Title

Presentation

Textron Inc. beats earnings expectations. Reported EPS is $1.28, expectations were $1.17.

Emily: Good morning, everyone, and a warm welcome to the Textron Inc. Q1 2025 Earnings Call. My name is Emily, and I’ll be moderating your call today. After the presentation, you will have the opportunity to ask any questions, which you can do so at any time by pressing star followed by the number one on your telephone. I will now hand over to Scott Hegstrom, Vice President of Investor Relations, to begin. Scott, please go ahead.

Scott Hegstrom: 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. The call today will have Scott Donnelly, Textron Inc.’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.

Scott Donnelly: 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 remained strong in the quarter, leading 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 strengthened military support programs contributed to significant growth from last year’s first quarter. As we progress through the FLARA program, the focus this year includes design maturation and deliverables towards sub 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 drove a 13.5% segment profit margin, up 10 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 thirteenth ship-to-shore connector craft 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. The segment profit was 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 Power Sports product line, resulting in the sale of the powersports business, including the Arctic Cat 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.

David Rosenberg: Thank you, Scott, and good morning, everyone. I’ll review how each of the segments contributed, starting with Textron Aviation. Revenues at Textron Aviation of $1.2 billion were up $24 million from February, largely reflecting higher aftermarket revenue of $27 million. 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 February. 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.

Segment profit of $90 million was up $10 million from a year ago, primarily due to higher volume mix of products and services. Backlog in the segment ended the quarter at $7.1 billion. At Textron Systems, revenues were $290 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 February 2024, partially offset by higher volume for the ship-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 volume. Backlog in the segment ended 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 Kautex 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 volume and mix was offset by the benefit of cost reductions from restructuring activities. Textron eAviation segment revenues were $7 million in February. Segment loss was $17 million as compared with a 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 postretirement income was $66 million. Our adjusted effective tax rate for February 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 $215 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 to be $800 to $900 million.

That concludes our prepared remarks. So, operator, we can open the line for questions.

Emily: Thank you. 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 Stallard with Vertical Research. Robert, please go ahead.

Robert Stallard: Thanks so much. 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?

Scott Donnelly: Nothing that we’re announcing, Rob. We always look at the portfolio, but we certainly would never pre-announce.

Robert Stallard: Yeah. 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 Inc. businesses going forward from here.

Scott Donnelly: 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 manufacturer. 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. I think so far we’ve seen to be in very good shape. We haven’t seen a tariff impact in terms of anything moving amongst our North American operations.

You look at the Kautex 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.

Robert Stallard: That’s great. Excellent.

Emily: Thank you. Our next question comes from Sheila Kahyaoglu with Jefferies. Sheila, please go ahead.

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

David Rosenberg: Thank you.

Sheila Kahyaoglu: Scott, maybe first one on Bell, just really outstanding performance there. Revenue is up 35% equally split between military and commercial. You think about the puts and takes on maybe the FLARA revenue contribution and profitability from here?

Scott Donnelly: Sure. So, Sheila, 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 FLARA program. Q1 was sort of 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 FLARA 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 FLARA program driving a lot of the growth and commercial helicopters. OEM deliveries, as you know, tend to be a little bit dilutive 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.

Sheila Kahyaoglu: Can I also ask on industrial how the Arctic Cat and certain product line sales impact revenues and profitability for the remainder of the year?

Scott Donnelly: Yeah. So we’ll be down a little bit on revenue. When we did the guide, we assumed first quarter, which obviously revenue in line with what we expected here in Q1. We did have some revenue through the balance of the year in 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 pretty de minimis. So I think we’ll still be in the guide range on the revenue side and probably have a little bit movement towards the upper end of the guide in terms of margin.

Sheila Kahyaoglu: Great. Thank you.

Emily: Thank you. Our next question comes from Noah Poponak with Goldman Sachs. Noah, please go ahead.

Noah Poponak: Hey. Good morning, everyone.

Scott Donnelly: Morning, Noah.

Noah Poponak: Scott, maybe you could just talk about the demand environment in the private jet market. Obviously, it’s 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 Q1 book-to-bill was still pretty healthy even though the equity market highs were early March. But, you know, April 2 was 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.

