Q2 2025 Textron Inc Earnings Call
Hello everyone, and welcome to the Textron second quarter 2025 earnings call. My name is Emily and I'll be moderating your call today.
After the prepared remarks, you will have the opportunity to ask any questions, which you can do. So by pressing start, followed by the number 1 on your telephone keypad.
Speaker Change: Oh, now, hand over to Scott, Hegstrom vice president of investor relations and Treasurer to begin. Please go ahead.
Scott Hegstrom: Thanks Emily and good morning, everyone.
Scott Hegstrom: Mentioned that we will be discussing future estimates and expectations during our call today.
Scott Hegstrom: before I was looking in, statements are subject to various risk factors which are detailed in our SEC filings and also in today's press release,
Scott Donley: On the call today, we have Scott Donley text fronts, chairman and CEO and David Rosenberg. Our Chief Financial Officer
Scott Donley: Our earnings call presentation can be found in the investor relations section of our website.
Scott Donley: Revenues in the quarter were 3.7 billion up 5.4% or 189 million from last year's. Second quarter.
Scott Donley: 7 profit in the quarter was 346 million Up, 3 million from the second quarter of 2024.
Scott Donley: Adjusted income from continuing operations was 1.55 per share. Compared to 1 54 per share in last year's. Second quarter,
manufacturing cash flow before pinching contributions, total 336 million in the quarter, compared to 320 million in last year's second quarter with that. I'll turn the call over to Scott.
Scott Donley: Thanks Scott and good morning, everyone.
Scott Donley: Second quarter was a good quarter for Techron with Revenue growth in both our commercial aircraft and helicopter businesses, as well as in Bell's floor program, which is now known as the mv7 5.
Scott Donley: Aviation has segments revenues 1.5 billion up 2.8% from the second quarter of 2024 reflecting higher sales for both aircraft and air for Market.
Scott Donley: In the factory operations, continue to improve, as we ramp production.
Scott Donley: We delivered 49 Jets, and 34 commercial turbo props compared to 42, Jets and 44 commercial total props in last year's. Second quarter,
Scott Donley: Aviation continued to see solid demand across all products with backlog and in the quarter at 7.85 billion.
Scott Donley: In the quarter, Aviation out supports agreement, with the customer in Mexico for 4, citation, Jets, and an option for 8 additional jets with deliveries expected to begin in 2026.
Scott Donley: Also, during the quarter, the sky, C hit a number of important Milestones, including the first delivery in South America. The first are medical order, which is also our first order in Africa.
Scott Donley: And as we marked our fifth anniversary of the first flight,
Scott Donley: On the new product front, we continue to make progress on certification for the M2 gen2, M. Sorry, M2 gen2, cj3 Gen 2 and the ascent with deliveries of these aircraft expected to begin in the second half of this year.
At Bell revenues were up, 222 million or 28% compared to last year's second. Quarter driven by growth in both the mv7 program and our commercial helicopter business.
Scott Donley: on the military side, the US Army announced its intention to accelerate the mv7 program and also announced that the 101st Airborne will be the first division to operate the m75
Scott Donley: In the quarter belt delivered, 2 MV. 75 virtual prototypes to the Army, which are Advanced simulators based on a digital twin of the m75.
Scott Donley: These simulators will be used to support the training and development of tactics techniques and procedures leveraging. The Tilt. Rotor significant performance benefits. In advance of Fielding aircraft
Scott Donley: Ongoing dialogue with the Army on specifics related to the acceleration of the mv7 program.
This includes acceleration of the development program, pull forward of initial low rate production and Rapid Fielding of units to the war fighter.
Scott Donley: That was recently down selected as a sole company for the next phase of DARPA speed and Runway, independent Technologies, xplane program.
Scott Donley: During this next phase, B will Design construct and perform ground testing of an xplane demonstrator.
Scott Donley: On the commercial side of the business, revenues increased 733 million primarily due to the mix of aircraft sold at Bell as Bell delivered 32 helicopters in both the second quarter of 25 and 24.
Scott Donley: During the quarter Bell received. An order for 12 Bell for 12, EP X's from the Tunisian Air Force with deliveries expected to begin in early 2027.
Scott Donley: In June Bell, signed a 5-year contract with United Auto Workers for its operations in Fort Worth Texas.
Scott Donley: Moving to systems revenues in the quarter were slightly lower as compared to last year. While segment profit margin was 12.5% up to 170 basis points.
Earlier this month systems received a 354 million contract modification from the US Navy to add 3 ship to short connector craft.
Scott Donley: In addition to our connector program received, 300 million through the recently, enacted, reconciliation bill.
Scott Donley: During the quarter.
Scott Donley: The US Army announced approval of Milestone B for the XM 30 program, and transition to the program to the engineering and Manufacturing development phase.
