Textron [TXT] Conference call transcript for 2023 q1
2023-04-27 16:37:14
Fiscal: 2023 q1
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 session. [Operator Instructions] 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. Please go ahead, sir.
Eric Salander: 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 of our website. Revenues in the quarter were $3 billion, up $23 million from last year's first quarter. Segment profit in the quarter was $259 million, down $18 million from the first quarter of 2022. During this year's first quarter, 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 first quarter. Manufacturing cash flow before pension contributions, a non-GAAP measure, totaled $104 million in the quarter compared to $209 million in the first quarter of 2022. With that, I'll turn the call over to Scott.
Scott Donnelly: Thanks, Eric, and good morning, everyone. We had a solid first quarter. Revenues up 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 first quarter. Aviation continued to see solid demand across jet and turboprop products. Backlog grew $136 million and in the first quarter at $6.5 billion. In the quarter, Aviation received an initial award on the U.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 of 9% as compared to last year's first quarter. Moving to Bell. We announced the appointment of Lisa Atherton as the CEO, succeeding Mitch Snyder, who will retire at the end of April. Lisa returned to Bell in January after more than five years as the President and CEO of Textron Systems. She's done an outstanding job building strong teams at Bell and Textron Systems in her 16 years with the company and certainly confidence 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 FLRAA contract protest was denied and the U.S. Army subsequently canceled the stop-work order allowing work on the contract to proceed. On the commercial side of Bell, we delivered 22 helicopters, down from 25 in last year's first quarter. During the quarter, we saw solid customer activity across all our commercial products and in markets, including order from the Polish National Police for four additional BEL407s, which will expand their fleet to seven aircraft. At Textron Systems, we saw a good margin performance on higher revenues across our programs. During the quarter, Systems Aerosonde Hybrid Quad was among five competing unmanned air systems that were down selected for Increment-2 of the Army's future tactical unmanned aircraft system competition. Also during the quarter, systems delivered craft 105 of the U.S. Navy Ship-to-Shore Connector program, the seventh craft delivered to the Navy. There are now two 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 Kautex. Specialized Vehicles, the golf business continues to see strong demand and pricing for its lithium product. At Kautex, we announced the first Pentatonic order from an automotive OEM for a thermoplastic composite underbody battery protection skid plates. Skid plate is part of the company's new Pentatonic battery system product line, supporting battery electric vehicle production. Moving to eAviation. During the quarter, we announced two new U.S. distribution partners on the East Coast to further expand Pipistrel's existing distribution network. Also in the quarter, we finalized the route with Mesa Airlines for 25 Alpha Trainer aircraft and an option for 75 additional aircraft. At [indiscernible] during the quarter, we displayed the Pipistrel's Panthera and Velis Electro aircraft receiving CW customer interest in both models. With that I'll turn the call over to Frank.
Frank Connor: Thank you, Scott. Good morning, everyone. Let's review how each of the segments contributed, starting with Textron Aviation. Revenues at Textron Aviation of $1.1 billion were up $109 million from the first quarter of 2022, reflecting higher pricing of $58 million at higher volume of $51 million, which included higher defense and aftermarket volume. Segment profit was $125 million in the first quarter, up $15 million from a year ago, largely due to favorable pricing net of inflation of $17 million and the impact from the higher volume and mix, partially offset by an unfavorable impact from performance of $17 million. Backlog in the segment ended the quarter at $6.5 billion. Moving to Bell, revenues were $621 million, down $213 million from last year, as expected, on lower military revenues, reflecting lower spares and support volume in V-22 and H-1 production volume. Segment profit of $60 million was down $31 million from last year's first quarter, primarily reflecting lower volume and mix, partially offset by a favorable impact from performance of $29 million, reflecting lower research and development costs. Backlog in the segment ended the quarter at $4.6 billion. At Textron Systems, revenues were $306 million, up $33 million from last year's first quarter, largely reflecting higher volume. Segment profit of $34 million was up $6 million from a year ago, primarily due to a favorable impact from performance. Backlog in this segment ended the quarter at $2 billion. Industrial revenues were $932 million, up $94 million from last year's first quarter, largely due to higher volume and mix at both Textron Specialized Vehicles and Kautex. Segment profit of $41 million was up $2 million from the first quarter 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 eAviation segment revenues were $4 million and segment loss was $9 million in the quarter, primarily reflecting research and development costs. Finance segment revenues were $12 million and profit was $8 million. Moving below segment profit. Corporate expenses were $39 million. Net interest expense was $17 million, LIFO inventory provision was $25 million, intangible asset amortization was $10 million, and the non-service component of pension and post-retirement income were $59 million. In the quarter, we repurchased approximately 5.2 million shares, returning $377 million in cash to shareholders. To wrap up with guidance, we are reiterating our expected 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 million to $1 billion. That concludes our prepared remarks. So Bradley, we can open the line for questions. Bradley?
Operator: Of course. And our first question comes from the line of Sheila Kahyaoglu with Jefferies. Please go ahead.
Operator: And our next question comes from the line of Doug Harned with Bernstein. Please go ahead.
Operator: And our next question comes from the line of Seth Seifman with JPMorgan. Please go ahead.
Operator: And our next question comes from the line of Cai Von Rumohr with Cowen. Please go ahead.
Operator: And our next question comes from the line of Robert Stallard with Vertical Research. Please go ahead.
Operator: And our next question comes from the line of David Strauss with Barclays. Please go ahead.
Operator: And our next question comes from the line of Myles Walton with Wolf Research. Please go ahead.
Operator: And our next question comes from the line of George Shapiro with Shapiro Research. Please go ahead.
Operator: And our next question comes from the line of Peter Arment with Baird. Please go ahead.
Operator: And our next question comes from the line of Pete Skibitski with Alembic Global. Please go ahead.
Operator: And our next question comes from the line of Kristine Liwag with Morgan Stanley. Please go ahead.
Operator: And with that our last question comes from the line of Ron Epstein with Bank of America. Please go ahead.
Operator: And with that, ladies and gentlemen, today's conference will be available for replay after 10 A.M. Eastern today through April 27, 2024. You may access the AT&T replay system at any time by dialing the 1-866-207-1041, entering the access code 4732406. International participants may dial 402-970-0847. And those numbers again are 1-866-207-1041 and 402-970-0847, again, entering the access code 4732406. That does conclude your conference for today. Thank you for your participation and for using AT&T conferencing service. You may now disconnect.
