Textron Inc.

Thank you, Emily, and good morning, everyone.

Before we begin, I'd like to mention that we'll 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, Techfront's chairman and CEO, and David Rosenberg, our chief financial officer. Our earnings call presentation can be found in the investor relations section of our website. Revenues in the quarter were $3.3 billion, up $171 million from last year's first quarter. Segment profit in the quarter was $280 million, down $10 million from the first quarter of 2024. During this year's first quarter, adjusted income from continuing operations was $1.28 per share compared to $1.20 per share in last year's first quarter. Manufacturing cash flow before pension contributions reflected a use of cash of $158 million compared to a use of cash of $81 million in last year's first quarter. With that, I'll turn the call over to Scott.

Thanks, Scott, and good morning, everyone. Overall, revenues were up 5% led by Bell, partially offset by lower revenues in industrial. During the quarter, aviation delivered 31 jets and 30 commercial turboprops compared to 36 jets and 20 commercial turboprops in last year's first quarter. Aviation operations continue to improve as the factory progressed toward pre-strike performance levels while ramping production. Textron Aviation's fleet utilization remains strong in the quarter, contributing to aftermarket revenue growth of 6% as compared to last year's first quarter. Aviation announced the sale of seven King Air 260 training aircraft that will be used to train pilots for the Royal Canadian Air Force. In February, the FAA announced certification of the GE Aerospace Catalyst Turboprop Engine, marking an important milestone for the Beechcraft Denali program. To date, the program has amassed more than 2,700 flight hours and crossed 1,000 flights with three test articles. At Bell, revenues were up $256 million, or 35% compared to last year's first quarter, driven by strong growth in both military and commercial product lines. On the military side, execution of the FLARA and strength in military support programs contributed to significant growth from last year's first quarter. As we progress through the PILAR program, the focus this year includes design maturation and deliverables towards subsystem and weapon system critical design review, our next major program milestone. On the commercial side, Bell delivered 29 helicopters, up from 18 in last year's first quarter. During the quarter, Bell was awarded a contract for five additional CMV-22 aircraft. This award extends production through 2027. Bell announced a purchase agreement with Air Methods for 15 IFR-configured 407 GXIs and an option for 12 additional aircraft, with deliveries expected to begin later this year. Moving to systems, revenues in the quarter were slightly lower as compared to the prior year, largely resulting from the cancellation of the shadow program in 2024. Strong execution in the quarter to over 13.5% segment profit margin, up 110 basis points as compared to last year's first quarter. During the first quarter, systems received a contract valued at up to $100 million from the U.S. Navy for support software development updates for its unmanned mine sweeping operations. Also during the quarter, systems delivered the 13th ship to shore connector aircraft to the U.S. Navy. Moving to industrial, we saw lower revenues in the quarter compared to last year's first quarter, consistent with our expectations, with segment profit essentially unchanged as cost savings from our previous restructuring activities offset the impact of lower revenues on segment profit. Within specialized vehicles, we have completed the previously announced strategic review of the PowerSports product line, resulting in the sale of the PowerSports business, including the already-kept brand and its operations. Also during the quarter, aviation successfully completed the first hover flight of the Nuva V300, a long-range, large-capacity, hybrid-electric VTOL unmanned aircraft. This milestone marks an advancement in the development of sustainable and versatile unmanned aerial systems. With that, I'll turn the call over to David.

