packs, now the Combi. The issue for us with Skycar is just to continue to ramp up the production volumes. The demand is there across all those segments and in a lot of different geographies.

Speaker Change: Domestic, international markets, cargo packs, now the Combi, the issue for us with Skycar is just continue to ramp up the production volumes. The demand is there across all those segments and in a lot of different geographies.

Scott Donnelly: The production volumes, the demand is there across all those segments and in a lot of different geographies.

Douglas Stuart Harned: Very good. Thank you. Your next question comes from the line of Seth Seifman from J.P. Morgan. Please go ahead.

Scott Donnelly: Something very good, but thank you.

Seth Seifman: Here, next question comes from the line of Seth Seifman from JP Morgan. Please go ahead. Hey, thanks very much, and good morning.

Speaker Change: Okay, very good. Thank you.

Speaker Change: Your next question comes from the line of Seth Seifman from J.P. Morgan. Please go ahead.

Seth Michael Seifman: Thanks very much and good morning. Thank you. Good morning. I was wondering if you could talk a little bit more about the potential, you know, where the margin can go in the industrial segment in the second half, kind of how much of the benefit of the cost-cutting program it felt like we saw in the second quarter and how much is still on the comp.

Seth Michael Seifman: Thanks very much and good morning.

Seth Seifman: If you talk a little bit more about the potential, where the margin can go in the industrial segment in the second half, kind of how much of the benefit of the cost-cutting program you felt like we saw in the second quarter, and how much is still on the come. I don't know if I'll give it an exact number, but we certainly expect to see it continue to grow as we move through the year. We're not expecting a miraculous turnaround in the end market demand. We're watching that very closely. If you look at the numbers, Frank went through, we've done about a third of the restructuring costs incurred here in Q2.

Seth Michael Seifman: Thank you. Thank you. Thank you.

Seth Michael Seifman: I was wondering if you could talk a little bit more about the potential, you know, where the margin can go in the industrial segment in the second half, kind of how much of the benefit of the cost-cutting program, it felt like we saw in the second quarter, and how much is still on the come.

Scott C. Donnelly: Well, I mean, I don't know if I'll give an exact number, but we certainly expect to see it continue to grow. As we move through the year, we're not expecting a miraculous turnaround in end market demand.

Speaker Change: I don't know if I'll give an exact number, but we expect to see it continue to grow as we move through the year. We're not expecting a miraculous turnaround in the end market demand. We're watching that very closely.

Scott C. Donnelly: We're watching that very closely. So if you look at the numbers Frank went through, we've done about a third of the restructuring costs incurred here in Q2. We'll see another big chunk of that for the most part in the back half of this year as we continue to take costs out of the business to align with that volume. But I think when you look at that, it's probably going to generate... We're probably still running 100 basis points or something below where we should be, and I think the cost actions that were taken will square that away.

Seth Michael Seifman: You know, if you look at the numbers Frank kind of went through, we've done about a third of the restructuring, you know, costs incurred here in Q2. We'll see another, you know, big chunk of that for the most part, you know, in the back half of this year as we continue to take.

Scott Donnelly: We'll see another big chunk of that for the most part. In the back half of this year, as we continue to take cost out of the business to align with that volume, but I think when you look at that, it's probably going to generate, we're probably still running a hundred basis points or something below where we should be, and I think the cost actions that we're taking will square that away.

Seth Michael Seifman: [inaudible]

Scott C. Donnelly: You know, the strategy right now is to keep taking the cost actions, don't assume that you see some miraculous turnaround in terms of, you know, that end consumer demand, and just keep driving, you know, sequentially improved markets.

Scott Donnelly: The strategy right now, keep taking the cost to actions, don't assume that you see some miraculous turnaround in consumer demand, and just keep driving sequentially improved margins. Great.

Speaker Change: The strategy right now is keep taking the cost actions, don't assume that you see some miraculous turnaround in terms of that end consumer demand, and just keep driving sequentially improved margins.

Seth Michael Seifman: Okay, okay, great. And then maybe just as a quick follow-up, you know, very good order activity, year to date and in aviation. Is there anything you could say to distinguish where the order activity is coming from with regard to either fleet customers versus individual customers?

Scott Donnelly: Maybe just as a quick follow-up, very good order activity year-to-date and innovation. Is there anything you'd say to distinguish where the order activity is coming from with regard to either fleet customers versus individual customers? Now that we're still seeing the spread is strong, pretty much across all the customer base, and both Jet and TurboCrop. It's pretty well across all characteristics; no matter how you want to show a slice and dice, it's looking, no, or you continually, continue strong demand.

Speaker Change: Okay, okay, great. And then maybe just as a quick follow-up, you know, very good order activity year-to-date in aviation. Is there anything you'd say to distinguish

Speaker Change: Where the order activity is coming from with regard to either fleet customers versus individual customers.

Scott C. Donnelly: Now we're still seeing, you know, the spread is strong pretty much across all the customer base and both JET and TurboProp, so it's pretty well across all characteristics, no matter how you want to kind of slice and dice. It's looking, you know, to be continually, continued strong demand.

Speaker Change: Now we're still seeing, you know, the spread is strong pretty much across all the customer base and both JET and TurboProp, so it's...

Speaker Change: It's pretty well across.

Speaker Change: All characteristics, no matter how you want to slice and dice.

Speaker Change: It's looking, you know, to be continually, continue strong.

Seth Seifman: Excellent.

Seth Michael Seifman: Excellent. Well, thanks very much.

Seth Seifman: Well, thanks very much.

Speaker Change: Command.

Noah Poponak: Your next question comes from the line of Noah Poppeneck from Goldman Sachs. Please go ahead. Hey, good morning, everyone. I know. The business jet output just remains, I guess, low relative to how strong demand is and where the backlog is.

Speaker Change: Excellent. Well, thanks very much.

Noah Poponak: Your next question comes from the line of Noah Poponak from Goldman Sachs. Please go ahead.

Speaker Change: Sure.

Speaker Change: Your next question comes from the line of Noah Poponak from Goldman Sachs. Please go ahead.

Scott C. Donnelly: The BusinessJet. Output just remains, I guess. Low relative to how strong demand is and where the backlog is, are lead times getting long enough that it's an issue for some customers and you're losing some sales on that? Or do you sort of just not care about that because you're managing to price and the margins are good? You're okay on that front.

Speaker Change: Hey, good morning everyone. Morning Noah. Morning Noah.

Jed: The business, Jed...

Speaker Change: Output just remains, I guess.

Speaker Change: low relative to how strong demand is and where the backlog is are

Scott Donnelly: Are lead times getting long enough that it's an issue for some customers, and you're losing some sales on that? Or do you sort of just not care about that because you're managing to price and the margins are good and you're okay on that front? Well, I think largely know this is an industry phenomenon, right? I mean, if you're out there, if you had a dramatically different lead time, you might be disadvantaged; but I think everybody is dealing with the same issue. So, we're still out there, obviously, with a book to build above one. We're selling, but we're delivering our crap, but we're continuing to take orders into those out here.

Noah Poponak: Are lead times getting long enough that it's an issue for some customers and you're losing some sales on that? Or do you sort of just not care about that because you're managing to price and the margins are good?

Scott C. Donnelly: Well, I mean, I think largely, no, this is an industry phenomenon, right? I mean, you know, if you're out there, if you had a dramatically different lead time, you might be disadvantaged. But I think everybody is dealing with the same issue.

Speaker Change: You're okay on that front.

Speaker Change: Well, I mean, I think largely, no, this is an industry phenomenon, right? I mean, you know, if you're out there...

Speaker Change: If you had a dramatically different lead time, you might be disadvantaged, but I think everybody is dealing with the same issue. So we're still out there, obviously we've booked a bill above one, we're selling, we're delivering aircraft, but we're continuing to take orders into that.

Scott C. Donnelly: So, you know, we're still out there, obviously, with a book to bill ratio above one. You know, we're selling, but we're, you know, delivering aircraft, but we're continuing to take orders, you know, into those out years.

