Jason Gursky

Jason Gursky revisited shipbuilding margins, noting the Q1 2026 guide is at the low end of the full-year range and asking if this conservatism is a back-half event or if a stronger start to the year is possible. He also asked for any specific milestones or delivery dates to flag for potential risk or opportunity in 2026.

Answer

EVP and CFO Tom Stiehle advised staying consistent with past performance driven by milestones and deliveries, noting that the Q1 guide reflects exiting Q4 at 5.5%. He expects awards in the first half of the year to facilitate a trajectory of at least midpoint or better for the full year. President and CEO Christopher Kastner flagged the deliveries of LPD-30 and SSN-800 towards the end of 2026 as critical from both a risk and opportunity standpoint.

Jason Gursky from Citigroup Inc. sought clarification on the quarterly trajectory of shipbuilding margins for 2026, noting the Q1 guidance was at the low end of the full-year range and asking if the conservatism was primarily a back-half phenomenon. He also inquired about the possibility of achieving the higher end of the margin guidance early in the year and asked management to flag any critical milestones or delivery dates with potential risk for 2026.

Answer

Executive Vice President and CFO Tom Stiehle stated that quarterly margins are subject to milestones, performance, and deliveries, with the Q1 guide reflecting the Q4 2025 run rate. He indicated that awards expected in the first half of 2026 would facilitate a trajectory towards the midpoint or better for the year. President and CEO Chris Kastner highlighted the deliveries of LPD-30 and SSN 800 towards the end of the year as critical milestones from a risk and opportunity standpoint.

Jason Gursky requested an update on the transition from pre-COVID to post-COVID contracts and asked about the potential impact of acquisition reform and OTAs on HII's cash flow and Mission Technologies business.

Answer

President and CEO Christopher Kastner reaffirmed the transition timeline, expecting to cross the 50% mark in 2027, despite some equipment delays on CVN 80. He stated it is too early to know the cash flow impact of reforms but sees Other Transaction Authorities (OTAs) as a clear positive with potential upside for the Mission Technologies division.

Jason Gursky asked how the company manages through the current uncertainty and inquired about the multi-year outlook for Mission Technologies, including its pipeline, growth, and margins.

Answer

CEO Christopher Kastner stated that while there is no 'pause' due to national security urgency, the company is repositioning its hiring strategy to focus on experienced labor to improve efficiency. Both Mr. Kastner and CFO Thomas Stiehle praised Mission Technologies' strong performance, citing 14% year-to-date growth, major contract wins, and a robust pipeline, expressing confidence in exceeding prior growth targets.

Jason Gursky inquired about the revenue outlook for the 'RemainCo' L3Harris (excluding Missile Solutions) over the next few years, asking if acceleration is envisioned and what leverage points remain for a potentially large defense budget.

Answer

CEO Chris Kubasik projected solid mid-single-digit growth for RemainCo, faster than the industry average, citing a strong portfolio alignment, SDA wins, and classified work. He noted potential upside if the FY2027 defense budget reaches $1.5 trillion. CFO Ken Bedingfield added that L3Harris is positioned to deliver quicker on increased defense budgets due to its agile nature and investments in production capacity across space, communications, and solid rocket motors.

Jason Gursky asked for insights into the revenue outlook for the 'RemainCo' L3Harris, excluding the Missile Solutions business, over the next couple of years. He also inquired about whether the revenue growth rate is expected to accelerate and what points of leverage remain in the business, especially with the IPO of the high-growth Missile Solutions segment.

Answer

CEO Chris Kubasik projected solid mid-single-digit growth for RemainCo, emphasizing the strength of L3Harris's realigned portfolio, capabilities in Space (SDA wins, HBTSS, classified work), airborne, and maritime domains. He noted that a potential $1.5 trillion FY2027 defense budget could provide further upside. CFO Ken Bedingfield added that L3Harris is positioned to deliver quicker on increased defense budgets due to its agile nature and investments in production across Space, communications, and solid rocket motors.

Jason Gursky from Citigroup asked for clarification on the split of LHX NEXT savings between the company and customers, and for a broader update on the space demand environment, including new projects and European opportunities.

