Textron Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
April 27, 2023

There are 14 speakers on the call.

Operator

Thank you for standing by, and welcome to the Q1 2023 Textron Earnings Release Conference Call. At this time, all participants are in listen only mode. Later, we will conduct a question and answer As a reminder, today's conference is being recorded. I would now like to turn the conference over to your host, Mr. Eric Salander, Vice President of Investor Relations.

Operator

Please go ahead, sir.

Speaker 1

Thanks, Bradley, 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 Revenues in the quarter were $3,000,000,000 up $23,000,000 from last year's Q1.

Speaker 1

Segment profit in the quarter was $259,000,000 down $18,000,000 from the Q1 of 2022. During this year's Q1, we reported net income of $0.92 per share. Adjusted net income, a non GAAP measure, was $1.05 per share compared to $0.97 per share in last year's Q1. Manufacturing cash flow before pension contributions, a non GAAP measure, totaled $104,000,000 in the quarter compared to $209,000,000 in the Q1 of 2022. With that, I'll turn the call over to Scott.

Speaker 2

Thanks, Eric, and good morning, everyone. We had a solid first quarter Revenues up at Aviation, Industrial and Systems, largely offset by lower revenues at Bell, consistent with our expectations. At Aviation, in the quarter, we delivered 35 jets, Down from 39 last year and 34 commercial turboprops, up from 31 in last year's Q1. Aviation continued to see solid demand across jet and turboprop Products. Backlog grew $136,000,000 ending the first quarter at $6,500,000,000 In the quarter, Aviation received an initial award on the U.

Speaker 2

S. Navy multi engine training system contract for 10 King Air 260 Aircraft and associated support equipment. This contract includes options for up to 64 aircraft with deliveries in 2024 through 2026. Textron Aviation's fleet utilization remained strong in the quarter, contributing to aftermarket revenue growth 9% as compared to last year's Q1. Moving to Bell, we announced the appointment of Lisa Atherton as CEO, succeeding Mitch Schneider, who will retire at the end of April.

Speaker 2

Lisa returned to Bell in January after more than 5 years as the President and CEO of Textron Systems. She's done an outstanding job building strong teams at Bell and Textron Systems 16 years for the company and is there any conference for our military customers. I want to thank Mitch for his leadership. During his tenure, he oversaw significant wins at Bell's military business along with development of new technologies and product innovations. Earlier this month, the flower contract protest was denied and the U.

Speaker 2

S. Army subsequently On the commercial side of Bell, we delivered 22 helicopters down from 25 in last year's Q1. During the quarter, we saw solid customer activity across all our commercial products and end markets, including an order from the Polish National Police for 4 additional Bell 407s, which will expand their fleet to 7 aircraft. Textron Systems, we saw a good margin performance on higher revenues across our programs. During the quarter, Systems' Aeroson Hybrid Quad was among 5 competing unmanned aerosystems that were down selected for increment 2 of the Army's Future Tactical Unmanned Aircraft System Competition.

Speaker 2

Also during the quarter, systems delivered Craft 105 of the U. S. Navy Ship to Short Connector Program, The 7th craft delivered to the Navy. There are now 2 craft remaining to be delivered under the detailed design and construction contract. Moving to Industrial, we saw higher revenues in the quarter, driven by higher volume, both in Specialized Vehicles and Kaltex.

Speaker 2

Specialized Vehicles, the Golf business continues Strong demand and pricing for its lithium product. At Kaltex, we announced the 1st pentatonic order from an automotive OEM for a thermoplastic Composite Under Body Battery Protection Skid Plate. Skid Plate is part of the company's new pentatonic battery system product line, supporting battery electric vehicle production. Moving to Aviation. During the quarter, we announced 2 new U.

Speaker 2

S. Distribution partners on the East Coast to further expand Pipistrel's existing distribution network. Also in the quarter, we finalized agreement with Mesa Airlines for 25 Alpha Trainer aircraft and an option for 75 additional aircraft. At During the quarter, we displayed the Pipistrel Panthera and Bellas Electro aircraft, receiving CW customer interest in both models. With that, I'll turn the call over to Frank.