Scott Donley: Also in the second quarter system, sold the first tsunami aircraft tsunami crap. The US Navy the tsunami is an attributable rapidly, Deployable autonomous unmanned surface vehicle.
Scott Donley: Moving to Industrial we saw lower revenues in the quarter compared to last year's second quarter reflecting the impact of the disposition of Textron specialized Vehicles, Power Sports business and lower volume.
Scott Donley: A CeX. We recently freed received a pentatonic award from a leading European Automotive OEM for a battery electric vehicle composite lower battery housing unit.
Scott Donley: This marks. The second OEM platform for pentatonic and this wind secures a major foothold on what is anticipated to become 1 of the leading Global Bev platforms.
Second profit margin was 6.4% up, 180 basis points.
David: A Aviation the new v300 a long range, large capacity, hybrid electric, VTOL unmanned, aircraft continued to slice test program and made its debut at the Paris air show in June with that. I'll turn the call over to David.
David: Thank you, Scott and good morning everyone. Let's review how each of the segments contributed starting with Textron Aviation.
David: Revenue is a Textron Aviation of 1.5 billion. We're up 42 million from the second quarter of 2024, reflecting higher aircraft revenues of 35 million and higher, aftermarket parts and service revenues of 7 million.
David: Segment profit was 180 million in the second quarter down 15 million from a year ago. Primarily due to the mix of aircraft sold in higher warranty costs.
David: Partially offset by the favorable impact of manufacturing efficiencies and higher pricing net of inflation.
David: Backlog in the segment ended the quarter at 7.85 billion.
David: Moving the Bell revenues were 1 billion up 222 million from the second quarter of 2024.
David: The revenue increase in the quarter was driven by higher military revenues of 149 million, primarily due to higher volume from mv7 5 and higher commercial revenues of 73 million primarily due to the mix of aircraft sold.
David: Segment profit of 80 million was down 2 million from last year's. Second quarter, primarily reflecting, higher research and development costs, partially offset by higher volume and mix.
David: Backlog in the segment, ended the quarter at 6.9 billion.
David: A Textron systems revenues were 321 million Down 2 million from last year's. Second quarter.
David: Segment profit of 40 million was up 5 million compared with the second quarter of 2024, primarily due to lower selling and administrative expense backlog in the segment ended the quarter at 2.2 billion.
David: Industrial revenues are 839 million down to 75 million. From last year's second quarter largely a Textron specialized Vehicles where revenues decrease 666 million. Reflecting the impact from the disposition of the Polish Sports business and lower volume primarily in golf products.
David: Segment profit of 154 million was up 12 million from the second quarter of 2024, primarily reflecting the impact from the disposition of the Powersports business, and the benefit of cost reductions from restructuring activities. Partially offset by lower volume and mix.
David: On E Aviation segment. Revenues, are 8 million in the second quarter of 2025 as compared to 9 million in last year, or second quarter. And segment loss was 16 million as compared with a segment loss of 18 million in the second quarter of 2024.
David: Finance segment, revenues for 15 million and profit was 8 million in the second quarter of 2025 as compared to segment, revenues of 12 million and profit of 7 million in the second quarter of 2024,
Interest expense for the manufacturing group was 26 million lipo inventory. Provision was 38 million and intangible asset amortization was 8 million.
David: Net special charges were 4 million and the non-service component of pension and postretirement income were 67 million.
David: Our adjusted effective tax rate for the second quarter of 2025 was 20%.
David: during the quarter, we repurchased approximately 2.9 Million shares returning, 214 million in cash to shareholders
David: year to date. We have repurchased the proximately 5.8 million shares returning, 429 million to shareholders.
David: To wrap up with.
David: We are reiterating our expected full year, adjusted earnings per share to be in the range of $6 to $6.20.
David: We are increasing our expected full year manufacturing cash flow before pension contributions to be in the range of 900 million to 1 billion up.
David: From our previous range of 800 to 900 million.
This reiterated, adjusted, EPS, Outlook and increase cache Outlook incorporates, the estimated impact associated with recently enacted tax legislation. The 1 big beautiful, bill act that was signed into law. Include several Provisions, that benefit cash flow and has some elements that impact our adjusted effective tax rate for the year.
David: As a result, we now expect an adjusted effective tax rate in the range of 20 to 21% for the year.
David: Our adjusted EPS Outlook of 6 dollars to 6.20 cents, incorporates as higher, adjusted effective tax rate.
David: That concludes our prepared remarks. So operator, we can open the line for questions.
Speaker Change: Thank you. We want to help again the question.
Speaker Change: And would like to ask a question today, please do so now by pressing start, followed by the number 1 on your telephone keypad.
Speaker Change: If you change your mind or you feel like your question has already been answered, you can press Start followed by 2 to withdraw yourself from the key.
Speaker Change: Our first question today comes from David Strauss with Barclays. Please go ahead.
Morning.
