Q1 2025 General Electric Co Earnings Call

April 22, 2025

Rahul Ghai: Sa.

Rahul Ghai: Sam.

Rahul Ghai: Sa.

Operator: Good day, ladies and gentlemen, and welcome to the GE Aerospace first quarter 2025 earnings conference call. At this time, all participants are in a listen only mode. My name is Liz, and I will be your conference coordinator today. If you experience issues with the webcast slides refreshing or there appears to be delays in the slide advancement, please hit F5 on your keyboard to refresh. As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today's conference, Blaire Shoor from the GE Aerospace Investor Relations Team. Please proceed.

Good day ladies and gentlemen and welcome to the GE Aerospace first quarter 2025 earnings conference call.

Liz: At this time, all participants are in a listen-only mode. My name is Liz, and I will be your conference coordinator today. If you experience issues with the webcast slides refreshing or there appears to be delays in the slide advancement, please hit F5 on your keyboard to refresh. As a reminder, this conference is being recorded.

Liz: I would now like to turn the program over to your host for today's conference, Blaire Shoor from the GE Aerospace Investor Relations team. Please proceed.

Blaire Shoor: Thanks Liz. Welcome to GE Aerospace's Q1 2025 earnings call. I'm joined by Chairman and CEO Larry Culp and CFO Rahul Ghai. Many of the statements we're making are forward-looking and based on our best view of the world and our businesses as we see them today. As described in our SEC filings and website, those elements may change as the world changes. Additionally, Larry and Rahul, consistent with prior quarters, will speak to total company and corporate financial results and guidance today on a non-GAAP basis. Larry, over to you.

Blair Shoor: Thanks, Liz. Welcome to GE Aerospace's first quarter 2025 earnings call.

Speaker Change: I'm joined by Chairman in CEO Larry Colts and CFO for a whole guy.

Speaker Change: Many of the statements were making our forward looking and based on our best view of the world and our businesses as we see them today.

Speaker Change: As described in our SEC filings and website, those elements may change as the world changes

Larry Culp: Larry, thanks and good morning everyone. While a lot has happened since January, we at GE Aerospace remain focused on our purpose. Our team works daily to invent the future of flight, lift people up and bring them home safely. Those last four words ring true to us given right now there are nearly a million people in the sky. With our technology under wing. This is an incredible responsibility and one that we take very seriously.

Larry Culp: Blaire, thanks and good morning everyone. While a lot has happened since January, we at GE Aerospace remain focused on our purpose. Our team works daily to invent the future of flight, lift people up and bring them home safely. Those last four words ring true to us given right now there are nearly a million people in the sky. With our technology under wing. This is an incredible responsibility and one that we take very seriously.

Speaker Change: and guidance today on a non-GAAP basis. Larry, over to you. Larry, thanks, and good morning everyone.

Speaker Change: While a lot has happened since January , GE Aerospace remained focused on our purpose. Our team works daily to invent the future of light, lift people up and bring them home safely.

Speaker Change: Those last four words ring true to us, given right now there are nearly a million people in the sky with our technology under wing.

Speaker Change: This is an incredible responsibility and one that we take very seriously.

Larry Culp: With safety at our core, we're advancing our vision to be the company that defines flight for today, tomorrow, and the future. Today we're focused on service and readiness, keeping our customers' fleets flying. For tomorrow, we're delivering the ramp and executing our $170 billion plus backlog. And for the future, we're advancing the technology that will define the future of flight across both commercial and defense. With approximately $3 billion in annual R&D spending.

With safety at our core, we're advancing our vision to be the company that defines flight for today, tomorrow, and the future. Today we're focused on service and readiness, keeping our customers' fleets flying. For tomorrow, we're delivering the ramp and executing our $170 billion plus backlog. And for the future, we're advancing the technology that will define the future of flight across both commercial and defense. With approximately $3 billion in annual R&D spending.

Speaker Change: With safety at our core, we're advancing our vision to be the company that defines quite where today, tomorrow and the future.

Speaker Change: Today, we're focused on service and readiness, keeping our customers' fleets flying. For tomorrow, we're delivering the ramp and executing our $170 billion plus backlog.

Speaker Change: And for the future, we're advancing the technology we'll define the future of life across both commercial and defense with approximately $3 billion in annual R&D spending.

Larry Culp: Flight Deck, our proprietary lean operating model, is how we translate that strategy into results. Launched a year ago, we're activating Flight Deck to deliver for our customers and create long term value for our shareholders.

Flight Deck, our proprietary lean operating model, is how we translate that strategy into results. Launched a year ago, we're activating Flight Deck to deliver for our customers and create long term value for our shareholders.

Speaker Change: Blake Deck, our proprietary lean operating model, is how we translate that strategy into results.

Speaker Change: wants to hear a go, racquet any flight deck to deliver for our customers, and create long-term value for our shareholders.

Larry Culp: Turning to Q1, GE Aerospace delivered a strong start to the year. Orders were up 12% and revenue grew 11% with double digit growth in both services and equipment. Profit was up $2.1 billion, up 38% with contributions from both segments leading to margins of 23.8%. Overall we delivered $1.49 of EPS, up 60% year over year and free cash flow was $1.4 billion.

Turning to Q1, GE Aerospace delivered a strong start to the year. Orders were up 12% and revenue grew 11% with double digit growth in both services and equipment. Profit was up $2.1 billion, up 38% with contributions from both segments leading to margins of 23.8%. Overall we delivered $1.49 of EPS, up 60% year over year and free cash flow was $1.4 billion.

Speaker Change: Turning to the first quarter, GE Aerospace delivered a strong start to the year, orders were up 12% and revenue grew 11% with double digit growth in both services and equipment.

Speaker Change: Profit was up $2.1 billion, up 38% with contributions from both segments, leading to margins of 23.8%.

Speaker Change: Overall, we delivered $1.49 of EPS, up to 60% year-over-year, and free cash flow was $1.4 billion.

Larry Culp: In Commercial Engines and Services, or CES, we're servicing and growing the industry's most extensive commercial installed base. Services strength continued, with orders up 31% and revenue up 17%, driving total operating profit growth of 35% year over year.

In Commercial Engines and Services, or CES, we're servicing and growing the industry's most extensive commercial installed base. Services strength continued, with orders up 31% and revenue up 17%, driving total operating profit growth of 35% year over year.

Speaker Change: In commercial engines and services, or CES, or servicing and growing the industry's most extensive commercial install base. Services Strength continued with orders up 31% and revved new up 17%, driving total operating profit growth of 35% year-over-year.

Larry Culp: In defense and propulsion technologies, or DPT, we're improving the delivery of our leading defense programs while developing mission critical technology. The Q1 was solid, with defense units growing 5% and profit increasing 16%. My thanks go out to all of our 53,000 employees around the world for delivering once again for our customers.

In defense and propulsion technologies, or DPT, we're improving the delivery of our leading defense programs while developing mission critical technology. The Q1 was solid, with defense units growing 5% and profit increasing 16%. My thanks go out to all of our 53,000 employees around the world for delivering once again for our customers.

Speaker Change: In defense and propulsion technologies, or DPT, we're improving the delivery of our leading defense programs while developing mission critical technology.

Speaker Change: The first quarter were solid with defense units growing 5% and profit increasing 16%.

Speaker Change: My thanks go out to all of our 53,000 employees around the world for delivering once again for our customers.

Larry Culp: Moving to slide 5.

Moving to slide 5.

Larry Culp: GE Aerospace supports efforts to revitalize domestic manufacturing, and it's why we're investing $1 billion in US manufacturing this year and hiring over 5,000 US workers. At the same time, we support promoting free and fair trade that ensures the continued strength of the US aerospace industry. Our industry has a nearly $75 billion trade surplus, the highest trade balance of any sector, and exports more than $135 billion of products each year. This is possible because the global aviation sector has long operated without tariffs on civil aircraft engines and avionics.

GE Aerospace supports efforts to revitalize domestic manufacturing, and it's why we're investing $1 billion in US manufacturing this year and hiring over 5,000 US workers. At the same time, we support promoting free and fair trade that ensures the continued strength of the US aerospace industry. Our industry has a nearly $75 billion trade surplus, the highest trade balance of any sector, and exports more than $135 billion of products each year. This is possible because the global aviation sector has long operated without tariffs on civil aircraft engines and avionics.

Moving to slide five five.

Speaker Change: Ge Aerospace supports efforts to revitalize domestic manufacturing, and it's why we're investing a billion dollars in U.S. manufacturing in this year and hiring over 5,000 U.S. workers.

Speaker Change: At the same time, we support promoting free and fair trade that ensures the continued strength of the US Aerospace Industry.

Army Industry Housing Nearly $75 billion Tracer Plus.

Larry Culp: As the US Administration engages in discussions with its trade partners, we'll continue to advocate for an approach that reestablishes 0 for 0 tariffs in the aviation sector and ensures a level playing field for the US Aerospace industry.

As the US Administration engages in discussions with its trade partners, we'll continue to advocate for an approach that reestablishes 0 for 0 tariffs in the aviation sector and ensures a level playing field for the US Aerospace industry.

Speaker Change: As the U.S. administration engages in discussions with its trade partners, we'll continue to advocate for an approach that reestablishes zero for zero tariffs in the aviation sector and ensures a level playing field for the U.S. aerospace industry.

Larry Culp: In the meantime, heightened tariffs will result in additional costs for us and our supply chain. We're leveraging available programs the administration is providing businesses such as duty drawbacks along with other strategies to optimize our operations, like expanding foreign trade zones. With those actions, we expect to reduce the tariff costs to roughly $500 million.

In the meantime, heightened tariffs will result in additional costs for us and our supply chain. We're leveraging available programs the administration is providing businesses such as duty drawbacks along with other strategies to optimize our operations, like expanding foreign trade zones. With those actions, we expect to reduce the tariff costs to roughly $500 million.

Speaker Change: In the meantime, heightened tariffs will result in additional costs for us and our supply chain.

Speaker Change: We're leveraging available programs the administration is providing businesses such as duty drawbacks along with other strategies to optimize our operations, like expanding foreign trade zones.

Speaker Change: With those actions, we expect to reduce the tariff costs to roughly $500 million.

Larry Culp: We're taking additional actions to offset this remaining impact. This includes controlling costs while maintaining investments in key priorities and pricing actions. Departures remained favorable in the quarter, up 4% in line with our expectations. Given strong orders growth over the last several quarters, our commercial services backlog has grown out to over $140 billion. We've had a lag in converting those orders to revenue given the broader supply chain dynamics. Our spare parts delinquency continues to increase, unfortunately.

We're taking additional actions to offset this remaining impact. This includes controlling costs while maintaining investments in key priorities and pricing actions. Departures remained favorable in the quarter, up 4% in line with our expectations. Given strong orders growth over the last several quarters, our commercial services backlog has grown out to over $140 billion. We've had a lag in converting those orders to revenue given the broader supply chain dynamics. Our spare parts delinquency continues to increase, unfortunately.

Speaker Change: We're taking additional actions to offset this remaining impact. This includes controlling costs while maintaining investments in key priorities and pricing actions.

Speaker Change: Departures Remain Favorable in the Quarter, 4% in line with our expectations.

Speaker Change: Given strong orders growth over the last several quarters, our commercial services backlog has grown out over 140 billion dollars.

Speaker Change: We've had a lag in converting those orders to revenue given the broader supply chain dynamics.

Speaker Change: Our spare parts don't leak and see it continues to increase, unfortunately, up over two times

Larry Culp: Up over 2x year over year, and our internal shop visit slots are full with a healthy pipeline of engines which have been removed but not yet inducted into our shops. So far, Q2 departures are shaping more or less in line with Q1. We're taking a more cautious approach and embedding a slower H2 in our estimate, resulting in departures up low single digits for the full year. This includes a reduction in North American departures, which make up about 25% of the total.