Answer

SVP and CFO Kenneth Bedingfield confirmed there was no change to the model, with L3Harris retaining 30-40% of LHX NEXT savings as margin. Chairman and CEO Christopher Kubasik described a robust space outlook, highlighting opportunities in weather satellites, missile tracking, and various roles as a prime, sub, and merchant supplier. He expects market momentum to increase in the second half of the year.

Jason Gursky of Citigroup asked for clarification on the portion of LHX NEXT savings passed to customers versus retained, and for a broader view on the space market's demand environment, including opportunities in Europe.

Answer

SVP & CFO Kenneth Bedingfield confirmed no change to the model, with 30-40% of LHX NEXT savings expected to generate margin opportunity. Chairman & CEO Christopher Kubasik described a broad space strategy across all orbits and noted a recent industry slowdown but expects momentum to pick up in the second half of the year. He also sees international opportunities for their weather satellite technology.

Jason Gursky asked for an in-depth perspective on procurement reform, including its ultimate goal (cost savings vs. increased purchasing power), potential low-hanging fruit, and the long-term impact on the industrial base.

Answer

CEO Christopher Kubasik, a vocal advocate for reform, stated the goal is to increase purchasing power through speed and agility. He identified low-hanging fruit like reforming the FAR, eliminating Cost Accounting Standards, and raising the threshold for Truth in Negotiation Act (TINA) requirements. He believes reform will favor agile companies like L3Harris that can adapt to commercial-like practices and that it will be a 'game changer' for the industry, especially in buying software and resilient communications.

Jason Gursky asked for more detail on the trajectory of the munitions business, including how long the strength might last, potential production rates and run rate revenue over multiple years, and incremental margins compared to overall Combat Systems margins. He also inquired about the knock-on impact of commercial Aerospace production ramps on the biz jet supply chain, specifically regarding materials, subcomponents, and labor.

Answer

Phebe Novakovic, Chairman and CEO, stated that demand signals for munitions are strong due to low inventories, expecting continued growth with margins typically in the 14%-15% range. She noted that while labor is not an issue, some suppliers in the Gulfstream supply chain have ramped more successfully than others, with capacity throughput being the main constraint, though quality remains good.

Jason Gursky requested more details on the negative EAC adjustment at the NASSCO shipyard, the general operational status there, and any potential impacts from the new administration's priorities.

Answer

Chairman and CEO Phebe Novakovic noted continued strong demand for NASSCO's ships. EVP of Global Operations Danny Deep explained the EAC was due to a flood that reduced production lines, followed by a subsequent issue that created significant rework. He stated that they expect to resolve the issue and have both production lines running by the end of the year.

Jason Gursky inquired about General Dynamics' perspective on the administration's new 'office of shipbuilding' and the potential impact of recent executive orders on federal acquisition regulations and procurement reform.

Answer

Phebe Novakovic, Chairman and CEO, stated that GD welcomes the increased focus on shipbuilding and has had productive conversations with the administration. Regarding acquisition reform, she expressed support for the dialogue, emphasizing the importance of understanding what works and what doesn't in the current process to reduce bureaucracy and cost drivers.

Jason Gursky from Citigroup asked for a high-level view on the most exciting areas for technology investment and business development across the defense portfolio. He also inquired about the company's philosophical approach to its balance sheet, capital structure, and leverage targets.

Answer

CEO Phebe Novakovic highlighted capitalizing on the strong growth profile in the Marine group, the competitive positioning of the Technologies group, and translating strong demand into revenue at Combat Systems as key focus areas. On the balance sheet, CFO Kim Kuryea noted its strength, a recent credit rating upgrade, and plans to repay maturing debt, with both executives stating they feel good about their current position.

Jason Gursky asked for an update on the $10 billion normalized free cash flow target, suggesting its potential to be significantly higher given the adjusted starting point and future production rates.