Speaker Change: Morning morning.
Speaker Change: Uh, Scott 1 to ask you about, uh, you know, the potential acceleration on MB 75. What what that could look like, what that could mean for your numbers. And if you could remind us of uh the contract structure As you move into, uh, into lrip
Uh sure. So talk to I mean, this is very much a work in process. I would say on the development side.
Speaker Change: you know, we're we're already have very good visibility around that I suppose and and and agreement with the Army on how to proceed on accelerating EMD that's partly why you're seeing, you know, the increased
Speaker Change: Uh, you know, EMD Revenue here in 2025, and certainly we will see, you know, an acceleration of that in 2026. As we try to get that first aircraft, you know, completed and turned over and ready for test. So I think on the EMD front
Speaker Change: You know, it's, it's, it's pretty clear. We know what we've got to go do and, uh, both we and the Army are are working to execute against that.
Speaker Change: in terms of the production acceleration, the
Speaker Change: you may recall the the L rip which was 8 aircraft, which was bid in the initial contract.
Speaker Change: Production of that wouldn't have started until really triggering off Milestone C. So that was going to reflect probably about an 18-month or so gap between the last of the EM delete EMD delivered aircraft and
Speaker Change: And L rip. We're now pulling that forward and the intent is to basically be able to smoothly transition from that last
Speaker Change: EMD aircraft into the first of the lreb. So that'll probably pull in something on the order of 18 months.
And then we're also working talking about what, you know what what is a, what is a ramp look like? So it's not just going to be, you know, those 8 but what do you think about in terms of the next lot? And the next lot right behind that. And so those discussions are still ongoing, you know, with with the Army. I think what you're seeing primarily in the FY 26, budget asks is the increased dollars to support that acceleration of the EMD and you would expect to see, you know, increase and and additional production dollars in the FY 27 budget as to support. What I just talked about in acceleration of that first lot. But also lining up the second and the, the third lots of, uh, production
Speaker Change: Okay, thanks for that. And Dave, uh, could you touched on, maybe, what? Some of the offsets were to the higher tax rate to hold the guys? It seems like Bells may be coming in better than you expected.
Speaker Change: with the, um,
Speaker Change: Um, while at the same time, taking this 200 to 300 basis, basis point increase in the effective tax rate.
Speaker Change: Okay, thanks very much.
Speaker Change: Thank you. Our next question comes from Peter armant with bed, please. Go ahead. Peter.
Peter Armant: Yep. Good morning Scott Dave. Uh, nice results. Um, hey, Scott could could you maybe give us a little uh your thoughts around just kind of the um margins and Aviation. I know that you you had kind of talked to us about
Peter Armant: some of the pricing that was going to be lingering from from last year. Flowing through how how how do we think about that? As we as we move forward in the second half.
Um, sure, look, I think we're right on track with where we expected to be on Aviation you know as we guided at the beginning of the year.
Peter Armant: You know, with the, with the recovery, kind of coming off of the, the strike and some of those issues. As you mentioned pricing of aircraft that moved into this year, we knew we would be, you know, a little more margin challenged in the in the first half and the second half. So I think we're right on track.
With that, I think the production ramp is is going well.
Peter Armant: Um, you know, 10 years is probably the only 1 where we've been, you know, you know, a little behind that's a tougher line to get going. Um and picking back up the good news is I think that's that's now running. Well, so we certainly in line with what we expected. We'll we'll see good jet deliveries in the back after the year, but also much stronger, turbo, crop deliveries in the back, half of the year.
Peter Armant: So in all those dynamics that we were kind of factoring into our plan are playing out exactly as we expected. So we certainly expect to see, you know, nice volume increases here through, you know, Q3 and Q4 with that with that margin.
Peter Armant: Um, Step ups that will put us right on our Target for the full year.
Speaker Change: I appreciate that card Scott and just maybe just as a follow up and saying with an aviation just talked about I guess the demand environment continue to have very good bookings and uh just what you're seeing and kind in terms of uh customer interest in the new models.
Speaker Change: Yeah, the demand the demand has been has been strong so we're seeing good order flow. Uh, I think customers are very excited about, you know, the Gen 2s of both the M2 and the cj3 coming out.
Speaker Change: Uh, send also getting close to certification here and we have a, a good backlog on that as well. So I think the, uh, the aircraft portfolio is doing really well in the market.
Speaker Change: I appreciate that. I'll jump back into you. Thanks Scott.
Speaker Change: Thank you. Our next question.
Speaker Change: Just go ahead.
Speaker Change: Um, good morning, Scott and David. Maybe let's stick to Aviation. Um, Scott on that last Point. Are you seeing any changes given the tariffs uh, on competitors and yourselves? How are you thinking about?
Speaker Change: Tariffs. And what were the higher warranty costs you mentioned for the aviation margins?