Up over 2x year over year, and our internal shop visit slots are full with a healthy pipeline of engines which have been removed but not yet inducted into our shops. So far, Q2 departures are shaping more or less in line with Q1. We're taking a more cautious approach and embedding a slower H2 in our estimate, resulting in departures up low single digits for the full year. This includes a reduction in North American departures, which make up about 25% of the total.

Speaker Change: and our internal shot visit slots are full, the healthy pipeline of engines which had been removed, but not yet inducted into our shots.

Speaker Change: So far, second quarter departures are shaping more or less in line with the first quarter.

Speaker Change: We're taking a more cautious approach and embedding a slower second half in our estimate.

Speaker Change: resulting in departures, uh, most single digits for the full year. This includes a reduction in North American departures, which make up about 25% of the total.

Larry Culp: So to step back, while the broader environment is certainly uncertain, we are watching demand closely, and we're operating from a position of strength. The actions we're taking, combined with our robust backlog, position us well to maintain our full year guidance.

So to step back, while the broader environment is certainly uncertain, we are watching demand closely, and we're operating from a position of strength. The actions we're taking, combined with our robust backlog, position us well to maintain our full year guidance.

Speaker Change: So to step back, while the broader environment is certainly uncertain, we are watching demand closely, and we're operating from a position of strength. The actions we're taking combined our robust backlog, position as well to maintain our full year guidance.

Larry Culp: Shifting to Slide six, we're focused on meeting the aftermarket NOE ramp to deliver for our customers. Demand continues to outpace supply, and we're utilizing Flight Deck to tackle supply chain constraints head on. In the first quarter, material input at our priority supplier sites was up 8% sequentially, which supported CES services revenue up 17% year over year.

Shifting to Slide six, we're focused on meeting the aftermarket NOE ramp to deliver for our customers. Demand continues to outpace supply, and we're utilizing Flight Deck to tackle supply chain constraints head on. In the first quarter, material input at our priority supplier sites was up 8% sequentially, which supported CES services revenue up 17% year over year.

King, Kittin' the slide six. [inaudible]

Speaker Change: We're focused on meeting the aftermarket NOE ramp to deliver for our customers.

Speaker Change: Demand continues to outpace supply and reutilizing flight deck to tackle supply chain constraints head on. In the first quarter, material input at our priority supplier sites was up 8% sequentially, which supported CES Services revenue up 17% year-over-year.

Larry Culp: While defense units were a bright spot of 5%. Total engine units were down 6% with LEAP down 13%. This was lighter than we expected from the slower start to material inputs in January and the lead times to complete new engines. We drove significant improvement in material input in February and March, giving us confidence that we will accelerate output in Q2.

While defense units were a bright spot of 5%. Total engine units were down 6% with LEAP down 13%. This was lighter than we expected from the slower start to material inputs in January and the lead times to complete new engines. We drove significant improvement in material input in February and March, giving us confidence that we will accelerate output in Q2.

Speaker Change: While the fence units were bright spot of 5%, total engine units were down 6% with leap down 13.

Speaker Change: This was lighter than we expected from the slower start to material inputs in January and the lead times to complete new engines.

Speaker Change: We drove significant improvement in material input in February and March, giving us confidence that we will accelerate output in the second quarter.

Larry Culp: In partnership with our suppliers, we're leveraging Flight Deck to deliver our priority. Suppliers continue to improve shipments against their committed targets, which increase both year over year and sequentially. In the first quarter, they delivered shipping more than 95% of their committed volumes. Our new technology and operations organization has hit the ground running. In March, we hosted a supplier symposium to share our near- and longer-term growth outlook across both services and OE. This helps our suppliers with required transparency and stability. They need to make critical investments to support the ramp and a forum for discussing key challenges in doing so.

In partnership with our suppliers, we're leveraging Flight Deck to deliver our priority. Suppliers continue to improve shipments against their committed targets, which increase both year over year and sequentially. In the first quarter, they delivered shipping more than 95% of their committed volumes. Our new technology and operations organization has hit the ground running. In March, we hosted a supplier symposium to share our near- and longer-term growth outlook across both services and OE. This helps our suppliers with required transparency and stability. They need to make critical investments to support the ramp and a forum for discussing key challenges in doing so.

Speaker Change: In partnership with our suppliers, we're leveraging flight deck to deliver. Our priori suppliers continue to improve shipments against their committed targets, which increase both your overyear and sequentially.

Speaker Change: In the first quarter they delivered, shipping more than 95% of their committed volumes.

Speaker Change: Our new technology and operations organization is hit the ground running.

Speaker Change: In March, we hosted a supplier symposium to share our near and longer-term growth outlook across both services and OE.

that helps our suppliers with...

Larry Culp: Importantly, we know these joint efforts with our suppliers work. Last quarter we shared that a joint Kaizen with one of those priority suppliers achieved a 50% increase in output in just one week. Now at the end of the first quarter, the same team has delivered a 3x increase quarter over quarter.

Importantly, we know these joint efforts with our suppliers work. Last quarter we shared that a joint Kaizen with one of those priority suppliers achieved a 50% increase in output in just one week. Now at the end of the first quarter, the same team has delivered a 3x increase quarter over quarter.

Speaker Change: Importantly, we know these joint efforts with our suppliers work. Last quarter, we shared that a joint ties in with one of those priori suppliers achieved a 50% increase in output in just one week.

Speaker Change: Now at the end of the first quarter, the same team has delivered a 3x increase quarter over quarter.

Larry Culp: Additionally, LEAP remains an important growth area with the fleet expected to more than double by the end of the decade. We're continuing to expand capacity to support aftermarket demand. LEAP external shop visits grew over 60% in Q1, demonstrating the rapid growth in the third-party network.

Additionally, LEAP remains an important growth area with the fleet expected to more than double by the end of the decade. We're continuing to expand capacity to support aftermarket demand. LEAP external shop visits grew over 60% in Q1, demonstrating the rapid growth in the third-party network.

Speaker Change: Additionally, Leap remains an important growth area with the fleet expected to more than double by the end of the decade. We're continuing to expand capacity to support aftermarket demand. Leap external shop visits grew over 60 percent in the first quarter demonstrating the rapid growth in the third party network.

Larry Culp: Also, all engine shipments to Airbus now incorporate the durability kit, including the upgraded HPT blade, which was approved back in December, enables the LEAP-1A to achieve CFM56 levels of time on wing. We're also shipping those same blades to MRO shops to support upgrades of the existing fleet. The upgraded HPT blades incorporate a simpler design requiring less capacity, improving process yields, and ultimately supporting higher output. Critical additional benefits that will support achieving the 15% to 20% growth in LEAP deliveries we expect in 2025.

Also, all engine shipments to Airbus now incorporate the durability kit, including the upgraded HPT blade, which was approved back in December, enables the LEAP-1A to achieve CFM56 levels of time on wing. We're also shipping those same blades to MRO shops to support upgrades of the existing fleet. The upgraded HPT blades incorporate a simpler design requiring less capacity, improving process yields, and ultimately supporting higher output. Critical additional benefits that will support achieving the 15% to 20% growth in LEAP deliveries we expect in 2025.

Speaker Change: Also, all engine shipments to Airbus now incorporate the durability kit, including the upgraded HPT blade, which was approved back in December , and it holds the Leap 1A to achieve CFM 56 levels of time-on-wing.

Speaker Change: We're also shipping those same blades to MRO shops to support upgrades of the existing fleet.

Speaker Change: The upgraded HPT blades incorporate a simpler design, requiring less capacity, improving process shields and ultimately supporting higher output.

Critical Additional Benefit, Civil Support Achieving

The 15-20% growth in leap deliveries we expect in 2025.

Larry Culp: We're already seeing improvement in our overall output through April and remain confident we'll accelerate in 2025 and long.

We're already seeing improvement in our overall output through April and remain confident we'll accelerate in 2025 and long.

Speaker Change: We're already seeing improvement in our overall output through April and remain confident will accelerate in 2025 and longer term.

Larry Culp: Turning to Slide 7 in Q1, we saw continued demand for both our services and products. At GE's, we secured multiple agreements for our customers' growing fleets. We secured entry commitments from ANA for both our narrow-body and widebody platforms. They selected LEAP, GEnx engines to power 13 A321neos, up to 22 737 MAXes, and 18 787-9 aircraft as part of their fleet upgrade. Additionally, we received a commitment from Malaysia Aviation Group for 60 CFM LEAP engines plus additional spares to power 30 Boeing 737 MAX aircraft.

Turning to Slide 7 in Q1, we saw continued demand for both our services and products. At GE's, we secured multiple agreements for our customers' growing fleets. We secured entry commitments from ANA for both our narrow-body and widebody platforms. They selected LEAP, GEnx engines to power 13 A321neos, up to 22 737 MAXes, and 18 787-9 aircraft as part of their fleet upgrade. Additionally, we received a commitment from Malaysia Aviation Group for 60 CFM LEAP engines plus additional spares to power 30 Boeing 737 MAX aircraft.

Turning to slide, Seth.

Speaker Change: In the first quarter we saw a continued demand for both our services and products.

Speaker Change: It's the E.S. We secured multiple agreements for our customers growing fleets.

Speaker Change: We secured engine commitments from ANA for both our narrow body and wide body platforms. They selected [inaudible]

787-9 aircraft as part of their fleet upgrade.

Speaker Change: Additionally, we've received a commitment from Malaysia Aviation Group for 60 CFM Leap Engines plus additional spares to power 30 Boeing 737 MAX aircraft.

Larry Culp: In the widebody segment, Korean Air announced an agreement for up to 30 Boeing 787-10s and 20 777-9s with our GEnx and GE9X engines underwing. In defense, budgets are increasing globally, and customers are selecting our leading programs. We received a contract from the US Air Force valued up to $5 billion. This supports foreign military sales for the F110 engines which power the F-15 and the F-16 aircraft operated by allies around the world.

In the widebody segment, Korean Air announced an agreement for up to 30 Boeing 787-10s and 20 777-9s with our GEnx and GE9X engines underwing. In defense, budgets are increasing globally, and customers are selecting our leading programs. We received a contract from the US Air Force valued up to $5 billion. This supports foreign military sales for the F110 engines which power the F-15 and the F-16 aircraft operated by allies around the world.

Speaker Change: In DPT, Defense Budgets are increasing globally and customers are selecting our leading programs.

Speaker Change: We receive the contract from the U.S. Air Force valued up to $5 billion. The supports foreign military sales for the F-110 engines.

Speaker Change: which powered the F-15 and the F-16 aircraft operated by allies around the world.

Larry Culp: At the same time, we're strengthening our leadership position with continued investments starting with the RISE program. We recently completed a second endurance test campaign on the high pressure turbine blades earlier in the development process than ever before. This demonstrated improved durability and fuel efficiency, key customer priorities for the future of flight. We also completed the initial ground runs for the T901 engine on a US Army Black Hawk helicopter, a major milestone toward delivering a more powerful mission-ready aircraft and one that puts us on a path to a flight test.

At the same time, we're strengthening our leadership position with continued investments starting with the RISE program. We recently completed a second endurance test campaign on the high pressure turbine blades earlier in the development process than ever before. This demonstrated improved durability and fuel efficiency, key customer priorities for the future of flight. We also completed the initial ground runs for the T901 engine on a US Army Black Hawk helicopter, a major milestone toward delivering a more powerful mission-ready aircraft and one that puts us on a path to a flight test.

Speaker Change: At the same time, we're strengthening our leadership position with continued investments.

Speaker Change: Starting with the RISE program, we recently completed a second endurance test campaign on the high pressure turban blades.

earlier in the development process than ever before.

Speaker Change: The demonstrated improved durability and fuel efficiency, key customer priorities for the future of life.

