Textron Q4 2024 Earnings Call Transcript

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Provided by AlphaStreet
January 22, 2025
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Operator

Good morning, everyone. Welcome to the Textron Q4 2024 Earnings Release Call. [Operator Instructions] Also, today's call is being recorded. [Operator Instructions]

Now at this time, I'll turn things over to Mr. Dave Rosenberg, Vice-President, Investor Relations. Please go-ahead, sir.

David Rosenberg
Vice President, Investor Relations at Textron

Thanks, Bo, 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 $3.6 billion, down from $3.9 billion in last year's 4th-quarter. Segment profit in the quarter was $283 million, down $101 million from the 4th-quarter of 2023. During this year's 4th-quarter, adjusted income from continuing operations was $1.34 per share compared to $1.60 per share in last year's 4th-quarter. Manufacturing cash-flow before pension contributions totaled $306 million in the quarter, down $74 million from last year's 4th-quarter.

For the full-year, revenues were $13.7 billion, up $19 million from last year. In 2024, segment profit was $1.2 billion, down $127 million from 2023. Adjusted income from continuing operations was $5.48 per share as compared to $5.59 per share in 2023. Manufacturing cash-flow before pension contributions was $692 million, down $239 million from 2023.

With that, I'll turn the call over to Scott.

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Thanks, David. Good morning, everyone. 2024 results were impacted by work stoppage deviation and difficult end-markets in our Industrial segment. During the quarter, Aviation reached an agreement with the IM on a new five-year contract. While the strike was unfortunate, we did take this opportunity to significantly improve our parts flow to the production line, which we expect will reduce our station work and improve efficiency going-forward. Aviation saw steady customer demand continue in the quarter, supported by new product launches and our portfolio resulted in a year-end backlog of $7.8 billion, an increase of $676 million from 2023.

In December, Aviation secured an order from Naval Air Systems Command for an additional 26 multi-engine training system Beachcraft Keny Air 260s. Also in the quarter, Aviation continued to expand the global market for its versatile twin-engine large utility turbo, Sky Carrier, achieving type certification by the Transport Canada Civil Aviation.

During 2024, steady aircraft utilization within the aviation product portfolio resulted in a 6.3% growth in aftermarket revenues. At Bell in 2024, we saw significant growth with the continued expansion of the FLRA program largely driving a 13.7% increase in revenues for the year. During the quarter, Bell received a follow-on award for the FLRA program as the US Army exercised Option 2, an option for two limited user test aircraft.

On the commercial side, Bell continue to see steady order activity in 2024. For the year, Bell delivered 172 commercial helicopters compared to 171 in 2023. Moving to systems, the team delivered another strong quarter with a 13.5% segment profit margin. During the quarter, Systems completed options three and four of the Future uncrued aircraft system with the delivery of a production representative system to the US Army in December. Also during the quarter, Systems received an award from the Naval Sea Systems Command for the next production lot of nine ship to shore connector crafts with a total contract value of $960 million. Systems was also awarded a contract value of up to $106 million for mine sweeping payload delivery systems from the US Navy to support its mine sweeping operations.

At Industrial, the segment experienced lower revenues and operating profit in the quarter, primarily driven by the ongoing softness in specialized vehicles end-markets. We are in the process of conducting a strategic review of our Powersports product-line. At the aviation, delivered 42 aircraft during the 4th-quarter and 120 aircraft for the full-year, while continuing our investment in electric and hybrid aviation platforms.

Despite the challenges faced in 2024 at Aviation and industrial, the company exited the year well-positioned for future growth in the aerospace and defense businesses with strong order activity generating total company backlog of $17.9 billion, up $4 billion in 2023. On the new product front at MBA in October, Aviation announced a significant advancement in aviation technology with the Gen 3 platform upgrades to the M2, CJ3 and CG4 aircraft, adding Garmin emergency auto land along with other avionics and aircraft enhancements.

During the year, we continued to make progress on the Citation Ascend and Beachcraft Denali development programs. Ascend has logged over 700 hours of flight testing, while Denali finished the year having logged over 2,500 hours of flight testing. At Bell, the US Army announced approval of Milestone B in August for the FLRA program. Bell is now executing on the engineering and manufacturing development phase of the program and progressing towards the first prototype aircraft build. Bell's H1 and V22 military program highlights include an FMS award for the production and delivery of 12 H1 Zulu helicopters to Nigeria and over $1 billion in sustainment awards on the H1 and V22 programs.

