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spk07: Ladies and gentlemen, thank you for standing by. Welcome to the Q2 2023 Textron earnings release. At this time, while participants are in a listen-only mode, later we will conduct a question and answer session. If you wish to ask a question, please press 1 and then 0 on your touchtone phone. You will hear an acknowledgement that you've been placed into queue, and you can remove yourself from that queue at any time by repeating the 1-0 command. Should you require assistance during the conference, please press star, then zero, and an operator will assist you offline. As a reminder, today's conference is being recorded, and I would now like to turn the conference over to our host, Vice President of Investor Relations, Eric Salander. Please go ahead.
spk08: Thanks, Keeley, 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 $3.4 billion, up $270 million from last year's second quarter. Segment profit in the quarter was $352 million, up $71 million from the second quarter of 2022. During this year's second quarter, we reported income from continuing operations of $1.30 per share. Adjusted income from continuing operations, a non-GAAP measure, was $1.46 per share compared to $1.11 per share in last year's second quarter. Manufacturing cash flow before pension contributions, a non-GAAP measure, totaled $242 million in the quarter compared to $309 million in the second quarter of 2022. With that, I'll turn the call over to Scott. Thanks, Eric, and good morning, everyone.
spk10: The second quarter was a strong quarter, with revenue up across all our businesses and solid execution, generating a segment profit margin of 10.3%, up 140 basis points from the second quarter of 2022. At aviation, in the quarter, we delivered 44 jets, down from 48 last year, and 37 commercial turboprops, up from 35 in last year's second quarter. Aviation continues to see solid demand across jet and turboprop products, Backlog grew $315 million, ending the second quarter at $6.8 billion. In the quarter, aviation received an order for 11 Special Mission King Air 360s, expected to deliver in 2024 and 2025. Also during the quarter, aviation delivered the first passenger-configured Cessna SkyCourier to Lanai Air for its Hawaiian inter-island routes. On the new product front, aviation announced the Cessna Citation Ascend at eBase in May. The Ascend will feature the latest Garmin 5000 avionics suite, a four-passenger range of 1,900 nautical miles, comfortable cabin experience with large windows and a flat floor, and the new Pratt 545D engine that features improved thrust and increased time between overhauls and enhanced fuel efficiency. The aircraft is expected to enter into service in 2025. Moving to Bell, revenues were slightly higher in the quarter. Bell began ramping activity on the FLORA program, including onboarding engineers, contracting with major suppliers, and ordering long-lead materials. Bell also added $1.2 billion of backlog related to the FLORA contract during the quarter. Also in the quarter, Bell received an initial contract authorization for four additional V-22 aircraft. On the commercial side of Bell, we delivered 35 helicopters, up from 34 in last year's second quarter. At Textron Systems, we saw continued solid margin performance on slightly higher revenues. In June, systems delivered craft 107 to the U.S. Navy Ship-to-Shore Connector Program. The eighth craft delivered to the Navy. Also during the quarter, systems Aeroson Hybrid Quad UAS was among four competing unmanned aerial systems that were awarded a design contract under the first option of the Army's Future Tactical Unmanned Aircraft Systems Program. Systems also advanced as part of Team Lynx, led by American Rheinmetall, in the next phase of the U.S. Army's XM-30 program, Textron Systems is the designated manufacturer of Team Links. The Army down selected two competitors for the next phase of the program, which includes detail design and prototype builds. Moving to industrial, we saw higher revenues in the quarter driven by higher volume at both Caltechs and Specialized Vehicles. At Specialized Vehicles, we announced the new Liberty LSV, a street legal vehicle powered by our elite battery system with four forward-facing seats. Within Caltechs, we saw increased volumes year-over-year across all our geographic end markets. Moving to e-Aviation, we began wind tunnel testing on the Nexus eVTOL aircraft. These tests represent a significant step in the aircraft development process and supporting design validation activities. Additionally, we continued the prototype assembly and systems integration of the NUVA, our hybrid electric unmanned cargo VTOL aircraft at our facilities in Slovenia. With that, I'll turn the call over to Frank.
