Textron Inc.

Thank you for standing by and welcome to the Q1 2023 Textron earnings release conference call. At this time, all participants are in listen-only mode. Later, we will conduct a question and answer session. If you wish to ask a question, please press 1 then 0 on your telephone keypad. You may withdraw your question at any time by repeating the 1 then 0 command. If you should require assistance during the call, please press star then 0. As a reminder, today's conference is being recorded. I would now like to turn the conference over to your host, Mr. Eric Salinger, Vice President of Investor Relations. Please go ahead, sir.

Thanks, Bradley, and good morning, everyone. Before we begin, I'd like to mention we will be discussing future estimates and expectations during our call today. These forward-looking statements are subject to various risk factors, which are detailed in our SEC filings and also in today's press release. On the call today, we have Scott Donnelly, Textron's Chairman and CEO, and Frank Conner, our Chief Financial Officer. Our earnings call presentation can be found in the investor relations section of our website. Revenues in the quarter were $3 billion, up $23 million from last year's first quarter. Segment profit in the quarter was $259 million, down $18 million from the first quarter of 2022. During this year's first quarter, we reported net income of $0.92 per share. Adjusted net income, a non-GAAP measure, was $1.05 per share compared to $0.97 per share in last year's first quarter. Manufacturing cash flow before pension contributions, a non-GAAP measure, totaled $104 million in the quarter, compared to $209 million in the first quarter of 2022. With that, I'll turn the call over to Scott.

Thanks, Eric, and good morning, everyone. We had a solid first quarter. Revenues up aviation, industrial, and systems, largely offset by lower revenues at Bell, consistent with our expectations. At Aviation, in the quarter, we delivered 35 jets, down from 39 last year, and 34 commercial turboprops, up from 31 in last year's first quarter. Aviation continued to see solid demand across jet and turboprop products. Backlog grew $136 million, ending the first quarter at $6.5 billion. In the quarter, Aviation received an initial award on the U.S. Navy Multi-Engine Training System contract for 10 King Air 260 aircraft and associated support equipment. This contract includes options for up to 64 aircraft with deliveries in 2024 through 2026. Textron Aviation's fleet utilization remains strong in the quarter, contributing to aftermarket revenue growth of 9% as compared to last year's first quarter. Moving to Bell, we announced the appointment of Lisa Atherton as the CEO, succeeding Mitch Snyder, who will retire at the end of April. Lisa returned to Bell in January after more than five years as the President and CEO of Textron Systems. She's done an outstanding job building strong teams at Bell and Textron Systems in her 16 years for the company, and has earned the confidence of our military customers. I want to thank Mitch for his leadership. During his tenure, he oversaw significant wins at Bell's military business, along with development of new technologies and product innovations. Earlier this month, the FLORA contract protest was denied, and the US Army subsequently canceled the stop work order, allowing work on the contract to proceed. On the commercial side of Bell, we delivered 22 helicopters down from 25 in last year's first quarter. During the quarter, we saw solid customer activity across all our commercial products and in markets, including an order from the Polish National Police for four additional F-407s, which will expand their fleet to seven aircraft. At Textron Systems, we saw good margin performance on higher revenues across our programs. During the quarter, Systems' aerosol and hybrid quad was among five competing unmanned aerial systems that were down-selected for Increment 2 of the Army's future tactical unmanned aircraft system competition. Also during the quarter, systems delivered craft 105 of the U.S. Navy ship-to-shore connector program, the seventh craft delivered to the Navy. There are now two craft remaining to be delivered under the detailed design and construction contract. Moving to industrial, we saw higher revenues in the quarter, driven by higher volume, both at Specialized Vehicles and Caltex. Specialized Vehicles, the golf business, continues to see strong demand and pricing for its elite lithium product. At Caltex, we announced the first pentatonic order from an automotive OEM for a thermoplastic composite underbody battery protection skid plates. Skid plates are part of the company's new pentatonic battery system product line, supporting battery electric vehicle production. Moving to E-Aviation, during the quarter, we announced two new U.S. distribution partners on the East Coast to further expand Pipistrel's existing distribution network. Also in the quarter, we finalized a group with Mesa Airlines for 25 Alpha Trainer aircraft and an option for 75 additional aircraft. At Sun and Fun during the quarter, we displayed the Pipistrel Panthera and Bellis Electro aircraft, receiving significant customer interest in both models. With that, I'll turn the call over to Frank.

