Thank you for standing by. Welcome to the Textron First Quarter 2024 Earnings Call. [Operator Instructions] This conference is being recorded for digitized replay and will be available after 10 a.m. Eastern Time today through April 25, 2025. You may access the replay by dialing (866) 207-1041 and enter the access code 8546032. I would now like to turn the conference over to David Rosenberg, Vice President, Investor Relations. Please go ahead.

Thanks, Leah, 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 Connor, our Chief Financial Officer. Our earnings call presentation can be found in the Investor Relations section of our website. Revenue in the quarter were $3.1 billion, up from $3 billion in last year's first quarter. Segment profit in the quarter was $290 million, up $31 million from the first quarter of 2023. During this year's first quarter, adjusted income from continuing operations was $1.20 per share compared to $1.05 per share in last year's first quarter. Manufacturing cash flow before pension contributions reflected a use of cash of $81 million in the quarter compared to $104 million of cash provided in last year's first quarter. With that, I'll turn the call over to Scott.

Thanks, David, and good morning, everyone. In the first quarter, we saw higher segment profit at Aviation, Bell and Systems. At Aviation in the quarter, we delivered 36 jets, up from 35 last year, 20 commercial turboprops, down from 34 last year's first quarter. Aviation continues to see strong demand across our product lines that resulted in backlog growth of $177 million and in the first quarter at $7.3 billion. Textron innovations fleet utilization remained strong in the quarter, contributing to aftermarket revenue growth of 6% as compared to last year's first quarter. Throughout Q1, we saw continued improvements in our supply chain and hours attained in the factory, supporting delivery growth throughout the remainder of the year. At Bell, revenues in the quarter were up driven by higher military volume, reflecting the continued ramp of the FLRAA program. On the FLRAA program, we continue to progress through preliminary design reviews and expect to complete milestone B, which allows for the entrance into the engineering and manufacturing development phase of the program later this summer. Also during the quarter, Bell received an award for the production delivery in Nigeria of 12 AH-1Z helicopters. V-22, the recently enacted FY '24 budget includes 5 additional aircraft scheduled for delivery in 2027. On the commercial side of Bell, we delivered 18 helicopters down from 22 in last year's first quarter. During the quarter, we continued to progress toward FAA certification on the 525 expected later this year. Bell recently received its first order for 10 525 helicopters from Equinor, Norwegian state energy company. Moving to Textron Systems, revenue was flat and margin was up versus last year's first quarter. During the quarter, we received notification from our government customer of the termination of the shadow program. We're currently working with the Army on…

Thanks, Scott, and good morning, everyone. Let's review how each of the segments contributed, starting with Textron Aviation. Revenues at Textron Aviation of $1.2 billion were up $39 million from the first quarter of 2023, reflecting higher pricing of $48 million and lower volume and mix of $9 million. Segment profit was $143 million in the first quarter, up $18 million from a year ago, reflecting a favorable impact from pricing net of inflation of $14 million. Backlog in the segment ended the quarter at $7.3 billion. Moving to Bell. Revenues were $727 million, up $106 million from last year's first quarter, reflecting higher military volume of $95 million, primarily related to the FLRAA program. This was partially offset by lower volume on the V-22 and H-1 programs. Segment profit of $80 million was up $20 million from a year ago, primarily driven by a favorable impact from performance of $30 million which includes $13 million of lower research and development costs. Backlog in the segment ended the quarter at $4.5 billion. At Textron Systems, revenues were $306 million, flat with last year's first quarter. Segment profit was $38 million, up $4 million from last year's first quarter. Backlog in the segment ended the quarter at $1.8 billion. Industrial revenues were $892 million, down $40 million from last year's first quarter, largely reflecting lower volume and mix of $51 million, principally in the Specialized Vehicles product line, partially offset by higher pricing of $16 million in the segment. Segment profit of $29 million was down $12 million from the first quarter of 2023, primarily due to lower volume and mix at specialized vehicles. Textron eAviation segment revenues were $7 million and segment loss was $18 million in the first quarter of 2024 compared with a segment loss of $9 million…

[Operator Instructions] And we'll start with David Strauss with Barclays.