Thank you, Scott, and good morning, everyone. Let's review how each of the segments contributed, starting with Textron Aviation. Revenues of Textron Aviation of $1.2 billion were up $24 million from the first quarter of 2024, largely reflecting higher aftermarket revenue of $27 million. Segment profit was $127 million in the first quarter, down $16 million from a year ago, primarily reflecting the mix of aircraft sold, partially offset by higher aftermarket volume. Backlog in the segment ended the quarter at $7.9 billion. Moving to Bell, revenues were $983 million, up $256 million from the first quarter of 2024. The revenue increase in the quarter was driven by higher military revenues of $154 million, primarily due to higher volume from the U.S. Army's FLARA program and military sustainment programs, and higher commercial revenues of $102 million, primarily due to higher volume and mix. Second, profit of $90 million was up $10 million from a year ago, primarily due to higher volume and mix of products and services. Backlog in the segment ended the quarter at $7.1 billion. At Textron Systems, revenues were $296 million, down $10 million from last year's first quarter, largely due to lower volume, which included the impact of the cancellation of the shadow program in 2024, partially offset by higher volume for the shift-to-shore connector program. Segment profit of $40 million was up $2 million from last year's first quarter, primarily due to lower research and development costs, partially offset by lower volumes. Backlog in the segment end of the quarter at $2.3 billion. Industrial revenues were $792 million, down $100 million from last year's first quarter, largely due to lower volume and mix. Textron specialized vehicles revenues decreased $62 million, reflecting lower volume and mix, primarily in golf and context revenues decreased $38 million, largely due to lower volume. Segment profit of $30 million was essentially unchanged from the first quarter of 2024. as the impact of lower bond and mix was offset by the benefit of cost reductions from restructuring activities. Text on E-Aviation segment revenues were $7 million in the first quarter of 2025 and segment loss was $17 million as compared with the segment loss of $18 million in the first quarter of 2024. Finance segment revenues were $16 million and profit was $10 million in the first quarter of 2025 as compared to segment revenues of $15 million and profit of $18 million in the first quarter of 2024. Moving below segment profit, corporate expenses were $43 million, net interest expense for the manufacturing group was $25 million, LIFO inventory provision was $29 million, intangible asset amortization was $8 million, and the non-service component of pension and post-retirement income were $66 million. Our adjusted effective tax rate for the first quarter of 2025 was 15.3%. For the full year, we still expect a rate of 18%. During the quarter, we repurchased approximately 2.9 million shares, returning $250 million in cash to shareholders. To wrap up with guidance, we are reaffirming our expected full-year adjusted earnings per share to be in a range of $6 to $6.20. We also expect full-year manufacturing cash flow before pension contributions of $800 to $900 million. That concludes our prepared remarks, so operator, we can open the line for questions.

Thank you. As a reminder, if you would like to ask a question today, you may do so now by pressing star followed by the number one on your telephone keypad. If you change your mind or you feel like your question has already been answered, you can press star followed by the number two to withdraw yourself from the queue. Our first question today comes from the line of Robert Stellard with Vertical Research. Robert, please go ahead.

Thanks so much. Good morning. Good morning. Scott, let me start with you. On the Arctic Cat disposal, congrats on getting that done. Are you considering any further portfolio actions here?

Nothing that we're announcing, Rob. We always look at the portfolio, but we certainly would never pre-announce. Okay.

And then the other major issue, of course, at the moment is tariffs. and the trade war. And I was wondering if you've given any consideration to what the impact could be on the Textron businesses going forward from here.

Sure. Look, I think the tariff issue is one that everybody's talking about. I would say that when you look at our businesses, first of all, our largest businesses in the aviation space, whether it's fixed wing or rotorcraft, and we are principally a North American manufacturers, the vast majority of that manufacturing is in the United States. Certainly, we have operations in Mexico and in Canada. The good news is that with USMCA compliance, we're not having tariffs as things are crossing over that border. We do have quite a process that we're sort of in the middle of just going through and validating USMCA compliance, but I think so far we've seemed to be in very good shape. So we haven't seen a tariff impact in terms of anything moving amongst our North American operations. If you look at the Caltech business, as you know, we have manufacturing operations all around the world. You need to be close to those OEMs. But as a result, all those products that we manufacture in different regions around the world are consumed in those regions around the world. So we're not subjected to tariffs on any of that. Certainly, in all of our businesses, we do have some parts and suppliers that are either in Europe or in Asia. But so far, the impact of that has been pretty de minimis. And I think we'll just continue to monitor that as the situation evolves. But at this point, we certainly don't see it as being something that's a material impact to the company.

That's great. Thanks, Colton.

Thank you. Our next question comes from Sheila. Sheila Kaogulu with Jefferies. Sheila, please go ahead.

Thank you. Morning, Scott and David. And David, I just want to say congratulations on keeping up with the eight-minute tight script that Scott and Frank have. So congrats on that. Thank you.