Thank you, Scott. Good morning, everyone. Let's review how each of the segments contributed, starting with Textron Aviation. Revenues at Textron Aviation of $1.1 billion were up $109 million from the first quarter of 2022, reflecting higher pricing of $58 million and higher volume of $51 million, which included higher defense and aftermarket volume. Segment profit was $125 million in the first quarter, up $15 million from a year ago. largely due to favorable pricing, net of inflation of $17 million, and the impact from the higher volume and mix, partially offset by an unfavorable impact from performance of $17 million. Backlog in the segment end of the quarter at $6.5 billion. Moving to Bell, revenues were $621 million, down $213 million from last year as expected on lower military revenues, reflecting lower spares and support volume in V-22 and H-1 production volume. Segment profit of $60 million was down $31 million from last year's first quarter, primarily reflecting lower volume and mix, partially offset by a favorable impact from performance of $29 million, reflecting lower research and development costs. Backlog in the segment ended the quarter at $4.6 billion. At Textron Systems, revenues were $306 million, up $33 million from last year's first quarter, largely reflecting higher volumes. Segment profit of $34 million was up $6 million from a year ago, primarily due to a favorable impact from performance. Backlog in this segment ended the quarter at $2 billion. Industrial revenues were $932 million, up $94 million from last year's first quarter, largely due to higher volume and mix at both Textron Specialized Vehicles and Caltex. Segment profit of $41 million was up $2 million from the first quarter of 2022, primarily due to higher volume and mix and a favorable impact from pricing, net of inflation, principally in the specialized vehicles product line, partially offset by an unfavorable impact from performance. Texturon e-aviation segment revenues were $4 million, and segment loss was $9 million in the quarter, primarily reflecting research and development costs. Finance segment revenues were $12 million, and profit was $8 million. Moving below segment profit, corporate expenses were $39 million. Net interest expense was $17 million. LIFO inventory provision was $25 million. Intangible asset amortization was $10 million. And the non-service component of pension and post-retirement income were $59 million. In the quarter, we repurchased approximately 5.2 million shares, returning $377 million in cash to shareholders. To wrap up with guidance, we are reiterating our expected full-year adjusted earnings per share to be in a range of $5 to $5.20. We also continue to expect full-year manufacturing cash flow before pension contributions of $900 million to $1 billion. That concludes our prepared remarks, so Bradley, we can open the line for questions.

Bradley? Of course, and our first question comes from the line of Sheila with Jefferies. Please go ahead.

Thank you, and good morning, guys. Good morning. I want to ask about Bell Profitability. Frank, I think you mentioned some favorable performance in there, but with the FLORA protest now cleared, how does this change the trajectory of Bell Profit, and how are you thinking about the dilution just given the development work? And just thinking about the bid overall, Textron's development value was nearly two times Lockheed. How do we think about this in terms of revenue contribution?

Well, I'd say that, you know, we had anticipated or we had planned basically for, you know, a delay in FLORA when we gave our guidance. So, you know, FLORA is going to roll in consistent with how we had seen Bell in terms of the $3.3 billion of revenue in 8.25 and 9.25, not guidance. Obviously, we had margins above that for this quarter. So, you know, we do expect to be within that margin range that we had guided to. We do expect to see revenue growth. We think this will be the low quarter for Bell from a revenue standpoint. So as Flora kicks in, you know, we talked about that being a lower contribution margin. We'll see ultimately, you know, kind of where we get in terms of booking rates on that. But we'd expect volume growth with some margin headwinds associated with that revenue coming in. But overall, the team did a really nice job from a cost structure standpoint in this quarter offsetting you know, that decline in volume. And we feel good about, you know, kind of how Bell is positioned and the performance of the business.