spk11: Thanks, Scott, and good morning, everyone. Let's review how each of the segments contributed, starting with Textron Aviation. Revenues of Textron Aviation of $1.4 billion were up $78 million from the second quarter of 2022, reflecting higher pricing of $95 million, partially offset by lower volume and mix. Segment profit was $171 million in the second quarter, up $22 million from a year ago, largely due to favorable pricing, net inflation of $52 million, partially offset by an unfavorable impact from performance of $23 million. Performance included unfavorable manufacturing performance largely related to supply chain and labor inefficiencies. Backlog in the segment ended the quarter at $6.8 billion. Moving to Bell, revenues were $701 million, up $14 million from last year due to higher pricing of $21 million, partially offset by lower military revenue of $7 million. Segment profit of $65 million was up $11 million from last year's second quarter due to a favorable impact from performance of $13 million, largely reflecting lower research and development costs and a favorable impact from pricing, net of inflation of $9 million, partially offset by lower volume and mix. Backlog in the segment ended the quarter at $5.6 billion. At Textron Systems, revenues were $306 million, up $13 million from last year's second quarter, largely reflecting higher volume. Segment profit of $37 million was down $1 million from a year ago. Backlog in the segment ended the quarter at $1.9 billion. Industrial revenues were $1 billion, up $155 million from last year's second quarter, largely due to higher volume and mix at both Caltechs and Textron specialized vehicles of $121 million and a favorable impact from pricing of $37 million. Segment profit of $79 million was up $42 million from the second quarter of 2022, primarily due to higher volume and mix of $32 million and a favorable impact from pricing, net of inflation of $17 million. principally at Caltechs, partially offset by an unfavorable impact of $10 million from performance. Text on e-aviation segment revenues were $11 million, and segment loss was $12 million in the quarter, primarily reflecting research and development costs. Finance segment revenues were $18 million, and profit was $12 million. Moving below segment profit, corporate expenses were $21 million, net interest expense was $16 million, LIFO inventory provision was $35 million, intangible asset amortization was $10 million, and the non-service components of pension and post-retirement income were $59 million. In the quarter, we repurchased approximately 4.2 million shares, returning $273 million in cash to shareholders. Year-to-date, we have repurchased approximately 9.4 million shares, returning $650 million in cash to shareholders. Earlier this week, Textron's Board of Directors approved a new authorization for the repurchase of up to 35 million shares under which the company intends to repurchase shares to offset the impact of dilution from stock-based compensation and benefit plans and for opportunistic capital management purposes. To wrap up with guidance, we are increasing our expected full-year adjusted earnings per share to be in a range of $5.20 to $5.30 per share up from our prior range of $5 to $5.20 per share. We also continue to expect full-year manufacturing cash flow before pension contributions of $900 million to $1 billion. That concludes our remarks, so operator, we can open the line for questions.
spk07: Thank you. And again, ladies and gentlemen, if you wish to ask a question, please press 1 and then 0 on your touch-tone phone. You'll hear an acknowledgment that you've been placed into queue, and you can remove yourself from queue at any time by repeating the 1-0 command. We ask if you're on a speakerphone to pick up your handset before pressing the numbers. Once again, for questions, it's one and then zero. Our first question will come from the line of Peter Arment with Baird.
spk03: Yeah, good morning, Scott, Frank. Hey, Scott, I guess, you know, start with aviation, really strong performance on margins and top line. Do you still, you know, kind of tracking, I mean, I guess with the supply chain, the way There's been so much volatility. How are you thinking about just kind of your delivery targets and just managing your skyline? I know you're probably sold out now, much farther out, just giving your backlog. Maybe just some overall comments. Thanks.
spk10: Sure, Peter. Look, I think on the order activity, the market is still quite strong. So I think we're posted a strong book to build. Again, in the quarter, it's both jets and turboprops. So I think we continue to be really happy with how the market is is behaving in terms of demand and pricing. So that's all good. As I think you're hearing from everybody, the biggest challenge still remains on the supply chain side of things. I'd say it's not getting worse. It's probably modestly getting better. But as you know, the challenge is every part's important, right? So you may not have as many problems, but you still are kind of hit by that weakest link. And if you look at our numbers, we're probably a few jets lighter in each quarter than we would like to be. That's obviously creating a little bit of inventory, but these things ultimately will sell. But I think when we think about the guide and what's going forward, we're still very happy with the margins and the execution performance despite inefficiencies and dealing with some of those supply chain issues. But I think for the year, it'll be a little light on the revenue side versus where we would like to be. But those things will push into 2024, obviously. So net of everything, it's still a good, strong demand environment. and we'll continue to fight our way through some of the supply chain challenges through the course of the year.