On the commercial side, Bell saw steady demand throughout the year, including its first 525 helicopter order for 10 units to Equinor, the Norwegian state energy Company. In 2024, Textron Systems made significant progress on several key pursuits. On the US Army's robotic command vehicle development program, Systems announced the delivery of two Ripsaw M3 prototype vehicles to the Army for Phase-1 of the competitive development effort ahead of a downside expected in the first-half of 2025. As part of the XM30 program, TeamLinks advanced to the detailed design phase that is expected to conclude with a critical design review in the first-half of 2025.

On the advanced reconnaissance vehicle program, Systems continued its development work as one of two vendors selected to design, develop and manufacture a 30 millimeter autocan prototype variant for expected delivery in 2025. Moving to FTUAS, Systems has fulfilled its contractual delivery commitments as waiting -- awaiting decision on a final downside for a production award on the competitive program by the US Army in the second-half of 2025. Systems also secured the next production contract award for the ship to short connector and expanded maritime aerosign operations with the US Navy.

Moving to industrial throughout the year, we continue to focus on our cost structure to offset challenging end-markets. At Aviation, was granted an airworthiness exemption by the FAA for its Electric trainer, which allows US flight schools to use the aircraft and certified pilot training programs. During the year, Aviation acquired Amazilia Aerospace, the developer of digital flight controls, flight guidance and vehicle management systems for both manned and unmanned aircraft. Looking to 2025 at Aviation, we are projecting growth driven by increased deliveries across all product lines and higher aftermarket volume with improved productivity and manufacturing efficiency.

Moving to Bell, we expect revenue growth driven by the program and higher commercial volumes. At Systems, we expect low-single-digit revenue growth with strong margins as we continue to pursue new program opportunities. In our Industrial segment, we are projecting lower revenues, largely driven by the suspension of powersports production at TSV and lower automotive volume at Caltech and expect cost reductions to drive improvement in segment profit margin for 2025. At, we plan to continue our investment in the development of new hybrid and electric technologies for manned and unmanned aviation platforms. With this overall backdrop, we're projecting revenues of about $14.7 billion, up 7% from 2024 for Textron's 2025 fiscal year. We are projecting adjusted EPS in the range of $6 to $6.20. Manufacturing cash-flow before pension contributions is expected to be in the range of $800 million to $900 million.

With that, I'll turn the call over to Frank.

Frank T. Connor
Executive Vice President and Chief Financial Officer at Textron

Thank you, Scott, and good morning, everyone. Let's review how each of the segments contributed starting with Texton Aviation. Revenues at Texton Aviation of $1.3 billion were down $242 million from the 4th-quarter of 2023, reflecting lower-volume and mix of $282 million, which was principally a result of production disruptions related to the strike. Segment profit was $100 million in the 4th-quarter, down $93 million from a year-ago, primarily due to lower-volume mix and manufacturing inefficiencies, which included idle facility costs and higher costs associated with the labor disruption resulting from the strike. Backlog in the segment ended the quarter at $7.8 billion, up $219 million from the prior quarter.

Moving to Bell, revenues were $1.1 billion, up $58 million from last year's 4th-quarter, reflecting higher military and support program revenues of $67 million, primarily due to higher-volume on the program, partially offset by lower-volume on the V22 program. Segment profit of $110 million was down $8 million from a year-ago, primarily driven by mix as lower-volume on the V22 program offset higher-volume on the FLRA program. Backlog in this segment ended the quarter at $7.5 billion.

At Textron Systems, revenues were $311 million, down $3 million from last year's 4th-quarter. Segment profit of $42 million was up $7 million from last year's 4th-quarter. Backlog in this segment ended the quarter at $2.6 billion. Industrial revenues were $869 million, down $92 million from last year's 4th-quarter, largely reflecting lower-volume. Segment profit of $48 million was down $9 million from the 4th-quarter of 2023, reflecting lower-volume and mix and inflation, partially offset by manufacturing efficiencies and lower selling and administrative expense largely due to cost-reduction activities. Textron Aviation segment revenues were $11 million in the 4th-quarter of 2024 with a segment loss of $22 million largely associated with research and development expense on new products. Finance segment revenues were $11 million and the profit was $5 million in the 4th-quarter of 2024.