Thank you.

Scott, maybe first one on Bell. Just really outstanding performance there. Revenue is up 35%, equally split between military and commercial, how do you think about the puts and takes on maybe the FLORA revenue contribution and profitability from here?

Sure. I think we had a very big increase obviously on a Q1 to Q1 basis. We did have very strong performance in terms of deliveries on the commercial helicopter side, but we also had a very large increase on the FLORA program. Q1 was still early in the program. Obviously, we're full run. At this point, it's not only our internal level of activity, but a lot more suppliers on board as we're starting to issue drawings and get things on purchase authorizations and actually start to build first parts in many cases. So we're seeing a real step function. I do still believe if you look at FAR on a year-over-year basis, it's probably going to be up 20% or so. So it will be a contributor through the course of the year. I think the margins are roughly in line with where we guided. I think that'll be relatively consistent through the course of the year as we see a large mix of the FLORA program driving a lot of the growth and commercial helicopters. OEM deliveries, as you know, also tend to be a little bit delivered to our overall margin rate. But I think all in all, Bell had a great quarter, and we would expect to continue to see nice growth and solid performance through the balance of the year.

Can I also ask on industrial how the Arctic cap and a certain product line sales impact revenues and profitability for the remainder of the year?

Uh, yeah, so we'll be down a little bit on revenue. Um, you know, when we, when we did the guide, we assume, you know, first quarter, which obviously there's revenue, you know, in line with what we expected here in Q1, you know, we did have some revenue through the balance of the year and expectation that we would need to run this as an aftermarket business. Obviously, as a result of the sale, which was really our desired outcome. We won't have that revenue in the next three quarters, but it's a pretty de minimis number. So I think we'll still be in the guide range on the revenue side and probably have a little bit of movement towards the upper end of the guide in terms of the margin.

Great. Thank you. Sure. Thank you. Our next question comes from Noah Poponek with Goldman Sachs. Noah, please go ahead.

Hey, good morning, everyone. Good morning, Noah. Scott, maybe you could just talk about the demand environment in the private jet market. Obviously, hard to predict the future, but in the past when we've had macro concerns, we've at least seen some pause in orders. Your one Q book to bill was still pretty healthy, even though the equity market highs were early March. But, you know, April 2nd was after the quarter ended. So I know it's never super useful to break it apart month by month, but just curious to what you're seeing and hearing from your customers.

Well, no, I mean, look, I think as you point out, anytime there's a great deal of uncertainty in the world, you can see some folks, you know, pause a little bit. And we're not seeing a dramatic impact. There's still order activity and flow that's happening, which I think is encouraging. And I do think part of it, Noah, is the fact that, you know, unlike the last decade or so, when you have an uncertainty or a ripple in the system, it's easy for people to say, well, I'll wait until next quarter. I think the backlog situation helps people say, okay, look, I'm talking about an aircraft that's going to deliver 18 months from now. So I think it's a different dynamic when you're thinking about deliveries that are out there 18 months to two years even, as opposed to, geez, what do I do with this quarter or next quarter? So yes, some customers are taking a pause, but a lot of other customers are continuing with their order activity, and I think we still feel like the demand environment is solid, and we continue to press on.

Okay. And then... Maybe you could just give us your updated plan on production and delivery growth through the rest of the year as you continue to recover from the strike but have demand to deliver more airplanes.

Sure. Look, I think we will see the ramp continue as we got it originally. We expected the first half to be a little bit lighter and to be a little bit lighter on the margin rate because you had a lot of that disruption still kind of working its way through and aircraft that were in part built last year and still getting delivered through the first half of this year. So I still think we're very confident in where we guided, and we'll see these couple hundred basis points below our guide here in the early part of the year and make up for that in the back half. The encouraging part is as we leave the quarter, the metrics that our teams track around productivity and attrition and earned hours and all those sorts of, of metrics that Ron and his guys drive every day, you know, leaving the quarter, you know, we're, we're getting back to kind of where we were in the pre-strike. So I would say that we do feel very comfortable that we've recovered from that disruption and those aircraft that we're now manufacturing, you know, largely which we'll deliver in the second half of the year are, are, are seeing the impacts of the productivity and efficiencies that we expected. So that, that, that, that model of sort of a ramp through the course of the year and, you know, improving margins, particularly in the back half, I think is going to be what we're going to see.