And then just maybe, Scott, one for you. How do we think about aviation pricing? I think you mentioned $58 million of gross price or 5%. Is that sort of what we should expect on the growth side? And how do we think about that as the dynamics of the market are changing?

Yeah, I think so, Sheila. I mean, obviously the pricing is, you know, well built into the backlog. I think we are on track in terms of our expectations on cost. So I would continue to expect to see pricing, you know, net of inflation as a positive. Demand is still good in the marketplace. I think, you know, pricing is stable out there as we look out into the future bookings. So, you know, again, I think it's a reasonable expectation to think that we're going to continue to see prices net of inflation is a positive going forward.

Thank you.

Sure.

And our next question comes from the line of Doug Harned with Bernstein. Please go ahead.

Good morning. Thank you. When you look at the first quarter and orders in aviation, yesterday we heard from General Dynamics that Gulfstream had some hiccups around the banking crisis that Silicon Valley Bank collapse that actually, you know, delayed a lot of decision making in pushing orders through. How did you find that period at aviation? Have you seen similar things there in terms of order flow?

Oh, look, I don't know that I would pin something specifically to Silicon Valley Bank. But, you know, when we had a positive, you know, greater than one to one booked bill in the quarter, which is good, we kind of guided the to around a one-to-one book-to-bill. I think the lead time that we have right now in aircraft is in a pretty healthy place, and that's kind of what we're targeting. I guess I would say that any time you have financial disruption or adverse events out there in the economy in general, it's certainly easy for people to say, hey, let me think about it or wait a little bit. I think the good position we have right now is we have enough backlog out there that even if you have a quarter where you're down below one-to-one, that's not the end of the world. If somebody defers out there for a few months, that's not a problem. That's the beauty of having a backlog. So unlike previous periods where you had some interruption and you'd see a delay, then that would hit you in terms of revenue and profit in the near term, I think we have sufficient backlog out there that even if you do have something where somebody waits a little bit, then that's fine.

And then when you look forward and you're talking about a book to bail on the order of one this year, When you look beyond that, how do you think about the aftermarket? I mean, we might look at this as the aftermarket should grow somewhat proportionate to the fleet, but do you expect other factors to give you more growth there, such as more content for airplane or pricing?

Well, look, I think it's a lot more driven around utilization, right? So flight hours is more closely correlated with the growth in the aftermarket as opposed to necessarily the fleet numbers. I mean, our fleet is so huge that You know, even adding small numbers in any given quarter doesn't make any real impact. So, you know, it's primarily driven around utilization, and utilization in the fleet remains very high.

Very good. Thank you.

Sure.

And our next question comes from the line of Seth Seifman with JP Morgan. Please go ahead.

Okay. Thanks very much, and good morning. You saw the share purchase amount step up nicely in order. I guess if you talk about your thinking around that and maybe where you expect share repo to come in for the year, I guess you guys might have some additional cash coming in from a recent verdict. And so what your thoughts are on repos this year and whether maybe it's a time to step things up.

Well, so I think what you did see us do is step things up here in the first quarter. We've always said that that's our primary return of capital would be through share repurchase. And to do that opportunistically, we feel we've still been sort of in a good place to be buying. And so we've stepped up $377 million in the quarter. Our cash flow in the company continues to be strong. We have a lot of cash on the balance sheet, as you guys know. And so I think consistent with what we guided at the beginning of the year, we expect to probably buy back somewhere in that 5% to 6% of the outstanding shares. So the first quarter was indicative of doing that. In terms of what's been out there in the media and the press around this intellectual property verdict, obviously we're not going to comment much on that as it goes on through the legal process, but that's not something that we would expect to see cash come in any time in the near future. There's appeal processes. Who knows how that's going to play out? That doesn't factor into our thinking in terms of share repossession at this time. Okay.

Great. I'll leave it there this morning and pass it on. Thanks very much.