Moving below segment profit, corporate expenses were $17 million. Net interest expense for the manufacturing group was $21 million. LIFO inventory provision was $80 million and tangible asset amortization was $8 million, and the non-service components of pension and post-retirement income were $65 million.

In December, we announced a strategic review of our Powersports product-line within the Industrial segment that resulted in additional restructuring actions. With these actions, we recorded total pre-tax special charges of $53 million and an inventory valuation charge of $38 million in the 4th-quarter. Our manufacturing cash-flow before pension contributions was $306 million in the quarter. For the year, manufacturing cash-flow before pension contributions totaled $692 million, down $239 million from the prior year. In the quarter, we repurchased approximately 2.8 million shares, returning $232 million in cash to shareholders. For the full-year, we repurchased approximately 12.9 million shares, returning $1.1 billion in cash to shareholders.

With that, I'll turn the call over to David.

David Rosenberg
Vice President, Investor Relations at Textron

Thank you, Frank. Turning now to our 2025 outlook on Slide 7. We're expecting adjusted earnings per share to be in a range of $6 to $6.20. We're also expecting manufacturing cash-flow before pension contributions to be about $800 million to $900 million.

Moving to segment outlook on Slide 8 and beginning with Textron Aviation, we're expecting revenues of about $6.1 billion. Segment margin is expected to be in a range of 12% to 13%. Looking to Bell, we expect revenues of about $4 billion. We're forecasting a margin in a range of 8.5% to 9.5%. At Systems, we're estimating revenues of about $1.3 billion with a margin in a range of 12% to 13%. At Industrial, we are expecting segment revenues of about $3.2 billion and margin to be in a range of about 4.5% to 5.5%. At Aviation, we expect revenues of $45 million and a segment loss of $70 million, reflecting our continued investment in sustainable Aviation solutions. At Finance, we are forecasting segment profit of about $25 million.

Looking at Slide nine, we're projecting about $160 million of corporate expense. We're also projecting about $130 million of net interest expense for the manufacturing group, $165 million of LIFO inventory provision, $35 million of intangible asset amortization and $265 million of non-service pension income. We expect a full-year effective tax-rate of approximately 18%.

Turning to Slide 10, R&D is expected to be about $500 million, up from $491 million last year. We're estimating CapEx will be about $425 million, up from $364 million in 2024. Our outlook assumes an average share count of about 184 million shares in 2025.

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

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Operator

[Operator Instructions] We'll go first this morning to Sheila of Jefferies.

Sheila Kahyaoglu
Analyst at Jefferies Financial Group

Good morning, Scott, Frank and David. Maybe, Scott, if you could start-off with the aviation guidance. Can we talk about the 2025 deliveries? I think it's implied around 190 deliveries versus 151 in 2024. Can you talk about the quarterly cadence of jet deliveries as well as maybe turbo props just given the Q4 delivery number.

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Well, I do think that the numbers obviously will ramp-up through the course of the year, Sheila, we're recovering. I'd say the factors are getting back to towards full operation coming out-of-the strike. We will continue as we have been for some time expanding our production capacity as we go through the year, and that's largely driven by parts, which I think we're in fairly good shape and ramping-up the workforce. And again, I would say early signs of coming out-of-the contract agreement, we're seeing a little more stability in the workforce, which is good and that should enable us to see that ramp on the -- over the course of the year.

As we talked about in the last call, we're probably going to see also a significant progression in terms of margins as we go through the year. We will have a lot of deliveries here in the first-quarter that are -- that would have been 2024 deliveries. So obviously, they're priced in 2024 levels. So I would expect to see both volume and margin progress through the course of the year.

Sheila Kahyaoglu
Analyst at Jefferies Financial Group

Maybe if I could just follow-up on the margin ramp. Can you talk about that bridge as we think about the 7.8% exit-rate for Q4 for Q4 for aviation, how we think about that progressing and the contributors to that?

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Well, for sure, the 7.8 is an anomaly, right? I mean, we had obviously unusually low volumes with the strike affecting a third or more of the quarter. And certainly, we took a an inefficient current-period expense with all of our overhead that wasn't burden -- we couldn't burden on volume. So the 7.8 million is certainly an anomaly. I would expect, as you think about us going through the year, it will you see progression. If you look at the guide, obviously, we're probably a 100 to 200 basis-points probably below the guide and probably finishing up more like 100 to 200 basis above the guide as you progress through the year to get to that average.