Okay. Thank you.

Thank you. Our next question comes from Peter Armand with Baird. Please go ahead, Peter.

Yeah, thanks. Good morning, Scott and Dave. Hey, Scott, on the continuing resolution, I know you had limited new starts in the first half, but now we've got a full year CR. Any impacts from that on systems or any of the other businesses?

Well, you know, that's a good question, Peter. I would say that in general, no. So when you look at this full year CR, which is obviously a very unusual situation, there were quite a few so-called amendments to that that provided specific guidance that allowed You know, programs, you know, to increase flora is a good example. That was in there at the number that we always expected in terms of the appropriation process. So that's why you're seeing this ramp on the flora side. So I think we're in good shape there. Similarly, on ship-to-shore connector, you know, the next tranche of craft was in that number. And so that's, you know, we're in the process of getting that added to the contract working with the Navy in sort of real time here. Other programs, money was appropriated in that FY25, so it's there. We're hoping to understand final resolution here on things like RCV and FTOS later on in the year. The good news is, generally speaking, order flow, contract activity in systems has been looking pretty good so far.

That's great to hear. Then just a quick follow-up on In aviation, just the latest on Denali, I saw the GE engine certainly certified in February. How is the rest of the program going?

I'd say the rest of the program is going very well. Peter, the milestone of getting the engine certified is hugely important to us. As you guys know, as we saw delays on that side of the program, we've always continued the flight test program, but in terms of all the formalities, we would kind of put other things in front of it, like Ascend and some of these you know, Gen 2s on CJ3s and things like that. So we kind of have, I would say we have Denali back in the queue here in terms of working through the balance of certification. And as we've always said, the good news is this issue around the engine with the certification was challenging, but the performance has been very, very good. So the aircraft is flying really, really well. We're thrilled with it. And, you know, we're sort of back in the queue now with the FAA and we'll be working through the aircraft level certifications.

Appreciate the details. Thanks.

Thank you. Our next question comes from David Strauss with Barclays. David, please go ahead.

Thanks, Maureen. Hey, Scott. You talked about Caltechs, no real tariff impact given the localized production, but how do you think about the demand environment for Caltechs given what's going on with tariffs?

Yeah, David, that's a good question. If there's any risk to a lot of the stuff in general, economically, it's more so than tariffs. It is what happens to macro demand. We try not to, we don't generally forecast on that. We kind of follow IHS. As you know, it's the only business really where we're not the end market guy. So I don't have any crystal ball to pontificate on what's going to happen to the global automotive markets. But the Q1 numbers were in line, consistent with what we have expected. So far, that's true in Q2. But what happens to global automotive demand is, I suppose... anybody's guess. And we obviously will roll with that one way or the other.

Okay. And Dave, I mean, can you, it sounds like industrial margin may be a little bit higher. Can you maybe just walk us through if there are any other moving pieces relative to the original guide, maybe corporate to the, you know, corporate's a little bit lower than what you thought for the year. If there's anything else we should know.

No, I mean, I think We would still expect corporate expense to normalize through the year, so we'll maintain our guide of $160 million. You know, interest expense will continue to trend up slightly throughout the year as we expected, just based on, you know, the turnover of our debt at a higher interest rate and the expected lower cash on hand, which generates interest income. On industrial, you know, I'd say the sequencing remains the same. We talked about You know, as the year went on, you know, the restructuring impact will continue to take effect, and we're starting to see that. So you'll see, you know, some sequential growth in the overall industrial number as we go through the rest of the year. And then, as Scott said, you know, a slight benefit as a result of the transaction with Arctic Cat that we announced today.

Okay. Are there any proceeds from the PowerSports divestiture, and are you holding on to that aftermarket piece, or did that go as well?

The aftermarket piece went with the business, and there was some small proceeds that were in material that will be in the Q2 results.

Thank you. Sure.

Thank you. Our next question comes from Seth Seifman with JP Morgan. Please go ahead, Seth.