Scott Donnelly: 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 pause a little bit. And we’re not seeing a dramatic impact. There’s still order activity in flow that’s happening, which I think is encouraging. And I do think part of it, Noah, is the fact that, unlike the last decade or so when you have uncertainty or a ripple in the system, it’s easy for people to say, well, just I’ll wait till next quarter. I think the backlog situation helps people say, okay. Look. I’m talking about an aircraft. It’s going to deliver eighteen months from now. So I think that’s, you know, it’s a different dynamic, you know, when you’re thinking about deliveries that are out eighteen months to two years even, as opposed to, you know, do I do it this quarter or next quarter?

So yes, some customers are taking a pause, but other customers are continuing with order activity. And I think we still feel like the demand environment is solid and we continue to press on.

Noah Poponak: 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?

Scott Donnelly: Sure. Look, I think we will see the ramp continue as we guided originally. We expected the first half to be a little bit lighter on the margin rate because you had a lot of disruption still kind of working its way through. And, you know, aircraft that were 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 of 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, you know, all those sorts of metrics that Ron and his guys drive every day.

You know, leaving the quarter, you know, 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 will deliver in, you know, in the half of the year are seeing the impacts of the productivity and efficiencies that we expected. So that model of sort of a ramp through the course of the year and improving margins, particularly in the back half, I think, is going to be what we’re going to see.

Noah Poponak: Okay. Thank you.

Emily: Thank you. Our next question comes from Peter Arment with Baird. Please go ahead, Peter.

Peter Arment: Yeah. Yeah. Thanks. Good morning, Scott and Dave.

Scott Donnelly: Hey, Scott. Good to hear from you.

Peter Arment: 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?

Scott Donnelly: 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 programs to increase. FLARA 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 FLARA side. I think we’re in good shape there. Similarly, on ship-to-shore connector, 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, look, money was appropriated in that FY ’25, so it’s there.

So we’re hoping to understand final resolution here on things like RCV and FQAS later on in the year. But the good news is, generally speaking, order flow contract activity in systems has been looking pretty good so far.

Peter Arment: That’s great to hear. And then just a quick follow-up on aviation, just the latest on Denali. I saw the GE engine, you know, certainly certified in February. How’s the rest of the program going?

Scott Donnelly: Yeah. I’d say the rest of the program is going very well, Peter. The last milestone of getting the engine certified is hugely important to us. You know, as you guys know, as we saw delays on that side of the program, it would always continue to reflect this program. But in terms of all the formalities, we would kind of put other things in front of it, like send some of these, you know, Gen 2s on CJ3s and things like that. So I would say we have Denali back in the queue here in terms of working through the balance of certification. As always said, the good news is this issue around the engine with a certification 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 certification.

Peter Arment: Appreciate the details. Thanks.

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

David Strauss: Thanks. Good morning.

Scott Donnelly: Morning.

David Strauss: Hey, Scott. You talked about the Kautex, no real tariff impact given the localized production. But how do you think about the demand environment for Kautex given what’s going on with tariffs?

Scott Donnelly: Yeah, David. Like, that’s a good question. And, you know, if there’s any risk to a lot of the stuff in general, economically, it’s more snow than tariffs. It is what happens to macro demand. We try not to, we don’t generally, you know, forecast on that. We kind of follow IHS. As you know, it’s one of 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, you know, I suppose anybody’s guess. And we obviously will roll with that one way or the other.

David Strauss: 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 corporate’s a little bit lower than what you thought for the year. If there’s anything else we should know.

David Rosenberg: 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. Interest expense will continue to trend up slightly throughout the year as we expected. Just based on the turnover of our debt at a higher interest rate and we expect a 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.

David Strauss: Okay. Are there any proceeds from the Power Sports divestiture? And are you holding on to that aftermarket piece? Or did that go as well?

David Rosenberg: The aftermarket piece went with the business and there were some small proceeds that were immaterial. That will be in the Q2 results.

David Strauss: Thank you.

David Rosenberg: Sure.

Emily: Thank you. Our next question comes from Seth Seifman with JPMorgan. Please go ahead, Seth.

Alex: Yeah. Hey, guys. This is Alex on for Seth. You know, maybe I wanted to kind of ask a follow-up, you know, regarding demand that you guys have kind of seen in aviation. You know, I 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 slash, you know, NetJets sides of things. Curious if you guys kind of have any color you could add on that, whether you’ve maybe seen any changes 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.