Sheila Kahyaoglu
Analyst at Jefferies Financial Group

Great. Thank you.

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Sure.

Operator

Thank you. We go next now to Peter Arment of Baird.

Peter Arment
Analyst at Robert W. Baird

Yes, good morning, Scott. David. I'm Frank. Frank, good luck with your retirement. Thanks for all your help over the years the years. Thank you. Thank you. Could you talk a little bit about the -- Scott, just or David, maybe you want to weigh-in on just the -- your outlook for cash-flow for the year, just given the earnings you're projecting, which is obviously a pretty nice snapback. Just some of the moving parts, it seems maybe was a little lower than we were estimating, but maybe we didn't have all the inputs. But thanks.

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Well, again, it will progress through the year. The cash was obviously in Q4 lighter than we normally have. That's largely reflective of a lot of inventory that was at aviation for jets that didn't deliver Q4. So we'll see our normal relatively light cash-in Q1 and that will grow to the -- over the course of the year, but I think we're pretty confident we'll be in that $900 million range. But as-is normal, it will be more back-end loaded.

Peter Arment
Analyst at Robert W. Baird

Okay. I appreciate that. And then maybe just Scott, in general, I know talked about aviation. And maybe you just talk about, I mean, you obviously have very strong bookings in refreshed product lines, obviously drawing a lot of new interest. Just maybe just if you want to highlight just what you're seeing on the demand environment, whether it's broad-based or any particular markets that are stronger than others? Thanks.

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Thanks, Peter. Look, it's been pretty much across the product-line. I think we feel like we're in pretty good shape. The demand and order activity across every model has been -- has been good. We saw some very strong demand, obviously in that light jet with the Gen 3 announcements. So that was very, very well-received by customers. So we, in particular had a very strong quarter in sort of that CJ3, CJ product-line. But again, it's been pretty strong in most of the portfolio. And I think we -- again, just given where customers are and the level of activity and the level of dialog, I think we'll continue to see a sustained demand through the course of the year. Again, we're probably looking at a one-to-one book-to-bill just because we think that's about where things ought to land given the lead times of where most availities are for our different products. So one-to-one is what we're baked into our basic plan.

Peter Arment
Analyst at Robert W. Baird

I appreciate the color. Thanks, Scott.

Operator

Thank you. We go next now to Robert Stallard of Vertical Research.

Robert Stallard
Analyst at Vertical Research Partners

Thanks so much. Good morning.

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Good morning, Rob.

Robert Stallard
Analyst at Vertical Research Partners

And Frank, best of luck for your retirement. It's been quite a ride. Let's start-off with Bell. I was wondering if you could talk about what the risks and opportunities could be within that 2025 guidance both for revenues and margin.

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

You know, Robert, I don't think there's a whole lot. I mean, this is all mostly backlog business. Obviously, the FLRA program, the ramp that we have baked into there is supported by what's in the sort of the pending '25 appropriations budgets and all the guidance we're receiving from the customer. So I don't think there's risk around that. Most of the commercial business is well booked, certainly sustainment around V22 and H1 is very predictable business and again, largely booked. So I think as we work our way through the course of the year, we're in I don't think there's a lot of risk to the downside of where we are on the on the bell numbers.

Robert Stallard
Analyst at Vertical Research Partners

Okay. And then as a follow-up, I was wondering if you've seen any sign of demand changing at aviation or industrial since we've had the US election.

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

No, no, we really didn't Robert. It's actually kind of interesting. I mean, normally, we see more of a slowdown a little bit before the election just because people don't like a lot of uncertainty. I think probably largely in-part as a result of the size of the backlog and the stuff that aircraft that are available well out past that period, obviously that we didn't see quite the drop-in that we often see around our presidential election. So I would say it was relatively steady and we really haven't seen any change that I'm aware of in the demand environment in terms of the industrial side.

Robert Stallard
Analyst at Vertical Research Partners

Okay. That's great. Thank you.

Operator

Thank you. We go next now to Noah at Goldman Sachs.

Noah Poponak
Analyst at Goldman Sachs & Co.