Yeah, hey, guys. This is Alex on for Seth. Um, you know, maybe I wanted to kind of ask a follow up, um, you know, regarding demand that you guys have kind of seen in, in aviation, you know, understand you guys kind of pointed to that. There hasn't really been any major changes, but, you know, maybe to put a finer point on it and kind of address, I guess, the fractional flash, you know, net jet sides of things. Um, you know, curious if you guys kind of, you know, have any color you could add on that, whether you've maybe seen any changes in, in kind of data customer behavior. you know, typically think of them as a little bit more macro sensitive. So, you know, curious if you guys could kind of maybe provide, you know, some color there.

Now, I guess we don't normally try to provide NETJET's guide. I mean, we're still, I mean, NETJET's still taking deliveries of aircraft and NETJET's still putting, you know, new aircraft on order. So, I guess I probably won't give a lot of color as far as the net jet, you know, fractional and market, but certainly order activity continues, deliveries continue. So I wouldn't break that out as a specific, you know, item one way or the other.

Okay. Understood. And then maybe as a quick follow-up, maybe if we could get kind of an update on, you know, how things are trending more recently in the supply chain with regards to you know, aviation? I know you guys talked about, you know, an expected improvement in labor productivity, you know, following the strike as well. Is everything there kind of trending towards expectations?

Yeah, I would say that we still feel very good about where the supply chain side is at aviation. I think that certainly that's one of the factors driving the improvements in productivity. We don't see nearly as much out-of-station work. You know, parts are there, so the flow is much cleaner. That clearly helps to drive The productivity side, our attrition rates are also down. In terms of training and disruption, new people coming in, we're about the level of employment that we need to execute on the plan. Obviously, there's always a certain amount of hiring going on with retirements and things of that nature. I would say that the parts situation at aviation is where we expect it to be. It's in much, much better shape than it's been in a long time. There are always, as you can imagine, supply chain issues that pop up. There always have been issues that pop up periodically. But I'd say at a macro level, the supply chain at aviation is in good shape and our workforce situation is in good shape. And that's what I think will help to drive that improvement in both the volume and the productivity efficiencies and therefore margins as we go through the balance of the year.

Cool. Thank you, guys.

Thank you. Our next question comes from Miles Walton with Wolf Research. Miles, please go ahead.

Thanks. Good morning. I'm wondering on systems backlog, it looks like it declined sequentially about in line with your sales. And so maybe, Scott, back to Rob's question, or maybe it was Peter's question on the demand in the defense complex. What, if anything, was ordered there, and did you have any D-books that caused that decline?

No, there were no debuffs, guys. I mean, we don't usually go into much detail on the system's backlog. It tends to be very lumpy, right, because it aligns with contract awards. So, I mean, I talked frankly about Ship to Shore is a good example, right? I mean, that was in the CR. We're in the process of negotiating with the Navy, but that number, that won't go into backlog until we've definitized that contract. So it tends to be very lumpy, and I wouldn't read anything you know, one way or the other into the pet system's backlog.

Okay. And on the cash flow statement, could you give some colors to the larger use of cash and operating cash flow from the other category? What was that?

Yeah, there are really two components. Some additional inventory build at aviation that will normalize throughout the year, and then just some payment timing at Bell from Q1 to Q2 around some government programs But nothing really unexpected in either of those. And we'll look at on the payment timing with Bell, we'll get those receipts in Q2.

Okay, got it. Thank you.

Thank you. Our next question comes from the line of Jason Gursky with Citigroup. Please go ahead, Jason.

James Moore- yeah good morning Scott, I wanted to ask you a quick question about the Defense businesses so both at Bell and maybe systems, you know we clearly hearing a lot from. James Moore- Do D that the future is going to include a lot more unmanned autonomous and a treatable systems. I'm just kind of curious what you're seeing both on the demand side and whether there are new programs of record that are being stood up or whether there's an increased usage of OTAs and we've got some non-traditional actors that are coming in and garnering some wins, utilizing some products that they've developed that are unmanned, autonomous, and attributable, and kind of how your company is responding to this new vector in demand and what that means for R&D and contract types that you might be working on in the future. I'm just kind of curious if there's going to be a bit more IRAD here and firm fixed price contracts going forward. Thanks.