spk03: I appreciate that. And just one quick follow-up. Frank, did you disclose what the aftermarket growth was in the quarter for aviation at all?
spk11: So aftermarket for the quarter was about 3% growth and 32% of total revenue.
spk03: I appreciate it. Thanks again.
spk07: Thank you. We'll go next to the line of Sheila Kayaglu with Jefferies.
spk01: Good morning, guys, and thank you. Maybe just to start off a specific one on Bell, how do we think about the B-22 here? The House Appropriations Bill included about $700 million for potentially five B-22s. How do we think about how that could add legs to this program and transition to FLORA?
spk10: Well, so what's going on there, Sheila, is the Navy, of course, has now had a good while of deploying the CMV-22s into the Navy applications. As you know, that program was originally awarded, and the program record was based on replacing the C-2 COD. And so the number of aircraft was really sort of designed just to replace that mission. What we're hearing from the Navy, and they've been fairly public about this, there's been some nice articles out there, is that as they're getting the CMV-22 into the fleet, they're realizing there's a lot of things you can do with a V-22 that you couldn't do with a COD, which was restricted to big deck carriers and airports on shore. So the versatility and the performance of the V-22 is leading the Navy to say, look, we've got other applications that would cause us to like to have more of these aircrafts. That hasn't been formalized yet on the Navy side of things. I mean, there's a lot of dialogue around that. But what you're seeing in the House appropriations is those five, you know, CMV-22s, which would be above program of record, is because of the versatility and the desire ultimately of the Navy to have more of these crafts. So, you know, we'll see how this plays out, you know, over time. But, you know, we're obviously, you know, we're very happy with the performance of the aircraft. The Navy is very happy with the performance of the aircraft. And so hopefully we'll see
spk01: know some continuing level of production now that we're you know sort of beyond the program record that's great thank you for that color and then maybe a bigger picture one um frank if you could start and i know you'll be verbose so give um scott some time on this too you announced a pretty large repurchase program in the quarter how are you thinking about capital allocation and then scott obviously with ascend you know capital allocation for repo versus new product
spk11: So capital allocation, it really remains the same, Sheila. You know, we've obviously continued to generate very good free cash flow. We've talked about, you know, obviously we invest significant capital back into the business in R&D and CapEx. That's going to continue. But beyond that, we're generating a lot of free cash flow that we've been returning through share repurchase activity. We talked about, you know, kind of baseline of 5% to 6% or so of our share base a year from a repurchase standpoint. We came out of the pandemic more liquid than we usually are and need to be. And you've seen in the first half of the year, we've repurchased a lot of stock and we expect to continue to be in the market opportunistically. And the 35 million reflects kind of the need to have the shares available, authorization available to do that. We were down to 2.7 million shares on the last repurchase and we're rolling through it pretty quickly.
spk10: As Frank said, Jill, I certainly don't see it as a trade with R&D. As you know, we're a fairly high R&D company. We think investing in new products is the key to growth. I think we're seeing that play out right now. You look at aviation with the investments in latitudes and longitudes, a lot of the upgrades of a lot of our current products, both on the jet and the turboprop side. SkyCurrier now driving nice growth for us. The Ascend that we just announced, if you look at Bell, obviously we've made a huge investment over the years in the FLORA program and the FAR program. That's obviously now turning into a great growth driver for us. So across all the businesses, we're not going to change our strategy here in terms of R&D. We'll keep making the investments that we think we need to make in the product side. But despite all that, we're obviously making strong profits and strong cash flow, and that gives us a great deal of flexibility to allocate and drive some of that back through the share repurchase program and and do what's right, we think, for the shareholders.
spk07: Great. Thank you. Thanks. We'll go next to the line of Jason Gursky with Citi.
spk12: Hey, good morning, everybody. Scott, I was wondering if you could provide kind of a general update on the general aviation market. I think there was a show here recently up in Oshkosh. I was wondering if you had any general learnings from either that show or your general view of the general aviation market. And then second one would be just kind of an update from your perspective on the market for pilots, both for, you know, as they come in through the general aviation market and make their way maybe up into the biz jets and other aircraft that are more important to you.
