Ladies and gentlemen, thank you for standing by. Welcome to the Q2, 2023 Textron Earnings Release. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, today's conference is being recorded.

And I would now like to turn the conference over to your host, Vice President of Investor Relations, Eric Salander. Please go ahead..

Thanks, Kaylie 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. Revenues in the quarter were $3.4 billion, up $270 million from last year's second quarter.

Segment profit in the quarter was $352 million, up $71 million from the second quarter of 2022. During this year's second quarter, we reported income from continuing operations of $1.30 per share. Adjusted income from continuing operations, a non-GAAP measure, was $1.46 per share compared to $1.11 per share in last year's second quarter.

Manufacturing cash flow before pension contributions, a non-GAAP measure, totaled $242 million in the quarter compared to $309 million in the second quarter of 2022. With that, I'll turn the call over to Scott..

Thanks, Eric, and good morning, everyone. Second quarter was a strong quarter with revenue up across all our businesses and solid execution, generating a segment profit margin of 10.3%, up 140 basis points from the second quarter of 2022.

At Aviation in the quarter, we delivered 44 jets, down from 48 last year and 37 commercial turboprops, up from 35 in last year's second quarter. Aviation continues to see solid demand across jet and turboprop products. Backlog grew $315 million, ending the second quarter at $6.8 billion.

In the quarter, Aviation received an order for 11 Special Mission King Air 360s expecting to deliver in 2024 and 2025. Also during the quarter, Aviation delivered the first passenger configured Cessna SkyCourier to Lāna’i Air for its Hawaiian interisland routes.

On the new product front, Aviation announced the Cessna Citation Ascend at Ebase ph in May.

Ascend will feature the latest Garman 5000 avionics suite, 4-passenger range of 1900 nautical miles, comfortable cabin experience with large windows and a flat floor and the new Pratt 545D engine that features improved thrust and increased time between overhauls and enhanced fuel efficiency. The aircraft is expected to enter into service in 2025.

Moving to Bell, revenues were slightly higher in the quarter. Bell began ramping activity on the FLRAA program, including on-boarding engineers, contracting with major suppliers and ordering long lead materials. Bell also added $1.2 billion of backlog related to the FLRAA contract during the quarter.

Also in the quarter, Bell received an initial contract authorization for four additional V-22 aircraft. On the commercial side of Bell, we delivered 35 helicopters, up from 34 in last year's second quarter. At Textron Systems, we saw a continued solid margin performance on slightly higher revenues. In June, Systems delivered Craft 107 to the U.S.

Navy Ship-to-Shore Connector program, the Aircraft delivered to the Navy. Also during the quarter, Systems Aerosonde Hybrid Quad UAS was among four competing unmanned aerial systems that were awarded design contract under the first option of the Army's Future Tactical Amend Aircraft Systems Program.

Systems also advanced as part of Team Lynx led by American Rheinmetall in the next phase of the U.S. Army's XM30 program. Textron Systems is a designated manufacturer of Team Lynx. The Army down selected two competitors for the next phase of the program, which includes detailed design and prototype builds.

Moving to Industrial, we saw higher revenues in the quarter, driven by higher volume in both Kautex and Specialized Vehicles. At Specialized Vehicles, we announced the new Liberty LSV, a street legal vehicle powered by our elite battery system with four forward-facing seats.

Within Kautex, we saw increased volumes year-over-year across all our geographic end markets. Moving to Aviation, we began wind tunnel testing on the Nexus eVTOL aircraft. These tests represent a significant step in the aircraft development process and supporting design validation activities.

Additionally, we continued the prototype assembly and systems integration of the Nuuva, our hybrid electric unmanned cargo VTOL aircraft at our facilities in Slovenia. With that, I'll turn the call over to Frank..

Thanks, Scott, and good morning, everyone. Let's review how each of the segments contributed, starting with Textron Aviation. Revenues at Textron Aviation of $1.4 billion were up $78 million from the second quarter of 2022 reflecting higher pricing of $95 million, partially offset by lower volume and mix.