Scott, maybe if you could just dig in a little bit in the -- on the deliveries in the quarter. I think the mix was pretty strong but relatively flat year-over-year and you build a lot of inventory. So maybe just how the supply chain is doing? Did you want to deliver more airplanes than you ended up doing? And how do we think about how much deliveries could grow this year off of 168 last year?

Sure. David, look I think that we certainly expect to see nice growth on a year-over-year basis. The supply chain does continue to improve the number of hours that we're able to get in the factory in terms of labor hours that are productive hours post training and whatnot does continue to improve. So I think we feel pretty good about how things progressed through the quarter. Look, we always have a few aircraft that we would like to have gotten delivered. We definitely had some things that got late in the quarter or just didn't get to where they could transfer in time. But for sure, the trend in terms of productivity and efficiency and throughput in the factory improved as we worked our way through the quarter. So a little bit lighter than we probably would have liked but not a big number. And I think again, the momentum is good, and we certainly are still feeling very good about our guide in terms of a nice increase in volume on a year-over-year basis.

Next, we go to the line of Robert Stallard with Vertical Research.

Thanks Scott, maybe we'll start with Industrial, a bit of softness there in Q1. I know this is a tough division to forecast given its short-cycle nature. But are we finally seeing the U.S. consumer rolling over here.

Well, look, I think we talked last year Robert towards end of the year and in our guide that we expected to see the sort of high-end consumer dollars, sort of recreational personal transportation, stuff soften and we're seeing that. It's probably even a little bit softer than we would have expected. I think the automotive segment is pretty stable, which is fine. There are certainly some pieces in the vehicle business that are doing fine, but those high-dollar discretionary items have certainly softened. As you know, those are often financed. Finance costs are certainly higher than they have been. So we expected it to be softer, our PTV business, which has been a great business for us. It was a little bit softer than we would have expected, and that's part of what we'll have to do some additional restructuring on top of our initial plan to dial that in and avoid a situation where we put too much inventory out in the field.

Right. And then maybe one for Frank. On the revised restructuring plan, do you -- how do you expect the cash impact of that to flow through? And do you expect the savings to be roughly equivalent to the restructuring charge?

Yes. I think the savings will be ultimately in the area of $185 million or so kind of on a run rate basis and that we'll realize a fair amount of that by the end of 2024, but that will roll into '25 as well. The incremental cash is about $20 million in '24 for the additional restructuring, and we'll just absorb that into our cash guidance and overall cash for the restructuring for '24 is in the area of $60 million to $65 million. So -- but additional $20 million versus where we had been.

Next, we move on to Sheila Kahyaoglu with Jefferies.

Can we start off with maybe Bell, Scott, if we look at margins, they expanded up 130 basis points of Bell to 11% despite maybe $180 million of large contribution on the top line. So how do we think about the moving pieces to profitability for the year to get to 9.5% to 10.5%?

Well, I think we'll probably still end up in that range, Sheila. We had a strong Q1, obviously. We did have, as we noted there, a settlement on initial property-related lawsuit that gave us a little bit of a boost in the quarter. But I would say the team is performing well. As you know, we did restructuring actions to try to deal with the loss of the FARA program. We were able in a number of cases to take some of the appropriate engineering count and move that over to the FARA program, which helped us ramp that program up. But we also had to take some cost actions, both in the -- as a result of the loss of the FARA program as well as some of the lower production quantities. Obviously, it will certainly help us as we start to see some flow of the Nigerian H1 where that gets that line back up and going again, the extra 5 on V-22, which is above the original program of record is certainly a nice add, and we'll start to see some of that flow through in the latter part of the year. So I think Bell had a strong quarter. We're continuing to focus very much on cost to deal with the mix issues there. But we'll clearly end up towards the high side of the guidance on Bell, I think they're performing well.