Answer

Brian West, EVP and Chief Financial Officer, reaffirmed the $10 billion free cash flow target as 'very attainable,' emphasizing the need to achieve certification programs, ramp up BCA production, improve BDS margins, burn off prior charges, and maintain BGS performance. He acknowledged the potential to exceed $10 billion but prioritized reaching the initial target first.

Jason Gursky asked for an updated perspective on Boeing's long-term normalized free cash flow target of $10 billion, questioning if the adjusted starting point at the end of 2026, coupled with potential higher production rates, suggests a normalized figure significantly above $10 billion.

Answer

Jay Malave, Boeing's Executive Vice President and Chief Financial Officer, reaffirmed the $10 billion free cash flow target as "very attainable" and the immediate priority. He acknowledged the potential for cash flow to exceed $10 billion in the future but emphasized the current focus on achieving the $10 billion mark through successful certification programs, increased BCA production rates, improved BDS margin profiles, and sustained growth at BGS.

Jason Gursky asked about the margin cadence for the Commercial Airplanes (BCA) segment over the next two years, the long-term margin impact from increased labor costs, and for an update on the X-66 technology demonstrator program.

Answer

CEO Kelly Ortberg described the X-66 as an important technology development program providing key learnings for future aircraft. CFO Brian West projected negative BCA margins in 2025, improving through the year and into 2026. He argued that productivity gains from rate ramps and closing shadow factories would offset the pressure from the new IAM agreement, preserving long-term margin expectations.

Jason Gursky from Citi asked if exiting unprofitable programs or contracts is a viable option being considered as part of the company's turnaround strategy.

Answer

President and CEO Kelly Ortberg stated that walking away from major defense programs with performance issues is not a viable option due to long-term commitments to core customers. Instead, the focus is on working with customers to de-risk these programs. However, he did indicate that the company will evaluate whether to proceed with future phases of certain contracts and will stop doing some non-essential activities.

Jason Gursky asked which of RTX's business segments has the most potential to exceed its 2026 guidance, given the tailwinds experienced across all businesses.

Answer

Neil Mitchill, CFO of RTX, stated it's early in the year and all three businesses have tailwinds. He highlighted Collins' significant transformation efforts for cost reduction, Raytheon's productivity improvements ($160 million year-over-year for the last two years) driven by volume and supply chain synchronization, and Pratt's growing GTF program, improving contracts, and steady legacy businesses. Mitchill emphasized that executing the current backlog will naturally lead to margin expansion and strong cash conversion across all segments. Chris Calio, Chairman and CEO, reinforced that each business is focused on reaching its full potential through operational improvement, structural cost reduction, and execution.

Jason Gursky asked for insights into RTX's 2026 outlook, specifically which of its segments (Collins, Pratt & Whitney, or Raytheon) has the most potential to exceed guidance based on current demand signals.

Answer

CFO Neil Mitchill stated it's early in the year and all three businesses have tailwinds. He highlighted Collins' significant transformation efforts for cost reduction, Raytheon's positive productivity improvements ($160M YOY for past two years) from volume and supply chain synchronization, and Pratt's growing GTF program, pricing, and steady legacy businesses. Chairman and CEO Chris Calio emphasized each business's focus on reaching full potential through operational improvement and structural cost reduction.

Jason Gursky of Citigroup inquired about the multi-year growth outlook for the Raytheon segment, asking about the timing of new awards from increased defense spending and the challenges of converting its large backlog into revenue.

Answer

Christopher Calio, Chairman & CEO of RTX, highlighted Raytheon's strong demand, evidenced by a 1.35 book-to-bill ratio and a 25% backlog increase since year-end 2023. He pointed to robust demand in integrated air and missile defense and effectors, fueled by international partners and domestic initiatives like 'Golden Dome'. Calio noted that the company is ramping production on key programs like GemT and Coyote and investing $250 million in capacity, but did not speculate on the specific timing of when new funding would convert to sales.

Jason Gursky asked for the gross impact of tariffs before mitigations and for management's perspective on recent White House executive orders aimed at procurement reform.