spk10: Sure. Look, Jason, I think one of the nice parts about the market right now is this, you know, as much as we talk about the jets and the turboprops, and obviously that's the bulk of our business, but, you know, when you look at an Oshkosh, which is really a show that's, you know, aimed around the propeller, you know, marketplace and Cessna 172s and pedestal electric aircraft and all that kind of good stuff, you know, the demand is strong from top to bottom. You know, I mean, we, you know, we're, you know, have a great, you know, booked a bill in our 172s, 182s, 206s. So you see really, really strong demand from that GA customer that we've always had. There's very strong demand from training schools. So if we kind of shift into your pilot discussion, there's no doubt people have talked for many, many years about the shortages of pilots is coming up, and we're seeing that. So the training schools are putting a lot of orders in. They're increasing the size of their fleet so they can get more pilots through. There's a lot of activity with, frankly, some of the airlines buying a lot of aircraft so that they can get pilots, not just pilots that come into the industry, but pilots that need to get the hours in order to be eligible to fly for the actual airlines. And so those hours are best built by using less expensive per hour sorts of aircraft. We have a lot of demand on that side as well. So The nice part here is it's a robust market, everything from a Cessna 172 or a small Pipistrelle Veles all the way up through longitude. So the demand is very, very broad. Great. Thank you.
spk07: Thank you. We'll go next to the line of David Strauss with Barclays.
spk02: Hey, good morning, Scott and Frank. This is Brad Barton. I'm for David. Just quickly starting off on Bell, it looks like quarter might have been a little light. Can you just talk about how much FLORA added in the quarter and how Bell's going to ramp from here and hitting the $3.3 billion?
spk10: Sure. Look, I think Bell's pretty in line with where we expect them to be. The FLORA program you know, is certainly ramping. We've added a lot of engineering resource and, you know, and we were able to ramp reasonably quickly because we, you know, we still had a lot of engineering talent that had been, you know, going through the Florida design, you know, the CDRR risk reduction programs that we've retained through that period. So I'd say the team's ramping really well. You know, the Army's been great about, You know, working to quickly get authorizations out there for us to award contracts to our major subcontractors, which is a huge part of the program, obviously, as it goes out through the industrial base. You know, they've authorized, you know, critical long lead materials that we need to support the initial flight aircraft. So, you know, the program is probably ramping about as fast as I can imagine ramping such a large program. So I think we still feel very comfortable with the guide that we provided in terms of where we're going to end up the year on revenue as that program, you know, drives a lot of the growth, frankly, that's ramping up. You know, and look, the way to think about this program is it certainly is ramping here as we go through, you know, 2023, but, you know, the JDOCs are out there, right? In the next few years, this is sort of a billion-dollar-a-year program. Obviously, part of that, you know, is retained by the government to run their program offices and things like that, but I think we'll very rapidly ramp up and be, you know, how far exactly where we expect it to be, which is in that, you know, probably $800 million, $900 million a year of revenue.
spk02: Okay. And then just to follow up on it, there has been some reports in the press about potential interest and some properties out there. Just wondering if you could talk a little bit how you see the portfolio shaping up.
spk10: We probably won't provide any commentary on various rumors that are out there in terms of M&A activity at this point. All right. Thanks for your time.
spk07: Sure. Thank you. We'll go next to the line of Noah Poppenack with Goldman Sachs.
spk09: Hey, good morning, everyone. Hi, Noah. Hi, Noah. The aviation margin, that's one of the highest levels in a while. And the incremental, I think, is a little higher than your kind of long-term framework. And I guess that's despite the performance number you cited. If I add that back, I'm more in the mid-teens. And so I guess as I think about where that margin goes over time, obviously the labor and supply chain inefficiencies you're citing won't be solved immediately, but also won't last forever. So is it reasonable to think about the margin adjusted for that in the quarter as kind of a baseline plus an incremental for where you can go you know, late next year into the middle of the decade?