Great. And then if I could ask one on Aviation, orders held up pretty well, book-to-bill above 1x. Maybe if you could provide any color on what you're seeing from your customers. One of your competitors noted interest rates are potentially prohibiting orders? If you could just comment on that?

Sheila, we continue to see real good strength across pretty much all the product lines in the business. So we're feeling pretty good about the order flow a lot of these aircraft are going to deliver a couple of years from now. So from a financing standpoint, I don't know, we don't -- I guess here is as much about that, but the order activity was staying pretty strong, very positive.

Next, we go to Myles Walton with Wolfe Research.

Scott, I was wondering if you could touch on the supply chain within Bell. Obviously, the 1Q seasonally light usually for the commercial helos but down year-on-year. And then also the comment you made on the 525 certification at year-end. I know that, I wonder if your business heads had been quoted is getting more confident on that into the year-end. Could you also comment on your confidence level of that certification?

Sure. Look, the Bell supply chain continues to I would say, improve. We always have a number of parts that are sort of problem children. We're continuing to work that. But in general, I think we are able to manage our way through that. And I don't think there's anything new or surprising that would have, in any way, affect our guide as we think about Bell commercial volumes through the course of the year. We did have a very strong Q4, obviously, on the commercial deliveries and so a little lighter maybe than we expected in Q1, but I think we're in good shape. And order activity there also remains very healthy. So I think Bell is in a good place. 525 flight test is going very well. The FAA flight testing portion, we're well into that. We have a few more performance flight test and then we go through sort of what they call FNR, which is about 150 hours of just durability reliability flying. And obviously, as you guys know, we've been flying that aircraft for a long time. It's proven to be very durable, reliable aircraft. So I don't think we'll have any issues going through there. So we'll we should wrap up flight testing year as we get to midyear. And as you know, there's a fair bit of paperwork processing and final documents and all that kind of stuff that have to go before the final certification. But I'd say at this point, we feel pretty good about where it is.

And if it were certified, what would be sort of the production rate that you target over the next few years?

Yes. We haven't released a production rate on the 525.

And our next question comes from Peter Arment with Baird.

Scott, nice results. Did you quantify what the settlement was in the Bell that affected the margins this quarter?

No, we didn't. I mean, it's not a huge number, Peter, but it's not that helped the margin rate a little bit in the quarter.

Okay. Okay. So I just want to clarify that. And then just a quick one for you, Frank. We expected that you would have higher corporate expenses in Q1. Just wondering, just from a modeling perspective calibrate the rest of The Street. Are we thinking more evenly spread for the balance of the year for your $160 million target?

Yes. As you know, that bounces around depending on where the share price is, but kind of we expected, it certainly will not be as volatile or may not be as volatile for the rest of the year. So we'll see. But yes, we're still sticking with the same target for the full year.

Next, we have a question from Cai von Rumohr with TD Cowen.

Yes. So your competitors, Gulfstream and Embraer basically had higher biz jet deliveries and we're kind of closer to where they expected to be. And yet you guys continue to struggle. Is part of that related to geography that you guys are in Wichita and you have to fight with Spirit to get people because they're trying to ramp to. And that, therefore, this is going to be a longer slog than maybe others are going to see?

Cai, I mean I thought we feel pretty good about our deliveries. We always would like to get another couple of jets here and there, but I think we're doing pretty good and feeling good about where we are. On the labor front, where we expect it to be. So I don't see a problem with our labor situation in which [indiscernible] I think everybody has been challenged by higher turnover rates just in terms of the amount of churn. And that's really been one of the biggest impacts to us on the productivity efficiency side is the number of people that come in and rotate back out, but I think most companies in all industries, frankly, are seeing that. But no, I don't think we have a -- we certainly don't feel like we have a macro unsolvable problem. It's improved significantly. The number of employees is where we needed to be. And I expect we'll -- as I said, we will continue to see a ramp on deliveries as we go through the year.