Speaker Change: We also completed the initial ground runs for the T901 engine on a U.S. Army Black Hawk helicopter, a major milestone toward delivering a more powerful mission-ready aircraft and one that puts us on a path to a flight test.

Larry Culp: Finally, we successfully completed the detailed design review for the XA102 adaptive cycle engine, working toward production of a full-scale model. This is a critical milestone supporting the US Air Force's next generation Adaptive Propulsion program. We were also pleased to see President Trump's award of the F47 and the administration's commitment to advance this important program. Our progress on advanced engines position us well with the administration's efforts to maintain military air superiority. So overall we're focused on executing our sizable backlog while investing in the technology building blocks that will define the future of flight. Rahul, over to you.

Finally, we successfully completed the detailed design review for the XA102 adaptive cycle engine, working toward production of a full-scale model. This is a critical milestone supporting the US Air Force's next generation Adaptive Propulsion program. We were also pleased to see President Trump's award of the F47 and the administration's commitment to advance this important program. Our progress on advanced engines position us well with the administration's efforts to maintain military air superiority. So overall we're focused on executing our sizable backlog while investing in the technology building blocks that will define the future of flight. Rahul, over to you.

Speaker Change: Finally, we successfully completed the detailed design review for the XA-102 Adaptive Cycle Engine, working toy production of a full-scale model.

Speaker Change: This is a critical milestone supporting the U.S. Air Force's next-generation adaptive propulsion program.

Speaker Change: We were also pleased to see President Trump's award of the F-47 and the administration's commitment to advance this important program.

Our Progress on Advanced Engines, Position as Well

with the administration's efforts to maintain military air superiority.

Speaker Change: So overall, we're focused on executing our sizeable backlog while investing in the technology building blocks that will define the future of flight.

Rahul Ghai: Thank you Larry. Good morning everyone. We started out 2025 with a strong first quarter marked by significant top line and EPS growth. Orders were up 12% and revenue was up 11%, both led by commercial services. Profit was $2.1 billion, up $600 million or 38%, driven by services volume, favorable mix, and price. Margin expanded 460 basis points to 23.8%.

Rahul, over to you.

Rahul Ghai: Thank you Larry, good morning everyone. We started out 2025 with a strong first quarter.

Mark by Cygnuskin, Stopline, and EPS Road

Orders were up 12% and revenue was up 11% [inaudible]

Both Led by Commercial Services

Profit was $2.1 billion. Up $600 million or 38%

Driven by services volume, favorable make and price.

Margin expanded 460 basis points to 23.8%.

Rahul Ghai: EPS of $1.49 was up 60% from profit growth, a favorable tax rate, and a lower share count from buyback actions. Free cash flow was $1.4 billion, down 14% and in line with our expectations. Working capital was the source, primarily from contract assets. Inventory increased to prepare for higher output and to tackle ongoing material availability challenges. This was partially offset by payables.

EPS of $1.49 was up 60% from profit growth, a favorable tax rate, and a lower share count from buyback actions. Free cash flow was $1.4 billion, down 14% and in line with our expectations. Working capital was the source, primarily from contract assets. Inventory increased to prepare for higher output and to tackle ongoing material availability challenges. This was partially offset by payables.

Rahul Ghai: LPS, a $1.49 was up 60% from profit growth of favorable tax rate and a lower share count from by that actions.

Rahul Ghai: Free cash flow was 1.4 billion dollars, down 14% and in line with our expectations.

Working Capital was the source primarily from contract assets.

Rahul Ghai: Inventory increased to prepare for higher output and to tackle ongoing material availability challenges.

Rahul Ghai: Given our operational and financial strength, we continue to expect to deploy over $8 billion of cash to shareholders in 2025 through dividends and buybacks. We remain well positioned to drive significant shareholder returns while continuing to invest in growth, innovation, and focused M&A.

Given our operational and financial strength, we continue to expect to deploy over $8 billion of cash to shareholders in 2025 through dividends and buybacks. We remain well positioned to drive significant shareholder returns while continuing to invest in growth, innovation, and focused M&A.

This was partially offset by variables.

Rahul Ghai: Given our operational and financial strength, we continue to expect to deploy over $8 billion of cash to share holders in 2025 through dividends and buybacks.

Rahul Ghai: We remain well positioned to drive significant shareholder returns while continuing to invest in growth, innovation and focus M&A.

Rahul Ghai: Looking closer at our businesses starting with CES. In the quarter, orders were up 15% with services up 31% while equipment was down 13%. Given a tough compare.

Looking closer at our businesses starting with CES. In the quarter, orders were up 15% with services up 31% while equipment was down 13%. Given a tough compare.

Looking closer at our businesses, starting with CES.

Rahul Ghai: In the quarter, orders were up 15% with services up 31% while equipment was down 13% given a tough compare.

Rahul Ghai: Revenue was up 14%, led by services up 17%. Spare parts revenue was up more than 20% from higher volume and price. Internal shop visit revenue grew 11% from higher shop visit. Output, increased work scopes, and widebody mix equipment grew 9% with favorable customer mix and price offsetting unit deliveries that were down 9% while still elevated. The spare engine ratio stepped down sequentially in line with expectations, and the LEAP life-of-program spare engine ratio remains in low double digits.

Revenue was up 14%, led by services up 17%. Spare parts revenue was up more than 20% from higher volume and price. Internal shop visit revenue grew 11% from higher shop visit. Output, increased work scopes, and widebody mix equipment grew 9% with favorable customer mix and price offsetting unit deliveries that were down 9% while still elevated. The spare engine ratio stepped down sequentially in line with expectations, and the LEAP life-of-program spare engine ratio remains in low double digits.

Revenue was up 14%. Led by services up 17%.

Rahul Ghai: Superparts revenue was up more than 20% from higher volume and price.

Internal shoppers at Revenue grew 11%

Rahul Ghai: from Higher Shoppers and Output, increased Workscops and wide-body mix.

Rahul Ghai: Equipment Group 9% with favourable customer mix and price of setting unit deliveries that were down 9%

Rahul Ghai: While still elevated, the spear range and ratio step down sequentially in line with expectations and the leap life of program spear range and ratio remains in low double digits.

Rahul Ghai: Profit was $1.9 billion, up 35% from services volume, mix, and price. This more than offset inflation, increased R&D, and a year-over-year change in estimated profitability on long-term service agreement of approximately $100 million. Primarily from the estimated impacts of tariffs. CES margins expanded 420 basis points to 27.5% overall, a very strong start for CES largely driven by services.

Profit was $1.9 billion, up 35% from services volume, mix, and price. This more than offset inflation, increased R&D, and a year-over-year change in estimated profitability on long-term service agreement of approximately $100 million. Primarily from the estimated impacts of tariffs. CES margins expanded 420 basis points to 27.5% overall, a very strong start for CES largely driven by services.

Rahul Ghai: Profit was $1.9 billion. Up 35% from services volume, mix and price.

Rahul Ghai: with more than offset inflation, increased R&D, and a year-over-year change in estimated costability on long-term service agreement of approximately $100 million.

Primarily from the estimated impact of tariffs.

CES, margins expanded 420 basis points to 27.5%

Rahul Ghai: Overall, a very strong start for CDS, largely driven by services.

Rahul Ghai: Moving to DPT. Orders were flat year over year with services up 14% while equipment was down. Given the significant growth in Q1 of last year, Defense demand remains robust with a book-to-bill of 1.4x. Revenue grew 1%. Defense and Systems revenue was flat. Defense unit growth of 5% and price were offset by lower services revenue. Propulsion and additive technologies grew 1%. Services volume and price offset lower internal shipments from our planned lower start in equipment sales. Profit was up 16% driven by customer mix, productivity, and price. This was partially offset by self-funding of next-generation investments and inflation. Margins improved 160 basis points to 12.7%. Stepping back, DPT delivered a better than expected Q1. Shifting to corporate costs, including eliminations, was about $70 million. This was down over 40% or approximately $55 million, mostly driven by expenses down roughly $40 million.

Moving to DPT. Orders were flat year over year with services up 14% while equipment was down. Given the significant growth in Q1 of last year, Defense demand remains robust with a book-to-bill of 1.4x. Revenue grew 1%. Defense and Systems revenue was flat. Defense unit growth of 5% and price were offset by lower services revenue. Propulsion and additive technologies grew 1%. Services volume and price offset lower internal shipments from our planned lower start in equipment sales. Profit was up 16% driven by customer mix, productivity, and price. This was partially offset by self-funding of next-generation investments and inflation. Margins improved 160 basis points to 12.7%. Stepping back, DPT delivered a better than expected Q1. Shifting to corporate costs, including eliminations, was about $70 million. This was down over 40% or approximately $55 million, mostly driven by expenses down roughly $40 million.

Rahul Ghai: Moving to D.P.D., orders of flat year over year with services up 14% while equipment was down given the significant growth in first quarter of last year.

Defense Demand, Cremain Robast [inaudible]

with a book to bill of 1.4x.

Rahul Ghai: Revenue grew 1%. Defense and systems revenue was flat. Defense unit growth of 5% and price were offset by lower services revenue.

Propulsion and Addictive Technologies, Group 1% [inaudible]

Rahul Ghai: Services volume and price offset lower internal shipments from a plant lower start in equipment sales.

Profit was up 16%

driven by customer mix productivity and price.

Margins improved 160 basis points to 12.7%.

Stepping back, DPD delivered a better than expected for a quarter

Shifting to corporate cost including eliminations was about $70 million and $70 million.

This was down over 40% or approximately 55 million dollars.

Mostly driven by expenses down roughly $40 million.

Rahul Ghai: Now moving to our guidance on slide 11, Q1 exceeded expectations given stronger spare parts sales and services mix, which should continue. We have a robust backlog supporting our growth for several years, and we're taking actions to offset the impact from tariffs and to help us in navigating the uncertainty in the environment. Operationally, we are performing better than we expected on the January earnings call, but given the macroeconomic backdrop, we are holding our guidance across the board. Therefore, we continue to expect low double digit revenue growth, profit of $7.8 to 8.2 billion, EPS of $5.1 to 5.45, and free cash flow of $6.3 to 6.8 billion. We're also maintaining our segment guidance.

Now moving to our guidance on slide 11, Q1 exceeded expectations given stronger spare parts sales and services mix, which should continue. We have a robust backlog supporting our growth for several years, and we're taking actions to offset the impact from tariffs and to help us in navigating the uncertainty in the environment. Operationally, we are performing better than we expected on the January earnings call, but given the macroeconomic backdrop, we are holding our guidance across the board. Therefore, we continue to expect low double digit revenue growth, profit of $7.8 to 8.2 billion, EPS of $5.1 to 5.45, and free cash flow of $6.3 to 6.8 billion. We're also maintaining our segment guidance.

Now, moving to our guidance on slide 11

First Quarter Exceeded Expectations [inaudible]

Rahul Ghai: Given stronger spare power sales and services mix, which would continue. We have a robust backlog supporting our growth for several years. And we're taking actions to offset the impact from the virus and to help us in navigating the uncertainty in the environment.

Rahul Ghai: Operationally, we are performing better than we expected on the January earnings call.

Rahul Ghai: But given the macroeconomic backdrop, we are holding our guidance across the board.

Rahul Ghai: Therefore, we continue to expect low double-digit revenue growth, profit of 7.8 to 8.2 billion dollars.

EPS of $5.10 to $5.45

and Free Cash Flow of $6.3 to $6.8 billion $6.

Rahul Ghai: Unpacking the moving pieces. We have included the following in our guidance. Recognizing the dynamic background, we are preparing for tariffs that could persist through year-end with 10% tariffs remaining in place, and then reciprocal tariffs resuming after the 90-day pause. As Larry mentioned, we expect roughly $500 million of cost after our operational actions to minimize the tariff impact. From there, we expect to primarily mitigate this remaining $500 billion through SGA cost controls and price increases. We are maintaining our R&D spend for the year.