Segment profit was $171 million in the second quarter, up $22 million from a year ago, largely due to favorable pricing net of inflation of $52 million, partially offset by an unfavorable impact from performance of $23 million. Performance included unfavorable manufacturing performance largely related to supply chain and labor inefficiencies.

Backlog in the segment ended the quarter at $6.8 billion. Moving to Bell, revenues were $701 million, up $14 million from last year due to higher pricing of $21 million, partially offset by lower military revenue of $7 million.

Segment profit of $65 million was up $11 million from last year's second quarter due to a favorable impact from performance of $13 million, largely reflecting lower research and development costs and a favorable impact from pricing net of inflation of $9 million, partially offset by lower volume and mix.

Backlog in the segment ended the quarter at $5.6 billion. At Textron Systems, revenues were $306 million, up $13 million from last year's second quarter, largely reflecting higher volume. Segment profit of $37 million was down $1 million from a year ago. Backlog in the segment ended the quarter at $1.9 billion.

Industrial revenues were $1 billion, up $155 million from last year's second quarter, largely due to higher volume and mix at both Kautex and Textron Specialized Vehicles of $121 million and a favorable impact from pricing of $37 million.

Segment profit of $79 million was up $42 million from the second quarter of 2022, primarily due to higher volume and mix of $32 million and a favorable impact from pricing net of inflation of $17 million, principally at Kautex, partially offset by an unfavorable impact of $10 million from performance.

Textron eAviation segment revenues were $11 million and segment loss was $12 million in the quarter, primarily reflecting research and development costs. Finance segment revenues were $18 million and profit was $12 million.

Moving below segment profit, corporate expenses were $21 million, net interest expense was $16 million, LIFO inventory provision was $35 million, intangible asset amortization was $10 million and the non-service components of pension and postretirement income were $59 million.

In the quarter, we repurchased approximately 4.2 million shares, returning $273 million in cash to shareholders. Year-to-date, we have repurchased approximately 9.4 million shares, returning $650 million in cash to shareholders.

Earlier this week, Textron's Board of Directors approved a new authorization for the repurchase of up to 35 million shares under which the company intends to repurchase shares to offset the impact of dilution from stock-based compensation and benefit plans and for opportunistic capital management purposes.

To wrap up with guidance, we are increasing our expected full year adjusted earnings per share to be in a range of $5.20 to $5.30 per share, up from our prior range of $5 to $5.20 per share. We also continue to expect full year manufacturing cash flow before pension contributions of $900 million to $1 billion. That concludes our remarks.

So operator, we can open the line for questions..

Thank you. [Operator Instructions] Our first question will come from the line of Peter Arment with Baird..

Yes, good morning Scott, Frank..

Good morning..

Hi, Scott, I guess, start with Aviation, really strong performance on margins and the top line.

Do you still kind of tracking, I mean, I guess, with the supply chain the way there's been so much volatility? How are you thinking about just kind of your delivery targets and just managing your skyline? I know you're probably sold out now much farther out, just given your backlog, maybe just some overall comments? Thanks..

Sure, Peter. Look, I think on the order activity, the market is still quite strong and so I think we've posted a strong book-to-bill again in the quarter. It's both jets and turboprops, so I think we continue to be really happy with how the market is behaving in terms of demand and pricing. So that's all good.

Okay, as I think you're hearing from everybody the biggest challenge still remains on the supply chain side of things.

I'd say it's not getting worse, it's probably modestly getting better but as you know, the challenge is every part is important, right? So, you may not have as many problems, but you still are kind of hit by that weakest link and hey, if you look at our numbers, we're probably a few jets lighter each quarter than we would like to be.

That's obviously creating a little bit of inventory, but these things ultimately will sell. But I think when we think about the guide and what's going forward, we're still very happy with the margins and execution performance despite inefficiencies and dealing with some of the supply chain issues.