All right. Thank you. And our next question comes from the line of Kai Von Rumer with Cowan. Please go ahead.

Thanks for taking the question and nice results. So in aviation, maybe give us some color in terms of relative trend you're seeing in supply chain and also What was the commercial Bizjet book to bill? Because obviously you also got some defense orders there in the quarter.

So the supply chain side, Kai, is largely unchanged. I would say that, you know, kind of as we've talked about earlier, I think our labor position is in a much better place than it was. You know, we did bring a lot of resources in in the in the third, fourth quarter last year. Obviously, that does create some disruption, which, as you know, affects some of our conversion here as some of that inefficiency unwinds here in the first half of this year. But we're largely staffed at the levels where we want to be. So I would say on that front, things are certainly improved. But we continue to have suppliers that have issues that are causing us to do things out of sequence and driving still some inefficiencies in and how we operate the plant. So it's, I'd say it's not getting worse, but it's not necessarily getting better. Sometimes it's frustrating. I think you get one kind of resolved and another supplier, you know, becomes a problem. And I, you know, we kind of expected that to be a ongoing issue through most of the balance of this year. So I don't think there's any big surprises there, but it's, it's still a challenge. As far as order, look, our, our, our book to bill was, was greater than one. We feel good about that. It's, You know, we don't break it out down to the individual models or programs, but, you know, certainly we're, I'd say we're happy with how the demand is going in both jets and turboprops. So I think we're in a pretty good place.

Okay, and then a follow-up to Seth's question. You know 5.2 million shares is like two and a half percent so essentially in one quarter you've done half of of your buyback target for the year you won flora you had this bluebird of the DJI patent suit what's the chance that basically the five to 6% is exceeded in terms of the repo.

Well, look, I think, again, we're going to continue to press on this opportunistically, Guy, and we'll see how it plays out through the balance of the year. But, I mean, as you know, it's not really formal guidance. We just kind of indicate to you guys how we're thinking, and there's no change in how we're thinking. It's continuing to be our primary means of returning value to shareholders.

Fabulous. Thank you very much. Sure.

And our next question comes from the line of Robert Stallard with Vertical Research. Please go ahead.

Thanks so much. Good morning.

Good morning.

Good morning. First of all, Frank, you said you were holding the EPS and cash flow guidance for the year. Are there any changes in the divisional guidance for 2023?

No, it's roughly in line with where we had been.

Okay. And then, Scott, one for you. Industrial double-digit growth in the quarter is a pretty healthy performance. How sustainable do you think that is given the economic backdrop that we're seeing, particularly on your shorter cycle products?

Well, look, it's something to keep an eye on. I'd say that, you know, we're kind of roughly to the plan that we thought. I think we certainly expect to see and have seen softness in some of the short cycle consumer-sided things. But we're seeing strong performance still, let's say, in some of the industrial and commercial applications. And, you know, when we look at our production allocations, for instance, we're certainly pushing some of our capacity and our volume to serve commercial industrial applications more so than, on some of the consumer side. So, you know, that's one where, you know, obviously there's some uncertainty. We keep a close eye on it. You know, but net of all those things, there's enough demand across all of the different markets that we serve to drive that kind of growth. And I think we'll continue to see that through the balance of the year.

Okay, that's great. Thank you.

And our next question comes from the line of David Strauss with Barclays. Please go ahead.

Thanks, Maureen. Morning. Um, Scott, um, this jet deliveries in the quarter, were those a little lighter than you were anticipating? Just, um, just looking at how much inventory, I know you always built some inventory in Q1, but, uh, you know, there was, there was a pretty big inventory build in the course. I don't know if some deliveries, you missed some deliveries or kind of where you came in relative to what you were thinking.

Well, I mean, it's, you know, for sure, but it's a couple of aircraft, right? I mean, I think it's something that's going to pressure us all year long, but, you know, we also factored in, you know, in terms of our plans, what we thought we would see in terms of headwinds. So I don't think we're very disconnected from what we indicated in terms of the guide for the year.

Okay. Was that supply chain related, customer decision? What drove those delays?