Answer

CFO Neil Mitchill stated that the net impact is the most relevant figure, as mitigations like USMCA and military duty-free exemptions significantly reduce the gross number. CEO Christopher Calio applauded the administration's efforts to streamline procurement, noting that faster contracting reduces risk and helps RTX execute on its significant backlog more quickly.

Jason Gursky of Citigroup asked about the company's top priorities for the year, focusing on productivity improvements relative to pre-pandemic levels, and inquired about the potential opportunity for RTX from a U.S. 'Iron Dome' missile defense system.

Answer

Executive Christopher Calio identified executing on the $218 billion backlog and driving productivity as top priorities, highlighting 11% sales growth on only 2% headcount growth as evidence of progress. Regarding a U.S. missile defense system, he stated that as a partner on Israel's Iron Dome, RTX is well-positioned for what would be a significant opportunity in its core competency.

Jason Gursky of Citigroup requested context on RTX's productivity improvements, asking about current levels relative to pre-pandemic and the company's long-term expectations for productivity growth.

Answer

Executive Christopher Calio noted that "green shoots" of productivity are emerging at Raytheon, driven by core operating system improvements and a healthier supply chain. He also pointed to company-wide automation and Industry 4.0 initiatives. Executive Neil Mitchill quantified the progress, stating Raytheon has seen a $110 million year-over-year productivity benefit and is on track for approximately $200 million for the full year, aided by new backlog being priced at current costs.

Jason Gursky of Citigroup asked for more detail on the 'new areas' of investment mentioned in the opening remarks and questioned Northrop's strategic approach to the potential shift from large, exquisite systems to more attributable, lower-cost platforms.

Answer

Chair, CEO & President Kathy Warden highlighted the 'Beacon' mission testbed as an example of new investments, where the company partners with others to test and integrate autonomous capabilities. She stated that future warfare will require a combination of exquisite and lower-cost systems working together, and that Northrop Grumman already operates across this spectrum. The strategic shift involves new go-to-market approaches, like partnering to provide integrated solutions rather than just selling hardware.

Jason Gursky from Citigroup Inc. asked CEO Kathy Warden to outline her top priorities for the year and inquired about the customer's perspective on enabling VC-backed defense tech companies.

Answer

CEO Kathy Warden listed her top priorities as advancing technology for military superiority, driving internal efficiency to deliver value, and deploying resources for maximum shareholder and customer impact. She noted that the Department of Defense uses a broad set of acquisition strategies, embracing both innovative, high-capability systems and lower-cost technologies, but emphasized that equipping the military requires leading-edge, not just commercially available, technology.

Jason Gursky of Citigroup asked about the mix of contract types (FMS vs. direct commercial) in the growing European business and its expected impact on margins. He also inquired about any observable shifts in the domestic DoD contracting environment.

Answer

Chair, CEO and President Kathy Warden explained that the international portfolio is a mix, with direct commercial sales common for products like ammunition and FMS used for more complex systems. She noted both contract types tend to be accretive to margins. Domestically, she has observed more dialogue on contract types, which she views as healthy, but has not seen a significant strategic shift from the DoD.

Jason Gursky from Citigroup Inc. asked about the international defense outlook, specifically how GE plans to participate in growing European defense budgets and if new local partnerships are needed.

Answer

Chairman & CEO Lawrence Culp stated that growth will come from existing programs and highlighted their Italian subsidiary, Avio Aero, as their core European defense asset with exposure to key programs like Eurofighter and GCAP. While open to new partnerships, he expressed confidence in their current strategic positioning to capture European growth.

Jason Gursky of Citigroup asked for a big-picture perspective on recent executive orders aimed at rewriting federal acquisition regulations and their potential impact on the defense industrial base.

Answer

Chairman and CEO H. Culp responded positively, noting that reforms to Foreign Military Sales (FMS) will help GE deliver products to allies more efficiently, supporting growth for key programs. He also viewed efforts to streamline requirements and improve acquisition processes as beneficial. He added that holding the industry accountable for performance is not a bad thing, though it has limited direct impact on GE's current portfolio.

Jason Gursky asked about the current state of labor productivity compared to pre-pandemic levels and the key factors required for improvement.