But I think for the year, it will be a little light on the revenue side versus where we would like to be, but those things will push into 2024, obviously. So net of everything, it's still a good strong demand environment and we'll continue to fight our way through some of the supply chain challenges through the course of the year..

I appreciate that. And just one quick follow-up.

Frank, did you disclose what the aftermarket growth was in the quarter for Aviation at all?.

So aftermarket for the quarter was about 3% growth and 32% of total revenue..

I appreciate it. Thanks again..

Thank you. We'll go next to the line of Sheila Kahyaoglu with Jefferies..

Good morning, guys and thank you.

Maybe just to start off a specific one on Bell, how do we think about the B-22 here? The House Appropriations Bill included about $700 million for potentially five B-22s, how do we think about how that could add legs to this program and transition to FLRAA?.

Well, so, what's going on there, Sheila, is the Navy, of course, has now had a good while of deploying the CMV 22s into the Navy applications. As you know, that program was originally awarded and the program record was based on replacing the C2 COD [ph]. And so the number of aircraft was really sort of designed just to replace that mission.

And what we're hearing from the Navy, and they've been fairly public about this, there's been some nice articles out there, is that as they're getting the CMV-22 into the fleet, they're realizing there's a lot of things you can do with a V-22 that you couldn't do with a COD, which was restricted to big deck carriers and airports onshore.

So the versatility and the performance of the V-22 is leading the Navy to say, look, we've got other applications that would cause us to like to have more of these aircraft. That hasn't been formalized yet on the Navy side of things. I mean there's a lot of dialogue around that.

But what you're seeing in the House Appropriations is those five CMV 22s, which would be above program or record is because of the versatility and the desire ultimately of the Navy to have more of these crafts. So, we'll see how this plays out over time, but we're obviously -- we're very happy with the performance of the aircraft.

The Navy is very happy with the performance of the aircraft and so hopefully, we'll see some continuing level of production now that we're sort of beyond the program or record..

That's great. Thank you for that color. And then maybe a bigger picture one. Frank, if you could start, and I know you'll be for both, so give Scott some time on this, too. You announced a pretty large repurchase program in the quarter.

How are you thinking about capital allocation? And then Scott, obviously, with Ascent, capital allocation for repo versus new products?.

So capital allocation, it really remains the same, Sheila. We've obviously continued to generate very good free cash flow.

We've talked about, obviously, we invest significant capital back into business in R&D and CapEx, that's going to continue, but beyond that, we're generating a lot of free cash flow that we've been returning through share repurchase activity. We talked about kind of baseline of 5% to 6% or so of our share base a year from a repurchase standpoint.

We came out of the pandemic more liquid than we usually are and need to be and you've seen in the first half of the year, we've repurchased a lot of stock, and we expect to continue to be in the market opportunistically and the 35 million reflects kind of the need to have the shares available -- authorization available to do that.

We were down to 2.7 million shares on the last repurchase and we're rolling through it pretty quickly..

Cool. Thank you..

That’s right. As Frank said, Sheila, I mean, I certainly don't see it as a trade with R&Ds. As you know, we're a fairly high R&D company. We think investing in new products is the key to growth.

I think we're seeing that play out right now and if you look at Aviation with the investments in Latitudes and Longitudes, a lot of the upgrades, a lot of our current products both on the jet and the turboprop side, SkyCourier now driving nice growth for us, the Ascend that we just announced.

So if you look at Bell, obviously, we've made a huge investment over the years in the FLRAA program and the FLRAA program, that's obviously now turning into a great growth driver for us. So across all the businesses we're not going to change our strategy here in terms of R&D.

We'll keep making the investments that we think we need to make in the product side. But despite all that, we're obviously making strong profits and strong cash flow and that gives us a great deal of flexibility to allocate and drive some of that back through the share repurchase program and do what's right we think for the shareholders..

Great, thank you..

Thanks. We'll go next to the line of Jason Gursky with Citi..

Hi, good morning, everybody..

Good morning..

Scott, I was wondering if you could provide kind of a general update on the general aviation market. I think there was a show here recently up in Oshkosh.