Speaker 3

Thank you, Scott, and good morning, everyone. Let's review how each of the segments contributed starting with Textron Aviation. Revenues at Textron Aviation of $1,100,000,000 were up $109,000,000 from the Q1 of 2022, reflecting higher pricing of $58,000,000 at higher volume of $51,000,000 which included higher defense and aftermarket volume. Segment profit was $125,000,000 in the Quarter up $15,000,000 from a year ago, largely due to favorable pricing, net of inflation of $17,000,000 and the impact from the higher volume and mix, partially offset by an unfavorable impact from performance of $17,000,000 Backlog in the segment ended the quarter at 6,500,000,000 Moving to Bell, revenues were $621,000,000 down $213,000,000 from last year as expected on lower military revenues reflecting lower spares and support volume in V-twenty two and H1 production volume. Segment profit of $60,000,000 was down $31,000,000 from last year's Q1, primarily reflecting lower volume and mix, partially offset by a favorable impact from performance of $29,000,000 reflecting lower research and development costs.

Speaker 3

Backlog in the segment ended the quarter at $4,600,000,000 At Textron Systems, revenues were 306,000,000 up $33,000,000 from last year's Q1, largely reflecting higher volume. Segment profit of $34,000,000 was up $6,000,000 from a year ago, primarily due to a favorable impact from performance. Backlog in this segment ended the quarter at 2,000,000,000 Industrial revenues were $932,000,000 up $94,000,000 from last year's Q1 largely due to higher volume and mix at both Textron Specialized Vehicles and Kautex. Segment profit of $41,000,000 was up $2,000,000 from the Q1 of 2022, primarily due to higher volume and mix and a favorable impact from pricing, net of inflation, principally in the Specialized Vehicles product line, partially offset by an unfavorable impact from performance. Textron e Aviation segment revenues were $4,000,000 And segment loss was $9,000,000 in the quarter, primarily reflecting research and development costs.

Speaker 3

Finance segment revenues were 12,000,000 and profit was $8,000,000 Moving below segment profit, corporate expenses were $39,000,000 net interest expense was 17,000,000 LIFO inventory provision was $25,000,000 intangible asset amortization was $10,000,000 and the non Service component of pension and post retirement income were $59,000,000 In the quarter, we repurchased approximately 5,200,000 shares, returning $377,000,000 in cash to shareholders. To wrap up with guidance, we are reiterating our Full year adjusted earnings per share to be in a range of $5 to $5.20 We also continue to expect full year manufacturing cash flow before pension contributions of $900,000,000 to $1,000,000,000 That concludes our prepared remarks. So Bradley, we can open the line for questions.

Operator

Bradley? Of course, and our first question comes from the line of Sheila Kahyaoglu with Jefferies. Please go ahead.

Speaker 4

Thank you and good morning guys. I want to ask about Bell profitability. Frank, I think you mentioned some favorable performance in there. But with the FLORA protest Now cleared, how does this change the trajectory of Bell profit and how are you thinking about the dilution just given the development work? And Just thinking about the bid overall, Textron's development value was nearly 2 times Lockheed.

Speaker 4

So how do we think about this in terms of revenue contribution?

Speaker 3

Well, I'd say that we had anticipated or we had planned basically for a delay in FLRAA When we gave our guidance, so FLAR is going to roll in consistent with how we had seen Bell in terms of the 3,300,000,000 Of revenue in 8.25 to 9.25, not guidance. Obviously, we had margins above that for this quarter. We do expect to be within that margin range that we had guided to. We do expect to see revenue growth. So we think this will be the low quarter for Now from a revenue standpoint, so as Flara kicks in, we talked about that being a lower contribution margin.

Speaker 3

We'll see ultimately kind of Where we get in terms of booking rates on that, but we'd expect volume growth with some margin headwinds associated with that revenue coming in. Overall, the team did a really nice job from a cost structure standpoint in this quarter offsetting that decline in volume. And we feel good about kind of how Bell is positioned in

Speaker 4

And then just maybe Scott one for you. How do we think about aviation pricing? I think you mentioned $58,000,000 of Gross price of 5%, is that sort of what we should expect on the growth side? And how do we think about that as the dynamics of the market are changing?