Answer

CEO H. Culp acknowledged that while the company's FLIGHT DECK operating model is driving improvements, the full benefits to labor productivity have been masked by supply chain disruptions. He expressed confidence that as material input reliability improves—now over 90% from critical suppliers—the company will achieve more predictable factory flow and better labor productivity in 2025.

Jason Gursky from Citigroup followed up on the EOCL topic, asking about other pockets of demand within the DoD, potential shifts in demand between agencies, and the timing of the EOCL contract renewal.

Answer

CEO Will Marshall confirmed there is separate interest from the DoD for solutions like MDA, citing collaborations with the U.S. Navy, and for satellite services. He declined to speculate on EOCL renewal timing or other specifics, stating the situation is fluid, but reiterated his confidence in the overall demand signals from the U.S. government.

Jason Gursky asked for clarification on the FY27 growth rate baseline, whether FY26 expense increases are one-time, and how Planet plans to monetize the non-JSAT satellite capacity.

Answer

CFO Ashley Whitfield Johnson advised using the midpoint of FY26 guidance as the baseline for the growth rate doubling and clarified that increased expenses are ongoing investments in R&D and Space Systems, not one-time costs. CEO William Marshall explained that Planet will monetize the satellite capacity covering the rest of the world (outside of JSAT's area of interest), which represents a significant, high-margin upside opportunity.

Jason Gursky of Citigroup asked for more details on the U.S. Defense & Intelligence pilots, including what was learned and the timeline for them to become larger opportunities. He also inquired about the revenue level needed to achieve cash flow break-even.

Answer

CEO Will Marshall described the pilots as broadly successful, likening their value to finding 'unknown unknowns' for the intelligence community, and stated that establishing new programs and budgets is a multi-quarter effort. President Ashley Whitfield Johnson addressed cash flow break-even by reiterating the strategy: first, reach adjusted EBITDA profitability, then expand EBITDA to cover CapEx, and finally, manage CapEx spending to operate within existing cash reserves without needing to raise additional capital.

Jason Gursky from Citigroup requested a detailed overview of SAIC's key end markets (Army, Navy, Air Force, Space, Civilian) and asked about the unique impacts of the fiscal 2025 full-year Continuing Resolution (CR) on award timeliness.

Answer

CEO Toni Townes-Whitley provided a comprehensive overview, highlighting growth in the Civilian business, challenges and opportunities within the Army, and strong positioning in Air Force, Space, and Navy. CFO Prabu Natarajan addressed the CR, noting that while solicitations remain robust, larger awards face extra scrutiny. He expressed cautious optimism, stating the team is focused on on-contract growth to mitigate potential delays.

Jason Gursky of Citi asked about the mechanical effects of shifting from cost-plus to firm-fixed-price contracts and questioned the risks and opportunities for SAIC related to the DoD's 17 protected capability sets.

Answer

CEO Toni Townes-Whitley explained that the shift to fixed-price contracts is viewed as a margin improvement opportunity, not necessarily a revenue risk, based on their experience in the civilian sector. CFO Prabu Natarajan added that the transition would be gradual. Regarding DoD priorities, Prabu emphasized that SAIC's focus is on executing well on mission-critical programs, which are less likely to be cut in a constrained budget environment. Toni reiterated that over two-thirds of their submitted pipeline aligns with these mission-critical areas.

Jason Gursky asked for clarification on the true size of SAIC's intelligence business beyond the reported 6% and questioned why the increased bid submission volume isn't leading to higher revenue growth targets.

Answer

CFO Prabu Natarajan and CEO Toni Townes-Whitley clarified that significant intelligence-related work is embedded within their DoD business, particularly in areas like C2 and combatant commands. Regarding growth, Toni Townes-Whitley cited the natural lag between bid submission and revenue conversion, with impacts expected in H2 FY26. Prabu Natarajan added that the company is guiding for ~5% growth in FY27 and is strategically focused on profitable growth—'vitamins, not calories'—rather than just top-line volume.