I was wondering if you had any general learnings from either that show or your general view of the general aviation market? And then second one would be just kind of an update from your perspective on the market for pilots both for, as they come in through the general aviation market and make their way maybe up into the biz jets and other aircraft that are more important to you?.

Sure.

Look, Jason, I think the -- one of the nice parts about the market right now is this, as much as we talk about the jets and the turboprops and obviously, that's the bulk of our business, but when you're looking at Oshkosh, which is really a show that's aimed around the propeller marketplace and Cessna 172s and Pipistrel electric aircraft and all that kind of good stuff, the demand is strong from top to bottom.

I mean, we’re -- have a great book-to-bill and our 172s, 182s, 206s. So you see really, really strong demand from that GA customer that we've always had. There's very strong demand from trading schools.

So if you kind of shift into your pilot discussion, there's no doubt people have talked for many, many years about the shortages of pilots is coming up, and we're seeing that, right? So the training schools are putting a lot of orders in, they're increasing the size of their fleet so they can get more pilots through.

There's a lot of activity with frankly, some of the airlines buying a lot of aircraft so that they can get pilots, not just pilots that come into the industry, but pilots that need to get the hours in order to be eligible to fly for the actual airlines.

And so those hours are best built by using less expensive per hour sorts of aircraft, we have a lot of demand on that side as well. So the nice part here is it's a robust market, everything from Cessna 172 or a small Pipistrel Velis all the way up through Longitude. So it's -- the demand is very, very broad..

Great, thank you..

Thank you. We'll go next to the line of David Strauss with Barclays..

Hi, good morning, Scott and Frank. This is Brad Barton on for David.

Quickly starting off on Bell, looks like the quarter might have been a little light, can you just talk about how much FLRAA added in the quarter and how Bell’s going to ramp from here and hitting the $3.3 billion?.

Sure. Look, I think Bell is pretty in line with where we expect them to be. The FLRAA program is certainly ramping.

We’ve added a lot of engineering resource and we are able ramp reasonably quickly because we still had a lot of engineering talent that had been going through the FLRAA design, the CDR risk reduction programs that we've retained through that carrier. So, I’d say the team is ramping really well.

The army has been great about working to quickly get authorizations out there for us to award contracts to our major subcontractors which is a huge part of the program obviously, as it goes out through the industrial base.

They’ve authorized critical long lead materials that we needed to support the industrial flight aircraft, so the program is ramping the battle status as I can imagine ramping such a large program.

So, I think we still feel very comfortable with the guide that we provided in terms of where we're going to end up the year on revenues that program drives a lot of the growth frankly that's ramping up.

And look, as the way they think about this program, is it’s certainly ramping her as we go through 2023, but the JDox [ph] out there, right? The next few years that’s just sort of a $1 dollar a year program.

Obviously part of that is retained by the government to run their program offices and things like that, but I think we will very rapidly ramp up and the -- how far exactly where we expect it to be, which is in that probably $800 million to $900 million a year of revenue..

Okay. And then just a follow-up, there has been some reports in the press about potential interest in some properties out there.

Just wondering if you could talk a little bit how you see the portfolio shaping up?.

We probably won't provide any commentary on various rumors that are out there in terms of M&A activity at this point..

All right, thanks for the time..

Sure..

Thank you. We'll go next to the line of Noah Poponak with Goldman Sachs..

Hi, good morning, everyone. .

Hi, Noah..

Hi, Noah..

The aviation margin is -- that's one of the highest levels in a while and the incremental, I think, is a little higher than your kind of long-term framework. And I guess that's despite the performance number you cited. If I add that back, I'm more in the mid-teens.

And so I guess, as I think about where that margin goes over time, obviously the labor and supply chain inefficiencies you're citing won't be solved immediately, but also won't last forever.

So is it reasonable to think about the margin adjusted for that in the quarter as kind of a baseline plus an incremental for where you can go late next year into the middle of the decade?.

Well, I'm probably not ready to guide into the middle of the decade, just yet, Noah..