Most of the delays we're going to see through the course of the year are supply chain related, just getting parts and being able to get things sequenced and And through test, we haven't seen any real change in customer behavior that's impacted anything.

Okay. And then I was wondering if you could maybe give a big picture look or how we should think about Bell given all the various moving pieces, thinking beyond this year, obviously with Flora now in-house. H1 ending, V22, you know, rolling off. I think, you know, not sure what the outlook is for V22 aftermarket, but how should we think about the growth profile for Bell, you know, thinking out over the next couple of years, given all these moving pieces?

Sure. Well, look, I think, and Frank kind of indicated this as well, we certainly expect revenues to be increasing, you know, in Bell. through the balance of the year and into next year as the FLORA program is ramping up. So I think on the revenue growth side, you know, we feel very good about that. Clearly, as we bring in, you know, a higher proportion of, you know, primarily cost plus development effort, that's going to be at lower margins than those production program volumes on V22 and H1 that have been going down. So you do have that mix issue. That's kind of where that led us, you know, to the guide that we have out there And I think that's kind of where we would expect to be as we go forward. So, you know, we're going to get this thing back into a growth mode, but it is going to be heavily weighted towards, you know, a cost plus, you know, relatively lower margin piece of the business, you know, that's going to be offsetting lost revenue that's a higher margin. But I think it stays a healthy business, but it's certainly not going to be at the margin levels that we've seen in the past number of years.

Okay. That's helpful. Thank you.

And our next question comes from the line of Miles Walton with Wolf Research. Please go ahead.

Thanks. Good morning. Scott, in the last 12 months, I guess, or 18 months, the last two additions to your board of directors were a couple of defense executives and Richard Ambrose and Tom Kennedy. And I'm curious if sort of the trend there is indicative of where you might want to be taking the portfolio directionally more towards defense, and if so, is it indicative of the organics with Flora obviously being a contributor or more inorganic from an M&A interest. Thanks.

Sure. Look, these are both guys who have, to your point, a lot of deep experience in the aerospace and defense world. Our company has always been sort of in that 30% defense with the growth that we're expecting to see in the systems business. With the growth, obviously, we're expected to see in Flora an ongoing growth. you know, opportunities in the near future here, I think, of future opportunities in Bell and systems. I felt like it made a lot of sense for us to, you know, to beef up a little bit more on the AD side of the company. Both these guys are, you know, recent retirees, they're current, you know, they know acquisition, they know defense, and they know aerospace technology. So I think they're two great ads to the board. So there's no real super underlying message, but obviously these are couple of high-quality individuals that know our space very well.

Okay, very good. And there was just one clarification if I could. On the FLORA disclosures from the protest, it talked about a cost-plus incentive portion and a fixed-price incentive portion. Can you just illuminate us on maybe where the fixed-price risk you've taken on is and isn't? Thanks.

Well, I think there's two principal pieces of fixed price. One is kind of a program management and operation layer, which I think is low risk. We sort of understand what that is. And then as you guys know, there's several deliverables under this, you know, full program. There's the EMD phase, which has about eight aircraft that are, you know, part of the development test, limited user test for the Army. And then there's eight craft that are the, sort of the LRIP, the first initial, you know, production and the material that's in there is at a fixed price. But it's heavily weighted towards the cost plus. Thanks again.

And our next question comes from the line of George Shapiro with Shapiro Research. Please go ahead.

Yeah, good morning. Good morning, George. The supply chain issues led to an incremental margin of 14% in aviation this quarter. That's the same that you had in the fourth quarter, and the performance impact, $16 million, $17 million, is similar. So do you expect that the rest of the year, or can you overcome some of the supply chain issues that you had mentioned are going to continue?