Speaker Change: Um, so we haven't really seen an impact yet on the tower front. I would say that there are certainly some customers and let's say particularly
Speaker Change: You know, in some Latin American countries that are are are are concerned. But we'll, we'll see how that plays out, I guess our our view of these things at the moment is
Speaker Change: Sort of not panic and give it a little time, just let things settle out so we'll continue to to kind of watch it and and see, but we have certainly have not yet seen any kind of dramatic.
Speaker Change: You know, impact and as you know, she the bulk of our deliveries are us. The bulk of our manufacturing Is Us.
Speaker Change: so, I think, you know, in the grand scheme of things, you know, while the Tariff
Speaker Change: You know, stuff can create, you know, some, some concerns and some noise I think we're actually, you know, pretty well. Positioned with our, our large in North American manufacturing base and our largely North American based delivery. So
Speaker Change: Um, I I think in that, in that respect, we're in pretty good shape.
Look on the warranty, you know, there's there's always a few things moving around in there. You know, we have had an issue that we've been dealing with probably for a couple of years that, you know, we feel like some of the work we're doing in. Uh,
Speaker Change: In the shops is coming in a little higher than what we originally expected. And we thought it was appropriate at this point just to sort of true up the reserves on that to make sure we can cover, you know, the balance of work that needs to be done there.
Speaker Change: And and maybe if I could ask 1 on B, margins, uh they fell below 8% in the quarter. You called out R&D costs. How should we expect that to progress through the remainder of the year?
Speaker Change: Uh well look, I mean I do think, you know, we saw the you know, as we talked about much higher um Revenue that we originally had in there on the EMD side.
Speaker Change: Of Florida, which is, you know, obviously a fantastic program for us. But a little more margin challenged.
Speaker Change: So I think we'll, you know, see the balance of the year, you know?
Speaker Change: By the EMD piece of Flora. We'll have higher higher revenues, but we'll probably be, you know, towards the lower end of the of the Bell range driven by that.
Speaker Change: Sure.
Speaker Change: Thank you. Our next question. Comes from a set Siteman with JP Morgan.
Speaker Change: Please go ahead.
Speaker Change: Thanks very much and uh good morning.
Speaker Change: Um, wanted to ask about.
Speaker Change: Uh, systems and um, I think 2 of the competitions that you've been looking at for for decisions this year. Uh, it was programs are either canceled or or under review, but there's maybe some other opportunities are merging that that you talked about. Um, so how are you thinking about the systems Outlook and, and the opportunities for for growth there,
Speaker Change: I think the obviously, you know, we were surprised by the situation on RCV and ftuas to see those programs be
Speaker Change: Terminated I in, in both those cases, I don't think it's the end. I mean, certainly the Army's going to continue to invest in robotics and we will look for ways to participate, you know, in those future activities, the same is true on ftuas. While the, while the program, the Fus itself program was was terminated the Army again, is putting more money into
Speaker Change: uh,
Speaker Change: Tactical UA system. So it's going to be acquired a different way, different competition and, and clearly, you know, we will, you know, compete for our
With our products in in, in those opportunities. So it, it certainly impacted Us in terms of what we would have expected timing of those programs, which we kind of had in the wind column. Um, but there's other opportunities that we'll pursue in both those spaces. What is happening in the year is that we're seeing nice growth and a number of big wins in other portions of the systems portfolio, that, that I think will effectively offset the terminations, you know, this year of RCV and ftuas. So, um, there's there's been a number of things competitions that are, are are already awarded obviously the short connector program um continues to grow The Sentinel program continues to grow. And I think, you know, we'll see some some nice wins in other pieces of the portfolio as well as we go through the balance of the year.
And then this was the, um,
Speaker Change: I think that this was probably the highest earnings quarter for uh, Industrial in a little while. Um, is there? Uh, you know, do do you feel like there's potentially some some upside there versus, uh, the initial Outlook?
Well, look, I it's, you know, we'll we're we're probably not revising our our guides at at the time, but I think the industrial business, you know, as you as you know, we've done a fair bit on, you know, post Powersports taking cost out of the business and restructuring, you know, this is a year where you have this cyclical low on the Gulf side. That's a very that's actually a very predictable cycle and totally consistent with our plan. But I, I think the team is executing well here, post Powersports. And we'll, uh, you know, we're certainly feeling good about being in the range, You know, despite taking the, uh, the revenue loss on on the disposition of the business.
Speaker Change: Okay, great. Thanks very much.
Speaker Change: Sure.
Speaker Change: Thank you. Our next question comes from Robert Stallard. With vertical research. Please go ahead. Robert
Speaker Change: Thank you so much. Good morning.
Speaker Change: Good morning.
Speaker Change: Um, Scott first of all on flower, which I know you should call mv7, um, with the acceleration plan, would this require Textron to put in more Capital to enable this 18-month acceleration?