Speaker 2

Yes, I think so, Sheila. Look, I mean, obviously, the pricing is well built into the backlog. I think we are on track in terms of our expectations on costs. So I would continue to Expect to see pricing net of inflation as a positive. Demand is still good in the marketplace.

Speaker 2

I think pricing It's stable out there as we look out into the future bookings. So again, I think it's a reasonable expectation to think that we're going to continue to see price net of inflation as a positive going forward.

Speaker 4

Thank you.

Speaker 2

Sure.

Operator

And our next question comes from the line of Doug Harned with Bernstein. Please go ahead.

Speaker 5

Good morning. Thank you. When you look at the Q1 and in orders in Aviation, yesterday we heard From General Dynamics, Gulfstream had some hiccups around the banking crisis that Silicon Valley Bank collapsed that Actually delayed a lot of decision making in pushing orders through. How did you find that period Aviation, have you seen similar things there in terms of order flow?

Speaker 2

Well, look, I don't know that I would pin something specifically to Silicon Valley Bank, but when we had a positive greater than 1 to 1 book to bill in the quarter, which is good, we Kind of guided to around a one to one book to bill. I think the lead time that we have right now on aircraft is in a pretty healthy place, and that's kind of What we're targeting, I guess, I would say that anytime you have financial disruption or adverse events out there in the Economy in general is certainly easy for people to say, hey, look, let me think about it or wait a little bit. I think the good We have right now is we have enough backlog out there that even if you have a quarter where you're down below 1 to 1, that's not the end of the world. If somebody defers Out there for a few months, that's not a problem. That's the beauty of having a backlog.

Speaker 2

So unlike previous Periods where you had some interruption and you'd see a delay, then that would hit you in terms of revenue and profit in the near term. I think we have sufficient backlog out there that even if you do have Where somebody waits a little bit and that's fine.

Speaker 5

And then when you look forward and you're talking about a book to bill in the order of 1 this year, When you look beyond that, how do you think about the aftermarket? I mean, we might look at this as the aftermarket should grow Somewhat proportionate to the fleet, but do you expect other factors to give you more growth there such as more content per airplane or pricing?

Speaker 2

Well, look, I think it's a lot more driven around utilization, right? So flight hours is more closely correlated with the growth in the aftermarket As opposed to necessarily the fleet numbers. I mean, our fleet is so huge that even adding small numbers in any given quarter doesn't make any real impact. It's primarily driven around utilization and utilization in the fleet remains very high.

Speaker 5

Very good. Thank you.

Speaker 2

Sure.

Operator

And our next question comes from the line of Seth Seifman with JPMorgan. Please go ahead.

Speaker 6

Hey, thanks very much and good morning. You saw the share repurchase amount step up nicely in the quarter. I guess, if you could talk about your thinking around that and maybe where you expect share repo to come in for the year. I guess you guys might have Some additional cash coming in from a recent verdict. And so what your thoughts are on reposes here and whether maybe it's a time to step things up.

Speaker 2

Well, so I think what you did see us do is step things up here in the Q1. We've always said that that's our primary return of capital, would be through share repurchase. And to do that opportunistically, we feel we've still been sort of In a good place to be buying. And so we stepped up $377,000,000 in the quarter. Our cash flow in the company We have a lot of cash on the balance sheet, as you guys know.

Speaker 2

And so I think consistent with what we guided at the beginning of the year, we expect to probably buy back somewhere in that 5% to 6% of the outstanding shares. So the Q1 was indicative of doing that. In terms of what's been out there in the media and the press around this intellectual property Verdict, obviously, we're not going to comment much on that as it goes on through the legal process, but that's not something that we would expect to see cash come in Anytime in the near future. There's appeal processes, who knows how that's going to play out. So that doesn't factor into our thinking in terms of share repossession at this time.

Speaker 6

Okay, great. I'll leave it there this morning and pass it on. Thanks very much.

Speaker 7

All right.

Speaker 8

Thank you.

Operator

And our next question comes from the line of Cai von Rumohr with Cowen. Please go ahead.

Speaker 9

Thanks for taking the question and nice results. So at Aviation, maybe give us some color in terms of relative trend you're seeing in supply chain? And also, What was the commercial bizjet book to bill because obviously you also got some defense orders there in the quarter?