Sure, George. Look, I think it'll abate in the back half of the year. As we talked about, a lot of those efficiencies are things that were experienced in the back half of last year. A lot of that obviously goes through inventory, so that releases with the aircraft deliveries here in the first half of of this year. Obviously that anticipates that performance, you know, and disruption will be less, you know, in the first half of this year than it was in the last half of last year. And I think, you know, more or less so far we're seeing that. I think our factory is running better. That's largely, as I said, attributable to the fact that we've got the resources on board. You know, there's still issues, turnover's higher than we would like. You know, there's still more churn than historical, but certainly the plant is running, you know, in a more efficient way. Now, supplier issues still pop up, as I said, but, you know, net of all that, I think that we will see, you know, better, lower impacts of those efficiencies in the back half of the year than the first half of the year. So even with that 14%, which again is kind of where we expect it to be, I think, you know, for the total year, the overall conversion, which is sort of, you know, 24 or so percent, you know, which is appropriate for our business is still something we expect to realize for the total year.

Okay. And then have you changed anything about deliveries expectation for the year?

No, not really. I think we're still tracking to what we got.

Okay. Thanks very much. Good report.

Perfect. And our next question comes from the line of Peter Arment with Baird. Please go ahead.

Yeah, thanks. Good morning, Scott and Frank. Nice results. um hey scott you've had a lot of questions on aviation i'll just ask one quick one you know there's been a slight kind of increase in in used aircraft out there i'm sure it's in production aircraft still remains very low just maybe any comments are you you're watching or from your perspective on the used market uh sure peter look obviously we watch this very carefully and and uh you know you see numbers coming out and they look like big percentages of course they're big percentages on very small numbers so i think when we look at the used available

you know, when you look at kind of that zero to 10 years old, it's less than, you know, it's around a couple tenths of a percent of our fleet. So it's a really, really small number. I mean, we're talking about nine aircraft that we know of right now that are under 10 years old versus our fleet size of over 7,000 aircraft. So, you know, look, it's a trend of the We see in the marketplace, but remember, on an absolute basis, these are very small numbers. So the available for sale is less than a few percent, and about half of those are 20, 25-plus-year-old aircraft. So still a very, very positive environment in terms of used aircraft available for sale.

Thanks so much. I appreciate the call. Sure. And our next question comes from the line of Pete Skibitsky with Alembic Global. Please go ahead.

Hey, good morning, Scott and Frank and Eric. A little bit of a follow-on to, I think it was Miles' question on FLARA. You know, typically, and, you know, congrats, you get past the GEO review on FLARA, you know, big milestone there, but now you have to kind of switch to a keep-sold strategy, right? So I'm just wondering, Scott, from your perspective, what your view is on the technical and schedule risk to the development contract, you know, as you kind of move from the aircraft in your configuration to the exact production configuration that the Army wants. I'm just wondering kind of how you gauge the risks and if there are any important milestones that we should be on the lookout for.

Sure, Pierre. Look, I think the way the Army's conducted this acquisition, and as you guys know, this goes back a decade, really, right, of both guys going through design, development, producing prototype aircraft, flying them, lots of soldier touchpoints. uh, army pilots flying them, you know, as you know, as we went even through the formalities of the, of the formal, um, RFP and during this whole period of time, the proposal evaluation, there was ongoing effort under the OTA for the, for the, uh, CRR program, which was continuing, you know, to reduce risk and finalize, um, you know, design activities and risk reduction, even whilst the proposal evaluation was going on. And, uh, So I think the good news here is we have a really, really solid technical baseline for the aircraft itself. We have a great team that's in place, ready to go, that is being reassembled here to now go execute the EMD program. Obviously, there's a lot of new stuff here around the mission systems and development of that capability and the MOSA system for the architecture of the mission systems and how they accommodate changes over time. But I think that we have a really, really good technical baseline. The aircraft that we're about to go design and build and fly is very, very close to the aircraft that we've already designed and built and flown. So I think there's a big chunk of a risk that has been very effectively reduced, and we're ready to go get at it.

Okay. I appreciate the call.

Sure. And our next question comes from the line of Christine LeWag with Morgan Stanley. Please go ahead.

Hey, good morning. Scott, Frank, you know, when you look at the portfolio today, it's clearly stronger this cycle versus the last. Aviation's got a backlog. Bell secured flora. Industrials are stable now. With the balance sheet pretty low, what's your appetite to expand into another vertical and tap into secular growth markets?