Hey, good morning, everyone. Hey, just back to the cash-flow guidance, I guess, it would be lower than 2023 and the conversion from net income or the free-cash margin, I think a little light of where you've talked about being over-time and I would have expected you'd be recovering some inventory from '24 that would help. So is there a net negative working capital assumption still in '25 or what else are we all missing in that bridge?

Frank T. Connor
Executive Vice President and Chief Financial Officer at Textron

There's a -- on the working capital side, there's a little bit of headwind associated with the timing of some military payments from an inventory standpoint. Obviously, we are -- we'll be ramping production through the year as we talked about. So even though we had some higher inventory levels going into the end of '24 than we would have originally anticipated, we do need to have some higher inventory levels at the end of '25 for anticipated ramp. So you won't see a lot of inventory benefit. There is some military payment timing, as I said. And then we are expecting higher capital expenditures relative to what you saw back-in the '23 timeframe associated with just the growth of the business and in particular, kind of flora prep activities at Bell.

Noah Poponak
Analyst at Goldman Sachs & Co.

Okay, that makes sense. And then I just was hoping to get a little more detail on the Bell margin. That's been quite resilient as you've ramped the early stages of FLRA rapidly, which we had all anticipated would dilute that margin. But so-far it hasn't. So maybe just walk us through the pieces that would bring the Bell margin down that much in 2025?

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Yeah. Well, I think if you look at the Bell through 2024, we were -- we were helped by a little bit of improvement on some of the H1 side, obviously, with the Nigerian deal that allowed us to maintain some more of that H1 volume, which is better volume for us. But you still at a macro-level, no, we do have V22 coming down, H1 will start to come down. We did have strong aftermarket in 2024. I think we'll still have strong aftermarket in 2025, but it's going to be flatter from where it was in 2024. So you really see a ton of the growth coming from the Flora ramp and commercial OEM deliveries. And as you know, commercial OEM deliveries tend to be dilutive to our margins. They generate a lot of aftermarket. So long-term, very good for the business. But the two real growth drivers in 2025 are that ramp on FLRA and increased commercial deliveries, both of which are obviously dilutive.

So as we've said, we have -- we've always expected that this margin will come down somewhat based on that mix, but that we're trying to target not having that be a dilution or problem at the EPS level. So I think we're still more or less in that range of holding the operating profit dollars. It's a little pressured year-over-year just because we sort of outperformed on 2024 and that kind of raises the bar on that 2025 target. But I still think we're going to be in that range of being able to at least hold not dollars even as we grow the revenue on lower-margin business.

Noah Poponak
Analyst at Goldman Sachs & Co.

Okay, great. I'll add my congrats and to Frank and Dave on the retirement and the new appointments. And thanks so much for working with us over the years, Frank, and thanks for taking my questions.

Frank T. Connor
Executive Vice President and Chief Financial Officer at Textron

Thanks, Noah.

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Thanks. Noah.

Operator

Thank you. We go next now to Seth at JPMorgan.

Seth Seifman
Analyst at J.P. Morgan

Hey, thanks very much and good morning and congratulations, Frank. Just to maybe come at Bell from the other side, it was strong performance through most of the year and certainly at the high-end relative to the initial guide. But I think the guide went up in Q3 to about 10.5% to 11%, I, I think and came in slightly lower. Was there something that changed in Q4 at Bell that led to that shortfall?

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Well, look, I mean we had -- we did have some program adjustments in Q4 that weren't favorable at Bell that largely had to do around FLRA. I mean, we did exercise the limited user test. That is a fixed-priced you know option that was exercised. And as we would expect, the fixed-price options are not at not a great margin, so that did create some dilution, which when you do the program accounting did put a little bit of a drag in Q4 for us.

Seth Seifman
Analyst at J.P. Morgan

Okay. Okay. Okay. Thanks. And maybe to follow-up just at aviation, the orders have been quite steady through the year. When we think about the composition of those orders in terms of, you know net chats versus retail, is that -- is that a pretty steady composition? Is it a pretty -- both in terms of how it's been trending versus itself and then how it's been trending versus the level of deliveries that we're seeing?