Great. And sort of maybe going back to Myles' question. So energy prices are up 525 is clearly targeting that market. You've got an order for 10, do delivery start relatively early next year? So could we start to see some pretty good build on that program?

Well, we're already ramping up the production side of the program to start to meet deliveries, but I suspect those deliveries will be in the late '25 sort of time frame. I think we're in a very good place in terms of the cycle, as you alluded to. Obviously, Equinor is an energy company, and those are for oil and gas offshore applications, and we have several other customers who were in, I'd say, positive latter stage negotiations that are primarily aimed at the oil and gas market right now. So it's certainly a favorable time to be getting these things through certification. And I think it fits a nice place in that end market.

Next, we go to Seth Seifman with JPMorgan.

Thanks very much. Good morning, everyone. I guess, Scott, you called out the contribution to EBIT growth from pricing at Aviation, and we'll see more about the other components in the queue. It looks like the compares for pricing get somewhat tougher from here, should we think about I know you probably have some visibility into the backlog here. Should we think about the $14 million of year-on-year pricing being a relatively high level compared to what we're likely to see for the rest of the year given that those compares get harder?

Yes. I think it kind of is pretty stable through the course of the year. I mean we do have obviously very good visibility to the pricing side of things because they're all in the backlog. Obviously, what's important to us is to maintain that spread of net pricing over inflation. And so that's really most of the work as we go through the course of the year is just managing the inflation numbers around supply base and things like that. So -- but I would expect to see positive price over inflation through the course of the year.

Okay. Okay. And then just a follow-up, I think you talked earlier about potentially some upside at Bell. I talked about being in good shape at Aviation. I mean when we think about where industrial came in, in the first quarter and where the guidance is, it looks like they're going to probably have a tough time getting to that guidance and then maintaining the overall guidance for the company of Aviation and Bell to fill in those gaps? Or that...

I think that -- yes, I think look, the industrial business, we would anticipate the revenue being a little bit lower than probably our original guide. I think we'll probably hold in the margin range. But I think we have sufficient upside in terms of the performance and how we're doing on the aviation and the Bell front that -- which is why we're comfortable holding our guide for the overall company.

Sorry about that. We will next go to the line of Noah Poponak with Goldman Sachs.

Scott, Frank. Just staying on the Aviation margin, I mean, it's a pretty good incremental in the quarter. I think it was a little bit of an easier compare. We kind of a sense what units and price are doing. I think you've had cost input inflation, but you've also cited just kind of supply chain and some internal operating performance, maybe that's been a hurdle. Is that behind you now? Is that no longer an issue as you move through 2024? And is that a tailwind year-over-year?

I think you'll still see some pressure in second quarter. No. Remember, a lot of these aircraft are inventories, a lot of that cost is inventory. So it usually takes the first half of the year to bleed out in the performance levels and productivity levels that we saw in the back half of the previous year in 2023 in this case. So I still think we see some pressure for that. But I'd say the good news is that when we look at the metrics in the factory and the efficiencies, productivity and things of that nature, we are starting to see some of the benefits that we expect to see in a more stable production environment, less supplier disruption, fewer onboarding, so less impact on the training. There's a lot of things the business is doing to try to address some of those issues. So I do think that we'll have margin rates that do continue to improve over the course of the year, but you're still going to have some drag of that inventory release, particularly as you get through Q2.

Okay. That makes sense. And then I guess just a follow-up on the Bell margin. I know the FLRAA is still ramping and it will kind of exit the year at a different revenue run rate than it achieved in the first quarter. But it's also ramped a decent amount. And I think this year, you'll get pretty close to what the run rate is in the sort of medium term. And this Bell margin just keeps outperforming. I mean the amount of margin compression that was discussed out there in the market, I guess, in the medium term? Is that kind of off the table? Or I guess, how do you see this dollar margin hanging in '24, '25 or '26, just in the medium term as you continue to ramp FLRAA?