Well, you have a pretty big backlog in that business now..

Well, look, there's look, I think the margins are very good. The guys, you're right, are working through challenges, which we would certainly hope will abate somewhat over time. I mean, obviously there's inflation that's baked into the numbers at this stage of the game.

But I think we'll probably avoid doing too much in terms of guiding out to the future other than what is a good gross margin products. I mean, I think we'll be the way to long-term, think about this is going to be around that 20%, 25% conversion and we're sort of looking at certainly growth as we look into 2024 and beyond.

But again, it's going to be in some part, constrained by supply and also I was just looking and making sure that we're tracking to where the demand is in the marketplace.

I think again, we've talked before about the health of this industry should be running with a substantial backlog, and we are now running with a substantial backlog, and that's a good place for the whole industry to be. So....

In the near-term, is it reasonable to expect that price net of inflation number to grow because I think your -- I think the pricing in your backlog is still better than what's hitting the P&L now, although correct me if that's wrong.

And then if inflation is decelerating, it would seem like both the top and bottom end of that number would be widening..

Well, look, I think we do feel good about the pricing that's going into the backlog, but we are still seeing inflationary pressures. The rate of inflation is certainly coming down, but there is still inflationary pressure out there..

Yes. Remember, we have some longer-term supply contracts, so we did a nice job of responding to any demand in the market and created a more appropriate pricing environment, but there is some lag effect associated with our contracts and just the flowing in of inflation.

But we still feel very good about where we are price net of inflation, but there is a lagging impact on some of those cost inputs..

Okay.

And just the last piece on it, is your price, your rate of change in price decelerating with maybe some normalization in the market or did you not increase it so fast that it needs to slow and the rate of change is just kind of holding at this point?.

I don’t know. I have not run a first derivative on our price at this point, but I don't know. We probably won't go into that level, quite that level of detail, but suffice to say, we're still getting price and feel good about how that price demand is working in the market..

All right, I appreciate it. Thank you..

We'll go next to the line of Robert Stallard with Vertical Research..

Thanks so much. Good morning..

Good morning..

Good morning..

Scott, on industrials, a good quarter there, both on the top line and the margin. How sustainable do you think this is going forward? And do you just see this as a sign that the U.S.

consumer is still holding in there pretty resilient?.

Oh, look, I do think it's a good sign for sure, Robert. I mean the automotive guys recovery as kind of every geography is encouraging to see those volumes going up and there, and I think the Kautex guys did a nice job of converting on that. We still continue to see strong demand across golf and turf and consumer products.

I mean -- so yes, I mean, it's -- they're hanging in there, right? I mean I think we all still worry a little bit about that high-end consumer, but things have been pretty reasonable. Now as you know, there is a certain seasonality of these businesses.

In autumn, we do a lot of summer shutdowns and things like that, so second quarter is usually a stronger quarter. Third quarter is usually a little bit lighter in terms of the revenue on those businesses. But look, net of the whole thing, I think the demand environment has been improving, and our teams are doing a nice job of executing on that..

Yes. And then Frank, a technical question for you.

You raised the EPS guide by $0.10, so can you give us some idea of where that's coming from within the operations?.

Yes. I mean it reflects kind of strong first half and the earnings obviously that we just reported. So there's a little bit in there for kind of share count and some other things, but it reflects a solid first half of the year and just continuing good execution in the second half of the year.

As Scott said, I think kind of -- there's a little bit of volume at aviation that is going to probably be light relative to our guide, but industrial is probably coming in stronger than we had first thought from a top line standpoint and overall solid execution across the businesses..

That’s great. Thanks so much..

Thank you. We'll go next to the line of George Shapiro with Shapiro Research..

Good morning and good numbers.

Scott, are we -- do you think we still do 200 deliveries or we should not maybe call that 190 or something given that we seem to be missing a couple each quarter?.

Yes. I think the number is going to be a little bit lighter than we originally had in there, George so I don't think it's going to be 200. As I said, I think their execution is strong.