Speaker Change: Uh,
Speaker Change: Yeah, Robert. I would say sure. I mean, we've always had a capital plan that ties in with
Speaker Change: you know, the production program and and and ramping that
Speaker Change: you know, so certainly in terms of how we were thinking about the long term, this would accelerate those plans, let's say on the order of around 18 months,
Speaker Change: so you know, we've always anticipated that this you know, was coming but it's a manageable number and it's something that we factor into our long-range plan and uh
Speaker Change: That's that would be a fantastic outcome. If we have to spend more Capital sooner to ramp this program,
Speaker Change: And secondly, on, Aviation we've seen some of your peers signing up to uh new big Fleet purchases, is this something you'd be interested in doing more of going forward?
Speaker Change: Uh, look, I think we're on the interested in Fleet business. If it's, if it's good business. I mean our demand continues to be strong, our retail demand is strong so you know it will we're always happy to look at.
Speaker Change: Um, you know, we'll, we'll we always look at at every opportunity whether it's a 1-off aircraft or a fleet.
Speaker Change: Sure.
Mi Walton: Thank you. Our next question comes from Mi Walton with wolf research. Please go ahead.
Mi Walton: Thanks, good morning Scott. I was wondering given your experience in the the group 3 uas Market. Um, is there any interest given the attention of the administration and the sector on the smaller drone market for um, higher levels of investment um, at at Textron more broadly?
Speaker Change: Well, okay. And the the group 3 has obviously been our our strong suit. So you know there are there are opportunities. There's
Speaker Change: R&D work, you know, going on, looking at, you know, some of the smaller classes or frankly, places where we might participate in some of these, you know, programs but nothing that we would announce, or specifically comment on at this time, I guess.
Speaker Change: Okay. Good enough. And then I guess from a from a perspective of the um the the 525 is there any update you can offer on on that certification? That does seem like the FAA maybe is moving along with things and and maybe there's a more adjudication that's being done.
Speaker Change: Uh, well, like, I mean, we it's hard for us to comment. I mean that, obviously, that's very much an FAA process at this stage of the game. Um, I like to think we're in kind of the, the, the last stages here. And obviously, a lot of documentation going back and forth and trying to get through final, um, final test criteria, and we're just going to continue to work that with the FAA.
All right. Thank you.
Speaker Change: Thank you. Our next question comes from Ronald Epstein with Bank of America.
Speaker Change: Please go ahead.
Speaker Change: Hi, good morning. This is Samantha styro on for Ron today. Um, I was just wanted to ask about Capital deployment, um you did uh about 200 million of share repurchases in the quarter, how are you thinking about that? Going forward and then m&a opportunities, thanks.
Speaker Change: Sure. Look I as we've said, I think our our primary focus on Capital deployment is opportunistic. Share buyback.
Speaker Change: Obviously, that's certainly what we did in the first half of the year. And I would expect, we will continue that through the through the second half of the Year from an acquisition standpoint, if something made sense.
Speaker Change: I think we have, you know, plenty of capacity to, to be able to do something like that. So, in the meantime, the uh, the most logical thing for us to do and I think the best return for our shareholders in terms of,
Speaker Change: You know where we are is to continue to focus, Capital Inn in uh redeployment via share buyback.
Speaker Change: Hello. Thank you. Our next question comes from dog heart, Ned with Bernstein. Please. Go ahead.
Uh, good morning. Thank you.
Speaker Change: Um, you know, going back to demand. Um, you know, you've talked about it. It's it looks strong, we've heard, we've heard some of that from others. Um, but when you consider your, how could you describe your discussions with corporate customers? Because on 1 hand, they've got uncertainty in this environment. As tariff environment on when when to make Capital Investments on the other hand, you've got bonus depreciation. How do you see these different factors playing into those decisions that your corporate customers?
Speaker Change: So I think I think none of everything is positive. I think the corporate world is healthy right now. Um sure everybody. Obviously depending on companies have a lot of different exposures or not you know relative to the Tariff
Speaker Change: Situation. But the, the demand the dialogues are are good. Flying is very strong, right? Which helps to drive or you know after market. So it's sure.
Speaker Change: You know, it appears to us that the corporate world is is, is flying and and buying and managing their fleets as you would expect in in pretty good times.
Speaker Change: And then I separately it. Now you're um, you didn't create, you had higher R&D in the quarter, uh, where, where are you directing that, is that connected at all to mv25 or is that on the commercial side? What, what are you looking at in terms of investment there?
Speaker Change: So, mv25 is primarily contracted now. Alright. So that's all under the EMD, phase. You know, the R&D spending obviously, it looked lighter, you know? I mean, in, in, in the quarter
Higher R&D spending and the R&D spending on the commercial side is largely focused around the 525 and completing that program on the military side, it's really focused around, you know, the R&D programs that we need to execute to support the development of the high-speed Vol program. So, uh, especially now with having, you know, been selected for the, for the darker Sprint program. So that's sort of, you know, I I was, I would expect R&D to be, you know, fairly flat. You know, on a quarter quarterly up over over last year, again, largely because of the The increased spend on R&D associated with the highspeed retail program.