Well, look, I mean, I think again, the team is performing well. We're doing everything we can on the cost front to deal with the lower production levels, things like the Nigerian order, the additional 5 V-22, these things are all helpful. I guess I would also note and you may have seen, if you look at the FY '25 budget request, one of the allocations of sort of the elimination of FARA and where that money in the out years goes, there is over $200 million of FY '25 money on FLRAA above what was originally in the [ FIDAE ]. So I do think that we're going to -- we're ramping quite nicely on FLRAA. We'll actually probably see that increase in terms of the number of revenues on FLRAA as we get into 2025 above what we might have originally expected on the [ FIDAE ]. So that's another couple of hundred million dollar probably revenue step as we get into next year. So look, we'll continue to stay very focused on the cost side and executing and perform against all these programs. And as I said, I think that will drive us to the higher side of the revenue guide -- part of the -- I'm sorry, the margin guide for this year, and we'll certainly get back to you on the FY '25 guide sometime in January, February.

Okay. And Frank, I guess, a decent amount or a lot of the items below segment manufacturing segment EBIT were pretty different in the quarter compared to what the full year implied on a quarterly run rate. If I look at what Aviation did finance did tax rate, corporate interest, even. Is it worth updating those on a full year basis? Or are they all just kind of still looking like the land in the range of what you had originally embedded in the earnings guidance?

Well, I think that finance will be in the range of what we had thought. We talked about corporate expense was kind of significantly higher this first quarter due to share price performance. But we'll kind of stick with that type of range. I think interest expense relative to, I don't know what -- we didn't really guide interest expense, but our -- I guess, we're probably a little better on interest expense, excuse me, relative to the $90 million depending on what interest rates do for the year. Our investment in cash is a little better than we had thought given the continuing higher interest rates, so there's probably a benefit there. But the other stuff is kind of in the range of what we had talked about.

Next, we have a question from Doug Harned with Bernstein.

I wanted to go back to your discussion around pricing at aviation. This has been a great story with continuing to be able to get pricing ahead of inflation. But when you look at this, and I'd say outside of what you have in the order book right now. When you try and plan longer term, is this something you can expect to continue? Or do you have to look at this as eventually pricing is going to come back and kind of converge with inflation rates?

Jeez, I don't know. I mean, obviously, I would say at a macro level, generally speaking, over very long periods of time, price inflation probably end up pretty close. I think we certainly went through a number of years in this industry where the prices were where the products were way under price. I mean it just doesn't make sense. So I mean, we had a significant catch up in price. I think got them back to much closer to where they should be. And obviously, our expectation is you're going to continue to see inflation on a go-forward basis, and we expect to see pricing increasing on a go-forward basis. And then we're seeing that. I mean pricing in the market is solid. And beyond that, I'm not sure how to forecast over a long period of time. But we still think demand is strong and the price environment is also doing well. As I said, I think when we guided, we talked about the fact that you wouldn't see as significant a price -- absolute price increase, as you saw in the last couple of years, but you also see some inflation starting to come down as well. So anyway for us, what's important is that we have net pricing positive over inflation.

Okay. And then just switching over to Bell for a moment on -- again, on margins. You've talked in the past, and I think as one would expect, initially, FLRAA is dilutive. But when you look at that trajectory now that you're moving forward, you're headed toward [ Milestone B ], I would expect long term, this is a very accretive program once you're in full rate production. Can you give us a sense of how you expect kind of the time line of FLRAA's contribution to margins to proceed?

Well, I mean, I think that -- as you described, that's kind of what you would nominally expect for any of these large defense contract programs, FLRAA is a very big program, right? So the EMD phase of this thing goes out through into 2030. Now you'll start to see, I would suspect initial production lots. We have LRIP deliveries that happen out in 2028, but you'll start to see some of the follow-on production lots be negotiated out in that time frame. But certainly, the next several years is very much dominated by the EMD program.

Okay. And that would be dilutive in that period.

Yes. Correct.