I think the margins and contribution to earnings are going to be where we expected them to be, but it's going to be with a little bit lighter top line just driven by, again, trying to get the aircraft out and obviously those are aircraft that will move into 2024 sales that are still going to happen, but I do think we'll be a little bit lighter on the year than what we originally guided on the top line..

And at Bell, is the margin guide still good, assuming that this quarter was particularly strong because Florida hasn't fully built yet, so margins will weaken in subsequent quarters?.

Look, look, I think Bell is tracking right on where we expected from a guide standpoint. So we're still seeing good execution on a lot of the production side of things. Obviously, FLRAA coming in is nice in terms of driving the top line.

And clearly, it absorbs a lot of overhead in the business, which helps maintain the level of profitability in some of the other product lines. But as we've talked about the absolute number and we don't have as much V22, H1 production as we had, but we're going to still, I think, post a number that's very much in line with what we guided..

And then just one follow-up on Industrial, I mean it was particularly strong, I mean, I went back and looked, it was the best quarter since like Q2 of 2018 and that probably- the business wasn't even the same at that point, although Kautex is obviously there.

So, can you comment anymore? I mean it would seem like the sales you could- would be $3.6 billion guide here for the year and the margin certainly would look like it could be based on what the margin was this quarter.

So if you could comment a little bit more on that?.

Yes, look, I think we do have George as I said, look, aviation is probably a little bit light on the revenue line. I think industrial will be a little bit stronger on the revenue line to offset that as we go through the year.

I do think that the margins, there's probably a little bit of upside to the margin, but certainly just conversion on net revenue will give us a little bit of upside on the year. And again, that's part of what's factored into the raise on our guidance at the EPS level, so I think we're happy with how that's going on, on the industrial side.

And again, it's strong demand recovering in the auto side. You don't see as much drag on automotive manufacturing, and that's good for us at Kautex, and golf and turf and these markets are staying pretty robust.

So I do think that's kind of the way we think about mostly offset here, we'll see some nice upside on the revenue there, and that will bring with it some increase in Op, that's certainly incorporated in part of our raise for the year..

Okay, thanks very much..

We'll go next to the line of Myles Walton with Wolfe Research..

Hi, you have Lou Raffetto on for Miles for you..

Good morning..

So I think you kind of covered this a little bit with the ongoing disruption, I guess, within Aviation, but at what point do you think that the pricing benefit will sort of overcome or more than overcome the sort of the negative on the performance side?.

Well, I mean it is, right? I mean so our -- when you look at our pricing right now is even net of inflation is still enough to overcome some of the challenges in terms of inefficiencies driven by some of the ongoing supply stuff.

So I think that's a trend that we've had here for a while, and I expect we'll continue to see that as we go into the future. ..

Okay.

And then I think you mentioned, so is 190 the right number to think about or will you be maybe a little bit higher than that for the year?.

We're not going to guide a specific number. But I mean, I don't think it's-- being light by a couple of hundred million dollars is probably the right way to think about the top line. But again, I think from a performance standpoint, a margin standpoint, we'll -- we should be more or less in where we guided. ..

Okay, thank you very much..

Sure..

Thank you. We'll go next to the line of Cai Von Rumohr with TD Cowen..

Yes. Thanks, so much. So Scott, a strategic question, obviously, your A&D business is growing with FLRAA, some opportunity at OMB, a number of other programs. And yet when you look at your business, you're not really a niche player, and you're also not up with the GD or Lockheed, those guys.

Strategically, I think you said you'd like to increase A&D, how big would you like to get? And what sorts of things would you consider buying to bolster your A&D business?.

Well, it's a good question, Cai. Look we -- obviously, we'd like to be bigger. And I think that the approach we're taking here is investments that we've made in our existing businesses is driving a lot of that growth.

So I think if you look at aviation, all the investments that we've made and continue to make in those new platforms, you referenced a couple of other names. Look, I think obviously, we've made a huge investment in FLRAA over the years.