Scott C. Donnelly: So I'd say right now it's pretty well balanced, and I don't think we're at a competitive advantage or disadvantage right now in terms of availability. We're all out competing. But on the timeline, obviously, based on the backlog, it's out there a year and a half, two years.

Scott Donnelly: So, I'd say right now it's pretty well balanced, and I don't think we're at a competitive advantage or disadvantage right now in terms of availability. We're all out competing, but in the timeline, obviously, based on the backlog that's out there, a year and a half, two years, in many cases. Okay.

Speaker Change: And those out years, so I'd say right now it's pretty well balanced, and I don't think we're at a competitive advantage or disadvantage right now in terms of availability. We're all out competing, but in the timeline, obviously, based on the backlog, it's out there a year and a half, two years in many cases.

Scott C. Donnelly: The additional H1 orders at Bell, can you speak to roughly what that adds annually and how far out in the future that will go?

Scott Donnelly: The additional H1 orders at Bell, can you speak to roughly what that adds annually and how far out in the future that will go? No, I don't think so.

Speaker Change: Okay.

Speaker Change: The additional H1 orders at Bell, can you speak to roughly what that adds annually and how far out in the future that will go?

Scott C. Donnelly: Uh, no, I don't think so, no, I mean, the, you know, the Nigerian order was 12, aircraft, the upgrade programs like SIPU, you know, that'll go on for, you know, for quite a number of years. But I mean, those aren't all appropriated.

Scott Donnelly: I mean, the Nigerian order was 12 aircraft; the upgrade programs like Seifu, that was the one for quite a number of years, but I mean, those aren't all appropriated, so I don't think I would get it. And to that, the same, I would say, on the V22 program, we think there's improvement opportunities. There's a number of other things that are in dialogue with our V22 customers on enhancements. Everybody knows that aircraft is going to be around for a very long time. And so, like any military platform, you would expect ongoing investment, upgrades, and enhancements, but these are all dialogues and programs that will flow over the years, so I don't think I would necessarily start to get into multi-year forecast on those.

Speaker Change: No, I don't think so, no, I mean the, you know, the Nigerian order was 12.

Scott C. Donnelly: So I don't think I would get into that. The same I would say on the V-22 program, right, we think there are missile improvement opportunities, there's a number of other things that are in dialogue with our V-22 customers on enhancements. Everybody knows that the aircraft is going to be around for a very, very long time. And so, like any military platform, you would expect, you know, ongoing investment upgrades and enhancements, but these are all dialogues and programs that will flow over the years. So I don't think I would necessarily start to get into a multi-year forecast.

Speaker Change: Aircraft, the upgrade programs like SIPU, you know, that'll go on for, you know, for quite a number of years. But, I mean, those aren't all appropriated, so I don't think I would get into that. The same, I would say, on the V-22 program, right, we think there's, you know, missile improvement opportunities. There's a number of other...

Speaker Change: You know, things are in dialogue with our V-22 customers on enhancements. Everybody knows that aircraft's going to be around for a very, very long time. And so like any military platform, you would expect, you know, ongoing investment, upgrades, enhancements.

Speaker Change: But these are all dialogues and programs that will flow over the years, so I don't think I would necessarily start to get into a multi-year forecast on those.

Scott C. Donnelly: Okay, and then just the last one. Does it make sense to walk through the math on the shadow decommission, just... So that's modeled correctly. How much comes out? What does it do to the margins? Did that affect the second quarter? Any clarity you can provide there?

Scott Donnelly: Okay, and then just the last one, does it make sense to walk through the math on the shadow decommission, just so that's modeled correctly, how much comes out, what does it do to the margins? Did that affect the second quarter? Any clarity can provide there. So, look, I mean, from a modeling standpoint, Noah, this is about a $50 million business or something like that, right? So I mean, we've already obviously worked our way through most of what the revenue is going to be this year, as we wound down from Q1 to Q2. So I'd say it's fairly diminimous as we go through the bounce of the year.

Speaker Change: Okay, and then, um, just the last one.

Speaker Change: Does it make sense to walk through the math on the shadow decommission just...

Speaker Change: So that's modeled correctly. How much comes out? What does it do to the margins? Did that affect the second quarter? Any clarity you can provide there?

Scott C. Donnelly: So, I mean, from a modeling standpoint, Noah, this is about a $50 million business or something like that, right? So, I mean, you know, we've already obviously worked our way through most of what our revenue is going to be this year as we wound down from Q1 to Q2. So I'd say it's... fairly de minimis as we go through the balance of the year. Again, I think this is one where, if you look at, you know, that team from our original guide absorbed, you know, that loss of the shadow which kind of came out of nowhere, obviously from our perspective, and, you know, we've seen enough growth in all of the other business within systems to try to make up for that revenue and, obviously, continue to hold a good margin business.

Speaker Change: So, look, I mean, from a modeling standpoint, Noah, this is about a $50 million business or something like that, right? So, I mean, you know, we're, we've, we've

Speaker Change: We've already obviously worked our way through most of...

Speaker Change: What the revenue is going to be this year as we wound down from Q1 to Q2, so I'd say it's

Scott Donnelly: Again, I think this is one work you look at that team from our original guide, absorbed that loss of the shadow, which kind of came out of nowhere, obviously, from our perspective. And we've seen enough growth in all of the other businesses within systems to try to make up for that revenue and obviously continue to hold a good margin of business. So I think the team has largely got shadow; unfortunately, it is largely behind us, and the team managed their way through that and as position is to at least continue to operate the business well.

Speaker Change: It's fairly de minimis as we go through the balance of the year. Again, I think this is one where if you look at, you know, that team from our original guide absorbed

Speaker Change: You know, that loss of the shadow, which kind of came out of nowhere, obviously, from our perspective. And, you know, we've seen enough growth in all of the other business within systems to try to make up for that revenue, and obviously continue to hold a good margin in business. So I think the team is...

Scott C. Donnelly: So I think the team is, you know, largely got the shadow unfortunately is largely behind us, and the team managed their way through that and has positions to at least, you know, continue to operate the business well and again, most importantly probably in systems focus on, you know, those new programs like the FTUSs, the RCVs, the ARV, XM30. I mean there's a lot of stuff going on in that business that But I would say largely the way we model is we sort of have absorbed the loss of the shadow program.

Speaker Change: You know, largely got Shadow, unfortunately, largely behind us, and the team managed their way through that and has positioned us to at least, you know, continue to operate the business well. And again, most importantly, probably, in systems focus on, you know, those new programs like the FTUSs, the RCVs, the ARV, XM30, I mean, there's a lot of...

Scott Donnelly: And again, most importantly, probably in systems focus on those new programs like the FTS, the RCBE, the ARV, XM30. I mean, there's a lot of stuff going on in that business as opportunity. But I would say largely what you model is we sort of have absorbed the loss of the shadow program.

Speaker Change: [inaudible]

Noah Poponak: Okay, yeah that looked mathematically a little tough to do, at least in the very near term, so yeah, that's impressive. Okay, thank you.

Scott Donnelly: Okay, yeah, that looked mathematically a little tough to do, at least in the very near term. So, yeah, that's impressive.

Speaker Change: Okay, yeah that looked mathematically a little tough to do, at least in the very near term. So yeah, that's impressive. Okay, thank you.

Scott Donnelly: Okay, thank you.

Kyvon Rumor: Your next question comes from the line of Kyvon Rumor from Cohen & Company. Please go ahead.

Cai von Rumohr: Your next question comes from the line of Cai Von Rumohr from Cohen & Company. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Cai Von Rumohr from Cohen & Company. Please go ahead.

Cai von Rumohr: Yes, thanks so much. Scott, you know, you guys have been kind of warning about margins, don't get ahead of yourself, because the inefficiencies that we experienced in the second half of last year are going to flow through inventory into the P&L, and that will restrain margins. Looks like that didn't really occur, although I know mixing was a plus, and, presumably, your efficiencies are improving, even if not as much as we'd hoped.