Speaker Change: Okay, very good. Thank you.
Speaker Change: Sure.
Speaker Change: Thank you. Our next question comes from Noah Park. Mark we've got
Mark: Please go ahead. Noah
Hey, good morning everyone. Um on MV 75.
Speaker Change: When you?
Speaker Change: Put the pieces together of movement in timing of EMD, and lrip.
Does total program Revenue grow each of the next few years or does it decline at any point in the window as your shifting from development to L rep and before you make it to 48 production?
Speaker Change: Well, we don't know the exact answer to that yet Noah. I think we have to, you know, continue to work on what the production acceleration looks like uh EMD clearly is up here in the next couple years. The pull forward of the lrip, you know, volumes would obviously add to that. So I mean, I guess I feel fairly confident saying it's going to continue to go up for the next couple years, but we've got to get that.
Speaker Change: You know, I mean, from an army, budgeting standpoint there, there this is very much a work in process, right? As they look at their 2728, you know, and all on, uh, program budgets. Certainly what the secretary and the chief would like to go do when they talk about the volumes and getting things delivered out to the 101st.
Speaker Change: Would would drive incremental volume here for the next several years?
History has had these other examples of programs that fixed the eret pricing. At the time of the bid,
Speaker Change: Um, where you know, by the time you get to rip there's been cost creep. So your L reps are break, even or or loss making?
Um, can you talk about?
Speaker Change: Where you see price cost right now um on the L reps compared to when you bid.
Speaker Change: Well, I'm not sure we go into that level of detail know. I mean, we expect and like, you know, the lrip, the 8 L, rip aircraft were bid as a fixed price as part of the original contract.
Speaker Change: And so you wouldn't expect margins to be very good there. I think, you know, part of what you see in our in our margin rates, is, you know, pretty conservative assumptions, on our part.
Speaker Change: Um you know to have the appropriate amount of Mr, to support you know, those programs but you know those haven't been definitive yet supplier pricing has been locked in so you know I don't have specific numbers for you but we we we would expect those and I always have expected those you know to be pretty challenging for those first 8 aircraft.
Speaker Change: Okay, and then just last 1 I was hoping to ask you about Scott. Just um,
Speaker Change: How you're thinking about setting Supply and and deliveries um at Cessna for the rest of this year. And into next year, just we've had this window with um, you know, the strike and supply chain. It's it's a little tricky to sort of
Um, have a sense for where you think Supply should be, I guess on a run rate basis from here.
Speaker Change: Yeah. Well look, I mean obviously, you know, as as we got it all the way back to the beginning of the year. You know, we we certainly have a production plan that has a ramp going through the course of the year. That's been well, communicated to all of our suppliers obviously.
Speaker Change: Um, and you know, as you know, we're probably a lot of our stuff is in that 2 year, you know, for some of that long cycle material. So certainly, you know, those suppliers are, are understanding with where we are on the ramp, you know, this year and and even out through 2026 as well. So I, I think, you know, supplier communication and
Speaker Change: Recognition of what that supply chain ramp needs to look like is, is pretty well understood. Not everybody is totally there. Obviously, you know, the supply chain I would say, is in much better condition than it was.
Going back a couple years ago but you still have issues that pop up and as we always say it's it's good not to have too many yourself, fly problems but every supplier part is an important part, right? So
Speaker Change: It's uh I think you know there there it's not because of a lack of understanding of what the ramp needs to be its execution. And obviously we work through that every day.
Speaker Change: Should we should we still be thinking about the?
Speaker Change: Being recovered in, in the medium term.
Speaker Change: I'm not sure. We're prepared to give guidance for 2026 just yet.
Speaker Change: Okay, fair enough. Thank you very much. Okay, okay.
Speaker Change: Thank you. Our next question comes from Gotham. Connor with the TD Cohen.
Connor: Good morning. Thanks guys.
Connor: Was, uh, wondering if you could elaborate a little bit on Commercial helicopter, demand, how that's trending.
Connor: Uh I'd say it's strong actually across all the models everything from you know 412 is all the way down to the 505.
Connor: I think the, uh, the commercial helicopter business is in good shape. You know, we had strong, um, delivery on a year-over-year basis here in, in q1, Q2.
Connor: uh, you know, Q3 Q4 was, was much, much stronger last year, so I think we'll have, you know,
Connor: You know, more comparable comps on a, on a year-over-year basis. But certainly for the, for the total year helicopter, deliveries
Connor: Um, our, our, our looking good and Order activity is very good. So I think, I think that business is in, is in good shape.
