The operator introduces the Textron First Quarter 2024 Earnings Call and mentions that the call will be recorded and available for replay. David Rosenberg, Vice President of Investor Relations, then discusses future estimates and expectations. Textron's Chairman and CEO, Scott Donnelly, and Chief Financial Officer, Frank Connor, are present on the call. The company's revenue and segment profit increased in the first quarter, and they saw strong demand across their product lines.

In the first quarter, Textron Aviation saw a backlog growth of $177 million and a revenue of $7.3 billion. The strong fleet utilization contributed to a 6% growth in aftermarket revenue. Bell also saw an increase in revenue due to higher military volume and progress on the FLRAA program. Bell also received an award for the production and delivery of 12 AH1Z helicopters to Nigeria. Textron Systems had flat revenue and increased margin, but also received notification of the termination of the Shadow program. They were awarded options for the EQAS program and remain one of two competitors for this next generation program.

In the first quarter of the year, Systems was selected to design and manufacture a combat vehicle prototype for the U.S. Marine Corps. The Army's budget request for FY '25 also includes funding for the design of a ground combat vehicle. In the industrial segment, revenues were lower due to decreased volume and mix in specialized vehicles, but there was growth in the hybrid space. At aviation, there was an increase in deliveries and Pipistrel received an airworthiness exemption for one of its aircraft. At Textron Aviation, revenues were up due to higher pricing and segment profit increased. Bell also saw an increase in revenues, primarily due to higher military volume.

In the first quarter of 2024, Textron experienced a decrease in revenues and profit in their Industrial segment due to lower volume and mix, but saw an increase in segment profit in their Textron Systems segment. The Textron E-Aviation segment also saw an increase in segment loss due to higher research and development costs. Corporate expenses, net interest expense, and various other expenses were incurred, including $14 million in special charges related to headcount reductions in the Textron Systems and Bell Segments.

Textron expects to incur additional severance costs in the second quarter and has expanded its 2023 restructuring plan. They also repurchased shares and reiterated their full-year guidance for earnings and manufacturing cash flow. In the quarter, deliveries were relatively flat year-over-year and the supply chain is improving. Textron expects to see growth in deliveries this year.

The company experienced some delays and challenges in their factory, but overall productivity and efficiency improved in the quarter. The industrial division had some softness due to a slowdown in high-end consumer spending, particularly in the recreational and personal transportation sectors. The company plans to implement additional restructuring to address this issue.

The Bell division of Textron saw a 130 basis point increase in margins in the first quarter, despite the loss of the FLRAA program. The company expects to end the year with a profit margin of $9.5 to $10.5, thanks to a strong performance and restructuring actions. The loss of the FLRAA program led to cost-cutting measures, but the company also saw some benefits from the Nigerian H1 order.

The Bell supply chain has improved, but there are still some issues that need to be addressed. The first quarter is typically slow for commercial kilos, and there has been a decrease compared to last year. The 525 certification is expected to be completed by the end of the year, and there is growing confidence in this timeline.

In the paragraph, Scott Donnelly discusses the performance of Bell commercial volumes and order activity, stating that they are in a good place. He also mentions that the 525 flight test is going well and they are nearing the end of FAA flight testing. They expect to wrap up flight testing by mid-year and feel confident about the final certification. When asked about the production rate for the 525, Donnelly states that they have not released a rate yet. He also mentions a settlement that affected margins in the quarter, but does not provide a specific amount.

The speaker clarifies that corporate expenses may not be as volatile for the rest of the year and the company is sticking with their target. The speaker also addresses concerns about lower deliveries compared to competitors, stating that they are doing well and do not see any major issues with labor in Wichita. The company has seen improvements in productivity and efficiency, but acknowledges that high turnover rates are a challenge for all industries.

The company's number of employees is at a good level and is expected to continue to increase deliveries throughout the year. The company is targeting the energy market and has an order for 10. Deliveries are expected to begin in late 2025. The company is in positive negotiations for other customers in the oil and gas market. The contribution to EBIT growth from pricing at aviation has been strong, but the compares for pricing will get tougher. The company has good visibility into pricing due to their backlog.