Kyvon Rumor: Yes, thanks so much. So Scott, you know, you guys had been kind of warning about margins. Don't get ahead of yourself because the inefficiencies that we experienced in the second half of last year are going to flow through inventory into the PML. And that will restrain margins. Looks like that didn't really occur. I know although I know mix was a plus.

Speaker Change: Yes, thanks so much.

Speaker Change: Scott, you know, you guys have been kind of warning about margins. Don't get ahead of yourself because...

Speaker Change: The inefficiencies that we experienced in the second half of last year are going to flow through inventory into the P&L, and that will restrain margins. Looks like that didn't really occur, although I know mix was a plus.

Scott Donnelly: And as presumably your efficiencies are improving, even if not as much as we hope, should we be looking for, you know, a good improvement in the second half from diminishing flow-through of kind of inefficiencies. Richard, but so that you could basically sustain this 13% type margin? Well, look, I think that the, you know, 13% is extremely strong, right? I'm not sure I would say that we're going to maintain 13% as we go through the balance of the year. But I think it's going to be solidly in that sort of that, you know, mid-twels, you know, kind of range.

Speaker Change: And as presumably, your efficiencies are improving, even if not as much as we'd hoped.

Cai von Rumohr: Could we be looking for, you know, a good improvement in the second half from diminishing flow through of the kind of inefficiencies, so that even though I assume the mix is negative, given we've got more latitudes, but so that, you know, you could basically sustain this 13% type margin?

Speaker Change: Should we be looking for, you know, a good improvement in the second half from diminishing flow through of kind of inefficiencies?

Speaker Change: So that even though I assume the mix is negative, given we've got more latitudes, but so, you know, you could basically sustain this 13% type margin.

Scott C. Donnelly: Well, look, I think that 13% is extremely strong, right? I'm not sure I would say that we're going to maintain 13% as we go through the balance of the year, but I think it's going to be solidly in that sort of that, you know, mid-12s, you know, kind of range. So for sure, we will have.

Speaker Change: Well, look, I think that the 13% is extremely strong, right? I'm not sure I would say that we're going to maintain 13% as we go through the balance of the year. But I think it's going to be solidly in that sort of that, you know.

Scott Donnelly: So for sure, we will have, you know, some of this earlier probably less price inflation spread than we had. And part of that, frankly, is some next. We do have a lot of latitude deliveries, a number of which are, you know, heavy on the, on the fractional side and particularly Q3. And as, you know, those have lower margin than a retail attitude. So there's, like, there's always some headwinds, but there's also good things that are going on. So I think this business is well within the guide that we put out there despite the ongoing inefficiencies.

Speaker Change: Mid-12s, you know, kind of range. So for sure we will have

Scott C. Donnelly: As I said earlier, probably less price inflation spread than we had, and part of that, frankly, is some NICs. We do have a lot of latitude deliveries, a number of which are heavy on the fractional side, particularly in Q3. And, as you know, those have a lower margin than retail latitude.

Speaker Change: you know some

Speaker Change: As I said earlier, probably less price inflation spread than we had, and part of that, frankly, is some NICs. We do have a lot of latitude deliveries, a number of which...

Speaker Change: are heavy on the fractional side, particularly in Q3, and as you know, those have lower margin than a retail latitude. So there's always some headwinds, but there's also good things that are going on. So I think this business is well within the guide that we put out there despite the ongoing inefficiencies.

Cai von Rumohr: So there are always some headwinds, but there are also good things that are going on. So I think this business is well within the guidelines that we put out there despite the ongoing inefficiencies. And at a mid-12s percent margin, we feel like this business is performing well, generating strong margin, generating good revenue growth, and generating continued strong backlog. So I think the guide that we had out there, which I think we're clearly still on track to deliver, shows that business in a very good place.

Scott Donnelly: And, you know, at a mid-twels, you know, percent margin, we feel like this business is performing well, generating strong margin, generating good revenue growth, generating continued strong backlog.

Speaker Change: And, you know, at a mid-twelves...

Speaker Change: You know, percent margin, we feel like this business is performing well, generating strong margin, generating good revenue growth, generating continuing strong backlog. So I think, you know, the guide that we had out there, which I think we're clearly still on track to deliver, shows that business in a very good place.

Scott Donnelly: So I think, you know, the guide that we had out there, which I think we're clearly still on track to deliver, shows that business is in a very good place.

Scott Donnelly: Terrific. And then secondly, you continue to be aggressive actually, even more aggressive in terms of share repurchase. You've got to give me 58 billion for both one share. So you're basically whacking away at a 5% rate.

Scott C. Donnelly: Terrific. And then secondly, you continue to be aggressive, actually even more aggressive, in terms of share repurchase. You bought 358 million, 4.1 million shares. So you're basically whacking away at a 5% rate. What should we expect in terms of the repo in the second half?

Scott C. Donnelly: and Frank Donnelly.

Scott C. Donnelly: Terrific. And then secondly,

Speaker Change: You continue to be aggressive, actually even more aggressive, in terms of share repurchase. You bought 358 million, 4.1 million shares. So, you're basically whacking away at a 5% rate. What should we expect in terms of the repo in the second half?

Scott Donnelly: What should we expect in terms of the repo in the second half? I think we'll continue to focus on that repo guy. What we're generating, we're getting good strong cash flow. We feel very good about where the business is on a cash standpoint. What we do, some small acquisitions of Amazonia, relatively small dollars, but add some real capability to the EAVation business. Frankly, technology will help us not just the EAVation, but I think also at, at, at Tax Run Aviation, as well as future opportunities at Bell. So, you know, but these are small dollars; clearly, the bulk of, you know, the strong cash flow.

Cai von Rumohr: I think we'll continue to focus on that repo guy. We're generating, and we're getting a good, strong cash flow. We feel very good about where the business is from a cash standpoint. What we do, some small acquisitions of Amazilia, for relatively small dollars, but add some real capability to the e-aviation business. Frankly, technology will help us, not just e-aviation but, I think, also at Textron Aviation, as well as future opportunities at Bell. So, you know, but these are small dollars. Clearly, the bulk of, you know, the strong cash flow generation that we have right now, is allocated to the buyback, and I think we'll continue to do that.

Cai von Rumohr: Thank you very much.

Speaker Change: I think we'll continue to focus on that repo guy, we're generating, we're getting good strong cash flow, we feel very good about where the business is on the cash.

Speaker Change: We do some small acquisitions of Amazilia, relatively small dollars, but add some real capability to the e-aviation business. Frankly, technology will help us not just in e-aviation but I think also in Textron aviation as well as.

Speaker Change: future opportunities at Bell. But these are small dollars. Clearly, the bulk of the strong cash flow generation that we have right now, we're allocated to the buyback, and I think we'll continue to do that.

Scott Donnelly: So, you know, generation that we have right now, we're allocated to the buy back, and I think we'll continue to do that.

Scott Donnelly: Thank you very much.

Ron Epstein: Your next question comes from the line of Ron Epstein from Bank of America. Please go ahead. Yeah, hello. Can you hear me? Ron, I'm here. Yeah, perfect. Sorry. Yeah, maybe just a couple of quick points.

Ronald Jay Epstein: Your next question comes from the line of Ron Epstein from Bank of America. Please go ahead.

Speaker Change: Thank you very much.

Speaker Change: Your next question comes from the line of Ron Epstein from Bank of America. Please go ahead.

Ronald Jay Epstein: Morning, Robert. Hey, Eric.

Ronald Jay Epstein: Yeah, good. Perfect. Sorry.

Ronald Jay Epstein: Yeah, hello, can you hear me?

Ronald Jay Epstein: Could you do a bigger version of SkyCarrier, is there any demand for that from your customers?

Ronald Jay Epstein: Yeah, maybe just a couple quick ones. Could you do a bigger version of Skycarrier? Is there any demand for that from your customers?

Scott Donnelly: Can you do a bigger version of SkyCurry? I guess we need to demand for that from your customers. I don't, you know, I don't know that we need to do a bigger version of it.