Scott Donnelly: No. I guess we don’t normally try to provide NetJets guide. I mean, we’re still, I mean, NetJets is still taking deliveries of aircraft and NetJets is still putting, you know, new aircraft on order. So I guess I probably won’t give a lot of color as far as the NetJets, you know, fractional end 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.

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

Scott Donnelly: 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. Parts are there, so the flow is much cleaner. That clearly helps to drive the productivity side. Our attrition rates are also down. So, you know, in terms of training and disruption, new people coming in, we’re about the level of employment that we need to, you know, to execute on the plan. I mean, obviously, there’s always a certain amount of hiring going on with retirements and things of that nature. But, yeah, 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, 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.

Alex: Cool. Thank you, guys.

Emily: Sure. Thank you. Our next question comes from Myles Walton with Wolfe Research. Myles, please go ahead.

Myles Walton: 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 debook that caused the decline?

Scott Donnelly: No. There were no debooks, guys. I mean, we don’t usually go into much detail on the systems backlog. It tends to be very lumpy. Right? Because it aligns with, you know, contract awards. You know, so I mean, I talked frankly about, you know, 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, you know, we’ve definitized, you know, that contract. So it tends to be very lumpy, and I wouldn’t read anything, you know, one way or the other into that system’s backlog.

Myles Walton: Okay. On the cash flow statement, could you give some color as to the larger use of cash and operating cash flow from the other category? What was that?

David Rosenberg: Yeah. There’s 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 will look at on the payment timing with Bell, we’ll get those receipts in Q2.

Myles Walton: Okay. Got it. Thank you.

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

Jason Gursky: Yeah. Good morning, Scott. I wanted to ask you a quick question about the defense businesses. Both at Bell and Navy Systems. You know, we’re clearly hearing a lot from DOD that the future is going to include a lot more unmanned autonomous and attritable 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 nontraditional actors that are coming in and garnering some wins, you know, utilizing some products that they’ve developed that are unmanned, autonomous, and attritable, 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 for fixed-price contracts going forward. Thanks.

Scott Donnelly: 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 FLARA, you know, it’s a manned platform, but there are certainly missions where you don’t want 12 guys in the back going into an assault insertion, but relocations and different missions, there might be places where they want that. So certainly, 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 V-280, you know, with safety pilots, obviously. But we flew that on an autonomous mission many years ago.

So ensuring that the capabilities in these platforms for either optionally or unmanned capabilities are just becoming very, very standard. In terms of other activities out there, look, we’ve talked in the past about our high-speed VTOL program. I think we’re working with the military, sort of what are the next steps of that. So certainly, when you look at 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, you know, whether that’s in the CCAs or contested logistics, continue to be a focus, and we’re participating in that area. So 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, right, again, there’s an area where we’ve invested for the better part of a decade for, you know, autonomous land vehicles as well. And, of course, we have our custody programs and, you know, things which we continue to support and unmanned mine sweeping. So 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.

You know, when you have a crushing product, you understand it. You know what? I think it’s in everyone’s interest to try to drive fixed-price contracting. But in most development activity, FLARA is a good example, when you’re in the EMD phase, you know, you’re largely cost-plus. Most of these other contract types, you know, where you’re working with, you know, earlier development even if it’s developmental, they’re tending to stay to the cost-plus, you know, or best effort, you know, kinds of contracting.

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

Scott Donnelly: Well, we have some areas in the classified space and IRAD space that are looking at, you know, attritable. 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 value. So those would not fall into desire for those to be attritable. But 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 attritable line.

Jason Gursky: Great. Appreciate the color.

Emily: Thank you. Our next question comes from Kristine Liwag with Morgan Stanley. Please go ahead, Kristine.

Kristine Liwag: 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?

Scott Donnelly: Look, I would say on the Bell commercial side, the demand is solid. I mean, our 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 412s. As you know, we have our initial 525s booked. We just signed a deal with Omni to get 525 out into their routes to do route proving. So I would say pretty much across the board, whether it’s paramilitary, border patrol, medical, oil and gas, you know, we’re seeing strong demand across pretty much all of the helicopter product lines.

Kristine Liwag: Great. Thanks. And, Scott, if I could add another one on business jets, I mean, 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?