Next, we go to the line of Jason Gursky with Citigroup.

Good morning, everybody. I was wondering if you could spend a little bit time on eAviation. Maybe provide us a little bit of an update on how things are going in that business and the development that you've got going on there? And kind of what the -- the next couple of years look like for you all on product development revenue and how EBIT is going to trend for us here over the next few years given that backdrop?

Sure. So look, I think there's obviously a couple of pieces that are in here, right? There's the Pivotal business, which I think is doing well. We're seeing -- we saw a significant increase in the number of deliveries here in Q1. I think demand for those products is strong. So we feel pretty good about where that is. As I mentioned, we did get an FAA exemption on the ability to do flight training on the Bell's electro, which is fundamentally a training aircraft. So I think that will help us pick up volume as we can now sell those and use those for training in the U.S. domestic market. It's already been accepted, and we've seen nice growth in the international markets. We have a couple of new products that are in that in that product line, I think we'll do well. So I think we feel very good about how the Pipistrel guys are doing and how that's performing. On the R&D, which is really the dominant piece of what's driving the financials in that segment, we have the Nexus program, which is progressing well. We're doing the full integration and testing of the first craft. We'll probably see -- we're already sort of doing ground testing and evaluation already. We'll probably see flight test later on this year on the Nexus front. That program is also, I'd say, progressing well. Most of the supplier selections are done. Parts coming in, we're starting to build the first airframe with an expectation that we would probably fly that sometime next year. So that's really what drives the financial side. Now I would say that we're -- the level of investment that we're making right now into those programs is probably going to level off. So we saw -- as we've guided, we saw a significant increase from '22 to '23 and now '23 to '24 and those -- that level of spending is probably going to level out going forward. So we'll start to see some EBIT increased contribution on the Pipistrel product sales side. So I think that's clearly a segment that the investments in Nexus and in the newer program, we're going to continue to have us in a loss position, but it probably stabilizes going out the next few years.

And as you think about the size of the market that you're going after, you're putting investment dollars against what you expect to be volumes. And so I'm just kind of curious, when do you expect the payback period to start on these investments that you're making?

Okay. So I think this is very much an unknown. I mean, there's plenty of studies out there and a lot of other noise in this industry that when you look at the eVTOL side of things, that it's a mega market. The exact timing of that, I think, is still a little bit to be determined. There's still plenty of work to do on the technical front from our perspective, technical work, regulatory work to make sure that there's viable products to meet that mission. So again, I think there's plenty of independent third-party data out there that has perspectives about how huge that market could be. Keep in mind as our spending here is relatively modest. I think we're taking advantage of a lot of cost and cost structure and talent and capability that we already have in the company. So if the market proves to be what third parties would say the market would prove to be, it's going to be a massive return on investment.

Next, we go to George Shapiro with Shapiro Research.

Scott, the incremental margin in Aviation, as people were talking about was, I mean, like 46%. And I recognize that revenue differences are small, so the numbers can get somewhat distorted. But given that you said inflation will probably pretty much be somewhat similar to the price benefit that you got this quarter. Why won't those incrementals for the rest of the year run somewhat higher than kind of your objective of 20%?

Well, George, look, I mean I think when we look at the cost and what's going to come out of inventory and what the margin rates are going to look like, it's, I do think you're right. We did have a higher conversion on Q1, but that's certainly, I think, certainly higher than we would expect for the course of the year. So I think at this point, as we look at it, our expectations in terms of what inflation is going to look like, what plant performance is going to look like, which, as I said, is for sure improving through the course of the year as we get towards the high side of guide there, it's that 20% kind of range, which is generally what we've guided as a long-term measurement for the business. And I think that's where we'll be.

Okay. And one quick one for you, Frank. You bought a lot of stock in the first quarter, like 1.8% of the outstanding I guess it was pretty opportunistic? Or do we expect that you might buy more than 5% for this year?