Scott C. Donnelly: I don't know that we need to do a bigger version of it; it's a big aircraft; you have to get up next to one of those guys, but I mean, just from a regulatory standpoint, where it sits. First of all, it fits really, really well in that short-haul cargo market. Obviously, we work very closely with FedEx, and particularly on designing that aircraft.

Scott Donnelly: It's a bigger cry. You have to get up next to one of those guys, but I mean, the, you know, from, just from a regulatory standpoint, I mean, where it sits, you know, first of all, fits really, really well in that short haul cargo market. Obviously, we worked very closely with that X in particularly on designing that aircraft. So, it was really, you know, designed to be in that 3LD3 container, you know, kind of space where it fits really, really well. And then on the backside, you know, for a regulatory standpoint, you hit that 19 packs, you know, line and this thing, you know, comfortably takes care of 19 passengers.

Speaker Change: I don't know that we need to do a bigger version of it, it's a big aircraft, it just has to get up next to one of those guys, but I mean, just from a regulatory standpoint, I mean, where it sits...

Speaker Change: First of all, it fits really, really well in that short haul cargo market. Obviously, we work very closely with FedEx and particularly on designing that aircraft.

Scott C. Donnelly: So it was really designed to be in that 3LD3 container, you know, the kind of space where it fits really, really well. And then on the pack side, you know, from a regulatory standpoint, you hit that 19-pack line. And this thing, you know, comfortably takes care of 19 passengers. So, you know, I think to do anything bigger than that, now you sort of start to step up into the ATR world and, and things like that.

Speaker Change: you know, designed to be in that 3LD3 container, you know, kind of space where it fits really, really well. And then on the pack side, you know, from a regulatory standpoint, you hit that 19-packs, you know, line, and this thing, you know, comfortably takes care of 19 passengers. So...

Scott Donnelly: So, you know, I think to do anything, you know, bigger than that, now you sort of start to step up into the HER world and, and thing like that.

Speaker Change: you know I think to do anything you know bigger than that now you sort of start to step up into the ATR world and and things like that and I don't think that's that's really our space I think the

Scott Donnelly: And I, I don't think that's, that's really our space. I think the, you know, that, that where there was a huge gap in the market was really when you went from our caravan, you know, which obviously is going to home run in that smaller cargo and packs market. You know, and then up into that sort of light, you know, air transport kind of slide. We felt like Skycars and the sweet spot of that. So, and, and we're seeing that from the market demand. Sampling.

Scott C. Donnelly: And I don't think that's, that's really our space. I think the, you know, where there was a huge gap in the market was really when you went from our caravan, which obviously has been a home run in that smaller cargo and tax market, you know, and then up into that sort of light, you know, air transport kind of side. We felt like Skycarriers in the sweet spot of that. So, and we're seeing that from market demand.

Speaker Change: you know, that where there was a huge gap in the market was really when you went from our caravan, you know, which obviously has been a home run in that smaller cargo and tax market, you know, and then up into that

Speaker Change: sort of light, you know, air transport kind of side, we felt like Skycarriers in the sweet spot of that. So, and we're seeing that from a market demand standpoint.

Ronald Jay Epstein: You got it. And then, on aviation...

Scott Donnelly: Got it. And then on aviation, how do I friend this? It seems like we're in a unique environment where for you guys, I don't want to put working them out, but everybody that you have no white tails. Everything going down lines is at home.

Speaker Change: You got it. And then, on aviation.

Ronald Jay Epstein: I mean, how should I frame this? It seems like we're in a unique environment where, for me, for you guys. I don't want to put words in your mouth, but everybody that you have no whitetails. Everything going down the line is owned. Have you ever experienced that before, if that's the case?

Speaker Change: How do I frame this? It seems like we're in a unique environment where...

Speaker Change: For you guys, I don't want to put words in your mouth, but everybody that...

Scott Donnelly: Have you ever experienced that before? Well, I think you have to go back to 2007, Ron, to be there. But look, this is a business, and we talked about this for years, Ron. This shouldn't be a white tail business, right? I mean, it wasn't in most of its, most of the history of business jets was not a white tail business. I think what happened, you know, sort of an anthropocrysis, post financial crisis, wasn't how that business should operate. You know, this business should operate off of a, you know, depending on the model types, you know, anywhere from 12, 18 months to 2 years, you know, kind of a backlog.

Speaker Change: You have no whitetails. Everything going down the line is owned. Have you ever experienced that before, if that's the case?

Scott C. Donnelly: Well, I think you have to probably go back to 2007, Ron, to be there. But look, this is a business, and we talked about this for years, right, Ron? This shouldn't be a whitetail business, right? I mean, it wasn't in most of it.

Speaker Change: Well, I think you have to probably go back to 2007, Ron, to be there, but look, this is a business, and we talked about this for years, right, Ron, this shouldn't be a whitetail business, right? I mean, it wasn't in most of its...

Scott C. Donnelly: Most of the history of business jets was not a whitetail business. I think what happened, you know, sort of financial crisis, post-financial crisis wasn't how that business should have operated. You know, this business should have operated. [inaudible] A new idea, right? This is how this industry worked for decades, and it's certainly good to have it back where it's supposed to be.

Speaker Change: Most of the history of business jets was not a whitetail business. I think what happened, you know, sort of financial crisis, post-financial crisis, wasn't how that business should operate. You know, this business should operate.

Speaker Change: off of a, you know, depending on the model types, you know, anywhere from 12, 18 months to two years, you know, kind of a backlog so that, you know, when an aircraft is rolling down that line, you know, where it's going, and that's where we are and I think that's where the industry should stay. Again, this is not ...

Scott Donnelly: So that you know when an aircraft is rolling down that line, you know where it's going, and that's where we are. And I think that's where the industry should stay. It's, and again, this is not a new idea, right?

Scott Donnelly: This is how this industry worked for decades, and certainly good to have it backwards, supposed to be.

Speaker Change: a new idea. This is how this industry worked for decades and it's certainly good to have it back where it's supposed to be.

Ronald Jay Epstein: Yeah, that's great. And then, if I can, just one last quick one. Just curious, you mentioned that eAviation, some of the technology investments you might make inorganically could flow back to, you know, just broader Textron Aviation. Can you highlight anything that you're learning in that business that could actually help outside of eAviation, just broader aviation?

Scott Donnelly: Yeah, that's great.

Scott Donnelly: And then, if I can just one last quick one, I'm just curious. You mentioned that the aviation, some of the technology, investments you might make, can organically could flow back to out, you know, just broader textile aviation. Can you highlight anything that you're learning in that business that could actually help outside of the aviation with broader aviation? Sure. I like the nature of what we're doing, you know, particularly with unmanned things like Uva, and when you look at the levels of automation that we believe need to be in things like Nexus, you know, these are very highly automated, you know, fly-by-wire, digital flight control, you know, almost autonomous.

Speaker Change: Yeah, that's great. And then, if I can, just one last quick one. Just curious, you mentioned that the aviation, some of the technology investments you might make inorganically could flow back to

Speaker Change: Can you highlight anything that you're learning in that business that could actually help outside of the aviation, just broader aviation?

Scott C. Donnelly: Sure, I like the nature of what we're doing, you know, particularly with unmanned things like Nuva. And when you look at the levels of automation that we believe need to be in things like Nexus, you know, these are very highly automated, you know, fly-by-wire, digital flight control, you know, almost autonomous, even if there's not a person, even if there is a person in the cockpit like in the next Still, in essence, the capability of the aircraft is inherently autonomous. When you look at the Amazilia guys, this is an area of expertise that they have. But we've done this.

Speaker Change: Sure, I like the nature of what we're doing, you know, particularly with unmanned things like Nuva. And when you look at the levels of automation that we believe need to be in things like Nexus, you know, these are very highly automated, you know, fly-by-wire, digital flight control.