Unpacking the moving pieces. We have included the following in our guidance. Recognizing the dynamic background, we are preparing for tariffs that could persist through year-end with 10% tariffs remaining in place, and then reciprocal tariffs resuming after the 90-day pause. As Larry mentioned, we expect roughly $500 million of cost after our operational actions to minimize the tariff impact. From there, we expect to primarily mitigate this remaining $500 billion through SGA cost controls and price increases. We are maintaining our R&D spend for the year.

We are also maintaining our segment guidance.

I'm packing the moving pieces.

We have included the following in our guidance.

Rahul Ghai: Recognizing the dynamic background, we are preparing for tariffs that could persist through year end with 10% tariffs remaining in place and then reciprocal tariffs resuming off to the 90-day pause.

Rahul Ghai: As Larry mentioned, we expect roughly $500 million of cost after our operational actions to minimize the

Rahul Ghai: From there, we expect to primarily mitigate this remaining $500 billion through S.C.A.C.C.C.C.C.C.C.C.C.C.C.C.C.C.C.C.C.C.C.C.C.C.C.C.C.

Rahul Ghai: Regarding the macro environment, given the ongoing uncertainty in the second half, we are adjusting some of our full year expectations.

Regarding the macro environment, given the ongoing uncertainty in the second half, we are adjusting some of our full year expectations.

We are maintaining our R&D spans for the year.

Regarding the macro-environment [inaudible]

Rahul Ghai: Given the ongoing uncertainty in the second half, we are adjusting some of our

Rahul Ghai: We now expect low single digit full year departure growth down from mid single digit in January. Given the tariffs in place, we've reduced spare parts and spare engine sales for the year to that region. This demand is not foregone as the customers in China still have needs for services and spare engines, but they may be delayed. We are maintaining our full year spare parts guidance for low double digit growth given the stronger start to the year and nearly 90% of spare parts in backlog for Q2.

We now expect low single digit full year departure growth down from mid single digit in January. Given the tariffs in place, we've reduced spare parts and spare engine sales for the year to that region. This demand is not foregone as the customers in China still have needs for services and spare engines, but they may be delayed. We are maintaining our full year spare parts guidance for low double digit growth given the stronger start to the year and nearly 90% of spare parts in backlog for Q2.

Rahul Ghai: We now expect low single-digit, full-year departure, growth, down from mid single-digit in January .

Rahul Ghai: Given the tariffs in place, we've reduced spare parts and spare engine sales for the year to that region.

Rahul Ghai: This demand is not work on. As the customers in China still have need for services and scare engines.

But they may be delayed

Rahul Ghai: We are maintaining our full-year square paths guidance for low double-digit growth, given the stronger start of the year and nearly 90% of square paths in backlog for second quarter.

Rahul Ghai: We expect minimal impact on internal shop visit revenue, which represents roughly 60% of our total services revenue. Given our backlog, pent-up demand, and limited risk to shop visits pushing out, overall, we continue to expect low double-digit to mid-teens services growth. We have not factored in a slowdown in airframer delivery schedules, further tariff escalation, or a global recession into our guidance. We remain confident in our ability to deliver another year of strong results. With that, Larry, I'll turn it back to you, Rahul.

We expect minimal impact on internal shop visit revenue, which represents roughly 60% of our total services revenue. Given our backlog, pent-up demand, and limited risk to shop visits pushing out, overall, we continue to expect low double-digit to mid-teens services growth. We have not factored in a slowdown in airframer delivery schedules, further tariff escalation, or a global recession into our guidance. We remain confident in our ability to deliver another year of strong results. With that, Larry, I'll turn it back to you,

Rahul Ghai: We have not factored in a slow-down in air-framer delivery schedules for the tariff escalation or a global session into our guidance.

Rahul Ghai: You remain confident in our ability to deliver another year of strong results. With that, Larry I'll turn it back to you. Rahul, thank you.

Larry Culp: Rahul. Thank you. We're encouraged by our strong start, which combined with the actions we're taking puts us well on our way to achieving our full year guide. CES is on track for another year of significant growth and we expect continued solid performance at DPT.

Larry Culp: Thank you. We're encouraged by our strong start, which combined with the actions we're taking puts us well on our way to achieving our full year guide. CES is on track for another year of significant growth and we expect continued solid performance at DPT.

Rahul Ghai: We're encouraged by our strong start, which combined with the actions we're taking puts us well on our way through achieving our full year guide.

Larry Culp: GE Aerospace has sustained competitive advantages. We have a diversified fleet of preferred platforms across the narrow body, widebody, and defense sectors. At the core of everything we do is safety, quality, delivery, and cost, always in that order.

GE Aerospace has sustained competitive advantages. We have a diversified fleet of preferred platforms across the narrow body, widebody, and defense sectors. At the core of everything we do is safety, quality, delivery, and cost, always in that order.

Aerospace has sustained competitive advantages.

Rahul Ghai: We have a diversified plea to preferred platforms across the narrow body, wide body, and defense sectors.

Rahul Ghai: The core of everything we do is safety, quality, delivery, and cost, always in that order.

Larry Culp: Our services and technology offer industry-leading operational reliability including greater efficiency, extended time on wing, and faster turnaround times. We serve the industry's largest fleet of 70,000 engines with unrivaled customer service and flight support. This keeps us close to our customers through decades-long life cycles, building meaningful relationships and making us the partner of choice.

Our services and technology offer industry-leading operational reliability including greater efficiency, extended time on wing, and faster turnaround times. We serve the industry's largest fleet of 70,000 engines with unrivaled customer service and flight support. This keeps us close to our customers through decades-long life cycles, building meaningful relationships and making us the partner of choice.

Rahul Ghai: Our services and technology offer industry leading operational reliability, including greater efficiency, extended time on wing, and faster turnaround times.

Rahul Ghai: We serve the industry's largest fleet of 70,000 engines with unrivaled customer service and flight support.

Rahul Ghai: This keeps us close to our customers through decades, long life cycles, building meaningful relationships and making us the partner of choice.

Larry Culp: Our talented engineering teams continue to develop breakthrough innovation to support our existing fleet and advance next generation technologies, and Flight Deck supports us in delivering results and lasting value for our customers and shareholders. These differentiators, combined with our growing backlog, will not only help us manage the near term, but enable us to deliver long term value with that. Blaire, let's go to questions before we.

Our talented engineering teams continue to develop breakthrough innovation to support our existing fleet and advance next generation technologies, and Flight Deck supports us in delivering results and lasting value for our customers and shareholders. These differentiators, combined with our growing backlog, will not only help us manage the near term, but enable us to deliver long term value with that. Blaire, let's go to questions before we.

Rahul Ghai: Our talented engineering teams continue to develop breakthrough innovation to support our existing fleet and advance next-generation technologies.

Rahul Ghai: and Flight Deck supports us in delivery results and lasting value for our customers and shareholders.

Rahul Ghai: These differentiators, combined with our growing backlog, will not only help us manage the near-term.

but enables us to deliver long-term value.

Blaire Shoor: Open the line. I'd ask everyone in the queue to consider your fellow analysts and ask one question so we can get to as many people as possible. Liz, can you please open the line?

With that, Blaire, let's go to questions.

Speaker Change: Before we open the line, I'd ask everyone in the queue to consider your fellow analysts and ask one question where we can get to as many people as possible. Liz, can you please open the line?

Operator: Ladies and gentlemen, if you wish to ask a question, please press star 11 on your telephone. If you wish to withdraw your question, or your question has already been answered, please press star 11. Again.

Speaker Change: Ladies and gentlemen, if you wish to ask a question, please press star 11 on your telephone. If you wish to withdraw your question or your question has already been answered, please press star 11 again.

Operator: Our first question comes from Doug Harned with Bernstein.

Our first question comes from Doug Harned with Bernstein.

Larry Culp: Thank you. Good morning. Good morning, Doug. Larry, you talked about tariffs at the outset, and tariffs in aviation really aren't good for anybody. You said that you're advocating a return to that zero tariff approach. But I wonder if you can comment some on the interactions that you've had or perhaps others in the industry have had with the administration in order to advocate for that point of view for aviation. And perhaps you can say, are there any thoughts you have about how this might play out over time, scenarios that may be possible given the uncertainty right now?

Doug Harned: Thank you. Good morning. Good morning, Doug. Larry, you talked about tariffs at the outset, and tariffs in aviation really aren't good for anybody. You said that you're advocating a return to that zero tariff approach. But I wonder if you can comment some on the interactions that you've had or perhaps others in the industry have had with the administration in order to advocate for that point of view for aviation. And perhaps you can say, are there any thoughts you have about how this might play out over time, scenarios that may be possible given the uncertainty right now?

Thank you. Good morning. Good morning, Doug.

Speaker Change: But I wonder if you can comment on the interactions that you've had or...

Speaker Change: Perhaps others in the industry have had with the administration in order to advocate for that point of view for aviation and Perhaps you can say are there any thoughts you have about how this might play out over time? Scenarios that may be possible given the uncertainty right now

Larry Culp: Well, Doug, I think it's easier to speak to the first part of that than the second part. We have spoken to a number of people, senior people within the administration, including the President. We have been, I think, full-throated in our support of the administration's efforts to support American competitiveness and revitalize American manufacturing. We're well aligned in that regard. But it's easy to overlook the $75 billion trade surplus the sector enjoys largely on the back of this tariff-free regime that we've had since 1979. So all we have suggested as the administration works through a myriad of issues is that they consider the position of strength that the country enjoys as a result of this tariff-free regime and to consider re-establishing the same.

Speaker Change: Well, Doug, I think it's easier to speak to the first part of that than the second part.

Speaker Change: We have spoken to a number of people, senior people within the administration, including the President.

Both wrote it in our support of the administration's efforts.

to support American competitiveness and revitalize American manufacturing.

We're well aligned in that regard.

But...

Speaker Change: It's easy to overlook the $75 billion dollar cratesor plus the sector enjoys largely on the back of this terra-free regime that we've had since 1979.

So all we have...

Speaker Change: Suggested is the administration works through a myriad of issues is that they consider the position of strength that the country enjoys as a result of this tear-free regime and to consider reestablishing.

Larry Culp: There are a whole host of potential scenarios here, Doug, that we could take on operationally. I won't take your time to go through them. There is uncertainty. None of us I think know for sure how this plays out. But as Rahul walked through a moment ago, I think what we've basically assumed here is that what we're dealing with is what we'll see through the rest of the year. We've knocked down a good bit of the gross effects through the actions like duty drawbacks, and foreign trade zones. But we're still staring at the better part of $0.5 billion of headwind in 2025. And in turn that's where the cost control actions and the price actions that we touched on here give us additional offset opportunities.

There are a whole host of potential scenarios here, Doug, that we could take on operationally. I won't take your time to go through them. There is uncertainty. None of us I think know for sure how this plays out. But as Rahul walked through a moment ago, I think what we've basically assumed here is that what we're dealing with is what we'll see through the rest of the year. We've knocked down a good bit of the gross effects through the actions like duty drawbacks, and foreign trade zones. But we're still staring at the better part of $0.5 billion of headwind in 2025. And in turn that's where the cost control actions and the price actions that we touched on here give us additional offset opportunities.

The same.

Speaker Change: There are whole hopes of potential scenarios here, Doug, that we could take on operationally.

Speaker Change: I won't take your time to go through them. There is uncertainty. None of us I think know for sure how this plays out. But as Rahul walked through a moment ago, I think what we've...

Basically, assumed here is that what we're dealing with.

Speaker Change: is what we'll see through the rest of the year. We've knocked down a good bit of the gross

Through the actions like duty drawbacks and foreign trade zones.

Speaker Change: We're still staring at a better part of the $1.5 billion of headwind in 2025, and in turn, that's where the cost control actions and the price actions that we touched on here give us additional

Larry Culp: But as we work those operationally, rest assured we will continue to advocate in the best ways possible on behalf of the industry.