Jason Gursky of Citi inquired about the contract types and execution risks within the current bid pipeline, with a follow-up on the maturity of technologies used in the increasing number of firm-fixed-price (FFP) bids.

Answer

CEO Toni Townes-Whitley explained that the company is bidding more strategically into its growth vectors (Civilian, Enterprise & Mission IT) and is increasing its volume of FFP bids. She noted that FFP bids in the pipeline are about 10 points higher than in the current backlog. She expressed confidence in managing FFP risk by leading with mature, differentiated capabilities like secure cloud and digital engineering, and by strengthening program management controls. CFO Prabu Natarajan added that historical debriefs show SAIC performs well on cost but needs more technical differentiation, which the new operating model addresses.

Jason Gursky asked about the strategic rationale for acquiring Mynaric, the unique aspects of the SDA transport layer versus commercial alternatives, and whether the future constellation pipeline is more likely to be government or commercial.

Answer

CEO Peter Beck stated the Mynaric acquisition serves a dual purpose: building a profitable merchant supply business and securing a scaled, reliable supply of components for Rocket Lab's own future constellations. He explained the SDA transport layer is unique due to its requirement for full interoperability with all DoD standards and systems. Beck concluded that the company is pursuing large-scale constellation opportunities across both government and commercial sectors, having matured to a point where it can competitively bid on both.

Jason Gursky of Citigroup asked for specific reasons behind Neutron's delays, the extent of supplier dependency, the future mix of the Space Systems business, and clarification on the long-term business model.

Answer

CEO Sir Peter Beck attributed Neutron's timeline adjustments to an accumulation of smaller issues, like supplier challenges and early COVID-era constraints, rather than a single major failure. He noted the ultimate goal is to provide space services, a higher tier than being an OEM. CFO Adam Spice clarified the 2/3-1/3 mix target is for the current business, which the future applications segment would fundamentally alter.

Jason Gursky challenged the '1, 3, 5' Neutron launch cadence, asking why it couldn't be accelerated, and questioned if there was more demand than available capacity. He also asked about the potential impact of a new administration on space policy.

Answer

CEO Peter Beck defended the cadence as realistic, explaining that while some production can be front-loaded, critical learnings only come from flight tests. He stressed that a methodical approach is necessary when flying customer payloads and confirmed that scaling production to meet demand is the primary focus, not a lack of customers. He also expressed a bullish outlook on the new administration, citing its strong focus on space, national security, and commercial partnerships.

Jason Gursky asked for Curtiss-Wright's perspective on the potential for significant acquisition reform in Washington, D.C., and the likely implications for both the defense industry and the company itself.

Answer

CEO Lynn Bamford stated that she views the proposed acquisition reforms as a 'strong positive' for Curtiss-Wright. She explained that the company is well-positioned because it almost exclusively uses firm-fixed-price contracts, has strong commercial buying practices, and is set up to leverage Other Transaction Authority (OTA) partnerships—all key areas of the reform efforts.

Jason Gursky asked for a big-picture perspective on the new presidential administration transition, how it differs from the past, and what actions Curtiss-Wright is taking in response. He also asked what recommendations CEO Lynn Bamford would offer the Pentagon to improve its processes.

Answer

CEO Lynn Bamford characterized the transition as fast-paced, with unusual clarity on support for nuclear and fossil fuels but ambiguity on tariffs. She noted that a government focus on efficiency and fixed-price contracts would be a net positive for Curtiss-Wright. In response, the company is increasing its visibility at the Pentagon and on Capitol Hill. Her primary recommendation for the Pentagon was to streamline the slow and bureaucratic acquisition process to deliver more value.

Jason Gursky from Citi asked about the potential for winning new work scopes on the commercial side, particularly given the dynamics at Spirit AeroSystems, and whether Ducommun is seeing increased outsourcing from major defense contractors.

Answer

CEO Stephen Oswald confirmed that Ducommun sees more opportunity with Spirit AeroSystems and is actively engaged with them, highlighting strong operational performance and growth on 737 MAX skins. He also noted heavy quoting activity with Airbus. On the defense side, Suman Mookerji mentioned active bidding with RTX. Stephen Oswald elaborated that the trend of primes offloading complex work like circuit card assemblies continues, and Ducommun is capitalizing on this while also strategically expanding its customer base to Northrop Grumman and BAE Systems.