Scott Donnelly: Even if there's not a person, even if there is a person in the cockpit like in the Nexus case, it's still, you know, in essence, you know, the capability of the aircraft is inherently autonomous. So when you look at the Amazon, you guys, this is an area of expertise that they had. But we've done this. We've done, you know, a lot of fly-by-wire on V22, for instance. Obviously, you know, the V28 is all fly-by-wire; the 525 is the first commercial helicopter in the world is fly-by-wire. So we have capability in the company to do this, but I think as we go forward, not just for these things like Nexus and like Nuva, but, you know, future families or products or enhancements upgrades to products is going to see more and more levels of fly-by-wire, digital control, quasi-autonomous capability.

Speaker Change: You know almost autonomous even if there's not a person even if there is a person in the cockpit like in the Nexus case It's still you know in essence. You know the capability of the aircraft is inherently autonomous

Speaker Change: So...

Speaker Change: When you look at the Amazilia guys, this is an area of expertise that they had, but we've done this. We've done a lot of fly-by-wire on V-22, for instance, obviously the V-280 is all fly-by-wire, the 525 is.

Scott C. Donnelly: We've done a lot of fly-by-wire on V-22, for instance. Obviously, the V-280 is all fly-by-wire. The 525 is the first commercial helicopter in the world that's fly-by-wire.

Scott C. Donnelly: So we have the capability in the company to do this. But I think as we go forward, not just for these things like Nexus and Nuva, but future families of products or enhancements, upgrades to products are gonna see more and more levels of fly-by-wire, digital control, quasi-autonomous capability, but it needs to be at a much lower price point than what you've seen in these high-end, very expensive systems. And so that's, you know, the technology that we're using, developing, and working both for the acquisition and the implementation of things like Nuva and Nexus are fundamental technologies that will, I believe, you'll start to see in the lower price point, both fixed-wing and rotorcraft markets.

Speaker Change: is the first commercial helicopter in the world that's fly-by-wire, so we have capability in the company to do this, but I think as we go forward, not just for these things like Nexus and like Nuva.

Ronald Jay Epstein: Very cool. Thank you very much.

Kristine Tan Liwag: Your next question comes from the line of Kristine Liwag from Morgan Stanley. Please go ahead.

Speaker Change: But, you know, future families of products or enhancements upgrades to products is going to see more and more levels of, you know, fly-by-wire, digital control, quasi-autonomous capability, but it needs to be a much lower price point, you know, than what you've seen in these in these high-end, you know, very expensive systems.

Scott Donnelly: But it needs to be a much lower price point, you know, than what you've seen in these high-end, you know, very expensive systems. And so that's, you know, the technology that we're using, developing, and working both through the acquisition and the implementation on things like Nuva Nexus are fundamental technology that will, I believe, you'll start to see in, you know, the lower price point, both fixed-wing and over-craft markets for the future.

Speaker Change: So that's...

Speaker Change: You know the technology that we're using developing and working both through the acquisition and the implementation on things like NuvaNexus

Speaker Change: are fundamental technologies that will, I believe, you'll start to see in the lower price point, both fixed-wing and rotorcraft markets of the future.

Christine Liwag: Thank you. Thank you very much.

Christine Liwag: Your next question comes from the line of Christine Laiweg from Morgan Stanley. Please go ahead. Hey, good morning, everyone. Scott and Frank, I mean, the strength and aviation is clear. Scott, you mentioned a long question that look, we're kind of almost back at that pre-financial crisis levels regarding the backlog. If you take out the performance headwind that you highlighted in the quarter, margins of aviation would have been 15.5%. I mean, this is also back to pre-financial crisis levels margin. So, yes, you know, when the performance headwinds pale off and the backlog continues to hold secure, you know, it is the mid-teens margin, kind of a new normal innovation.

Speaker Change: Great, cool. Thank you very much.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Kristine Liwag from Morgan Stanley . Please go ahead.

Kristine Tan Liwag: Hey, good morning, everyone. Scott and Frank, I mean, the strength in aviation is clear. Scott, you mentioned in Ron's question that, look, we're kind of almost back at pre-financial crisis levels regarding the backlog. If you take out the performance headwind that you highlighted in the quarter, margins for aviation would have been 15.5%. I mean, this is also back to pre-financial crisis levels of margin. So, yes, you know, when the performance headwinds hail off, and the backlog continues to hold securely, is the mid-teens margin kind of the new normal in aviation?

Kristine Tan Liwag: Hey, good morning, everyone.

Kristine Tan Liwag: Scott and Frank, I mean, the strength in aviation is clear, Scott, you mentioned, and Ron's question that, look, we're kind of almost back at that pre-financial crisis level.

Speaker Change: regarding the backlog.

Speaker Change #100: If you take out the performance headwind that you highlighted in the quarter, margins of aviation would have been 15.5%. I mean, this is also back to pre-financial crisis level of margin.

Speaker Change #101: So I guess, you know, when the performance headwinds pale off...

Speaker Change #102: and the backlog continues to hold secure. You know, is the mid-teens margin kind of the new normal in aviation?

Scott Donnelly: Well, Kristine, I guess what I would say is, you know, look, some of the, some of those performance items, you know, for sure are associated with these factoring efficiencies. And we do expect, you know, over time for those things to get better as we get better, you know, supply chain deliveries, as our workforce becomes, you know, more season, you know, again. So I do think there will continue to be underlying improvements going forward in those areas. Right? As I also said, you know, some of these things around performance are also just fundamentally associated with the growth of the business, right?

Scott C. Donnelly: Well, Kristine, I guess what I would say is, you know, look, some of those performance items are, you know, for sure, associated with these factory inefficiencies. And we do expect, you know, over time for those things to get better as we get better, you know. [inaudible] just fundamentally associated with the growth of the business, right? We are going to see more sales commissions when we have, you know, more sales, and we are going to see R&D again, not necessarily a headwind from a percent of sales standpoint, but you're going to see, you know, higher R&D numbers as we continue to invest in the business.

Speaker Change #103: Well, Kristine, I guess what I would say is, you know, look, some of the, some of those performance items, you know, for sure are associated with these factory inefficiencies and we do expect, you know, over time for those things.

Speaker Change #103: To get better, as we get better, you know.

Speaker Change #103: [inaudible]

Scott Donnelly: We are going to see more sales commissions when we have, you know, more sales, and we are going to see R&D, again, not necessarily a headwind from a percent of sales standpoint, but you're going to see, you know, higher R&D numbers as we continue to invest in the business.

Speaker Change #104: We are going to see more sales commissions and we are going to see more sales.

Speaker Change #104: R&D, again, not necessarily a headwind from a percent of sales standpoint, but you're going to see, you know, higher R&D numbers as we continue to invest in the business. So I think the bottom line answer to your question, Kristine, is...

Scott C. Donnelly: So I think the bottom line answer to your question, Kristine. We're not going to put a number out there right now, but clearly, you know, over the last few years, we continue to see improvements in the margin performance of this business. And I think, you know, it's reasonable to expect that we'll continue to see that going forward.

Scott Donnelly: So, but like I think the bottom line answer your question, Kristine, is we're not going to put a number out there right now, but clearly, you know, over the last few years, we continue to see improvements in the margin performance of this business. And I think, you know, it's reasonable, expected; we'll continue to see that going forward.

Speaker Change #104: We're not going to put a number out there right now, but clearly over the last few years we continue to see improvements in the margin performance of this business, and I think it's reasonable to expect that we'll continue to see that going forward.

Scott Donnelly: Thank you, this is really helpful context. And then maybe pivoting to a defense question, the European defense budget seems to be moving higher, a little faster and deeper than the US defense budget. I guess, how do you think about opportunities for European sales? It hasn't been a huge part of your portfolio historically, but with the leverage of the business pretty low.

Kristine Tan Liwag: Thank you, that's a really helpful context. And then maybe pivoting to a defense question, the European defense budget seems to be moving higher, a little faster and steeper than the U.S. defense budget. I guess, how do you think about opportunities for European sales? It hasn't been a huge part of your portfolio historically, but with the leverage of the business pretty low, what's your interest in expanding European capabilities either organically or inorganically? Well, I mean, we do have a number of them.