But as we work those operationally, rest assured we will continue to advocate in the best ways possible on behalf of the industry.

Speaker Change: Opportunities. But as we work those operationally, rest assured, we will continue to advocate in the best ways possible on behalf of the industry.

Operator: Our next question comes from Sheila Kahyaoglu with Jefferies.

Blaire Shoor: Good morning, Larry and Rahul, and thank you. Maybe just sticking on the tariffs topic if that's okay. Very good start to both CES and DPT. Total profit beat of $250 million. Even baking in $100 million of impact from tariffs in Q1, and you talked about a $500 million net impact. How do we think about the margin cadence in Q2 and the second half as we think about those tariffs coming in?

Sheila Kahyaoglu: Good morning, Larry and Rahul, and thank you. Maybe just sticking on the tariffs topic if that's okay. Very good start to both CES and DPT. Total profit beat of $250 million. Even baking in $100 million of impact from tariffs in Q1, and you talked about a $500 million net impact. How do we think about the margin cadence in Q2 and the second half as we think about those tariffs coming in?

Our next question comes from Sheila Kahyaoglu with Jeffries.

Good morning, Larry and Rahul. Thank you. May we just begin?

Speaker Change: In Q1 and you talked about a 500 million net impact, how do we think about the margin cadence in Q2 and the second half as we think about those tariffs coming in?

Rahul Ghai: Right. No Shiloh. So let me start and Larry can jump in here. Listen, we've had a good start here. Q1 came in better than what we expected. And as we think about the year, and we mentioned this in January, we did expect a strong start to the year. We were aiming for a more linear year than we had last year, and given the OE ramp was a little bit back-end loaded, we have 9F shipments in the back half of the year, and then lower spare engine ratio, and including step up in corporate expenses. So we had expected that we'll have a stronger first half, and we've seen that in the Q1.

Speaker Change: So let me start and let you can jump in here. Listen, we've had a good start here. You know, first quarter came in, came in better than what we expected.

Speaker Change: And as we think about the year, and we mentioned this in January , we did expect a strong start to the year.

Rahul Ghai: As we think about the second quarter to get to your question, we do expect that momentum to continue into the second quarter, and what we are thinking for second quarter right now, given where we are in April, is that the GE Aerospace revenue growth to be better than what we delivered in first quarter, and the profit dollars for the second quarter to be flat to sequentially up from first quarter and decently up on a year over year basis. This will be primarily driven by services, and we expect similar revenue growth in services as we did in the first quarter. As I said on the call, you know, more than 90% of the spare parts are in the backlog, which is a similar position that we were in in January for first quarter.

As we think about the second quarter to get to your question, we do expect that momentum to continue into the second quarter, and what we are thinking for second quarter right now, given where we are in April, is that the GE Aerospace revenue growth to be better than what we delivered in first quarter, and the profit dollars for the second quarter to be flat to sequentially up from first quarter and decently up on a year over year basis. This will be primarily driven by services, and we expect similar revenue growth in services as we did in the first quarter. As I said on the call, you know, more than 90% of the spare parts are in the backlog, which is a similar position that we were in in January for first quarter.

We've seen that in the first quarter.

Speaker Change: So, and as we think about the second quarter to get to your question, we do expect that momentum to continue into the second quarter.

Speaker Change: and what we are thinking for second quarter right now, given where we are in April , is that the GE Aerospace revenue growth to be better than what we delivered in first quarter, and the profit dollars for the second quarter to be classed to sequentially up from first quarter.

Speaker Change: and recently up on a year-over-year basis. So, and this will be primarily driven by services, and we expect similar revenue to new cool consults as we did in the first quarter.

Speaker Change: As I said on the call, you know more than 90% of the square parts are in the backlog, which is a similar position that we were in in January for first quarter

Rahul Ghai: Aftermarket growth in the second quarter will be partially offset by a higher OE growth. Now, as we think about the second half of the year, you know, a lot more uncertainty given the volatility around the macro trends that we've spoken to. But we've embedded a certain amount of conservatism in our guide around departures that we spoke about and issues arising from the tariffs in China. So given that we've reduced our expectations for spare engines and spare parts deliveries to China, now some of them will get diverted to other customers but will probably still be an impact. And we've also factored in the potential slowdown in departures in North America. But overall we are holding the low double-digit spare parts growth for the year just given the start that we've had.

Aftermarket growth in the second quarter will be partially offset by a higher OE growth. Now, as we think about the second half of the year, you know, a lot more uncertainty given the volatility around the macro trends that we've spoken to. But we've embedded a certain amount of conservatism in our guide around departures that we spoke about and issues arising from the tariffs in China. So given that we've reduced our expectations for spare engines and spare parts deliveries to China, now some of them will get diverted to other customers but will probably still be an impact. And we've also factored in the potential slowdown in departures in North America. But overall we are holding the low double-digit spare parts growth for the year just given the start that we've had.

Speaker Change: and but this fair pass growth in the second quarter will be partially offset by a higher OE growth.

Speaker Change: Now, as you think about the second half of the year, you know, a lot more uncertainty given the volatility around the macro trends that he's spoken to. But we've embedded a certain amount of conservatism in our guide around the pastures that he spoke about and issues arising from the tariffs in China.

Speaker Change: So, given that, we've reduced our expectations for spare engines and square parts deliveries to China. Now, some of them will get diverted to other customers but will probably be so being impact. And we've also factored in the potential slowdown in departures in North America.

Speaker Change: But overall, we are holding the blow double digit spare parts growth for the year, just given the start that we had.

Rahul Ghai: If you put all that together, you know, we should still see year over year profit growth in the second half. Should be a very, very good year for us. Overall, as we sit here today, Sheila, we feel better about the year, even with the tariffs, even with the macroeconomic uncertainty than we did back in January, and knowing that where we are in the world right now, we'll be back together in June at the Paris Air Show and we'll give you an update there.

If you put all that together, you know, we should still see year over year profit growth in the second half. Should be a very, very good year for us. Overall, as we sit here today, Sheila, we feel better about the year, even with the tariffs, even with the macroeconomic uncertainty than we did back in January, and knowing that where we are in the world right now, we'll be back together in June at the Paris Air Show and we'll give you an update there.

Speaker Change: So, if you put all that together, you know, we should still see, you know, we are probably going through the second half, should be a very, very good year for us. And overall, as we sit here today, Sheila, we feel better about the year, even with the tariffs, even with the macroeconomic uncertainty that we did back in January .

Speaker Change: and knowing that where we are in the world right now we'll be back together in June at the Paris Air Show and we'll give you an update there.

Operator: Our next question comes from David Strauss with Barclays.

Our next question comes from David Strauss with Barclays.

Rahul Ghai: Thanks. Good morning, everyone.

David Strauss: Thanks. Good morning, everyone.

Larry Culp: Good morning, David.

Rahul Ghai: So just wanted to dig in a little bit on that second half of the year assumption on departures. It looks like you're assuming basically no departure growth in the second half of the year, is that right? And what are you specifically assuming in a flat departure scenario for spares, and a follow up there on shop visits? I know you talk about you've got a lot of backlog on shop visits, but how long would you think that departures can stay relatively flattish before you start to see an impact in terms of shop? Is it just from, you know, retirement picking up and so on? Thanks.

David Strauss: So just wanted to dig in a little bit on that second half of the year assumption on departures. It looks like you're assuming basically no departure growth in the second half of the year, is that right? And what are you specifically assuming in a flat departure scenario for spares, and a follow up there on shop visits? I know you talk about you've got a lot of backlog on shop visits, but how long would you think that departures can stay relatively flattish before you start to see an impact in terms of shop? Is it just from, you know, retirement picking up and so on? Thanks.

Thanks. Good morning, everyone.

Good morning, David.

Speaker Change: So, just wanted to dig in a little bit on that second half of the year assumption on departures. It looks like you're assuming basically no departure growth in the second half of the year. Is that right?

Speaker Change: What is specifically in a flat departure scenario are you assuming for spares and a fall up there on shop visits? I know you talk about

Speaker Change: You've got a lot of backlog on shop visits, but how long would you think that departures can stay relatively flashed before you start to see an impact in terms of shop visits just from retirement picking up and so on? Thanks.

Larry Culp: David. You touched on a number of the variables there. Again, the mid single digit outlook for departures that we saw, we talked about back in January, held up quite well in the first. And it looks like just looking at this morning's data that that continues to be the case. We often I think maybe over index on the dynamics in the US market. We know there's some cross border traffic softening Canada, the US, even Europe to the US, but broadly, when you look around the world, departures are holding up pretty well. Rahul, I used the word conservatism earlier. I think we're just taking a conservative view with respect to the second half. US departures could, could soften. We may see some adjustments elsewhere. We'll leave the detailed planning to the airlines.

Speaker Change: David, you touched on a number of the variables there. Again, the mid single digit outlook for the parkers that we saw.

Speaker Change: We talked about back in January , held up quite well.

Speaker Change: in the first and it looks like it's looking at the morning's data that continues to be the case.

Speaker Change: We often, I think, maybe over index on the dynamics in the US market, we know there's some cross-border traffic softening Canada to the US, even Europe to the US, but broadly.

Speaker Change: When you look around the world, departures are holding up pretty well. Rahul Ghaioglu used the word conservatism earlier. I think we're just taking a conservative view with respect to the second half, U.S. departures

Speaker Change: Good Soppin, we may see some adjustments elsewhere. We'll leave the detail planning to the airlines. But again, I think we know...

Larry Culp: But again, I think we know that it will take some time for that to impact us. Not that we will be immune for the calendar year, but when you look at past downturns, it has taken 2, 3, 4/4, sometimes longer for that departure slowdown to really impact activities. I think that's why we've highlighted the strength of the spare parts order book that we have in hand. Again, 90% of Q2 already in place. And with the engines that are off wing either in our shops today, waiting to come in the shop, or waiting to be delivered to us, that would take us well into the fall. So we don't like the fact that we've got such delinquencies in place. We want to serve our customers better.

But again, I think we know that it will take some time for that to impact us. Not that we will be immune for the calendar year, but when you look at past downturns, it has taken 2, 3, 4/4, sometimes longer for that departure slowdown to really impact activities. I think that's why we've highlighted the strength of the spare parts order book that we have in hand. Again, 90% of Q2 already in place. And with the engines that are off wing either in our shops today, waiting to come in the shop, or waiting to be delivered to us, that would take us well into the fall. So we don't like the fact that we've got such delinquencies in place. We want to serve our customers better.

that it will take some time for that too.

Speaker Change: to impact us. I'm not that we will be immune for the calendar year but when you look at past downturns, it is taken two, three, four quarters, sometimes longer for that departure slowdown to really impact our activities.

And I think that's why we've highlighted the-

Speaker Change: to come in the shop or waiting to be delivered to us, that would take us well into the fall.

Speaker Change: So we don't like the fact that we've got such delinquencies in place.

Larry Culp: But it does, I think, support the underlying strength of the backlog and the delinquency as we look at our opportunities to execute and deliver through the rest of this calendar year. But again, there's uncertainty here. We're taking what we think is a cautious view, and we'll be watching it very, very closely.

But it does, I think, support the underlying strength of the backlog and the delinquency as we look at our opportunities to execute and deliver through the rest of this calendar year. But again, there's uncertainty here. We're taking what we think is a cautious view, and we'll be watching it very, very closely.

Speaker Change: We want to serve our customers better, but it does, I think, support the underlying strength of the backlog and the delinquency as we look at our opportunity to execute and deliver through the rest of this calendar year.

Speaker Change: But again, there's uncertainty here. We're taking what we take as a cautious view and we'll be watching it very very closely.

Operator: Our next question comes from Gautam Khanna with TD Cowen.