Sure. So I guess I would say with respect to unmanned, Without a doubt, there's a continued focus in that area. Obviously, things like FQAS are on the horizon, which is all unmanned. I would say that even when you look at platforms like AFLARA, for instance, the Army wants to make sure that that aircraft can be unmanned. Now, that doesn't necessarily mean they're going to fly it as an unmanned aircraft with 12 guys in the back going into an assault insertion, but relocations and you know, different missions, there might be places where they want that. So certainly, you know, one of the requirements on a new platform like that is that it needs to have the capability to perform autonomously. You may recall, good news is we flew the actual original B-280, you know, with, you know, safety pilots, obviously, but we flew that on autonomous mission, you know, many years ago. So ensuring that the capability is in these platforms for either, you know, optionally or unmanned, you know, capabilities that is becoming very, very standard. In terms of other activities out there, look, we've talked in the past about our high-speed VTOL program. You know, I think, you know, we're, you know, working with the military to sort of what are the next steps of that. So certainly when you look at, you know, technology that's still in that DARPA, you know, slash, you know, sort of special operations, there's activity there, which again is very focused on unmanned capability, whether that's in the CCAs or contested logistics, that continues to be a focus and we're participating in that area. There's no question that unmanned platforms of all types are going to continue to be a focus area when you look at remote combat vehicle. Again, there's an area where we've invested for the better part of a decade for autonomous land vehicles as well. Of course, we have our our custody programs and, you know, things we continue to support and unmanned line sweeping. So, you know, as a company, we have a lot of different programs everywhere from production to, you know, working, you know, with the DARPAs of the world on unmanned platforms. So it will be a continued focal point. And I think we're in a very good place. In terms of contract type, I guess I would say that I continue to see the trend being that when you're in production, that the military will lean towards fixed-price contracts, and frankly, we're fine with that. When you have a crushing product, you understand it, you know it. I think it's in everyone's interest to try to drive fixed-price contracting, but in most development activity, as far as a good example, when you're in the EMD phase, you're largely cost-plus. Most of these other contract types where you're working with earlier development, even if it's developmental, they're tending to stay to the cost-plus range. you know, or best effort, you know, kinds of contracting.

Right. Okay. That's helpful. I just can't, as a follow-up, one of the things you didn't mention there is a treatable systems. I'm just kind of curious on the munitions side or, you know, a treatable mass seems to be a phrase that we hear quite a bit. coming out of DOD these days. From a product perspective, what does that mean to you and is it an area that's of interest to you?

Well, we have some areas in the classified space and IRAD space that are looking at, you know, attributable, I guess most of the stuff for sure that I just mentioned are sort of platforms or derivations of platforms that are certainly much higher dollar, you know, value. So those would not fall into a desire for those to be attributable. But, you know, that's not been our historical focus, but for sure there are some smaller programs that we're executing that would be more along that attributable line. Great.

Appreciate the call, Eric. Sure.

Thank you. Our next question comes from Christine Lewag with Morgan Stanley. Please go ahead, Christine.

Hey, good morning, everyone. On Bell, we saw a nice positive uptick in commercial helicopter deliveries in the quarter. Can you talk about the demand environment, customer profile, pricing, and whether you'd expect this strength to continue?

I would say on the Bell commercial side, the demand is solid. I mean, order activity is good. It's across pretty much all of our models, all of our product lines, everything from the 505 up through the As you know, we have our initial 525s booked. We just at Verticon, you know, signed a deal with Omni to get 525, you know, out into their routes to do route proving. So I would say pretty much across the board, whether it's, you know, paramilitary, border patrol, medical, oil and gas, you know, we're seeing strong demand across pretty much all of the helicopter product lines.