Kristine Tan Liwag: Thank you, that's really helpful context.

Speaker Change #105: And then maybe pivoting to a defense question, the European defense budget seems to be moving

Speaker Change #106: a little faster and steeper than the U.S. defense budget. I guess, how do you think about opportunities for European sales? It hasn't been a huge part of your portfolio historically, but with the leverage of the business pretty low, what's also your interest in expanding European capabilities either organically or inorganically?

Scott Donnelly: So, what's also your interest in expanding European capabilities either organically or inorganically? Well, I mean, we do have a number of sales campaigns, you know, that go on in Europe. It's not, as you noted, has not been a huge part of our business in the past. I do think, as you look at, you know, far military sales opportunity, things like the flower program, clearly that's a big part of where the Army is focused is looking at partner countries around the world. And, you know, just as we saw for many, many decades, you know, things like the Black Hawk become really important parts of those businesses from an international sales perspective, including Europe.

Scott C. Donnelly: Well, I mean, we do have a number of sales campaigns, you know, that go on in Europe. But it's not, as you noted, has not been a huge part of our business in the past.

Speaker Change #107: Well, I mean, we do have a number of sales campaigns, you know, that go on in Europe . It's not, as you noted, has not been a huge part of our...

Scott C. Donnelly: I do think as you look at, you know, foreign military sales opportunities, things like the FLARA program, clearly that's a big part of where the Army is focused on looking at partner countries around the world. And, you know, just as we saw for many, many decades, things like the Blackhawk have become really important parts of those businesses from an international sales perspective, including Europe. We obviously will expect that to happen over time.

Speaker Change #107: Our business in the past.

Speaker Change #107: I do think as you look at, you know, foreign military sales opportunity, things like the FLARA program, clearly that's a big part of where the Army is focused is.

Speaker Change #107: Looking at partner countries around the world and, you know, just as we saw for many, many decades, you know, things like the Blackhawk become really important parts.

Scott Donnelly: We obviously will expect that to happen over time.

Speaker Change #107: of those businesses from an international sales perspective, including Europe .

Scott Donnelly: There's also some organic things. So, again, you know, if you look at World of Craft again, I guess, you know, right now we've, you know, we did announce, you know, sort of the teaming, you know, relationship with Leonardo around pursuit of the European next generation, World of Craft opportunity. So, that's, you know, kind of organic, but, you know, that would be a product that's tailored to that European market. So, I do think there are opportunities out there, and we're pursuing those, and we'll compete for those, you know, going forward.

Speaker Change #107: We obviously will expect that to happen over time.

Scott C. Donnelly: There are also some organic things. So, again, you know, if you look at Rotorcraft again, I guess, you know, right now we've, you know, we did announce, you know, sort of a teaming relationship with our, with Leonardo around pursuit of the European next-generation Rotorcraft opportunity. So that's, you know, kind of organic, but that would be a product that's tailored to the European market. So I do think there are opportunities out there, and we're pursuing those, and we'll compete for those, you know, going forward.

Speaker Change #107: There's also some organic things, so again, if you look at Rotorcraft again, I guess right now we did announce sort of a teaming relationship with Leonardo around pursuit of the European next generation Rotorcraft.

Speaker Change #107: opportunity. So that's, you know, kind of organic but, you know, that would be a product that's tailored to that European market. So I do think there are opportunities out there and we're pursuing those and we'll compete for those, you know, going forward.

Scott Donnelly: Great. Thank you.

George Shapiro: Your next question comes from the line of George Shapiro from Shapiro Research. Please go ahead. Good morning.

George D. Shapiro: Your next question comes from the line of George Shapiro from Shapiro Research. Please go ahead.

Speaker Change #108: Great, thank you.

Speaker Change #109: Your next question comes from the line of George Shapiro from Shapiro Research. Please go ahead.

George D. Shapiro: Morning, George. Scott, the year-to-date orders have been about $3 billion in aviation, about the same as last year's first half. Do you think you can reach the $1.86 billion of orders that you had in last year's third quarter, which was particularly strong?

Scott Donnelly: George. Scott, the year-to-date orders have been about $3 billion in aviation, about the same as last year's first half. You think you can reach the $1.86 billion of orders that you had in last year's third quarter, which was particularly strong? You know, George, I don't know. I mean, we're, you know, as we kind of guided, we think this is going to end up as a one-to-one year. That's still our view. So, you know, if you look at, you know, order activities, you know, last year, they were stronger than that. But I do think we're, again, our expectation is we're in sort of a more normalized world here where, you know, one-to-one is a good book to build targets.

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

George D. Shapiro: Scott, the year-to-date orders have been about $3 billion in aviation, about the same as last year's first half. Do you think you can reach the $1.86 billion of orders that you had in last year's third quarter, which was particularly strong?

Scott C. Donnelly: You know, George, I don't know. I mean, as we've kind of guided, we think this is going to end up as a one to one year. That's, that's still our view. So, you know, if you look at order activities, you know, last year, they were, they were stronger than that. But I do think we're, again, our expectation is we're in sort of a more normalized world here where, you know, one to one is a good book to bill target. You know, we are coming through the first half of the year strong, which is great. I mean, I'd love to see that continue, obviously, but I don't think necessarily 1.6 billion and a quarter is...

Scott C. Donnelly: You know, George, I don't know, I mean, we're...

Speaker Change #111: You know, as we kind of guide it, we think this is going to end up as a one-to-one year. That's still our view.

Speaker Change #112: So, you know, if you look at, you know, order activities, you know, last year, they were stronger than that. But I do think we're, again, our expectation is we're in sort of a more normalized world here where, you know, one-to-one is a good book-to-bill target.

Scott Donnelly: Target. You know, we are coming through the first half of the year strong, which is great.

Scott Donnelly: I mean, I'd love to see that continue, obviously, but I don't think a necessarily 1.6 billion in a quarter is probably pretty sporty. For the end of the year, do you expect that inventory level to come down to close to where it was at the end of last year's, at the end of last year, or we're going to stay a hundred, a couple hundred million above it.

Speaker Change #112: We are coming through the first half of the year strong, which is great. I'd love to see that continue obviously, but I don't think necessarily 1.6 billion and a quarter is probably pretty sporty.

George D. Shapiro: Okay, and then maybe one for you, Frank, that inventories year-to-date are up like $467 million, obviously less than the second quarter with better deliveries, but still up $110 million in the second quarter. I mean, for the end of the year, do you expect that inventory level to come down to close to where it was at the end of last year, or are we going to stay a hundred, a couple hundred million above it?

Speaker Change #112: Okay, and then maybe one for you, Frank, that inventories year-to-date are up like $467 million, obviously less than the second quarter with better deliveries, but still up $110 million in the second quarter. I mean...

Speaker Change #113: For the end of the year, do you expect that inventory level to come down to close to where it was at the end of last year's, at the end of last year, or are we going to stay a couple hundred million above it?

Frank Thomas Connor: We'll certainly expect to liquidate inventory in the back half of the year, but in order to kind of grow the business for next year, we need inventory in order to sell products. So we expect we'll see some inventory growth on a year-over-year basis at year end, but not at the level you've seen to date. I'd say overall, obviously, that offsets working capital in other areas, so we think working capital is kind of a flattish number for the year. So obviously, there are offsets and payables and other things associated with that, but we do need some inventory growth in order to grow the business.

Scott Donnelly: Thanks. Well, we'll certainly expect a liquidate inventory in the back half of the year, but in order to kind of grow the business for next year, we need inventory in order to sell products. So we expect we'll see some inventory growth on a year-over-year basis at year end, but you know, not at the level you've seen to date. I say overall, you know, obviously that offsets from working capital in other areas, so we think working capital is kind of flatish type number for the year. But you know, obviously there are offsets and payables and other things associated with that, but we do need some inventory growth in order to grow the business.

Frank Thomas Connor: We'll certainly expect to liquidate inventory in the back half of the year, but in order to kind of grow the business for next year, we need inventory in order to sell products. So we expect we'll see some inventory growth on a year-over-year basis at year end, but not at the levels you've seen.