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Well, in general, it holds about flat, right, because as you guys know, we put these into the backlog based on sort of a 12-year forward, not just puts orders in, generally speaking, every month, it's usually fairly linear, but not always. And so there can be from quarter-to-quarter some variation based on how many delivers we have to make in that quarter versus how many new exercises they happen to put. So it's not a perfectly linear process, but it generates a little bit of variability from quarter-to-quarter. But over the course of the year, it's been pretty stable.

Seth Seifman
Analyst at J.P. Morgan

Okay, great. Great. Thanks very much.

Operator

Thank you. We'll go next now to Miles Walton with Wolfe Research.

Myles Walton
Analyst at Wolfe Research

Thanks. Good morning. On R&D, I know you started-off the year with a $550 number for R&D, it came in at $490. I'm curious to the underrun there. And this would be a few years in a row of declines on the R&D front. I imagine much of it from Bell. It looks like you're looking for a stable outlook for '25 to $500. Is that a good number going-forward? And also what was the cause of the underrun in '24?

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Yeah. I think it's a good number going-forward. Look, I think the Bell dynamic with the end-of-the program is certainly what drove a significant change in the R&D on a year-over-year basis as that program was wrapped up. And so I think on a go-forward basis, we'll see more normalized R&D spending at Bell as well as across the rest of the businesses. So for sure, part of what drove the lower R&D in the year and drove some of the higher-margin frankly at Bell was that we did see a step-down associated with the funding that we were having to put in net to the -- to the FAR program.

Myles Walton
Analyst at Wolfe Research

Okay. And then relative to systems, I know the decisions on FT of AS and maybe RCV are kind of sort of dictate how the year goes and maybe how '26 goes. How sensitive to this year are the outcomes on those programs for your outlook for systems top-line of $1.3 billion.

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Well, I don't think there's a huge sensitivity to it. Obviously, the RCV program, we expect to be in the first-half of 2025. FTOES is probably more of the second-half, latter in the year. And of course, those programs have to ramp-up. So in the early phases, they're not huge numbers and particularly in the case of FTOES because it's late in the year, there's not a huge sensitivity to them. They're certainly much more important to us from a standpoint of what growth looks like as we go into '26 and beyond. So I guess I think of them as important milestones for us in the course of 2025, but not having a huge impact on revenue and margin in the year.

Myles Walton
Analyst at Wolfe Research

All right. Thank you.

Operator

We'll go next now to David Strauss at Barclays.

David Strauss
Analyst at Barclays

Thanks. Good morning, everyone. Scott, aviation revenues in the 4th-quarter, they came in a little bit light, I assume, looks like maybe you missed relative to what you're thinking 10 to 15 jet deliveries. What happened there? Was that supply-chain or was that more on kind of your own in terms of getting the factory restarted post the post the strike?

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Well, certainly versus our original guidance for the year, yeah, it was probably more in that mid-teens in terms of aircraft and that was largely driven by the fact that you know, I mean, we didn't -- we really didn't get the factory running again until really the beginning of October, so -- or I'm sorry, beginning of November. So we really lost a third of the quarter with having the workforce out. So as I said earlier, I think the good news is the folks are back. It's good to have the contract agreement in-place for five years. And I think the workforce is pleased with the outcome. We're fine with the outcome. Everybody is ramping-up. But we're really -- we did for sure lose a third of the quarter with not having a production operation in-place.

David Strauss
Analyst at Barclays

Yeah. Yeah, I was just looking at it, you took down the revenue forecast of 5.5% and you're a little short of that. Guess I guess just following-up there, how do you feel about the aviation supply-chain in terms of the ramp you're looking at in terms of deliveries for 2025?

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Look, David, I think we feel-good about it. I mean that's where we're guiding where we are. I would say that the third-party parts, supply-chain pieces coming into the factory are certainly in a much better position than they were throughout the course of 2024. So that feels very good. The other critical part is obviously stability of our workforce and retention. And again, since the -- the contract has been signed, we were very happy with the number of people that came back, even folks that had been with us for a very short period of time before the strike, you know, hung in there and came back once the agreement was put in-place. And the attrition numbers we're seeing are certainly improved from where they had been through the course of the rest of 2024. So I think the momentum is in the right direction.

Now we got a lot of work-in front of us here to get deliveries that were supposed to be in '24 done and ramp it up. But I'd say the early look in terms of aircraft coming out-of-the production lines, attack times, which clearly have to improve over the course of the year are operating as we would expect. And so I think we're at this point feeling pretty good that we're going to be able to make that ramp and deliver on the guide at the $6.1 billion.