The speaker, Scott Donnelly, discusses the importance of maintaining a spread of net pricing over inflation and managing inflation numbers within the supply base. He expects to see positive price over inflation throughout the year. When asked about the impact of the industrial business on overall guidance, Donnelly states that they anticipate lower revenue but will likely hold in the margin range. He is confident in the performance and potential upside of the aviation and Bell businesses. Another speaker, Noah Poponak, asks about the aviation margin, which had a good incremental in the quarter. Donnelly attributes this to an easier compare and mentions cost input inflation and supply chain issues as previous hurdles, but states that they are now behind them.

Donnelly responds to a question about whether the cost pressures from the previous year will continue to affect the company's margins in 2024. He explains that there may still be some pressure in the second quarter due to inventory costs, but overall, the company is seeing improvements in productivity and efficiency. Regarding Bell margins, Donnelly notes that the team is performing well and the previously discussed margin compression may no longer be a concern in the medium term.

The company is working on reducing costs due to lower production levels and recent orders. The FY '25 budget request includes an additional $200 million for FLRAA, which will likely result in higher revenues. The company remains focused on executing programs and expects to meet or exceed their margin guidance for the year. The finance and corporate expenses are expected to fall within the original guidance range.

The speaker discusses the company's interest expense and states that it may be better than previously expected due to higher interest rates. They then move on to discuss pricing in the aviation industry and state that while prices may eventually converge with inflation rates, they expect to see continued pricing increases in the future. They also mention strong demand and a solid pricing environment.

The speaker discusses the expected pricing and inflation trends for their company and mentions the impact of the FLRAA program on margins. They also mention that the initial phase of the program will be dilutive, but it is expected to become accretive in the long term. The speaker also briefly mentions EA Aviation.

Scott Donnelly provides an update on the company's Pipistrel business, which is seeing an increase in deliveries and strong demand. The company has received an FAA exemption for flight training on the Velis Electro and has new products in the pipeline. On the R&D side, the Nexus program is progressing well with ground testing and evaluation already underway and flight tests expected later this year. The company's investment in these programs will likely level off soon.

The company has seen significant increases in spending and expects it to level out in the future. The investments in new programs will continue to have the company in a lost position, but it is expected to stabilize in the coming years. The payback period for these investments is uncertain, but the company believes it will be a massive return on investment. The incremental margin in Aviation is only 4%.

The speaker is discussing revenue differences and how they can distort numbers. They also mention that inflation and price benefits will likely be similar for the rest of the year, leading to higher incremental costs. The speaker expects inflation and plant performance to improve throughout the year, with a 20% range being the long-term measurement for the business. The speaker also mentions that the company bought a lot of stock in the first quarter and plans to continue buying, possibly exceeding their 5% target for the year. The conversation then shifts to the recently passed defense supplemental.

In this paragraph, the interviewer asks about potential opportunities for the company in the recently passed supplementals and about the state of the supply chain in the aviation industry. The CEO responds that there are not many opportunities for the company in the supplementals, but there may be potential in Ukraine in the future. He also mentions that the supply chain has been affected by shortages of random items, such as windshields, which have caused problems in production and customer satisfaction.

In response to a question about the customer profile for high-end consumer products, Scott Donnelly discusses the strength of demand for various products in the industrial sector, such as Cessna 172s and M2s. He notes that while the consumer market for boats, RVs, and recreational vehicles has slowed down, the demand for pistons and light jets remains strong. He also confirms that the expected restructuring savings will be $185 million, higher than the initial plan of $75 million.

The company is experiencing increased savings due to headcount reductions and the cancellation of the Shadow program. The transition to the FTUAS program is still being determined, but there are plans for an early 2025 award. A conference call was held to discuss this information and a replay will be available until April 2025.

This summary was generated with AI and may contain some inaccuracies.