Speaker 2

So the supply chain side, Cai, is largely unchanged. I would say that kind of as we've talked about Earlier, I think our labor position is in a much better place than it was. We did bring a lot of resources In the 3rd, Q4 last year, obviously, that does create some disruption, which as you know, it could affect some of our conversion here as Some of that inefficiency unwinds here in the first half of this year, but we're largely staffed at the levels where we want to be. So I would say on that front, things are certainly improved. But we continue to have suppliers Have issues that are causing us to do things out of sequence and driving still some inefficiencies in how we operate the plant.

Speaker 2

So it's I'd say it's not getting worse, but it's not necessarily getting better. Sometimes it's frustrating if you get one kind of resolved and another supplier It becomes a problem. And I what we kind of expected that to be ongoing issue through most of the balance of this year. So I don't think there's any big Surprises there, but it's still a challenge. As far as order, look, our book to bill was greater than 1.

Speaker 2

We feel good about that. It's We don't break it out down to the individual models or programs, but certainly we're I'd say we're happy with how the demand is going in both jets and turboprops. So I think we're in a pretty good place.

Speaker 9

Okay. And then a follow-up to Seth's question. 5,200,000 shares is like 2.5%. So essentially, in 1 quarter, you've done half of your buyback target for the year. You won FLORA, you had this bluebird of the DGI patent suit.

Speaker 9

What's the chance that basically the 5% to 6% is exceeded in terms of the repo?

Speaker 2

Look, I think again, we're going to continue to press on this opportunistically, Kai, and we'll see how it plays out through the balance of the year. But I as you know, it's not really formal guidance. We just kind of indicate to you guys how we're thinking, and there's no change in how we're thinking. It's continuing to be our primary means of of returning value to shareholders.

Speaker 9

Fabulous. Thank you very much.

Operator

Sure, sir. And our next question comes from the line of Robert Stallard with Vertical Research. Please go ahead. Thanks so much. Good morning.

Speaker 3

Good morning. Good morning.

Speaker 10

First of all, Frank, you said you were holding the EPS and cash flow guidance for the year. Are there any changes in the divisional Guidance for 2023?

Speaker 3

No, it's roughly in line with where

Speaker 8

we had been.

Speaker 10

Okay. And then Scott, one for you. Industrial double digit growth In the quarter, so pretty healthy performance. How sustainable do you think that is given the economic backdrop that we're seeing, particularly on your shorter cycle products?

Speaker 2

Well, look, it's something to keep an eye on. I'd say that we're kind of roughly to the plan that we thought. I think you're We certainly expect to see and have seen softness in some of the short cycle consumer side of things. But we're seeing strong Performance still, let's say, in some of the industrial and commercial applications. And when we look at our production allocations, for instance, We're certainly pushing some of our capacity and our volume to serve commercial industrial applications more so than on some of the consumer side.

Speaker 2

No, that's one where obviously, there's some uncertainty. We keep a close eye on it. But net of all those things, there's Enough demand across all of the different markets that we serve, to drive that kind of growth. And I think we'll continue to see that through the balance of the year.

Operator

Okay. That's great. Thank you. And our next question comes from the line of David Strauss with Barclays. Please go ahead.

Speaker 7

Thanks. Good morning.

Speaker 3

Good morning.

Speaker 7

Scott, This jet deliveries in the quarter, were those a little lighter than you were anticipating? Just looking at how much inventory, I know you always build some inventory in Q1, but there was a pretty big inventory build in the course. I don't know some deliveries you missed some deliveries or kind of where you came in relative to what you were thinking?

Speaker 2

Well, Dave, I mean, it's for sure, but it's a couple of aircraft, right? I mean, I think it's something that's going to pressure us all year long, but we also factored In terms of our plans, what we thought we would see in terms of headwinds. So I don't think we're very disconnected from what we indicated in terms of the guide for the year.

Speaker 7

Okay. Was that supply chain related customer decision? What drove those delays?

Speaker 2

Most of the delays we're going to see through the course of the year are Supply chain related, just getting parts and being able to get things sequenced and through test. We haven't seen any real change in customer behavior that's Impacted anything.

