Textron Inc. Q2 FY2025 earnings call

• Aviation: Revenue growth in aircraft and aftermarket, delivered 49 jets and 34 commercial turboprops, backlog $7.85 billion, announced Mexico deal, SkyCourier milestones, progress on M2 Gen2, CJ3 Gen 2, Ascend certifications.
• Bell: Revenue up $222 million driven by MV-75 and commercial helicopter, Army accelerating MV-75 program, delivered MV-75 virtual prototypes, selected for DARPA program, received Tunisian Air Force order, signed UAW contract.
• Systems: Revenues slightly lower, segment profit margin 12.5% up 170bps, $354M Navy contract modification, Ship-to-Shore Connector program funding, XM30 program milestone, sold first TSUNAMI craft.
• Industrial: Lower revenues due to Powersports disposition, Kautex received Pentatonic award, Nuuva V300 flight test program and Paris Air Show debut.

Textron Aviation had revenues of $1.5 billion, up 2.8% from Q2 2024, with segment profit $180 million, down $15 million. Backlog ended at $7.85 billion. Bell had revenues of $1 billion, up $222 million, with segment profit $80 million, down $2 million. Backlog ended at $6.9 billion. Textron Systems had revenues of $321 million, down $2 million, with segment profit $40 million, up $5 million. Backlog ended at $2.2 billion. Industrial had revenues of $839 million, down $75 million, with segment profit $54 million, up $12 million. Textron eAviation had revenues of $8 million, down $1 million, with segment loss $16 million, improved from $18 million. Finance had revenues $15 million, profit $8 million, up from $12 million and $7 million.

• Reiterated full year adjusted EPS range $6 to $6.20.
• Increased full year manufacturing cash flow before pension contributions to $900M to $1B from $800M to $900M.
• Adjusted effective tax rate range 20% to 21% due to tax legislation.

• Tariff impacts on customers and manufacturing.
• Uncertainties around program terminations like RCV and FTUAS affecting Systems.
• Supply chain execution challenges.

Q: What that could look like, what that could mean for your numbers? And if you could remind us of the contract structure as you move into LRIP.

A: Sure. David, I mean, this is very much a work in process. I would say on the development side, we already have very good visibility around that, I suppose, in agreement with the Army on how to proceed on accelerating EMD. That's partly why you're seeing the increased EMD revenue here in 2025. And certainly, we will see an acceleration of that in 2026 as we try to get that first aircraft completed and turned over and ready for tests. So I think on the EMD front, it's pretty clear. We know what we've got to go do. And both we and the Army are working to execute against that. In terms of the production acceleration, the -- you may recall the LRIP, which was 8 aircraft, which was bid in the initial contract production of that wouldn't have started until really triggering all milestones C. So that was going to reflect probably about an 18 month or so gap between the last of the EMD delivered aircraft and LRIP. We're now pulling that forward. And the intent is to basically be able to smoothly transition from that last EMD aircraft into the first of the LRIP. So that will probably pull in something on the order of 18 months and then we're also working on talking about what does the ramp look like. So it's not just going to be those 8, but what do you think about in terms of the next lot right behind that. And so those discussions are still ongoing with the Army. I think what you're seeing primarily in the FY '26 budget ask is the increased dollars to support that acceleration of EMD, and you would expect to see increase in additional production dollars in the FY '27 budget ask to support what I just talked about an acceleration of that first lot but also lining up the second and the third lots of production.

Q: Could you touch on maybe what some of the offsets were to the higher tax rate to hold the guidance? It seems like Bell is maybe coming in better than you expected?

A: So as we sit right now, the biggest offset is the timing of our share repurchase this year has been a little ahead of what we originally planned. So from an average share count perspective, we should be better than what we -- where we started the year at. So that, in essence, gave us the ability to hold the guide with the while at the same time taking this 200 to 300 basis point increase in the effective tax rate.