That's going to drive a ton of growth and shows that we can go head-to-head on a program-by-program basis and win, and drive a lot of organic growth.

I think when you look at systems, some of the things that we talked around OMF or what's now referred to as XM30 and ARV with the Marine Corps, there's things out there that are potentially significant growth drivers. We're going head to head with some of the guys that are the biggest names in the business and I think we can win against them.

So our focus continues to be making sure that we're making the right investments so we can drive the organic growth. And will we do acquisitions, if there's a right opportunity that comes along, absolutely.

But we've got a cause I've always felt that you want to -- you don't want to have to do a deal, right? So I think that our strategy is continue to make the right investments on the organic side so that we can drive really good growth and if something comes along that makes sense from an extension [ph] standpoint, we're happy to look at that..

So when you look at things, do you look at it sort of from a holding company perspective, this would be a good business or are there specific skill sets that you think would be complementary to what you currently do that would make you a stronger player in helicopters and whatever?.

Well, look, I think, Cai, right now, it's primarily looking in the A&D space, things that would help diversify us in terms of our strength in A&D. I don't think it's likely that you see something that's specifically in the helicopter space. I just don't know that there is targets out there where you do that.

And from a government standpoint and other standpoint, I don't think you would probably see much activity in that space. I'd be kind of surprised.

But I think you look at complementary A&D capabilities, certainly where we bring technological capability where the target would bring technology capability that's some synergistic, but I think in large part, providing a more well-rounded, more diversified A&D company..

Great, thank you very much..

Thank you. And our last question will come from the line of Kristine Liwag with Morgan Stanley..

Great, thanks. Scott, with the macroeconomic uncertainty and increasing interest rates, I mean, ultimately the demand and pricing for business jets and general aviation continue to be robust, a surprise for the bears pretty much.

So what do you think is driving this sustained demand and how undersupplied do you think the market continues to be?.

Well, look, I think the demand environment is driven by the fact that people-- a particular people who have come into this market and started using aircraft and experienced what private aviation is all about, have had a great experience.

I mean there are time machines, right? It allows you to do things that you just can't do if you're using commercial transportation.

So the productivity, the efficiency, the ability to get from anywhere to anywhere on your time and in an expeditious way is something that the more and more people and I think, again, this is if you’re affected by COVID a lot of people got exposed to this market that had not in the past, and they're turning out to be a great tool.

And so I think that’s what continues to fuel a lot of the demand in this marketplace. So it's obviously, we offer a lot of products across a broad range of price points and performance. And I think that's why we're seeing just a fundamentally very strong demand environment.

And as you know, it's not just our company and our products, but across a very, very broad range of general aviation. ..

Yes. And I guess when you look at the portfolio, light, medium and large cabin, that large cabin out of the market continues to also be robust.

At this point, when you look at the Cessna portfolio, what's your appetite to go bigger? I mean we had the Columbus and the Hemisphere that didn't come about, but is there a right moment to reintroduce an airplane of that size or even larger and move up the portfolio to the larger cabin jets?.

No, I don't think there is. Look, we did look at one point, as you know when we stretch the top end of our platform. We did have programs at the time and for technical reasons and we ended up not doing those programs.

I think that part of the market now, particularly as you go larger in that market, which is kind of the choice we were faced with, is a very well-served market. So I think we're better off focusing all of our R&D and our energy in our investments in sort of up to that super midsize on the Longitude.

We've been doing, as you know, a lot of great upgrades to a lot of those programs, platforms all across our portfolio. And yes we continue to make the right investments. Denali is still in development, and that's going to be a homerun for us, is then which just announced.

I mean, that's right in the sweet spot of our market, that's a segment of the market that we've had a great track record in the past with previous aircraft, and I think this end will be really well received and drive a ton of growth for us.

So, this is -- I think that -- and we're very focused on making those investments across everything from our little Cessna 172s and now, of course, in the electric space with Pipistrel and eAviation up through Longitude. But I think that's a pretty good place for us to be and that's where we're going to focus our R&D efforts..

Great, thanks Scott..

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