Speaker 7

Okay. And then I was wondering if you could maybe give a big picture Sure. Look, how we should think about Bell given all the various moving pieces, thinking beyond this year, obviously, with Flora now in house, H1 ending, V22 rolling off, I think not sure what the outlook is for V22 aftermarket, but How should we think about the growth profile for Bell thinking out over the next couple of years, given all these moving pieces?

Speaker 2

Sure. Well, look, I think and Frank kind of indicated this as well. We certainly expect revenues to be increasing in Bell Through the balance of the year and into next year as the flower program is ramping up. So I think on the revenue growth side, We feel very good about that. Clearly, as we bring in a higher proportion of primarily cost plus development effort, that's Going to be at lower margins and those production program volumes on V-twenty two and H-one that have been going down.

Speaker 2

So you do have that mix issue. That's kind of where that led us It's the guide that we have out there this year, and I think that's kind of where we would expect to be as we go forward. So we're going to get Back into a growth mode, but it is going to be heavily weighted towards a cost plus relatively lower margin Piece of the business that's going to be offsetting lost revenue that's a higher margin, but I think it stays a healthy business, But it's certainly not going to be at the margin levels that we've seen in the past number of years.

Speaker 7

Okay. That's helpful. Thank you.

Operator

Sure. And our next question comes from the line of Myles Walton with Wolfe Research. Please go ahead.

Speaker 11

Thanks. Good morning.

Speaker 2

Good morning. Scott,

Speaker 11

in the last 12 months, I guess, or 18 months, the last two additions to your Board of Directors were a couple Defense executives, Richard Ambrose and Tom Kennedy. And I'm curious if sort of the trend there is indicative of where you might want to be taking the portfolio directionally More towards defense and if so, is it indicative of the organics with FLARO obviously being a contributor or more inorganic from an M and A interest? Thanks.

Speaker 2

Sure. Look, these are both guys who have, to your point, a lot of deep experience in the aerospace and defense World, our company has always been sort of a net 30% defense with the growth that we're expecting to see in the systems business. With the growth, obviously, we're expected to see in FLORA and ongoing opportunities in the near future here, I think, Future opportunities in Bell and Systems, I felt like it made a lot of sense for us to beef up a little bit more On the AD side of the company, both these guys are recent retirees, they're current, they know acquisition, they know defense And they know aerospace technology. So I think there are 2 great adds to the Board. So there's no real super underlying message, but obviously these are Couple of real high quality individuals that know our space very well.

Speaker 11

Okay, very good. And there was just one clarification, if I could, on the FLORA Disclosures from the protest, it talked about a cost plus incentive portion and fixed price incentive portion. Can you just, illuminate us on maybe where the fixed price Risk you've taken on is and isn't? Thanks.

Speaker 2

Well, I think there's 2 principal pieces of fixed price. 1 is kind of a program management and operation Blair, which I think is low risk, we sort of understand what that is. And then as you guys know, there's several deliverables under this Full program, there's the EMD phase, which has about 8 aircraft that are part of the development tests, Limited users test for the Army. And then there's 8 craft that are the so they out rip the first initial production Craft and the material that's in there is at fixed price. So but it's heavily weighted towards the cost plus.

Speaker 12

Thanks again. Sure.

Operator

And our next question comes from the line of George Shapiro with Shapiro Research. Please go ahead.

Speaker 1

Yes, good morning.

Speaker 8

Good morning.

Speaker 1

Scott, the supply chain issues, I mean, led to incremental margin of 14 And in Aviation this quarter, that's the same that you had in the 4th quarter and the performance impact $16,000,000 $17,000,000 is similar. So do you expect that the rest of the year or can you overcome some of the supply chain issues that you had mentioned are going to continue?

Speaker 2

Sure, George. Look, I think it'll abate in the back half of the year. As we talked about, a lot of those efficiencies are things that were experienced in the back half of last year. A lot of that obviously goes through inventory, so that releases with the aircraft deliveries here in the first half of this year. Obviously, that anticipates the performance And disruption will be less in the first half of this year than it was in the last half of last year.