Our next question comes from Gautam Khan with TD Cowan.

Rahul Ghai: Yeah, good morning guys.

Gautam Khanna: Yeah, good morning guys.

Larry Culp: Good morning.

Rahul Ghai: I was wondering if you could elaborate on your pricing strategy and how it might differ from normal years. Are you going to wait till kind of mid year to enact spare price increases? What's different as you approach pricing? Offset the tariffs this year. So Gautam, we are doing this. There are two pieces to this. You know, we will do our typical kind of catalog price increases that we do, you know, late in the summer. Again, our thinking around that has not changed. We are still aiming for that mid to high single digit price increases on our spare parts later that summer, which is consistent with where we were in January. So that expectation has not changed. Now that typically translates into kind of mid single digit at the overall services level for us, you know, after sharing with the revenue share partners and everything else.

Gautam Khanna: I was wondering if you could elaborate on your pricing strategy and how it might differ from normal years. Are you going to wait till kind of mid year to enact spare price increases? What's different as you approach pricing? Offset the tariffs this year.

Yeah, good morning guys.

Morning God, good morning.

Speaker Change: I was wondering if you could elaborate on your pricing strategy and how it might differ from normal years. Are you going to wait till kind of mid-year to...

Speaker Change: to enact spare price increases. What's different as you approach pricing offset the tariffs?

Rahul Ghai: So Gautam, we are doing this. There are two pieces to this. You know, we will do our typical kind of catalog price increases that we do, you know, late in the summer. Again, our thinking around that has not changed. We are still aiming for that mid to high single digit price increases on our spare parts later that summer, which is consistent with where we were in January. So that expectation has not changed. Now that typically translates into kind of mid single digit at the overall services level for us, you know, after sharing with the revenue share partners and everything else.

this year.

Speaker Change: That we do, you know, late in the summer. Again, our thinking around that has not changed. We are still aiming for that.

Speaker Change: mid to high single digit price increases on our spare parts.

Speaker Change: of later that summer, which is consistent with where we were in January .

Speaker Change: So that expectation has not changed. Now that typically translates into a kind of mid-single digit at the overall services level for us, you know, after sharing with the revenue share partners and everything else.

Rahul Ghai: The pricing benefit on the remaining service contract is lower than what we see on the spare parts, as you know. But overall I think that expectation has not changed. I think what we alluded to on the tariffs was a temporary surcharge for recovering the cost that we are feeling right now. Now we're trying to offset that with all the things that we spoke about, that Larry spoke about even a minute ago to Doug's question. So we're trying to manage through that and then we're going to take some SG and cost control actions, and whatever's left, we'll share that in some way, shape, or form to a tariff surcharge, and hopefully that doesn't. It's not a permanent thing, and we can take those away as soon as the tariffs end. So that's our thinking right now.

The pricing benefit on the remaining service contract is lower than what we see on the spare parts, as you know. But overall I think that expectation has not changed. I think what we alluded to on the tariffs was a temporary surcharge for recovering the cost that we are feeling right now. Now we're trying to offset that with all the things that we spoke about, that Larry spoke about even a minute ago to Doug's question. So we're trying to manage through that and then we're going to take some SG and cost control actions, and whatever's left, we'll share that in some way, shape, or form to a tariff surcharge, and hopefully that doesn't. It's not a permanent thing, and we can take those away as soon as the tariffs end. So that's our thinking right now.

Speaker Change: The pricing benefit on the remaining service contractors is lower than what we see on the spare parts as you know, but overall I think that that expectation has not changed.

Speaker Change: I think what we alluded to on the tariffs was a temporary surcharge for recovering the cost that we are that we are feeling right now. Now we're trying to offset that with all the things that we spoke about that very spoke about even a minute ago to Doug's question.

Speaker Change: So we're trying to manage through that and then we're going to take a message in a cost control action and whatever's left we'll share that in some way shape or form to a type of search judge and hopefully that doesn't it's not a permanent thing and we can take those away as well as the tariffs and so that's our thinking right now.

Operator: Our next question comes from Ken Herbert with RBC Capital Markets.

Ken Herbert: Our next question comes from Ken Herbert with RBC Capital Markets.

Larry Culp: Yeah, hi. Good morning everybody. Good morning Ken. Hey Larry or Rahul. I just wanted to see in the first quarter really strong spare parts purchasing. Can you comment if you expected or saw any pre buys there specifically in China or elsewhere, perhaps maybe ahead of the tariffs or other factors? And as part of that over 20% growth, can you give any granularity on maybe wide body versus narrow body dynamics or specifically LEAP versus CFM56?

Ken Herbert: Yeah, hi. Good morning everybody.

Larry Culp: Good morning Ken.

Ken Herbert: Hey Larry or Rahul. I just wanted to see in the first quarter really strong spare parts purchasing. Can you comment if you expected or saw any pre buys there specifically in China or elsewhere, perhaps maybe ahead of the tariffs or other factors? And as part of that over 20% growth, can you give any granularity on maybe wide body versus narrow body dynamics or specifically LEAP versus CFM56?

Good morning, everybody.

Good morning, Kad.

Speaker Change: Hey, and Larry, or Rahul, I just wanted to see in the first quarter really strong spare parts purchasing. Can you comment if you expected or saw?

Rahul Ghai, Co-Founder & CEO Alphabet and Google

Rahul Ghai: So Ken, no pre buys. I mean, typically we don't see that in January. I think we kind of knew that. I think as we go back to the Q1 earnings call, we said 90% was in the backlog, and we are sitting in a similar situation here in the Q2 as we said a couple of times here. So no pre buys. I think the departures were up 4%. They're hanging in there, were up 4% in the Q1. They're hanging in at that level even in the Q2 through April and through the forward schedules that we are seeing in May. So.

Ken Herbert: So can no no pre-bias. I mean typically we don't see that in in January . I think we kind of knew that. I think as we go back to first quarter earnings hall we said 90% was in the in the back walls.

Ken Herbert: I think the departures were up for person, they're hanging in there, we're up for person in the first quarter, they're hanging in the bad level even in the second quarter, two April and two the forward schedules that you're seeing in May.

Rahul Ghai: Clearly that trend is continuing. No pre buy. Now in terms of the wide body, narrow body, and on LEAP versus CFM56, obviously LEAP is growing faster, right? We expected more than 30% shop visit growth on LEAP, and within that 30% shop visit growth, the external channel. We expect the external channel this year to be about 15% of our total shop visit revenue versus kind of 10% last year. So within that you can see the external channel beginning to pick up, and that is driving the LEAP spare parts revenue growth for CFM56. We continue to expect kind of, you know, mid single digit shop visit growth which will drive the CFM56 revenue. So LEAP is clearly going faster here than CFM56 on a percentage basis.

Clearly that trend is continuing. No pre buy. Now in terms of the wide body, narrow body, and on LEAP versus CFM56, obviously LEAP is growing faster, right? We expected more than 30% shop visit growth on LEAP, and within that 30% shop visit growth, the external channel. We expect the external channel this year to be about 15% of our total shop visit revenue versus kind of 10% last year. So within that you can see the external channel beginning to pick up, and that is driving the LEAP spare parts revenue growth for CFM56. We continue to expect kind of, you know, mid single digit shop visit growth which will drive the CFM56 revenue. So LEAP is clearly going faster here than CFM56 on a percentage basis.

So...

Ken Herbert: So clearly, that trend is continuing, so no pre-bites. Now, in terms of the wide-body narrow-body end on leap versus CFM56, obviously, leap is growing faster, we expected more than 30 percent

Sharpley's Drought on Leap [inaudible]

Shoor, Rahul Ghai

Ken Herbert: For CFM56, we continue to expect kind of mid-single digit shoppers and growth, which will drive the CFM56 revenue. So Leap is clearly going faster here than CFM56 on a percentage basis.

Rahul Ghai: Narrowbody widebody, I think that, you know, obviously LEAP is driving a little bit higher percentage growth, but we're seeing good, good growth even on the widebody side, especially as GE90 and GEnx get into heavier work scopes.

Narrowbody widebody, I think that, you know, obviously LEAP is driving a little bit higher percentage growth, but we're seeing good, good growth even on the widebody side, especially as GE90 and GEnx get into heavier work scopes.

Ken Herbert: and but narrow body wide body, I think that you know, obviously the deep is driving a little bit higher first in page code, but you're seeing good growth on even on the wide body side, especially as G90 and NX get into heavier workscopes.

Operator: Our next question comes from Myles Walton with Wolfe Research.

Larry Culp: Thanks. Good morning, Rahul. Maybe for you, the equipment gross margins in the quarter is another quarter of positive gross margins. I think 12% even better than the 8% you had last quarter despite a lower spare engine ratio. I'm just curious, is there anything structural going on with respect to the razor razor blade model and making money maybe on, on new equipment or is there something else under the surface you could give some color to?

Myles Walton: Thanks. Good morning, Rahul. Maybe for you, the equipment gross margins in the quarter is another quarter of positive gross margins. I think 12% even better than the 8% you had last quarter despite a lower spare engine ratio. I'm just curious, is there anything structural going on with respect to the razor razor blade model and making money maybe on, on new equipment or is there something else under the surface you could give some color to?

Our next question comes from Myles Walton with Wolf Research.

Miles Walton: You had last quarter despite a lower spare engine ratio. I'm just curious is there anything structural going on with respect to the razor razor blade model and making money maybe on a new equipment or is there something else under the surface you could give some color to. [inaudible]

Rahul Ghai: Yeah, so Myles, a couple of things there. One, the number that you have is obviously at the total GE Aerospace level versus CES. Just keep that at the back of your mind. As you, as we, as you saw Defense, we did say higher revenue growth. I mean the units were up 5% in Defense. So that, that helps. The Defense business does contribute to that margin profile because those units are profitable now. Within CES, our OE volume was a little bit lower, and as you saw, the spare engine ratio did come down sequentially, but was still elevated. That will keep coming down as the year progresses, but in line with what we had projected at the beginning of the year. So nothing abnormal there and really no change, broadly speaking, to the razor razor blade model. Now widebodies are obviously those platforms.

Miles Walton: Yeah, so my couple of things there. One, the number that you have is obviously at the total GE Aerospace level versus CES. Just keep that at the back of your mind. And as you saw, defense we did say higher revenue growth. I mean, the units were up by percent in defense.

Miles Walton: So that helps the defense business does contribute to that margin profile because those units are profitable. Now, within CES, our OE volume was a little bit lower.

Miles Walton: and as you saw, the spare engine ratio did come down sequentially but was too elevated and that will keep coming down as the year progresses but in line with what we have projected at the beginning of the year. So nothing abnormal there and really no change.

Miles Walton: You know, broadly speaking to the razor razor blade model. Now, white bodies are obviously, you know, those platforms are are now profitable for the OE business. So, that is helping here as well.

Rahul Ghai: Are now profitable for the OE business. So that is helping here as well.

Are now profitable for the OE business. So that is helping here as well.

Operator: Our next question comes from Noah Popanek with Goldman Sachs.

Operator: Our next question comes from Noah Popanak with Goldman Sachs.

Larry Culp: Hey, good morning everyone. Hey, Noah. Good morning. Few questions on cash flow and its deployment.

Noah Poponak: Hey, good morning everyone.

Our next question comes from Noah Papineck with Goldman Sachs.

Larry Culp: Hey, Noah. Good morning.

Noah Poponak: Few questions on cash flow and its deployment. To what extent was the quarter ahead of the free cash plan, and if it was, how much of that is pure outperformance versus quarterly timing? And then I wanted to ask on the duty drawback, how long does it take to recover and what does that mean for cash flow? And then in terms of its deployment.

Hey, good morning, everyone. Hey, no, good morning.