Frank Thomas Connor: The date, I'd say overall, you know, obviously that offsets from working capital in other areas so we think working capital is kind of a flattish type number for the year. So, you know, obviously there are offsets and payables and other things associated with that but we do need some inventory growth in order to grow the business.

George D. Shapiro: And one last one. Industrial, in the first quarter, you pretty much said it was primarily weak because of special vehicles. This quarter, you kind of said, didn't say that, so do we assume that both Caltech and special vehicles were relatively weak in this quarter?

Scott Donnelly: And one last one, industrial in the first quarter, he pretty much said was primarily weak because of special vehicles. This quarter you kind of said, didn't say that, so do you assume that both cow tax and special vehicles were relatively weak in this quarter? Well, cow tax was down on a year-over-year basis, but it wasn't particularly weak. It was just, you know, we had a very strong second quarter last year, frankly, both in specialized vehicles and cow tax. So you had a really tough compare from both a volume standpoint as well as a margin standpoint, but you know, cow tax on a sequential basis was up quarter over quarter, but it was down a bit on a year-over-year basis.

Speaker Change #115: And one last one. Industrial, in the first quarter, you pretty much said was primarily weak because of special vehicles. This quarter, you kind of said, you didn't say that. So do we assume that both Caltechs and special vehicles were relatively weak in this quarter?

Frank Thomas Connor: Well, Caltech was down on a year over year basis, but it wasn't particularly weak. It was just, you know, we had a very strong second quarter last year, frankly, both in specialized vehicles and Caltech. So you had a really tough compare from both a volume standpoint as well as a margin standpoint. But Caltech on a sequential basis was up quarter over quarter, but it was down a bit on a year over year basis. But Specialized Vehicle was down kind of more on a year over year basis, coming off a very strong second quarter last year.

Speaker Change #114: Well, Caltex was down on a year-over-year basis, but it wasn't particularly weak. It was just, you know, we had a very strong second quarter last year, frankly, both in specialized vehicles and Caltex.

George D. Shapiro: Okay, thank you very much.

Speaker Change #114: So, you had a really tough compare from both a volume standpoint as well as a margin standpoint, but Caltech's on a sequential basis.

Speaker Change #114: was up quarter over quarter, but it was down a bit on a year over year basis. But Specialized Vehicle was down, you know, kind of more on a year over year basis, coming off a very strong second quarter last year.

Scott Donnelly: But specialized vehicle was down, you know, kind of more on a year-over-year basis, coming off a very strong second quarter last year.

Scott Donnelly: Okay, thank you very much.

Pete Scabitski: Your next question comes from the line of Pete Scabitsky from Olympic Global. Please go ahead. Hey, good morning, guys.

Peter John Skibitski: Your next question comes from the line of Pete Skibitski from Olympic Global. Please go ahead.

Speaker Change #119: Okay, thank you very much.

Speaker Change #116: Your next question comes from the line of Pete Skibitski from Olympic Global. Please go ahead.

Peter John Skibitski: Hey, good morning, guys. Hey, Scott, as we think about, you know, some of the softness in the consumer that you're experiencing at TSV, maybe, you know, to your Caltech comments as well, less so, but you guys aren't seeing that extent in any of your aviation customers at all. And I, you know, not even on the pistons or the turboprops. I'm asking in particular because it seems like deliveries on your lighter jets and aviation, that citation in the first half, where we're a little bit lighter year over year versus the larger jets. I just want to understand how you're seeing the health of your customers there. Obviously, they have bigger balance sheets, but I just want to get a sense.

Scott Donnelly: Hey, Scott, as we think about, you know, some of the softness and the consumer that you're experiencing at TSV, maybe, you know, to your cow tax comments as well. You know, less so, but you guys aren't seeing that extent to any of your aviation customers at all. And I, you know, not even on the pistons or the turbo props.

Peter John Skibitski: Hey, good morning, guys.

Speaker Change #118: All right. Peace.

Peter John Skibitski: Hey, Scott, as we think about, you know, some of the softness in the consumer that you're experiencing at TSV, maybe, you know, to your Caltech comments as well.

Speaker Change #120: you know less so but you guys aren't seeing that extent to any of your aviation customers at all and I you know not even on the pistons or the turbo props

Scott Donnelly: I'm asking in particular because it seems like deliveries on your lighter jets at aviation, that citation in the first half, where we're a little bit lighter year over year versus the larger jets. I just want to understand how you're seeing the health of your customers there. Obviously, they have bigger balance sheets, but I just want to get a sense. Yeah, Pete, I'd say when you look at our lighter aircraft, I mean M2, CJ3, CJ4, you know, we're seeing strong demand. So, booked available in those skies is good. Even, you know, pistons, I mean, you know, for the most part, we're just trying to make them faster, right?

Speaker Change #121: I'm asking in particular because it seems like deliveries on your lighter jets at aviation, that citation in the first half, where we're a little bit lighter year over year versus the larger jets.

Speaker Change #122: I just want to understand how you're seeing the health of your customers there. Obviously, they have bigger balance sheets, but I just want to get a sense.

Scott C. Donnelly: Yeah, Pete, I'd say when you look at our lighter aircraft, I mean, M2, CJ3, CJ4, you know, we're seeing strong demand, so the pipeline to build on those guys is good, even pistons. I mean, you know, for the most part, we're just trying to make them faster, right? I mean, you know, the piston aircraft training demand remains very high, right? It's very hard to find a 172 anywhere, you know, so I think the piston side of the business is good.

Speaker Change #123: Yeah, Peter, I'd say when you look at our lighter aircraft, I mean, M2, CJ3, CJ4,

Speaker Change #124: You know, we're seeing strong demand, so Book DeVille and those guys is good, even, you know, pistons, I mean, you know, for the most part, we're just trying to make them faster, right? I mean, you know, the piston aircraft training demand remains very high, right? It's very hard to find a 172 anywhere, you know, so...

Scott Donnelly: I mean, now the piston aircraft training demand remains very high, right? It's very hard to find a 172 anywhere. Also, I think the piston side of the business is good. The light jet side of the business is good. It's that, you know, again, these are people with stronger balance sheets, obviously, and, you know, looking out, you know, over time and, you know, there's backlogs. So, you know, you can't get one for, you know, a year, 18 months, you know, whatever it may be, even in the lighter, you know, jet side of things. So, we continue to grow to floor there.

Scott C. Donnelly: The light jet side of the business is good. [inaudible] It's that discretionary point-of-sale kind of consumer, generally financed kind of market that's down. As I said, we're aligning costs around that. But, as Frank said, it's tough, particularly this quarter. We had a really strong quarter for a lot of those kinds of products a year ago. It's softer now, and so we've made the necessary cost and production volume alignments to match that. We're absolutely not seeing that behavior when you look at light jets or Bell 505s, or Bell 407s. I mean, the market for those, even the sort of lower price point jets and rotorcraft continue to do very well.

Speaker Change #124: I think the piston side of the business is good, the light jet side of the business is good.

Speaker Change #124: It's that, you know, again, these are people with stronger balance sheets, obviously, and, you know, looking out, you know, over time, and, you know, you know, there's backlogs, so, you know, you can't even get one for, you know, a year, 18 months, you know, whatever it may be, even in the, in the lighter, you know, jet side of things. So we continuously go to floor there.

Scott Donnelly: It's that, you know, it's that discretionary, you know, sort of point of sale, kind of consumer. You know, you generally finance, you know, kind of market that's just that's down. As I said, we're aligning costs, you know, around that. You know, as Frank said, it's, you know, it's tough, particularly this quarter. We had a really strong quarter for a lot of those kind of products, you know, a year ago. It's off to now, and so we're, you know, we've made necessary costs and production volume alignments to match that. But no, we're absolutely not seeing that behavior when you look at light jets or Del 505s, Del 407s, you know, I mean, the market for, you know, those, you know, even the sort of the lower price point, you know, jets and aircraft continue to do very well.