Speaker 2

And I think more or less so far we're seeing I think our factory is running better. That's largely, as I said, attributable to the fact that we've got the resources on board. There's still issues, turnover is higher than we would like. There's still more churn than historical, but certainly the plant is running in a more efficient way. Now supplier issues still pop up, as I said, But net of all that, I think that we will see better lower impacts of those efficiencies in the back half of the year than the first half of the year.

Speaker 2

So Even with that 14%, which again is kind of where we expect it to be, I think for the total year, the overall conversion, which is Sort of 24% or so, which is appropriate for our business is still something we expect to realize for the total year.

Speaker 1

Okay. And then have you changed anything about deliveries expectation for the year?

Speaker 2

No, not really. I think we're still Track into what we guided.

Speaker 1

Okay. Thanks very much. Good report.

Speaker 3

Perfect.

Operator

And our next question comes from the line of Peter Arment with Baird. Please go ahead.

Speaker 13

Yes, thanks. Good morning, Scott and Frank. Nice results. Hey, Scott. You've had a lot of questions on aviation.

Speaker 13

I'll just ask one quick one. There's been a slight kind of increase in used aircraft out there. I'm sure it's In production aircraft still remains very low. Just maybe any comments that you're watching or from your perspective on the used market?

Speaker 2

Sure, Peter. Look, obviously, we watch this very carefully and you see numbers coming out, They look like big percentages. Of course, they're big percentages on a very small number. So I think when we look at the used available, When you look at kind of that 0 to 10 years old, it's less than it's around Couple of tenths of a percent of our fleet. So it's a really, really small number.

Speaker 2

I mean, we're talking about 9 aircraft that we know of right now that are under 10 years old versus our fleet size of over 7,000 aircraft. Look, it's a trend of that we see in the marketplace, but remember these are on an absolute basis, these Are very small numbers, right? So the available for sale is less than a few percent and about half of those are 20, 25 plus year old aircraft. So Still very, very positive environment in terms of used aircraft available for sale.

Speaker 13

Thanks so much. Appreciate the color. Sure.

Operator

And our next question comes from the line of Pete Skibitski with Alembic Global. Please go ahead.

Speaker 12

Hey, good morning, Scott and Frank and Eric. A little bit of a follow on to, I think it was Myles' question on FLRAA. Typically, congrats, you get past the GAO review on flaura, big milestone there, but now you have to kind of switch to Keep sold strategy, right? So I'm just wondering, Scott, from your perspective, what your view is on the technical and schedule risk To the development contract, as you kind of move from the aircraft in your configuration to the exact Production configuration that the Army wants. I'm just wondering kind of how you gauge the risks and if there are any important milestones that we should be on the lookout for?

Speaker 2

Sure, Pierre. Look, I think the way the Army has conducted this acquisition, and as you guys know, this goes back a decade really, right, Both guys going through design, development, producing prototype aircraft, flying them, lots of soldier touch points, Army pilots flying them, as you know, as we went even through the formalities of the formal RFP and during this whole period of time, the proposal valuation, there was ongoing effort under the OTA for the CGRR program, which was continuing To reduce risk and finalize design activities and risk reduction, even whilst the proposal evaluation was going on. And So I think the good news here is we have a really, really solid technical baseline for the aircraft itself. We have a great team that's in place, ready to go, That is being reassembled here and now go to execute the EMD program. Obviously, there's a lot of new stuff here around the Mission Systems and development of that Capability in the MOSA system for the in the choice, the architecture of the mission systems and how they accommodate changes over time.

Speaker 2

But I think that we have a really, really good technical baseline. The aircraft that we're about to go design and build and fly It's very, very close to the aircraft that we've already designed and built and flown. So I think there's a big chunk of A risk that has been very effectively reduced and we're ready to go get at it.

Speaker 8

Okay. I appreciate the color.

Speaker 3

Sure.

Operator

Our next question comes from the line of Christine Liwag with Morgan Stanley. Please go ahead.

Speaker 4

Hey, good morning. Scott, Frank, when you look at the portfolio today, it's clearly stronger this cycle versus the last. Aviation has got a backlog. Bell secured flara, industrials are stable now. With the balance sheet pretty low, what's your appetite to expand into another vertical and tap into secular growth markets.