Larry Culp: To what extent was the quarter ahead of the free cash plan, and if it was, how much of that is pure outperformance versus quarterly timing? And then I wanted to ask on the duty drawback, how long does it take to recover and what does that mean for cash flow? And then in terms of its deployment.

Miles Walton: To what extent was the quarter ahead of the free cash plan and if it was how much of that is?

Pure Outperformance vs. Quarterly Timing [inaudible]

Miles Walton: and then I wanted to ask on the duty drawback, how long does it take to recover?

Miles Walton: and what does that mean for Casulo? And then in terms of its deployment, how does the current environment change your thinking in terms of being more aggressive or more conservative on capital deployment?

Larry Culp: How does the current environment change your thinking in terms of being more aggressive or more conservative on capital deployment?

How does the current environment change your thinking in terms of being more aggressive or more conservative on capital deployment?

Larry Culp: Maybe we could take those in reverse order. Noah, I think as Rahul said in our prepared remarks, we continue to think that in 2025 we'll have more than $8 billion of total returns between the dividend and the buyback. At.

Miles Walton: We'll have more than $8 billion of total returns between the dividend and the buyback at 7.

Larry Culp: As you would appreciate, given the comments this morning and the conviction we have about the outlook.

As you would appreciate, given the comments this morning and the conviction we have about the outlook.

Miles Walton: is you would appreciate given the comments this morning in the condition we have about the outlook.

Larry Culp: We'll be thoughtful. We'll be opportunistic, we do have, I think it's close to $3 billion of remaining authorization to buyback once that $7 billion that we planned for this year has been utilized. So we've got some latitude, some flexibility in that regard with respect to the duty drawback.

We'll be thoughtful. We'll be opportunistic, we do have, I think it's close to $3 billion of remaining authorization to buyback once that $7 billion that we planned for this year has been utilized. So we've got some latitude, some flexibility in that regard with respect to the duty drawback.

of Remaining Authorization of the Buyback.

Once that $7 billion that we planned for this year. [inaudible]

has been utilized. So we've got some latitude. Thank you.

Larry Culp: Normal course we would see.

Normal course we would see.

Larry Culp: That cycle somewhere, call it four or five months.

That cycle somewhere, call it four or five months.

Miles Walton: Normal course we would see that cycle of somewhere called four or five months.

Larry Culp: We'll see how things play out in this environment. But that'd be a good planning assumption.

We'll see how things play out in this environment. But that'd be a good planning assumption.

Miles Walton: We'll see how things play out in this environment, but that would be a good planning assumption.

Rahul Ghai: Noel, for the on the Q1 cash, we basically came in in line. I think we expected kind of at the levels we had, working capital was positive in the quarter. You saw the inventory build that we had, you know, it was down a little bit year over year just given the timing of cash tax payments and some of the employee liabilities that we had. But again, nothing unusual or unexpected. As you sit here for the Q2, we do expect to have a strong Q2 on cash. It should be sequentially up from Q1 and we expect more than 100% conversion for the Q2.

Miles Walton: and Noah, on the first quarter of cash, we basically came in in line. We were expected at the levels we were at, working cap was positive in the quarter. You saw the inventory bill that we had. It was down a little bit year over year, just given the timing of cash tax payments and some of the employee liabilities that we had. But again, nothing unusual or unexpected. And as we sit here for the second quarter, we do expect to have a strong...

Rahul Ghai

Operator: Our next question comes from Scott Deuschle with Deutsche Bank.

Rahul Ghai: Hey, good morning.

Scott Deuschle: Hey, good morning.

Our next question comes from Scott Deuschle with Deutsche Bank.

Larry Culp: Good morning, Scott.

Rahul Ghai: Rahul, in your last investor day deck, you had this chart that showed price increases on both LEAP OE and LTSA contracts. And I think it compared pricing from prior to 2018 to pricing in 2022 and 2023. And the step up was something to the tune of 100%, I think. I guess. Can you characterize how much of that 100% increase in price you've seen at this point in the income statement versus how much is still just sitting in the backlog and remaining to be seen? Thank you.

Scott Deuschle: Rahul, in your last investor day deck, you had this chart that showed price increases on both LEAP OE and LTSA contracts. And I think it compared pricing from prior to 2018 to pricing in 2022 and 2023. And the step up was something to the tune of 100%, I think. I guess. Can you characterize how much of that 100% increase in price you've seen at this point in the income statement versus how much is still just sitting in the backlog and remaining to be seen? Thank you.

Hey, good morning.

Good morning Scott.

Scott: Rahul, in your last investor day deck, you had this chart that showed price increases on both Lee Bowie and LTSA contracts, and I think it compared pricing from prior to 2018.

Scott: DePricing in 2022 and 2023. And the step up was something to the tune of 100% I think. I guess, can you characterize how much of that 100% increase in price you see at this point in the income statement versus how much is still just sitting in the backlog and remaining to be seen. Thank you.

Rahul Ghai: No, Scott, you're right. So let me take that in two pieces. One, I think you're right. The shop visit prices are going up, and that's just basically the end of launch period pricing. Right? I mean, we've been, obviously, as we were in the 2019-2021 timeframe, it was a very different time period. We were in that initial stages of launch. As we've come out of that, the LEAP shop visit pricing has gone up since then.

Yep.

Speaker Change: Scott, you're right. So let me take that in two pieces. One, I think you're right. The shop of the prices are going up, and that's just basically...

The End of Launch

Rahul Ghai: But as we think about that price increase that we put in place, that takes a few years for it to show up in a P&L as you mentioned, just given the timing of contract and obviously with the delays in aircraft deliveries, that cycle is a little bit elongated. So while the price we are implementing price increases for the shop visits and the portfolio accretion is at the higher price, that has not really showed up in our P&L just yet. So that will take another couple of years before it starts showing up. And those contracts that we have signed recently, they go into effect.

But as we think about that price increase that we put in place, that takes a few years for it to show up in a P&L as you mentioned, just given the timing of contract and obviously with the delays in aircraft deliveries, that cycle is a little bit elongated. So while the price we are implementing price increases for the shop visits and the portfolio accretion is at the higher price, that has not really showed up in our P&L just yet. So that will take another couple of years before it starts showing up. And those contracts that we have signed recently, they go into effect.

Whereas we think about that, that-

Thank you.

Rahul Ghai

Speaker Change: So while the bribe, we are implementing bribe increases for the shop visits and the portfolio accretion is at the higher price.

Speaker Change: That is not really short-up in our P&L just yet. So that will take another couple of years before it starts showing up and those contracts that we have signed recently, they are going to affect.

Operator: Our next question comes from Seth Seifman with J.P. Morgan.

Rahul Ghai: Hey, thanks very much. Good morning.

Seth Seifman: Hey, thanks very much. Good morning.

Our next question comes from Seth Seifman with JP Morgan.

Larry Culp: Good morning, Seth.

Rahul Ghai: Morning. Wanted to follow up question on the drawbacks, I guess. How do you think about those working through the supply chain?

Seth Seifman: Morning. Wanted to follow up question on the drawbacks, I guess. How do you think about those working through the supply chain?

Thank you.

Hey, thanks very much. Good morning.

Speaker Change: I want to follow a question on the drawbacks. I guess, you know, how do you think about those working through the supply chain?

Rahul Ghai: Do suppliers take care of all of that themselves? Does any of it go through you? Do you anticipate, given that some of them might not be as well capitalized, some need to support them, or perhaps on the flip side, given the amount.

Do suppliers take care of all of that themselves? Does any of it go through you? Do you anticipate, given that some of them might not be as well capitalized, some need to support them, or perhaps on the flip side, given the amount.

Speaker Change: Does any of it go through you? Do you anticipate, given that some of that might not be as well capitalized?

Larry Culp: Of inventory that you have there.

Of inventory that you have there.

Rahul Ghai

Rahul Ghai: Is maybe an opportunity to draw a little bit less right now, and basically how you're thinking about managing the supply?

Is maybe an opportunity to draw a little bit less right now, and basically how you're thinking about managing the supply?

Larry Culp: China in light of the tariffs?

China in light of the tariffs?

Larry Culp: Well, Seb, I would say.

Larry Culp: Big picture.

Big picture.

or Seth, I would say.

Larry Culp: There's a tremendous amount of work going on with the new Tech and OPS organization to strengthen our overall working relationship with the supply base, large and small.

There's a tremendous amount of work going on with the new Tech and OPS organization to strengthen our overall working relationship with the supply base, large and small.

Big picture.

There's a tremendous amount of work going on.

with the new Tech and Ops organization.

to strengthen.

Speaker Change: Our overall working relationship with the supply base, large and small.

Larry Culp: I appreciate your comment about our current inventory levels. I don't think we're looking to make an adjustment here given some of the uncertainty, because we know with the backlog that we are challenged to deliver both OE and aftermarket for the rest of this decade. We're going to need that inventory and we want to strengthen the supply base, and we're going to be looking to find ways in which we can do that amid this uncertainty. Clearly, for the suppliers with whom we've got firm fix contracts.

I appreciate your comment about our current inventory levels. I don't think we're looking to make an adjustment here given some of the uncertainty, because we know with the backlog that we are challenged to deliver both OE and aftermarket for the rest of this decade. We're going to need that inventory and we want to strengthen the supply base, and we're going to be looking to find ways in which we can do that amid this uncertainty. Clearly, for the suppliers with whom we've got firm fix contracts.

I appreciate your comment about our current inventory levels.

Speaker Change: I don't think we're looking to make an adjustment here given some of the uncertainty because we know with the backlog

Speaker Change: that we are challenged to deliver both OE and aftermarket for the rest of this decade.

Speaker Change: We're going to need that inventory and we want to strengthen the supply base and we're going to be looking to find ways in which we can do that amid this uncertainty. Clearly for the suppliers with whom we've got firm fixed contracts.

Larry Culp: That additional burden will be borne by them. We'll work through, where appropriate, right adjustments in our overall arrangements with them. Clearly, we've got some bigger suppliers. We've got our partnership with Safran as well, where it's a different dynamic. So there are a lot of, there are a lot of moving pieces here, and that's probably why we wanted to take the step that we did this morning to include a good bit of that as best we know it today, into the forward guide. Right again to Doug's earlier question. We'll be advocating for a position which we believe to be very much aligned with President's America First trade agenda.

That additional burden will be borne by them. We'll work through, where appropriate, right adjustments in our overall arrangements with them. Clearly, we've got some bigger suppliers. We've got our partnership with Safran as well, where it's a different dynamic. So there are a lot of, there are a lot of moving pieces here, and that's probably why we wanted to take the step that we did this morning to include a good bit of that as best we know it today, into the forward guide. Right again to Doug's earlier question. We'll be advocating for a position which we believe to be very much aligned with President's America First trade agenda.

Speaker Change: That additional burden will be borne by them. We'll work through where appropriate adjustments in our overall arrangements with them. Clearly we've got some bigger suppliers.

We've got our partnership with SOPRAN.

Speaker Change: as well where it's a different dynamic. So there are a lot of moving pieces here and that's probably why we wanted to take the stuff that we did this morning to include a good bit of that.

is best we know it today.

Doug: End of the Forward Guide, right? Again, to Doug's earlier question, we'll be advocating.

Doug: for a position which we believe to be very much aligned with the president's America first trade agenda.

Larry Culp: But to the extent that things don't change, to the extent that the reciprocal tariffs kick in in the back half, we want to make sure we're ready hand in hand with our suppliers, large and small, in addition to taking the cost and price actions that we referenced. But it's a fluid situation. I think that's part of what I suspect we'll be talking about through the course of the spring and summer here, not the least of which is at Paris. As we work our way through this along with everybody else, Seth, just to.

But to the extent that things don't change, to the extent that the reciprocal tariffs kick in in the back half, we want to make sure we're ready hand in hand with our suppliers, large and small, in addition to taking the cost and price actions that we referenced. But it's a fluid situation. I think that's part of what I suspect we'll be talking about through the course of the spring and summer here, not the least of which is at Paris. As we work our way through this along with everybody else.