Great thanks and Scott if I could add another one on business jets, I mean on on aviation historically we've seen a strong correlation of us investment spending and demand for medium sized business jets. And with this administration focused on bringing manufacturing back to the US, are you seeing any early indication of increased demand from corporate clients who may want to reshore manufacturing or anything like that.

um. As I said, I think we continue to see a strong demand environment. I don't know if I know how to correlate that to a company that's reshoring per se, but I would say in general, despite the fact that there's a great deal of uncertainty and without a doubt the tariff situation is helping create some uncertainty, but I think most companies in the mid to long term feel pretty good about, you know, where, where things are. And I mean, what tax policy obviously is, is hugely important. That doesn't get talked about here a lot just because of all the other, you know, things that are going on. But I think most people view the mid to long term as a favorable environment. So I think that's part, partly what's, what's driving that is reshoring and growth, you know, in the, in the U S helping that it could be, I don't know that I have any, you know, anecdotal that would say, Hey, this particular company who's reshoring is, is talking about a jet, but, But it's a good environment.

Great. Thank you.

Thank you. Our next question comes from Gavin Parsons with UBS. Please go ahead.

Hi, Scott and Dave. This is Joel Santos for Gavin Parsons from UBS. Given the current demand environment for business jets, can you give us some more color on how net pricing and performance Have it been here to date? And if those align with your expectation for 2025?

Well, as I said, I think the environment for BizJets, you know, remains solid. Our order activity, you know, continues to flow. You saw that in the first quarter in terms of book to bill. And as I said earlier, I think you'll have some people that will take a brief pause here just for some of the uncertainty, but You know, given the nature of the backlog and the overall, you know, I think people's longer-term economic outlook, we continue to see, you know, good order activity.

And on aviation after Marquette, can you guys give us some more color on the strategy in place for continuing to grow the segment and how that's impacting the overall profitability?

The aftermarket business was up 6% in the quarter, which is good growth. So we see flying hours stays robust. So our service centers are busy. Parts flow into the aftermarket is obviously strong. So that's a really important part of our overall company. As you guys know, we serve in a huge installed base, and that's largely driven by flying, and people are flying.

Perfect. Thank you.

Thank you. Our next question comes from Ron Epstein with Bank of America. Please go ahead.

Yeah. Hey. Good morning, guys. Maybe changing gears a little bit. With the electric aviation segment, Is there an opportunity to take some of the technology you guys are developing there and moving it over to some of your other aircraft, like, for example, an electrified caravan?

Well, Lagrange, you know, there's a number of companies out there that are electrifying caravans. You know, it's been sort of one of the preferred choices, frankly, for folks, you know, that are working in that space because it has just such a huge, useful load, right? So to the extent that you have a a penalty in terms of battery weight and stuff like that. A caravan can absorb an awful lot of weight and still provide, you know, really good performance with a good payload and still, you know, hundreds of miles of range even with a lot of battery load. So caravans have actually been used by a lot of companies as test beds for this activity. So, you know, now again, where that goes and, you know, is it the right answer or do you have a hybridized version of it? You know, that I think is all still to be determined, but for sure, a caravan is one where you can electrify. People have electrified caravans, and we work to support those companies. We're not doing that ourselves. We're working with those guys to support their efforts towards ultimately, hopefully, certification where you would have an electrified caravan.

Now, if there's meat on that bone, is that the market you'd want to get into? I guess that's what I'm getting at, given that you have in-house technology anyway.

Yeah, I mean, well, I mean, I, I will go into all the, the, the gory details here, but I mean, you know, a couple of companies we've, we've worked with, you know, we do have arrangements where, you know, like say they're doing the work, we're supporting them and providing them information. They would own, let's say a supplemental type certification that would let you take a caravan and modify it, um, you know, to put it into service as an electrified aircraft. And, you know, and we have the ability to take that and incorporate that, you know, STC basically into our production line. So if we see sufficient volume, sufficient demand, we would absolutely look at incorporating that and turning that into a production product.

Got it. And then maybe just one last one, changing gears. Nobody's really asked much about it on the M&A front. Is there much out there? I mean, you guys are looking at stuff. Defense tech seems to be a space where there's a lot of interest in software-driven hardware, that kind of thing. Are you guys thinking about anything like that, or If you just give us a broader feel about how you're thinking about the current M&A environment.