Speaker Change: And just stepping back, broadly, would, would you say that you haven't really seen much demand erosion due to terrorists and all the trade policy uncertainty across the portfolio.
Speaker Change: Or have you not at this point?
Speaker Change: No we we we have not seen evidence of that yet.
Speaker Change: I'm not saying it can't happen, but, you know, I, I think most customers are
Speaker Change: You know, are are sort of, you know, taking sort of a wait and see with some of these things or just assuming that things are going to get resolved. And again, if you look at, you know, a lot of our stuff that's particularly the fixed Wing world and did business Jets. We were largely North American.
Speaker Change: Anyway, um, a lot of our International helicopter, things, end up being either FMS or some, you know, far military, and I think that that activity that order rate, um, seems to be continuing, You know, despite a lot of the Tariff dialogue.
Speaker Change: Thank you.
Speaker Change: Sure.
Christine leag: Thank you. Our next question comes from, Christine leag. With Morgan Stanley. Please go ahead.
Christine leag: Hey, uh, good morning everyone. Um Scott, maybe on tariffs and Aviation. I mean, tariffs are increasing the cost for your European and Brazilian competitors. Um, as these things shake out and some of the tariffs that ultimately, they'll probably see an incremental higher cost, uh, for us customers. So, when we think about this shaking out in the next few years, do you see this as an opportunity?
Christine leag: Committee to gain market, share or is this an opportunity to get more price? Um and and also get more margin
Christine leag: Again we I think we got need to give this time and see where all the Tariff dialogues settle out. So I'm I'm a little reluctant to think about a year 2 years, 3 years.
Speaker Change: You know, down the road on these things. But, I mean, there are certainly cases where we have foreign competition that
Speaker Change: That just has a lower cost basis and tends to be more aggressive on price. And, you know, we we we kind of Hold the Line in there and have tried to be
Speaker Change: Um, focused on making sure we're running a profitable business and the business can afford to keep reinvesting in your product lines and we'll continue to do that, you know, does that, you know, do long-term tariffs start to play a little more of a, a normalizing in terms of, you know some of the cost and pricing that we see, I mean that that could be but it's it's I'd say it's too early in the process to really know the answer to that question.
Speaker Change: Thanks. Um, so maybe Switching gears to e Aviation. Um, you know, earlier this year you had the new VA V uh, 300 get its first flight. Um, how has been the customer reception of this aircraft and are you expecting this to enter into service this year and should it enter into service this year? What kind of customer Milestones or or production rate are you thinking about for an aircraft like this?
Speaker Change: Oh, look, I saw the flight test program continues, you know, so there's a lot of work going on. You know, we continue to fly, you know, regularly it's it's obviously we've done a fair bit of hover flying, you know. We do need to go into conversion mode, you know. And like I think Christine in terms of certifications of aircraft of this class,
Speaker Change: That's just something I don't see in the, in the near term. I do think we see some interest on some
Speaker Change: Uh, military applications. I mean given the the range and the payload capability of this craft compared to others. I think we could have a real Advantage there and so
Speaker Change: Standpoint. But, uh, I mean there right now on a commercial basis, I see no Pathway to, you know, how you certify these, these kinds of aircraft. So I certainly wouldn't expect something that could happen, you know, anywhere near this year. Next year,
Speaker Change: great, thanks for the caller.
Speaker Change: Sure.
Speaker Change: Thank you. Our next question comes from Gavin Parsons with UBS.
Speaker Change: Please go ahead.
Gavin Parsons: Thanks, good morning.
Speaker Change: Morning morning.
Speaker Change: It's been kind of 4 4 quarters. Now that the aviation margins have been pretty disrupted is the second half of this year pretty normal. So as we think about going Beyond 25 is that a good Baseline?
Speaker Change: oh, so, so I think our our progression of margin through the course of the year is
Speaker Change: Is is is playing out as we expected. And so, you know, I think the the issues that we had around the, you know, the impacts of the strike and and what that meant to, you know, our shift, in our production to the right, and a lot of the disruption and things of that nature are fairly well behind us. And so, I think we're very much on plan.
Speaker Change: To, you know, hit the guide numbers, you know, that that we gave you guys. And so you know, certainly with those disruptions behind us, you would expect to see you know, good margins for the business as as we go on into 2026. So we're not going to guide yet but obviously you know, we you'll you guys will definitely see. You know, the kind of margins that we expected, you know, for the for the full year, you know, to come in, you know, you know, well within that that range that that we got it.
Speaker Change: So and like, I think considering all the disruptions and challenges from the strike and the hold over and ongoing supply chain issues to be, you know, posting real development 12% margins. It's the I think the business is doing pretty well.
Speaker Change: Certainly, we expect that margin rate to expand over the course of the year.
Speaker Change: Okay. Thanks and then once you get through Denali uh any categories where you see the opportunity for a new aircraft in aviation
Speaker Change: not that we are prepared to announce at this time.