David Strauss
Analyst at Barclays

Okay. And timing for certification, what are you looking at? And is the aviation guide sensitive at all to that timing?

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Well, I mean, obviously, we're expecting it to be in the course of the year. We got to work this through the FAA. If there's not an issue or a problem, it's going well. But clearly the actual certification is an FAA action. I think we feel great about the flight testing. The program is going very well. We do have a few aircraft in the year. So, yes, it's part of our guide, but certainly not material. But we would certainly expect to get the first few aircraft delivered late this year.

David Strauss
Analyst at Barclays

Great. Thanks very much.

Operator

Thank you. We go next now to Ron Epstein of Bank of America.

Ronald Epstein
Analyst at Bank of America Merrill Lynch

Yeah, hey, good morning, guys.

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Good morning, Ron.

Ronald Epstein
Analyst at Bank of America Merrill Lynch

Is there anything, Scott, you've seen with maybe the change in administration that could be like an added little tailwind for private aviation. So as an example, have you heard any discussion around some form of accelerated depreciation coming back or something like that historically has been a nice catalyst for private aviation?

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Yeah. I don't know specifically that the accelerated depreciation impact. But I would have to say, Ron, I think in general, you know, as you know, most of our customers are small to mid-sized businesses, entrepreneurial, you know, high-net wealth, I mean, it's a broad range of customers, obviously. But I think that in general, tax policy, regulatory policy is encouraging to them and therefore, they feel-good about their businesses. Their businesses are likely to be successful in growing and that certainly is nothing but helpful in terms of you know-how they get their head around capex expenditures like-new aircraft. So I would say, I wouldn't point out one particular item and it's obviously it's quite early here and we don't know-how all the tax stuff is going to work its way out. But I think in general, just the nature of our kinds of customers that they think the outlook for business is good and that's good for the prospects of private aviation.

Ronald Epstein
Analyst at Bank of America Merrill Lynch

Yeah, that makes a ton of sense. And if I can, a follow-up that change in directions just a little bit. A while ago, right, you guys did Scorpion, and I always thought that was kind of cool. And the DoD at the time didn't seem to have a big appetite for that. It does seem, however, there does maybe potentially seem to be a change in more -- maybe a push towards more commercial terms contracting, contractors taking more risk. Do you see any opportunities for you guys with maybe like a 2.0 parenthetically, something like that with maybe the changing environment with potentially more commercial type contracting?

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Well, I don't know about a specific around a Scorpion, Ron. I will -- I would say that in this administration four years ago, eight years ago to four years ago, however you want to think about it, there was certainly a mindset that we have to find ways to go faster, right? And so our acquisition system, you know, this was the OTAs and the MTAs and the Army's creation of things like Futures Command that frankly help to accelerate and drive a lot of the things that we're working on today. So again, it's very early, obviously.

Everybody talks about acquisition reform and I wouldn't say I expect huge things in terms of real change to policy, but expectations that what's good for the warfighter, good for the taxpayer is to figure out how to accelerate programs. And so again, it's early. We don't have any data yet, but I'm certainly hopeful that the incoming administration and within the building is interested in figuring out how to accelerate things. Commerciality is certainly a part of that. But just frankly, how do you make the process run faster and get things out-of-the warfighter quicker. And I think we would clearly be a beneficiary of that. We have a bunch of great programs that I think the warfighter side of the military would love to see them get-out into the hands in the actual combatant commands and hopefully, we'll see some of that happen.

Ronald Epstein
Analyst at Bank of America Merrill Lynch

Yeah. Thanks. Thanks a lot, Scott. Thank you.

Operator

Thank you. We go next now to Gavin Parsons of UBS.

Gavin Parsons
Analyst at UBS Group

Thanks. Good morning. Just maybe two questions on the aviation margin. You mentioned still having some impact of the disrupted '24 deliveries slipping into '25. Just I was hoping you could give us some sense of how much of that excess cost you're absorbing in that 12% to 13% margin guide?

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Well, we're not. It was a big driver, Gavin. Gavin of the of the Q4 number because we did take and period expense, a lot of overhead, which otherwise would have been into our sort of base cost spread across aircraft deliveries. And given that we were light, we did take a pretty significant hit on period expense. But as we think about the go-forward number, we expect -- have built a plan around margin rates and normal volumes of aircraft delivery. So I wouldn't expect to see any significant period expense thing associated back with the lower volumes in 2024.