Well, we talked about kind of 5% was in our guidance, but we also talked about the fact that we have a strong liquidity position, and we're going to return excess capital. So I think that kind of -- we did a fair amount in the first quarter. We'll continue to buy from here. We'll probably be on the higher side of that 5% for the year.

Next, we go to the line of Ron Epstein with Bank of America.

Just maybe circling back on the defense business in the supplemental that just got passed yesterday. Is there stuff in there for you guys? I mean have you looked -- obviously you've look at it, but can you give us a sense of potentially what's in there for Systems or Bell?

No, there's not. I mean we really haven't been in the in the guns and bullet business. So most of that stuff is not replenishments of things that we have. I do think there's opportunities in Ukraine over time when you look at things that are possibilities for Bell on some other things and systems, but not something that's directly tied to these supplementals.

Got it. Got it. And then kind of back to aviation. Broadly, how is this supply chain doing in that? One of the things I've heard oddly enough is like window screens, windshields for airplanes or there's a shortage of those. I mean is there other stuff like that, that's just kind of random stuff to just kind of short in supply.

Well, look, Ron, as we said, it's the randomness is part of what drives us crazy, right? It's -- and they change over time. But you're absolutely right. Windshields have been a problem now for several years. And it's, I'd say, probably getting better, but it's been a big problem. It's been a problem for us in terms of production builds. And frankly, it's been a big problem for us in terms of our customers. If somebody has a damaged windscreen and it's been an area of a lot of dissatisfaction in the industry, not just for the OEMs like us but also for our ability to provide spares in service. So it is -- certainly has been and remains one of the top problem items by category.

Yes. When I heard that I was astonished, but yes, I guess the current suppliers shut down the other supplier, whatever.

Next, we go to Kristine Liwag with Morgan Stanley.

Scott, earlier you mentioned on industrial, how you're seeing incremental weakness in the high-end consumer. Can you talk about the customer profile of those buyers? And if there are similarities to the customer profile for products like M2 or pistons or Couriers in aviation?

So I don't know exactly in terms of categorization of that customer per se. But I think that if you look at demand for all the way down to piston. The system 172, demand remains very strong, and we expect to have strong deliveries even over last year, but availability, the demand environment is very strong for that kind of stuff. And too strong. I mean these are products that we see strength in terms of demand across the product line. I don't think they're the same customer maybe or the same consumer perhaps. But I think if you look -- now certainly, what we're seeing and we look at other companies. If you're in the business of doing boats, RVs, recreational vehicles, PTVs, that consumer has clearly slowed down. They slowed down last year, and we did make some adjustments based on that, but we've seen further slowing on that. But yes, I don't know how to categorize whether it's the same customer or not, but certainly those product categories have slowed down and everything from pistons up into light jets has not. And of course, that's a much bigger, much more important business to us, which is good, I suppose.

Next, we go over to Gavin Parsons with UBS.

I just want to confirm if I heard the restructuring savings are expected at $185 million, given I think the initial plan was $75 million. And just what's driving the better number there?

Yes. That's a full kind of run rate when we get through it all. And it's really driven by the addition of head count reductions. The unanticipated Shadow, FARA and then the additional actions at Industrial are really focused on head count where the original restructuring had some asset impairment in it. And so we're getting a much bigger run rate savings as a result of those reductions to kind of rightsize those activities.

Got it. Okay. What is the transition from shadow to FTUAS look like in terms of kind of revenue and margins over what time frame?

Well, look, I think that's still a little bit to be determined when the Army canceled the Shadow program. They did say they wanted to move more aggressively on FTUAS, we have seen that in the awards now of option 3 and 4, which is good. There aren't, I don't think, formally published dates, but the dates that we hear about in terms of when they'll put an RFP out on The Street for the ultimate EMD production decisions, sounds like they're probably pulling that forward to where that RFP could come out as early as even late this year, which would lead to an early '25 calendar year award, which should be great. So the exact size and scope and therefore, the revenue and the margin is -- we just don't have visibility to that at this point.

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