Speaker Change: Okay, thank you.
Speaker Change: Thank you. Our next question comes from David Strauss with Barclays.
Speaker Change: Please go ahead.
David Strauss: Thanks. Uh, thanks for taking the follow-up. Um,
Speaker Change: Scott. What's the uh what's the outlook for King are? I mean the volumes have come down a fair amount there.
Speaker Change: Um, where where could that settle out for the year?
Speaker Change: Uh, sure, Dave look, I think the king airliners I kind of mentioned earlier is is is 1 of the more challenging lines. I mean it's just an an older product line in terms of tooling and, you know, documentation. I mean it's always been a great product but you know, the that it probably was impacted more than anything else in terms of just the, the challenges of going through, the, the strike and all the co the turnovers and all that kind of stuff. I think that line has stabilized and is running much better, you know, than it was. And so, like, I think you'll we'll have strong deliveries in Q3 and Q4 on the, uh, on the king Airlines. So, as I said, it's it's probably the last line to recover from a lot of the disruptions. It is, it is now flowing well and like, I say, I think it's Sports, you know, considerably higher, you know, deliveries in in Q3 and Q4
Speaker Change: Okay. And uh caltex was that was that flat? Or maybe just down a little bit in the quarter.
Speaker Change: oh, I was down a little bit in the quarter, which again, is what we expected, you know, I think the Global Automotive
Speaker Change: You know, markets are are are are more or less behaving as as him as had been inspected. And
Speaker Change: You know, that team continues to do a nice job in terms of managing cost and capital deployment and and all that kind of stuff. So, you know, I'd say on the, on the positive side there, you know, we've been investing as you guys know, for a number of years around pentatonic to make sure that we have a, a good play in the pure battery, electric vehicle Market. Um, we do continue to see nice momentum shift in hybrid, which is an important piece of the of the tanked business for us and not just the tank piece, but also the opportunity to participate in the in the battery portion of a, of a hybrid vehicle and and the wind this, you know, past quarter with a, a major OEM on their EV platforms. I think is urging for the for the future of that business.
Speaker Change: Okay, and then last 1, um, Dave on that on the tax rate step up, is that, is there fairly radical Q3 Q4 or is there a big uh, big catch up in Q3?
Speaker Change: Skewed.
Speaker Change: So I think on the tax thing guys, everybody, I mean I know there's a dialogue with a lot of companies, right? The the tax bill is a very good thing, right? I mean, it's going to give us a significant impact on cash for the next several years. Um, the bonus depreciation is clearly positive for our customers who buy our large Capital assets. It's also good for us because, you know, we do deploy Capital. So I think, you know, there's, this is mostly good. We are going to take this, you know, near-term.
Speaker Change: Probation of of a tax rate increase.
Speaker Change: Um which is David said, it's probably you know 2 300 basis points that is it just it is what it is but I think you know, net of everything. Um the the tax bill is a is a good thing for our company.
Speaker Change: Sorry, on the back of that, I got to ask 1 more. So on on, on Section 174, I I thought the benefit might be larger than the 100% flow up by is, is there any offset to that running through the numbers?
Speaker Change: Uh, that's where we see it right now, you know, where it's it's a relatively complicated, uh, bill. So we're continuing to evaluate it. And, uh, we'll continue to try to drive additional opportunity, but that's how we see the impact, at least for this year at this point, but it's cotton mentioned overall. It's, it's a, it's a significant positive on cash flow as we go forward.
Speaker Change: Okay. Thanks guys. Appreciate it.
Speaker Change: Sure.
Speaker Change: Thank you. Our next question comes from Pete skipit. Ski with Olympic Global, please go ahead.
Pete skipit: Hey, good morning, guys.
Um, Scott just 1 Scott, just 1 quick 1 from me. Um in the second quarter, 1 of your engine suppliers, Williams International announced a pretty sizable. I think they're calling it a billion dollar expansion into Florida and and some of their other facilities as well. And obviously, they have other customers, but I was wondering if you give us any color at all, in terms of what that might mean for citation and, and the just the, uh, the visibility to continue to grow. Um, maybe beyond the near term.
Pete skipit: Uh well I mean I obviously I I won't come in on their particular expansion, you know, works but like William Williams is a very important supplier to us. They've been a very good supplier to us.
Pete skipit: They deliver a great product it's you know, as a history of delivering, great performance.
Pete skipit: And uh,
Pete skipit: you know, it's it's a good relationship and 1 that I expect to see you continue to grow into the future Williams. Does a great job of supporting our, our new product programs and expect, they'll, uh, continue to do so in the future as well.
Thank you.
Pete skipit: Sure.
Pete skipit: Sure.
Speaker Change: Thank you. At this time. We have no further questions and so this concludes our call, thank you all for your participation. You may now disconnect your lines.