Scott Donnelly: No, as I said, I think we’re, you know, we continue to see a strong, you know, demand environment. I don’t know if I know how to correlate that to, you know, a company that’s bringing reshoring per se. But I would say, you know, in general, despite, you know, 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 things are and, I mean, what tax policy obviously is hugely important. That doesn’t get talked about here a lot just because of all the other 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 probably what’s driving that is reshoring and growth, you know, in the US. Helping that? It could be. I know that I have any, you know, anecdotal that would say, hey. This particular company who’s reshoring is talking about a jet. But it’s a good environment.

Kristine Liwag: Great. Thank you.

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

Joel Santos: Hi, Scott and David. 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 been year to date? And if those align with your expectation for 2025?

Scott Donnelly: Well, as I said, I think the environment for biz jets, 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 given the nature of the backlog and the overall, I think people’s longer-term economic outlook, we continue to see, you know, good order activity.

Joel Santos: And on aviation aftermarket, 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?

Scott Donnelly: Oh, okay. The aftermarket business was up 6%, you know, in the quarter, which is good growth. So we see flying hours, you know, stays robust. So our service centers are busy. Parts flow into the aftermarket is obviously strong. So, you know, 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, you know, by flying and people are flying.

Joel Santos: Perfect. Thank you.

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

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

Scott Donnelly: Well, Ron, you know, there’s a number of companies out there that are electrifying caravans. 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 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 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, you know, to be determined. But, you know, for sure, Caravan is one where, you know, you can electrify. People have electrified caravans, and we work to support those companies. We’re not doing that ourselves. We’re working, you know, with those guys to support their efforts, you know, towards ultimately, hopefully, certification where you would have an electrified caravan.

Ron Epstein: Now if there’s meat on that bone, is that a market you’d want to get into? I guess that’s what I’m getting at. Right? Like, given that you have in-house technology anyway.

Scott Donnelly: Yeah. I mean, we’re, well, I mean, I won’t run all the gory details here. But, I mean, you know, a couple of companies we’ve worked with, you know, we do have arrangements where, you know, let’s say, they’re doing the work. We’re supporting them and providing information. They would own, let’s say, a supplemental type certification that would let you take a caravan and modify it, 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.

Ron Epstein: Got it. Got it. And then maybe just one last one changing gears. Nobody’s really asked much about 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 kind of, you know, software-driven hardware and 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?

Scott Donnelly: 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 what are the multiples look like, you know, what are 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, jeez, a lot of these deals were just kind of a little bit on the nutty side in terms of, you know, multiples and not something that we thought could be accretive for our shareholder.

Ron Epstein: Got it. Very cool. Thank you.

Emily: Thank you. Our next question comes from Pete Skibitski with Alembic Global. Please go ahead.

Pete Skibitski: 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 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?

Scott Donnelly: Sure, Pete. Now look. You’re right. I mean, it is the legacy platforms. So H1 and V22, you know, we continue to have ongoing contracting activity with parts, with PBLs, 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, you know, 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 contract. So you always do have a little bit of lumpiness, 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 to continue to support that for many, many, many years to come.

Pete Skibitski: Okay. 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 CUSB, and I think you guys announced the Tsunami family. I just want to ask, you know, is this a marketplace on the USB side that’s really, you know, growing rapidly? You mentioned you dropped in classified earlier in your comments, and I ask 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, you know, 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 bear out there.

Scott Donnelly: Well, look. Yeah. I do think it’s growing. I think, you know, 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-alpha stuff. You got very tactical all the way down to almost micro, you know, versions of these systems. So I think you’re seeing the same thing happen in the unmanned surface vessel area. Obviously, we’ve been a player in this from the very, very early days of it. With CUSB, it’s not surprising that the first applications, you know, that everyone knows of that are out there are around mine hunting.

It’s just a place you’d like not to be as a person when you’re out there doing mine hunting operations. So, you know, whether it’s sweeping or an 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 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 of different types and different missions going into the future. We’re working with them on that. All the way to the extreme. And, you know, you mentioned a few, you know, as something like Tsunami, right, which is sort of in that attritable, you know, higher volume, lower cost, again, with different, you know, mission payloads, you know, going forward.

And that’s a good example. Everybody talks about sort of these new companies. Well, 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, you know, these things do take investment upfront for sure. But I think Tsunami is a good example. It shows, you know, 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, you know, in future applications.

Pete Skibitski: Great. Thanks for the color.

Emily: Sure. 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 1 at 11:59 PM Eastern Time. You can access the replay by dialing the United States local number (929) 458-6194 and use the access code 826596. Thank you, everyone, for joining us today. You may now disconnect your lines.