Speaker Change #124: It's that discretionary, sort of point-of-sale kind of consumer.

Speaker Change #124: [inaudible]

Speaker Change #124: You know, as Frank said, it's tough, particularly this quarter. We had a really strong quarter for a lot of those kind of products, you know, a year ago.

Frank Thomas Connor: It's softer now, and so we've made necessary cost and production volume alignments to match that. But no, we're absolutely not seeing...

Speaker Change #125: That behavior, when you look at light jets or Bell 505s, Bell 407s, you know, I mean, the market for, you know, those, you know, even the sort of the lower price point, you know, jets and rotorcraft continue to do very well.

Peter John Skibitski: Okay, okay, interesting. Last one for me just on GBSD. It looks like, Sentinel looks like it passed its Nunn-McCurry review. Any change that you guys expect to the program profile for you guys? No, I don't. We're continuing.

Scott Donnelly: Okay, okay, interesting. Last one for me, just on GBSD. It looks like he's setting up; looks like it passed, it's none McCurry review. Any change that you guys expect to the program profile for you guys?

Speaker Change #126: Okay, okay, interesting. Last one for me, just on GBSD, it looks like, Sentinel looks like it passed its Nunn-McCurry review. Any change that you guys expect to the program profile for you guys?

Scott C. Donnelly: No, I don't. We're continuing to work very closely with Northrop. I think the program is progressing well. We've had a number of things that have added scope to what we originally had bid on the program. So I think we have a great relationship with these guys. That piece of the program is going well. As you guys know, I mean, just in the media, a lot of the cost issues around the infrastructure as opposed to the missile itself have been a big issue.

Scott Donnelly: No, I don't. We're continuing to work very closely with Northrop; I think the program is progressing well. We've had a number of things that have added scope to what we originally had been on the program. So I think we have a great relationship with these guys; that piece of the program is going well.

Speaker Change #127: No, I don't. We're continuing to work very closely with Northrop. I think the program is progressing well.

Speaker Change #127: You know, we've had a number of things that have added scope, you know, to what we originally, you know, had been on the program. So...

Scott Donnelly: As you guys know, I mean just in the media, a lot of the cost issues around the infrastructure as opposed to the missile itself have been a big issue. So for sure, there's scheduled challenges, which I think are well documented. Northrop talks about them; their customer talks about them, but we continue to, I think, execute well in the program. See scope increases on the program and are continuing to make good progress on our piece of the overall weapon system.

Speaker Change #127: I think we have a great relationship with these guys, that piece of the program is going well. As you guys know, I mean, just in the media...

Speaker Change #127: you know, a lot of the cost issues around the infrastructure.

Scott C. Donnelly: So for sure, there are scheduled challenges, which I think are well documented. Northrop talks about them, their customers talk about them, but we continue to, I think, execute well on the program, see scope increases on the program, and are, you know, continuing to make good progress on our piece of the overall weapons system. And your final question today comes from the line of Gavin Parsons from UBS. Please go ahead.

Speaker Change #127: As opposed to the, you know, the missile itself had been, you know, a big issue.

Speaker Change #128: For sure, you know, there's scheduled challenges which I think are well-documented. Northam talks about them. Their customer talks about them. But, you know, we continue to, I think, execute well on the program. See scope increases on the program.

Speaker Change #128: and are continuing to make good progress on our piece of the overall weapons system.

Scott Donnelly: Okay, thank you.

Gavin Parsons: And your final question today comes from the line of Gavin Parsons from UBS. Please go ahead.

Speaker Change #129: Okay, thank you.

Speaker Change #129: And your final question today comes from the line of Gavin Parsons from UBS. Please go ahead.

Gavin Parsons: Thank you. Morning. All right.

Gavin Eric Parsons: Thank you, good morning, uh... sounded like

Scott Donnelly: Sounded like aviation guide in line with the initial thoughts, industrial margin, maybe a little below, but can you just kind of go around the horn a little bit and update what's tracking above or below to allow you to stay in the guidance range? Yeah, I think you actually did a pretty good job there. I think the aviation guys are well within in their guide and having a great year. I think the bell and systems will probably come in a little bit above their guide, strong performance in both those businesses. And as we talked about, you know, we'll probably be a little below the guide on the industrial segment just because of lower volume, particularly in that consumer space.

Speaker Change #130: Thank you. Good morning.

Gavin Eric Parsons: Thank you.

Gavin Eric Parsons: Sounded like aviation guide in line with the initial thoughts, industrial margin maybe a little below, but can you just kind of go around the horn a little bit and update what's tracking above or below to allow you to stay in the guidance range?

Scott C. Donnelly: Yeah, Gavin, I think you actually did a pretty good job there. I think the aviation guys are well within their guide and having a great year. I think that Bell and Systems will probably come in a little bit above their guide, with strong performance in both those businesses. As we've talked about, we'll probably be a little below the guide on the industrial segment just because of lower volume, particularly in that consumer space.

Speaker Change #132: Yeah, Gavin, I think you actually did a pretty good job there. I think the aviation guys are well within their guide and having a great year. I think that Bell and...

Speaker Change #133: We'll probably come in a little bit above their guide. Strong performance in both those businesses. As we've talked about, we'll probably be a little below the guide on the...

Scott C. Donnelly: But on that, I think we feel pretty good about where things are and most businesses are performing really well. And then maybe just on pricing on orders, it seems like you're still getting maybe mid-single digits on deliveries. Is it at a similar level, what's going into the backlog? Yeah, well, I mean, we're probably not going to give price forecasting, but, you know, I would certainly say price continues to be strong in the marketplace.

Scott Donnelly: But, you know, net, I think we feel pretty good about where things are, and most businesses are performed really well. Okay, appreciate it.

Speaker Change #133: [inaudible]

Scott Donnelly: And then maybe just on pricing on orders seems like you're still getting maybe mid single digits on deliveries. Is it a similar level what's going into the backlog today? Well, I mean, we're probably not going to give, you know, price forecasting, but, you know, I would certainly say price continues to be, you know, strong in the marketplace. Okay.

Speaker Change #134: Okay, appreciate it. And then maybe just on pricing on orders, seems like you're still getting maybe mid-single digits on deliveries. Is it a similar level what's going into the backlog today?

Speaker Change #135: We're probably not going to give price forecasting, but I would certainly say price continues to be strong in the marketplace.

Scott Donnelly: Thank you. All right.

Speaker Change #136: Okay, thank you.

Operator: Ladies and gentlemen, this conference will be available for replay after 10 a.m. Eastern Time today through July 18th, 2025. You may access the AT&T Executive Replay System at any time by dialing 1-866-207-1041 and entering the access code 430-6608. International participants dial 402-970-0847. Those numbers once again are 1-866-207-1041 or 402-970-0847 with the access code 430-6608.

Operator: Ladies and gentlemen, this conference will be available for replay after 10 a.m. Eastern Time today through July 18, 2025. You may access the AT&T Executive Replay System at any time by dialing 1-866-207-1041 and entering the access code 430-6608. International participants dial 402-970-0847. Those numbers once again are 1-866-207-1041 or 402-970-0847 with the access code 430-6608. That does conclude your conference call for today. Thank you for your participation and for using the AT&T Teleconference. You may now disconnect.

Speaker Change #137: Thank you. Bye.

Speaker Change #138: Ladies and gentlemen, this conference will be available for replay after 10 a.m. Eastern Time today through July 18th, 2025.

Speaker Change #139: You may access the AT&T Executive Replay System at any time by dialing 1-866-207-1041 and entering the access code 430-6608.

Speaker Change #140: International participants dial 402-970-0847

Speaker Change #140: Those numbers once again are 1-866-207-1041 or 402-970-0847 with the access code 430-6608.

Operator: That does conclude your conference for today. Thank you for your participation and for using AT&T Teleconference. You may now disconnect. Your conference is ending now. Please hang up.

Speaker Change #141: That does conclude your conference for today. Thank you for your participation and for using AT&T Teleconference. You may now disconnect.