Well, look, I think that we, as we've always said, we keep an eye on things as things come to market or there's opportunities out there. But obviously, you know, our plan is still built around organic growth, investment in the businesses that we have, which I think we've been making, you know, substantial investments, and those are paying off for us in terms of what organic growth we're seeing. And at this point, no, look, I think we do have a very strong balance sheet. We have a lot of cash on hand. We have strong cash generation in the business. We'll continue to execute on our buyback programs. If something came along that we thought made sense that was, you know, frankly in the A&D space and was something that we knew could be accretive and of better value to our shareholders than just continuing share buyback, we would look at it. But as I said, it would have to be something where it's a clear win and always contrasting that with what's going on with our share buyback program.

Great. Thank you.

And with that, our last question comes from the line of Ron Epstein with Bank of America. Please go ahead.

Hey, good morning, guys. Good morning, Ron. Good morning. Scott, could you kind of walk through, you mentioned earlier on the call, this is kind of back to Miles' question about positioning the company for some more growth and defense and the opportunities ahead of you in Bell and Systems. If you could walk through a couple of those that maybe you find particularly interesting for the company.

Sure. Well, John, I would say that the Florida win on a standalone basis is hugely important to our future. I think our guys have done a great job over the past decade in investing and positioning for that. Obviously, as you know, the Florida program continues. It's a few years behind the Florida program, but one where, again, I think our team has made the right investments. We've got the right people that have developed a a product that I think is going to be a home run. As you know, we're all kind of waiting on the engine side to have that thing fly. But, again, the Army activity continues in risk reduction and further definitizing that program. So clearly I think that's a great opportunity. I think we have a great solution. There are activities which, again, are publicly out there in terms of the future systems that the Navy and the Marine Corps are looking at. which I think a lot of our technology, particularly in the tilt rotor space, will potentially be a great solution and can leverage off a lot of the investment that we've already made on the 280 program. Those are likely to be adaptations, but again, from a technological standpoint, I think we're in a really good place for some of those future opportunities. High-speed VTOL bell, arguably a little bit further off, but that's another step, I think, that leverages our fundamental core capabilities to go to even higher speed higher-performing, longer-range assets. So I think Bell, in my view, Ron, I guess I would say I think we have a phenomenal franchise around Tilt-Rotor, and I think we have a lot of opportunities to continue to grow that franchise on a number of different adaptations of that technology into the future. On the system side, there's a lot of programs in there. I think the win on the Sentinel program with Northrop is a driver of growth for us. Going forward as that moves, you know, ultimately from EMD into its production phases here in the future, we have some great new wins on the munitions side with the XM-204s and XM-250s. Again, a great franchise for us for a long time, which is really growing. I mentioned our down select on FTUAS. You know, Shadow continues to be a good program for us, but, you know, future tactical UAS with the Army is certainly a big opportunity. there's a couple of big land vehicle programs, as you know, ARV on the Marine Corps side, OMFV on the army side, you know, so I, I mean, I don't want to wrap up all this stuff, but there's lots of opportunities out there for which, you know, we've either won or we've been down selected, or I think we're, uh, you know, uh, certainly a viable competitor. You're not going to win all these things, but there's enough opportunity. And I think we're a good enough place that we can see a lot of organic growth being driven out of that business as well. Gotcha. And then maybe one follow on if I can, um,

Maybe in the shorter term, are you seeing much demand being driven from the war in the Ukraine? Are you seeing orders for stuff that maybe 18 months ago you wouldn't have expected?

No, we're really not, Ron. We're not in that sort of munitions space. I mean, there has been some dialogue around some land vehicles, but they're largely EDA, things that are in surplus in the Army that would come out and be refurbished in and put over there. There's some talk of different UAS systems. We've had nothing so far. There's probably some relatively speaking smaller opportunities going forward, but it's not going to be a material impact to us. Got it. Got it. Thank you.

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