spk10: Well, I'm probably not ready to guide into the middle of the decade just yet, Noah. But look. Well, you have a pretty big backlog in that business now. Well, look, you know, there's, I think the margins are very good. The guys, you're right, are working through, you know, challenges, which we would certainly hope will abate, you know, somewhat over time. I mean, you know, obviously there's, you know, inflation that's baked into the you know, the numbers at this stage of the game. But I think we'll probably avoid doing, you know, too much in terms of, you know, guiding out to the future other than that, look, these are good gross margin products. I mean, I think we'll be, you know, the way to long-term think about this is going to be around that 20, 25% conversion. And, you know, we're sort of looking at, you know, certainly, you know, growth as we look into 2024 and beyond. But again, it's going to be in some part constrained by, supply and NSR is just looking and making sure that we're tracking to where the demand is in the marketplace. I think, again, we've talked before about the health of this industry should be running with a substantial backlog, and we are now running with a substantial backlog, and that's a good place for the whole industry to be.
spk09: In the near term, is it reasonable to expect that price net of inflation number to grow? Because I think the pricing in your backlog is still better than what's hitting the P&L now. Although, correct me if that's wrong. And then if inflation is decelerating, it would seem like both the top and bottom end of that number would be widening.
spk10: Well, look, I think we do feel good about the pricing that's going into the backlog, but we are still seeing inflationary pressures. The rate of inflation is certainly coming down, but there is still inflationary pressure out there.
spk11: Yeah, remember, you know, we have some longer term supply contracts. So we did a nice job of responding to LA demand in the market and created a more appropriate pricing environment. But there is some lag effect associated with our contracts and just the flowing in of inflation. But we still feel very good about where we are price, you know, net of inflation, but but there is a lagging impact on some of those costs.
spk09: Okay. And just last piece on it, is your rate of change in price decelerating with maybe some normalization in the market? Or did you not increase it so fast that it needs to slow and the rate of change is just kind of holding at this point?
spk10: I don't know. I have not run a first derivative on our price at this point. But I don't know. We probably won't go into that level, quite that level of detail. But suffice to say, we're still getting price and feel good about how that price demand is working in the market. All right. I appreciate it. Thank you.
spk07: We'll go next to the line of Robert Stallard with Vertical Research.
spk04: Thanks so much. Good morning. Scott, on the industrials, a good quarter there, both on the top line and the margin. How sustainable do you think this is going forward? And do you see this as a sign that the U.S. consumer is still holding in there pretty resilient?
spk10: Well, I do think it's a good sign for sure, Robert. I mean, the automotive guys' recovery as kind of every geography is encouraging to see those volumes going up in there. And I think the Caltex guys did a nice job of converting on that. We still continue to see strong demand. you know, across golf and turf and consumer products. I mean, so, yeah, I mean, it's, it's, they're, they're hanging in there, right? I mean, I think we all still worry a little bit about the, you know, that high end consumer, but things have been, have been pretty reasonable. Now, you know, as you know, there is a certain seasonality of these businesses and auto, we do a lot of summer shutdowns and, you know, things like that. So, you know, the, you know, second quarter is usually a stronger quarter. Third quarter is usually a little bit lighter in terms of, you know, the revenue, on those businesses. But look, net of the whole thing, I think the demand environment, you know, has been improving and our teams are doing a nice job of executing on that.
spk04: Yeah. And then, Frank, a technical question for you. You raised the EPS guide by 10 cents. Can you give us some idea of where that's coming from within the operations?
spk11: Yeah. I mean, it reflects, you know, kind of strong first half and, you know, the earnings, obviously, that the We just reported, so there's a little bit in there for, you know, kind of share count and some other things, but it reflects a solid first half of the year and just continuing good execution in the second half of the year. As Scott said, I think, you know, kind of there's a little bit of volume, you know, at aviation that is going to probably be light relative to our guide, but industrial is probably coming in stronger than we had first thought from a top line standpoint and overall solid execution across the businesses.
spk04: That's great. Thanks so much.
spk07: Thank you. We'll go next to the line of George Shapiro with Shapiro Research.
spk14: Good morning and good numbers. Scott, do you think we still do 200 deliveries or we should maybe call that 190 or something, given that we seem to be missing a couple each quarter?
spk10: Yeah, I think the number is going to be a little bit lighter than we originally had in there, George. So I don't think it's going to be 200 deliveries. As I said, I think their execution is strong. I think the margins and contribution earnings are going to be where we expected them to be, but it's going to be with a little bit lighter top line, just driven by, again, trying to get the aircraft out. Obviously, those are aircraft that will move into 2024. Sales are still going to happen, but I do think we'll be a little bit lighter on the year than what we originally guided on the top line.