Gavin Parsons
Analyst at UBS Group

And then anything you can give us on what you're expecting on-net price and performance for '25?

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

No, look, I mean, as I said, we certainly expect performance and factory efficiencies to be up significantly versus 2024 and that's a driver of a lot of where we're -- where we think we'll end-up with the margin that we have guided. In terms of price, look, price is still -- is still good in the industry, but there's also inflation out there. So as we've talked about before, I don't expect a huge spread on the net of that. I think most of our performance improvement, most of our margin improvement getting back to where we should be here in 2025 as a result of much better factory performance.

Ronald Epstein
Analyst at Bank of America Merrill Lynch

Thank you.

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Sure.

Operator

And we'll take our final question this morning from Pete Skibitski of Alembic Global.

Peter Skibitski
Analyst at Alembic Global Advisors

Hey, good morning, guys. Congrats, Frank. Hey guys, this longer fiscal '25 continuing resolution, is that impacting your military programs at all?

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

You don't -- Pete, I have not seen it have a big impact. I mean, look, we hate the uncertainty of it. And I think our -- certainly our customer hates it because they are constantly in -- I mean, they're trying to now do 2026 budgets when they haven't been allowed to finalize 2025. But I think the expectations -- the customer appears to be executing to what they expect their 2025 budget to be and has sort of been appropriate and sitting on the shelf waiting for you know, the final action. So it's very disruptive. I think it's a horrible process, obviously, and it takes a lot of time and energy away from the customer be focused on other things. But the good news is most of our programs are already funded programs, they're not new starts. There are some things as you get further into the year that will become new starts, but we certainly expect that the CR will be resolved, have an actual budget before that becomes a problem.

Peter Skibitski
Analyst at Alembic Global Advisors

Got it. Okay. Thank you. Just one last one for me. Across the whole company in terms of the new administration, is there anything on your radar in terms of new regulations or policies or the tariff issue that could be either positive or negative for the business that's on -- you know that's on your radar. I think maybe one thing in terms of if we get tariffs towards Canada, does that impact Commercial at all? Just anything on your radar that you can share with us? Thanks.

Scott C. Donnelly
Chairman, President and Chief Executive Officer at Textron

Yeah, sure. Look, Pete, I think on the positive side, again, we talked about just sort of what our expectations are for the overall business climate, less regulation, probably a better tax resolution than maybe otherwise of could have happened. So I think from an overall business environment standpoint, those -- that's very positive on the tax front on the regulatory front.

On the military front, as I said, I think we have an administration coming in that has in the past been Pro, how do we figure out how to accelerate, how do we go faster, which would be again net good for us. Look, the tariff is very much a wildcard. I mean, we don't know. We don't know the specifics. Clearly, we have operations in Mexico. We have, as you noted, a pretty significant operation in Canada, particularly on the Bell commercial side. A lot of the value of the dollars are things that go over from the US into Canada and then back. I assume those don't get hit, but we do have some big important suppliers like Pratt Canada that sell a lot of engines to us in both rotor and fixed-wing and we do have our Bell Mir Bell operations on the commercial side of Bell.

So look, it's an unknown and so we're not -- we're not rotating positioned one-way. On the other thing, we've got to see how this plays out. And again, I think a lot of this is around negotiations and working on how do you -- how do you deal with the free-trade agreements on a go-forward basis. So we're we're just going to kind of hang in there and see how it plays out.

Peter Skibitski
Analyst at Alembic Global Advisors

Got it. Got it. Helpful. Thanks guys.

Operator

Thank you. And ladies and gentlemen, that will bring us to the conclusion of today's Textron Q4 2024 earnings release call. We'd like to thank you all so much for joining us today and wish you all a great -- remainder of your day. Just a reminder, today's call will be available for replay beginning later today by calling or 402-2201502. Again, thanks for joining us everyone. We wish you all a great day. Goodbye.

Corporate Executives
  • David Rosenberg
    Vice President, Investor Relations
  • Scott C. Donnelly
    Chairman, President and Chief Executive Officer
  • Frank T. Connor
    Executive Vice President and Chief Financial Officer
Analysts

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