Doug: But to the extent that things don't change, to the extent that the reciprocal tariffs kick in in the back half we want to make sure we're ready and in hand with our suppliers large and small.

Doug: In addition to taking the cost and price actions that we reference. But it's a fluid situation. I think that's part of what I suspect we'll be talking about through the course of the spring and summer here, not the least of which is at Paris as we work our way through this along with everybody else.

Rahul Ghai: Seth, just to. Add maybe two points to what Larry said, one, we've learned a lot here, right. Over the last month or so since we started working.

Rahul Ghai: Add maybe two points to what Larry said, one, we've learned a lot here, right. Over the last month or so since we started working.

Doug: Seth, just to add, maybe two points to what Larry said. One, we've learned a lot here, right? Over the last month or so since we started working these, you know, the offsetting actions and understanding what programs are there that we can, that we can utilize to offset the growth impact.

Rahul Ghai: The offsetting actions and understanding what programs are there that we can utilize to offset the growth impact. We are sharing that with our supply base and helping them understand what we know today.

The offsetting actions and understanding what programs are there that we can utilize to offset the growth impact. We are sharing that with our supply base and helping them understand what we know today.

We are sharing that with our subliving and...

Larry Culp: Right.

Seth Seifman: Right.

Rahul Ghai: I'm sure we'll learn from them as well as we compare notes. So that's one. And the second, to your point about the duty drawbacks, they can claim the duty drawbacks for everything that we export, but obviously we will provide them the documentation and the support they need to avail of that program.

Doug: by helping them understand what we know today, right? And I'm sure we'll learn from them as well as we as we compare notes.

Doug: So that's one. And the second to your point about the duty drawbacks, they can claim the duty drawbacks for everything that we export. But obviously we will provide them with documentation of the support they need to to avail of that program.

Operator: Our next question comes from Jason Gursky with Citi.

Larry Culp: Hey, good morning, everybody.

Jason Gursky: Hey, good morning, everybody.

Our next question comes from Jason Gursky with City

Larry Culp: Good morning. I just wanted to ask a bigger picture question on the defense side of things. We've seen kind of a flurry of executive orders come out of the White House, and most recently.

Larry Culp: Good morning.

Jason Gursky: I just wanted to ask a bigger picture question on the defense side of things. We've seen kind of a flurry of executive orders come out of the White House, and most recently.

Jason Gursky: Good morning, everybody. I wanted to ask a bigger picture question on the defense side of things. We've seen kind of a flurry of executive orders come out.

Larry Culp: We got one related to the potential to rewrite Federal Acquisition Regulation.

We got one related to the potential to rewrite Federal Acquisition Regulation.

Jason Gursky: of the White House. And most recently, we got one related to the potential to rewrite federal acquisition regulation.

Larry Culp: So I just wanted to get a sense from you all on what impact that might have on the industrial base. The administration seems to be pitching this as, quote, unquote, kind of cutting red tape and speeding up the acquisition process. But I'm wondering if that's always a good thing or are there going to be some unintended consequences that we should be on the lookout for as we look at this kind of rewrite of FAR.

So I just wanted to get a sense from you all on what impact that might have on the industrial base. The administration seems to be pitching this as, quote, unquote, kind of cutting red tape and speeding up the acquisition process. But I'm wondering if that's always a good thing or are there going to be some unintended consequences that we should be on the lookout for as we look at this kind of rewrite of FAR.

Jason Gursky: I just wanted to get a sense from you all on what impact that might have on the industrial race. The administration seems to be pitching this as quote-unquote cutting red tape and speeding up the acquisition process.

Rahul Ghai: Yeah. So, Jason, I don't know if we know exactly what's on your mind, but the couple that I'm aware of or we are aware of here, and we could take it offline if that doesn't get to your question, which is I think there are two pieces. One is the FMS reform to support and deliver more efficiently and effectively our export to our allies. And we at GE Aerospace are fortunate to be in a position where we have several highly capable programs that have a lot of international demand, whether it's Blackhawks, Apaches, F-16, and soon to be exported, the F-15EX. So all these improvements allow us to get our products in the hands of our allies, and that's a really welcome improvement. So we appreciate everything that's done and that will help support our growth, but also that of the broader industry.

Yeah.

Speaker Change: So Jason, I don't know if we know exactly what's on your mind, but the couple that I'm aware of or we are aware of here and you know we could take it offline if it doesn't get to get to your question.

Speaker Change: which is, I think, the two pieces, one is the FMS reform to support and deliver more efficiently and effectively our export to our alliance. And we at GE Aerospace are fortunate to be

in a position where we have several highly capable programs.

Speaker Change: that have a lot of international demand, whether it's Blackhawk, Sepatis, F16.

Speaker Change: and soon to be exported the F15EX. So all these improvements allow us to get our products in the hands of our allies and that's a really welcome improvement. So we appreciate everything that's done and I'll help support our growth but also that of the broader industry.

Rahul Ghai: Then, you know, the other improvements in requirements and acquisition processes to define the requirements, you know, so that elimination of any bureaucratic issues there also supports us. So, and then, you know, few other things that are about loss programs and all that. Now, again, we don't have a ton of that in our portfolio, so that does not directly impact us. But, again, I think holding the industry accountable for its performance is not a bad thing.

Then, you know, the other improvements in requirements and acquisition processes to define the requirements, you know, so that elimination of any bureaucratic issues there also supports us. So, and then, you know, few other things that are about loss programs and all that. Now, again, we don't have a ton of that in our portfolio, so that does not directly impact us. But, again, I think holding the industry accountable for its performance is not a bad thing.

Speaker Change: and then, you know, the other improvements in requirement and acquisition processes to define the requirements, you know, so that elimination of any bureaucratic issues there also supports us.

Speaker Change: So a few other things that are about law programs and all that now, again, we don't have a ton of that in our portfolio so that does not directly impact us but again, I think holding the industry accountable for its performance is not a bad thing.

Operator: Our next question comes from Ron Epstein with Bank of America.

Ron Epstein: Our next question comes from Ron Epstein with Bank of America.

Larry Culp: Hey, good morning, guys. Maybe a little different angle on the tariff question. How are you all thinking about rare earths and some of the rare metals that you need either directly in what you do or what your suppliers need? Given some of the changing rules in China, do you have it inventoried or do you have alternative ways to source it? How are you thinking about that?

Ronald Epstein: Hey, good morning, guys. Maybe a little different angle on the tariff question. How are you all thinking about rare earths and some of the rare metals that you need either directly in what you do or what your suppliers need? Given some of the changing rules in China, do you have it inventoried or do you have alternative ways to source it? How are you thinking about that?

Good morning, guys.

Speaker Change: Maybe a little different angle on the tariff question. How are you all thinking about rare earths and some of the bare metals that you need either directly and what you do or what your suppliers need?

Ron Epstein: Given some of the changing rules in China, do you have an inventory or do you have alternative ways to source it? How are you thinking about that?

Larry Culp: As you would imagine, we've been thinking about that a lot. I'm sure everybody else in the space has between alternate sources and inventory positions, both our own and with our supplier partners.

Ron Epstein: Not as you would imagine, we've been thinking about that a lot, I'm sure everybody else in the space has. Between alternate sources and inventory positions.

Larry Culp: We don't currently see any real issues here. There's some things that we'll continue to work through.

We don't currently see any real issues here. There's some things that we'll continue to work through.

and our supplier partners.

Larry Culp: We'll see how this is resolved from a trade negotiation perspective. But that's not high on our worry list at the moment.

We'll see how this is resolved from a trade negotiation perspective. But that's not high on our worry list at the moment.

Ron Epstein: We'll see how this is resolved from a stray negotiation perspective, but that's not high on our very last moment.

Operator: Our next question comes from Scott Mikus with Melius Research.

Rahul Ghai: Morning.

Scott Mikus: Morning, Larry.

Our next question comes from Scott Mekas with Melius Research.

Larry Culp: Morning, Scott.

Blaire Shoor: Larry.

Rahul Ghai: Hey, Larry. I just wanted to ask a quick question on the pricing dynamics. So pricing in the aftermarket has been very healthy the past several years, but now airlines are seeing softening demand for travel. The departures at least seem to be holding up for now. So I'm just wondering how are you thinking about balancing the price increases to offset tariffs and inflation while avoiding demand destruction so engines aren't seeing premature retirements?

Scott Mikus: Hey, Larry. I just wanted to ask a quick question on the pricing dynamics. So pricing in the aftermarket has been very healthy the past several years, but now airlines are seeing softening demand for travel. The departures at least seem to be holding up for now. So I'm just wondering how are you thinking about balancing the price increases to offset tariffs and inflation while avoiding demand destruction so engines aren't seeing premature retirements?

Morning.

Speaker Change: Warren Scott Hey Larry, I just wanted to ask a quick question on the pricing dynamics. So pricing in the aftermarket has been very healthy the past several years, but now airlines are seeing softening demand for travel.

Speaker Change: The departures at these seem to be holding up for now. So I'm just wondering how are you thinking about balancing the price increases to offset tariffs and inflation while avoiding demand destruction. So engines aren't seeing premature retirements.

Larry Culp: There's clearly a balancing act here. I think what we've always tried to do is really adhere to a handful of principles with respect to making sure we share in the value that we create, are compensated for the risks that we take on, and obviously deliver adequate returns on the investments, the long-term, long-cycle investments that we make. I think Rahul talked about how we're going about some of the longer-term actions both around some of the new programs like LEAP, how we're approaching the CLP, the spare parts pricing later this year, and the surcharges, the hopefully temporary surcharges vis-à-vis the tariffs. So all of that's in play. And again, we need to balance that out in the right way given the competing priorities here.

Speaker Change: There's clearly a balancing act here, I think what we've always tried to do is really adhere to a handful of principles with respect to making sure we share in the value that we create.

Speaker Change: are compensated for the risks that we take on and obviously deliver adequate returns on the investments.

The long-term long cycle investments that we make.

Rahul Ghai: I think Rahul talked about how we're going about some of the longer-term actions, both around some of the new programs like Leap, how we're approaching the CLP, the spare parts pricing later this year, and the surcharges, the hopefully temporary surcharges.

These would be the tariffs

Rahul Ghai: So all of that's in play and again we need to balance that out in the right way given the competing priorities here, but I think we're optimistic that we can do that smartly, fairly constructively with

Larry Culp: But I think we're optimistic that we can do that smartly, fairly, constructively with our customers around the world and do so in a way that doesn't, you say, disrupt demand.

But I think we're optimistic that we can do that smartly, fairly, constructively with our customers around the world and do so in a way that doesn't, you say, disrupt demand.

Speaker Change: with our customers around the world and do so in a way that doesn't, you say, destruct demand.

Blaire Shoor: Liz, I think we will wrap it up there. Larry, any final comments?

Larry Culp: Blaire, thank you. Just to close, our customers in the flying public are counting on us. We know that, and we're confident in our ability to deliver. The GE Aerospace team is up to that challenge. We continue to increase our deliveries of services and products, keeping safety and quality top of mind while developing the technologies for the future. We appreciate your time today and your interest in GE Aerospace.

Rahul Ghai: Where's I think we will wrap it up there? Where are you any final comments?

Blair, thank you.

Speaker Change: Just to close, our customers and the flying public are counting on us, we know that, and we're confident in our ability to deliver.

Speaker Change: The GE Aerospace team is up to that challenge. We continue to increase our delivery of services and products, keeping safety and quality top of mind, while developing the technologies for the future.

Speaker Change: We appreciate your time today and your interest in GE Aerospace.

Operator: Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.

Speaker Change: Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

Rahul Ghai: Sa.

Rahul Ghai: Sam.

Rahul Ghai: Sa.

Rahul Ghai: It.

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