Sure, Ron. Look, I mean, we continue to look all the time. You know, we've been in a number of deals, but, you know, we do look at, you know, what do the multiples look like? You know, what do the earnings look like? And is it something that we can do that would be accretive? And if it's something that we thought we could get a price point where it's accretive, we would absolutely, you know, entertain adding things like that, you know, obviously particularly in our A&D space. But You know, look, I mean, things maybe here are a little rocky with some of the uncertainty in the world, but, you know, a lot of these deals are just kind of a little bit on the nutty side in terms of, you know, multiples and not something we thought could be a creator for our shareholder.

Yeah, got it. Very cool. Thank you.

Thank you. Our next question comes from Pete Skibitsky with Alembic Global. Please go ahead.

Good morning, guys. Hey, Scott, the release stated that, and I think you might have mentioned that Bell military sustainment volume was up year over year. Can you talk about where that's coming from? I assume maybe it's H1 and V22. I don't know if it's weighted one way or another, but can you talk about that and maybe if that's sustainable or if it was just a timing thing?

Sure, Pete. Look, you're right. I mean, it is the legacy, you know, so-called legacy platform. So H1 and V22, you know, we continue to have you know, ongoing contracting activity with parts with PBLs and, and, you know, things of that nature. So, you know, that, as you know, is always also a little bit lumpy, right? We often find ourselves in a situation where we're out there building, you know, because we know the demand is there and then just contracting takes a while. And so, you know, when those contracts get definitized, you know, stuff that we have that would move from, you know, company funded, you know, long lead gets put up against that, you know, that, that contract. So you always do have a little bit of lumpiness, but, But yes, it's related to H1 and V22 programs, but I expect that to continue to be there. You know, these aircraft are flown, you know, every day, and they generate a lot of aftermarket demand, and we expect, you know, to continue to support that for many, many, many years to come.

Okay, thank you. And then just, I just want to follow up on Jason's comment earlier, question earlier about unmanned, but sticking kind of to the unmanned surface vehicle area where you've participated in the past with the CUSP and I think you guys announced the Tsunami family. And I just want to ask, you know, is this a marketplace on the USP side that's really, you know, growing rapidly? You mentioned you dropped in classified earlier in your comments. And I ask that because I think there's been a couple of startups that have emerged out of stealth mode fairly recently with some money behind them. And so I'm just wondering if this is an area on the surface side that's really kind of poised to grow. Or if you're maybe more balanced type of a view and you think it's going to be a few more years of experimentation before we see something there out there?

Well, look, I do think it's growing. I think the analogy I would go back to when you think about early days of unmanned aircraft systems, the proliferation of those missions and different types and whatnot has grown dramatically from just ISR to weaponization. Obviously, you've got very long-range, high-altitude stuff. You've got very tactical all the way down to almost micro versions of these systems. I think you're seeing the same thing happen in the unmanned surface pestle area. Obviously, we've been a player in this from the very, very early days of it with CUS-V. It's not surprising that the first applications that everyone knows of that are out there are around mine hunting. This is place you'd like not to be as a person when you're out there doing mind hunting operations. So, you know, whether it's sweeping or in addiction, you know, that's an area that we've played. We continue to do that. We work very closely with the Navy and have for, you know, quite some time in supporting that mission and also supporting now, you know, the integration of new platforms onto those sorts of craft. I think they have a roadmap that shows more craft and of different types and different missions, you know, going into the future. We're working with them on that all the way to the extreme. And, you know, you mentioned it, you know, is something like tsunami, right. Which is sort of in that attributable, you know, higher volume, lower cost, you know, again, with different, you know, mission payloads, um, you know, going forward. And, you know, that's a good example. Everybody talks about sort of these new companies. Well, I'm putting money behind it. We've been putting money behind this for a very long time and we have programs to show for it. So, um, These things do take investment up front for sure, but I think Tsunami is a good example. It shows you can go compete with all these new upstart companies, and we actually won because we, too, have put a lot of money behind this and invested in future applications.

That's great. Thanks for the call. Sure.

Thanks. Thank you. We have no further questions, and so this concludes today's call. Thank you everyone for your participation. A replay will be available until Thursday, May 1st at 1159 p.m. Eastern Time. You can access the replay by dialing the United States local number 929-458-6194 and use the access code 826-596. Thank you everyone for joining us today. You may now disconnect your lines.