Jason Gursky inquired about Ducommun's production capacity to absorb more work without needing to increase capital expenditures and asked for an update on the M&A pipeline and current deal environment.

Answer

Suman Mookerji, an executive, explained that the structures business has ample capacity due to low 737 MAX rates and that electronics growth would not be capital-intensive, maintaining the CapEx outlook around $20 million annually. Stephen Oswald, Chairman, President and CEO, added that plants are not running heavy second or third shifts. Regarding M&A, both executives described the pipeline as very active but emphasized that the company remains highly selective or 'picky eaters' to ensure the right strategic fit.

Jason Gursky asked for the company's perspective on potential changes to the DoD's Federal Acquisition Regulation (FAR) and their long-term impact. He also inquired about any changes in the competitive threat from PMA (Parts Manufacturer Approval) parts.

Answer

President and CEO Kevin Stein stated it was too early to speculate on regulatory changes, noting they stay informed through close work with the DoD and DLA but have not seen this raised as a major issue yet. Co-COO Mike Lisman reported no meaningful uptick in PMA competition, citing the specialized nature of their products as a defense.

Jason Gursky asked for confirmation that the interior refurbishment cycle is tied to new aircraft deliveries and requested more insight on inventory unwinds at major customers like Boeing.

Answer

CEO Kevin Stein confirmed the link between new aircraft availability and the ability to refurbish older planes but noted interiors are not a major part of their total business. He reiterated that they lack clear communication from OEMs on inventory plans. Co-COO Joel Reiss added that their operating units create bottoms-up forecasts to account for potential over-shipping.

Jason Gursky asked about inventory trends in the distribution channel and sought clarification on M&A discipline, specifically whether it's relative to historical norms or the current high-multiple market environment.

Answer

Co-COO Mike Lisman reported that distributor inventory levels are appropriate and stable. CEO Kevin Stein clarified that M&A 'discipline' refers to their strict criteria for proprietary products and high aftermarket content, not a fixed valuation multiple. He acknowledged paying higher multiples today but emphasized their 20% IRR target remains unchanged.

Jason Gursky from Citi requested a detailed overview of the FAA air traffic control modernization challenge, including the scope of the problem, required investment, timeline, and necessary capabilities.

Answer

CEO Tom Bell described high-level engagement with the FAA and Department of Transportation, noting the administration's goal to modernize the system within the current term. He affirmed Leidos is well-positioned with numerous existing programs and cited its global experience with the U.K.'s NATS system and its 'Skyline' product as evidence of its deep capabilities.

Jason Gursky inquired about V2X's exposure to GSA purchasing, the potential impact of Federal Acquisition Regulation (FAR) reform, and how the company's capabilities align with the administration's top national security spending priorities.

Answer

President and CEO Jeremy Wensinger stated that V2X sees no push to move its work to the GSA and that it's too early to determine the impact of FAR reform. He and SVP and CFO Shawn Mural emphasized that V2X's core capabilities in training, readiness, and global support, particularly in the INDOPACOM region, align very well with the administration's stated priorities for national security.

Jason Gursky asked how Textron is responding to the Department of Defense's growing focus on unmanned, autonomous, and attributable systems, and specifically what 'attributable systems' means for Textron's product strategy.

Answer

Chairman and CEO Scott Donnelly detailed Textron's deep involvement in unmanned systems, from ensuring new platforms like FLRAA have autonomous capabilities to programs in high-speed VTOL, remote combat vehicles, and unmanned minesweeping. He noted that while most of these are high-value platforms, Textron is also engaged in smaller programs in the classified and IRAD space that align with the concept of lower-cost, attributable systems.

Jason Gursky asked for commentary on labor productivity trends compared to pre-pandemic levels and inquired about the ideal or 'North Star' backlog duration for the Aviation business.