spk14: At Bell, is the margin guide still good, assuming that this quarter was particularly strong because Flora hasn't fully built yet, so margins will weaken in subsequent quarters?
spk10: I think Bell is tracking right on where we expected from a guide standpoint. We're still seeing good execution on a lot of the production side of things. Obviously, Flora coming in is nice in terms of driving the top line. It Clearly, it absorbs a lot of overhead in the business, which helps maintain the level of profitability in some of the other product lines. But as we've talked about, the absolute number is we don't have as much V22 H1 production as we had, but we're going to still, I think, post a number that's very much in line with what we guided.
spk14: And then just one follow-up on industrial. I mean, It was particularly strong. I mean, I went back and looked. It was the best quarter since like Q2 of 18, and the business wasn't even the same at that point, although Caltech was obviously there. So you comment any more? I mean, it would seem like the sales would beat 3.6 billion guide here for the year, and the margin certainly would look like it could beat based on what the margin was this quarter. So if you comment a little bit more on that.
spk10: Yeah, look, I think we do have, you know, as I said, look, aviation is probably a little bit light on the revenue line. I think industrial will be a little bit stronger on the revenue line to offset that as we go through the year. I do think that the, you know, the margins, there's probably a little bit of upside to the margin, but certainly just the conversion on that revenue will give us a little bit of upside on the year. And again, that's part of what's factored into, you know, the raise on our guidance at the EPS level. So I think we're happy with how that's going on on the industrial side. And again, it's strong demand, recovering in the auto side. You don't see as much drag on automotive manufacturing, and that's good for us at Caltechs. And golf and turf and these markets are staying pretty robust. So I do think that's kind of the way we think about most of the offset here. We'll see some nice upside on the revenue there, and that will bring with it some increase in NAPA. that's certainly incorporated and part of our raise for the year.
spk14: Okay, thanks very much.
spk07: We'll go next to the line of Miles Walton with Wolf Research.
spk05: Hey, you have a little federal one for Miles. How are you? Good morning. So I think you kind of covered this a little bit with the ongoing disruption, I guess, within aviation, but at what point do you think that the pricing benefit will sort of overcome or more than overcome the sort of the negative on the performance side?
spk10: Well, I mean, it is, right? I mean, so our, you know, when you look at our, you know, pricing right now is even net of inflation is still enough to overcome, you know, some of the challenges in terms of the inefficiencies driven by some of the ongoing supply stuff. So I think that's a trend that, you know, we've had here for a while, and I expect we'll continue to see that as we go into the future.
spk05: Okay, and then I think you mentioned, so is 190 the right number to think about, or would it be maybe a little bit higher than that for the year?
spk10: We're not going to guide a specific number, but, you know, I mean, I don't think it's, you know, being light by a couple hundred million dollars is probably the right way to think about the top line. But, again, I think from a performance standpoint, margin standpoint, we'll, you know, we should be more or less in where we guided.
spk05: Okay, thank you very much.
spk07: Thank you. We'll go next to the line of Kai Vonrumer with TD Cowen.
spk13: Yes, thanks so much. So Scott, a strategic question. Obviously, your A&D business is growing with FLARA, some opportunity at OMFB, a number of other programs. And yet, when you look at your business, you're not really a niche player. And you're also not up with a GED, a Lockheed, those guys. strategically, you know, I think you said you'd like to increase A&D. How big would you like to get and what sorts of things would you consider buying to bolster your A&D business?
spk10: Well, that's a good question. Obviously, we'd like to be bigger. And I think that, you know, the approach we're taking here is investments that we've made in our existing businesses is driving a lot of that growth. So I think if you look at aviation, all the investments that we've made and continue to make in those new platforms, you know, you reference a couple of other names. Look, I think, you know, obviously we've made a huge investment in FAR over the years. That's going to drive a ton of growth and shows that we can go, you know, head to head on a program by program basis and win and drive a lot of organic growth. I think when you look at systems, some of the things that We talked around OMFV or what's now referred to as XM30 and ARV with the Marine Corps. There's things out there that are potentially significant growth drivers. We're going head-to-head with some of the guys that are the biggest names in the business, and I think we can win against them. Our focus continues to be making sure that we're making the right investments so that we can drive the organic growth and Will we do acquisitions if there's the right opportunity that comes along? Absolutely. But you know, we've got to, you know, I, you know, I've always felt that, you know, you want to do, you don't want to have to do a deal, right? So I think that our strategy is continue to make the right investments on the organic side so that we can drive really good growth. And if something comes along that makes sense from an accident standpoint, we're, we're happy to look at that.