Speaker 2

Look, I think that we as we've always said, we'll we keep an eye on things As things come to market or there's opportunities out there, but obviously, our plan is still built around organic growth, Investments in the businesses that we have, which I think we've been making substantial investments and those are paying off for us in terms of what organic growth we're seeing. And at this point, look, I think we do have a very strong balance sheet. We have a lot of cash on hand. We have strong cash generation in the business. We'll continue to execute on our buyback programs.

Speaker 2

If something came along that we thought made sense that was frankly in the A and D space and was something that we knew could be accretive and have better value To our shareholders that just continuing share buyback, we would look at it. But as I said, it would have to be something where it's a clear win And always contrasting that with what's going on with our share buyback program.

Speaker 4

Great. Thank you.

Speaker 8

Sure.

Operator

And with that, our last question comes from the line of Ron Epstein with Bank of America. Please go ahead.

Speaker 8

Hey, good morning, guys. Good morning, Ron. Good morning. Scott, could you kind of walk through, you mentioned earlier on the call, Just kind of back to Myles' question about positioning the company for some more growth in defense and the opportunities ahead of you in Bell and Systems. If you could walk through a couple of those that maybe you find particularly interesting for the company?

Speaker 2

Sure. Well, Ron, I would say that the FLORA win on a standalone basis is hugely important to our future. I think our guys have done a great job over The past decade in investing and positioning for that, obviously, as you know, the flower program continues. It's a few years behind the flower program, but one where, Again, I think our team has made the right investments. We've got the right people that have developed a product that I think It's going to be a home run.

Speaker 2

As you know, we're all kind of waiting on the engine side to have that thing fly. But Again, the Army activity continues in risk reduction and further definitizing that program. So clearly, I think that's a great opportunity. I think we have a great solution. There are activities, which again are publicly out there in terms of the future systems that the Navy and the Marine Corps are looking at, Which I think a lot of our technology, particularly in the tiltrotor space, will potentially be a great solution and can leverage off a lot of the investment that we've already made on the 2 80 program, those are likely to be adaptations.

Speaker 2

But again, from a technological standpoint, I think we're in a really good place for some of those future opportunities. High speed VITOL at Bell, Arguably a little bit further off, but that's another step. I think that leverages our fundamental core capabilities to go to even higher speed, High performing longer range assets. So I think Bell in my view, Ron, I guess, I would say, I think we have a phenomenal franchise around Tow rotor and I think we have a lot of opportunities to continue to grow that franchise on a number of different adaptations of that technology into the future.

Speaker 7

On the

Speaker 2

system side, okay, that's a there's a lot of programs in there. I think we've the win on the Sentinel program Northrop is a driver of growth for us going forward as that moves ultimately from EMD into its production phases here in the future. We have some great new wins on the munition side with the XM204s and XM250s. Again, a great franchise for us for a long time, Which is really growing. I mentioned our down select on FTUAS.

Speaker 2

Shadow continues to be a good program for us, but the future Tactical UAS with the Army is certainly a big opportunity. There's a couple of big land vehicle programs, as you know, ARV on the Marine Corps side, OMFV on the Army side. So I mean, I don't want to wrap up all this stuff, but there's lots of opportunities out there for which we've either won or we've been down selected or I think we're Certainly a viable competitor, you're not going to win all these things, but there's enough opportunity and I think we're in a good enough place that we can see a lot of organic growth being driven out of that business as well.

Speaker 8

Got you. And then maybe one follow on, if I can. Maybe in the shorter term, are you seeing much demand being driven from The war in the Ukraine, are you seeing orders for stuff that maybe 18 months ago you wouldn't have expected No,

Speaker 2

we're really not, Ron Wing. We're not in that sort of munition space. I mean, there has been some dialogue around Some land vehicles, but they're largely EDA, things that are in surplus in the Army that would come out and be refurbished and put over there. There's some talk of different UAS systems. So there's some there are we've had nothing so far.

Speaker 2

There's probably some relatively speaking smaller opportunities going forward, but it's not going to be a material impact to us.

Speaker 8

Got it. Got it. Thank you.

Operator

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Operator

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Earnings Conference Call
Textron Q1 2023
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