Answer

CEO Scott Donnelly cited supplier parts and labor turnover as the main drags on productivity, expressing confidence that the new labor contract and recent supply chain work will drive improvements. He identified an 18-to-24-month backlog as the ideal state for the Aviation business, as it allows for smooth production planning and customer coordination.

Jason Gursky requested perspective on recent White House executive orders aimed at speeding up the Foreign Military Sales (FMS) process and potentially rewriting Federal Acquisition Regulations (FARs), asking about the potential consequences for the industry.

Answer

James Taiclet, Chairman, President and CEO, welcomed and applauded the executive orders, noting the company has advocated for such changes. He believes reducing bureaucratic 'red tape' will accelerate both FMS and the adoption of new technologies, creating a more competitive environment for the entire U.S. industrial and technology base.

Jason Gursky asked about the 'blue sky' scenario for the multiyear outlook, questioning if growth could exceed the mid-single-digit upside case if the supply chain and production systems perform exceptionally well.

Answer

CFO Jesus Malave acknowledged that under the right circumstances, it is possible for a single year to deliver high-single-digit growth, especially in the shorter term like 2025 where visibility is better. However, he emphasized that the company's current focus is on consistently achieving the mid-single-digit target before considering a higher multiyear framework.

Jason Gursky of Citigroup asked about several topics: dynamics with OE customers like Boeing, including ordering patterns and channel inventory; the M&A pipeline outlook for the next 12-18 months; and the potential impact of tariffs on input costs and the pending acquisition of the French company, LMB.

Answer

CEO Dirkson Charles and Director of IR Ian McKillop addressed OE demand, noting it's mixed but stronger than initially forecasted, with conservative exit rate assumptions of 30/month for Boeing and 50/month for Airbus. On M&A, McKillop stated the pipeline is active and to expect a pace of 1-2 deals per year. Executive Co-Chairman Brett Milgrim and CEO Dirkson Charles addressed tariffs, explaining the impact on LMB would be minimal, and for the broader business, proactive inventory purchases and the ability to pass on costs would mitigate any material impact.

Jason Gursky of Citigroup inquired about the potential risks and opportunities surrounding Loar's initial 2025 guidance and asked for details on the drivers of the strong 2025 free cash flow conversion forecast.

Answer

CEO Dirkson Charles explained that the 2025 guidance is cautiously optimistic, viewing it as a baseline the company expects to meet or exceed. He detailed minimal risk from commercial OEM challenges due to low direct exposure, strong confidence in commercial aftermarket driven by high demand and record backlogs, and a solid backlog in the defense sector. CFO Glenn D'Alessandro added that the strong cash flow conversion is driven by high EBITDA, expectations for stable working capital, and defined interest and capital expenditures.

Jason Gursky of Citigroup asked for context on the scale of the manufacturing changes underway, particularly the effort to reduce traveled work to zero, and questioned how difficult this philosophical shift would be to achieve.

Answer

CEO Pat Shanahan described the changes as a fundamental realignment of Spirit's and Boeing's inspection processes to drive corrective actions upstream. He noted the 'heavy lift' of standing up the new joint inspection process is largely complete, having already yielded a 15% improvement in quality in Q1. He expects a 'step function change' in quality by the second half of the year, which is foundational for future rate increases.

Jason Gursky of Citigroup asked for context on the scale of manufacturing changes being implemented, particularly the effort to reduce 'traveled work' to zero, and the difficulty of this transformation.

Answer

CEO Pat Shanahan described the changes as a 'step function' improvement, highlighting the new joint inspection process with Boeing that aligns quality standards. He explained the 'heavy lift' of moving the inspection process 2,000 miles and normalizing it is complete, with a 15% quality improvement already seen in Q1. He believes this foundational work will enable future rate increases.

Asked for perspective on the root causes of the current quality issues and whether the industry's ability to handle production rate increases has fundamentally changed, suggesting future rate ramps may be slower.

Answer

Management stated that while supply chain dynamics have changed, the fundamentals of rate increases have not. The 2024 plan was aligned with Boeing to create stability, and they have line of sight on issues for rate 47, which are mainly related to raw materials and labor.