spk13: So, so when you look at things, do you look at it sort of from a holding company perspective, this would be a good business. Or are there specific skill sets that you think would be complementary to what you currently do that would make you a stronger player in helicopters and whatever?
spk10: Well, look, I think, Kai, right now it's primarily looking in the A&D space, things that would help diversify us in terms of our strength in A&D. I don't think it's likely that you see something that's specifically in say the helicopter space. I just don't know that there's targets out there where you do that. And from a government standpoint and antitrust standpoint, I don't think you would probably see much activity in that space. I'd be kind of surprised. But I think you look at complementary A&D capabilities, certainly where we bring technological capability, where the target would bring technological capability that's some synergistic. But I think in large part, providing a more well-rounded, more diversified A&D company
spk13: Great. Thank you very much.
spk07: Thank you. And our last question will come from the line of Christine Leeweg with Morgan Stanley.
spk00: Great. Thanks. You know, Scott, with macroeconomic uncertainty and increasing interest rates, I mean, ultimately the demand and pricing for business jets and general aviation continue to be robust, you know, a surprise for the bears pretty much. So what do you think is driving this sustained demand, and how undersupplied do you think the market continues to be?
spk10: Well, look, I think the demand environment is driven by the fact that people, particularly people who have come into this market and started using aircraft and experienced what private aviation was all about, have had a great experience. I mean, they're time machines, right? It allows you to do things that you just can't do if you're using commercial transportation. So the productivity, the efficiency, the ability to get from anywhere to anywhere on your time in an expeditious way is something that the more and more people, and I think, again, if you go back to the COVID, a lot of people got exposed to this market that had not in the past, and they're turning out to be a great tool. And so I think that's what continues to fuel a lot of the demand in this marketplace. So Obviously, we offer a lot of products across a broad range of price points and performance, and I think that's why we're seeing just a fundamentally very strong demand environment. And as you know, it's not just our company and our products, but across a very, very broad range of general aviation.
spk00: Yeah, and I guess when you look at the portfolio, light, medium, and large cabin, that large cabin end of the market continues to also be robust. At this point, when you look at the Cessna portfolio, what's your appetite to go bigger? I mean, we had the Columbus and the Hemisphere that didn't come about, but is there a right moment to reintroduce an airplane of that size or even larger and move up the portfolio to the larger cabin jets?
spk10: No, I don't think there is. We did look at one point, as you know, would we stretch the top end of our platform? We did have programs at the time, and it you know, for technical reasons. And, you know, we ended up not doing those programs. I think that part of the market now, particularly as you go larger in that market, which is kind of the choice we were faced with, is a very well-served market. So I think we're better off focusing all of our R&D and our energy and our investments in the, you know, sort of up to that super mid-size on the longitude. We've been doing, as you know, a lot of great upgrades to a lot of those programs, platforms all across our portfolio. And, you know, we continue to make the right investments. Denali is still, you know, in development and, you know, that's going to be a home run for us. Ascend, which we just, you know, announced, I mean, that's right in the sweet spot of our market. You know, that's a segment of the market that we've had a great track record in the past with previous aircraft. And I think Ascend will be really well received and drive a ton of growth for us. So, you know, this is, I think that, And we're very focused on making those investments across everything from our little Cessna 172s and now, of course, in the electric space with Pipistrelle and the aviation up through Longitude. But I think that's a pretty good place for us to be, and that's where we're going to focus our R&D efforts.
spk07: Great. Thanks, Scott. Thank you. And ladies and gentlemen, today's conference will be available today, 10 a.m. Eastern Time, running through July 27, 2024 at midnight. You may access the AT&T replay system by dialing 1-866-207-1041 and entering the access code of 846-7989. International dialers may call 402-970-0847. Those numbers again are 1-866- 207-1041 or 402-970-0847 with the access code of 846-7989. That does conclude your conference for today. Thank you for your participation and for using AT&T Event Conferencing. You may now disconnect.
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