Patrick Winterlich: Good morning, Kristine.
Kristine Liwag: Maybe a follow-up on wide-body demand. When you look at Boeing’s production rate plans, working with 787 go from 1.5 to 2.5 per month today and they are kind of going to that 10 per month by 2025, 2026 and that’s a 400% to 500% increase. You guys already have the CapEx in place since you were meeting the rate higher from that pre-COVID, so it would seem like a step up in volume should be relatively easy for you. So just want to understand, are there any hurdles that we want to keep in mind, as we see the ramp up or should this be easy-peasy considering how the CapEx is in place already?
Nick Stanage: Well, I am not sure I’d characterize it as that easy, growing and ramping up and driving efficiency and productivity is always challenging, and we always challenge our team to go above and beyond and not do it the way we had in the past decade, but define new ways, new opportunities to make us even more productive going forward. To your point, expanding and growing. Knowing how to put the assets in the ground that’s fairly straightforward. We have replicated our assets numerous times in various countries and we know how to do that well. We have got great processes and teams to make sure we manage and deliver and execute based on our commitments. I’d say and Patrick touched on it, the training curves. We have a significant number of our team that are fairly new in terms of their knowledge with the product, processing and efficiencies.
And although we are running and we are ramping up, and we are seeing more efficiencies climb rapidly. That is the challenge that we really focus on and really work on going forward. So we know how to do it, to your point, we have done it before, it’s nothing special, it’s just a matter of executing. And I think we have a pretty good track record on delivering on our commitments and executing to plan.
Kristine Liwag: Thanks, Nick. That’s really helpful. And following on some of the earlier questions on long-term growth. I mean, you have addressed your market share success in carbon fiber and you have benefited from the high barrier to entry, intermediate modulus carbon fiber. That’s been very clear in your operating history. But when you look at that next-generation wide, sorry, next-generation narrow-body when we get to that 2030 timeframe, if thermoplastic you indeed takes more of a share versus your traditional metal products like how do you think about that evolution. Would you have the same benefit in terms of your technology? Is that a substitution also for carbon fiber? How do you think about the evolution of thermoplastics and carbon fiber in that sense in your competitive advantage?
Nick Stanage: Yeah. Well thermoplastics clearly are not as mature as thermoset technology and it has a ways to go. What we are promising is we have that technology. We are working on that technology. We are demonstrating that technology with our customers. And I don’t believe there’s going to be a mass transfer of products moving from thermoset to thermoplastic overnight. I think there will be applications that are better suited for thermoplastic, that are better suited for thermoset, and again, why I love our position is that we offer both, we can help our customers identify the optimum solution based on the application they have. So, again, I think, it’s going to be a function of when that new aircraft is launched, how far down the road, because all technology whether it’s thermoset, thermoplastic or honeycomb core and noise suppression or thermal management those technologies just continue to advance every day and will be even more ready down the road.
Kristine Liwag: Thank you very much.
Nick Stanage: Thank you.
Operator: Your next question comes from the line of Gautam Khanna with Cowen. Your line is now open.
Gautam Khanna: Hey guys. Great quarter.
Nick Stanage: Thanks.
Patrick Winterlich: Thanks.
Gautam Khanna: I wanted to just ask you M&A pipeline anything evolving there, anything of interest and — but, yeah, if you could just comment on that?
Nick Stanage: Well, we never slowed down, Gautam. We have got an active business development function. We look at technologies that will enhance our portfolio, would allow us to serve our customers better provide more value. So we have an active pipeline. Bolt-on type acquisitions, bolt-on type technology targets are high on our priority list. Obviously, I can’t get into details on any of those names, but you can imagine some of them may be actionable, may not be actionable and that changes over time. So it’s clearly one of the priorities we constantly look at and we balance our capital deployment against what internal developments we have versus what M&A opportunities we see not only near-term but potentially mid-term or long-term.
Gautam Khanna: I was just curious with a while back there was the Woodward pursuit or whatever you want to call it, the — any desire to move into the aftermarket?
Nick Stanage: Well, again, the Woodward merger of equals that we worked in 2019 and announced early in 2020, which we then had to abandon because of the pandemic. That was very unique, a game changer really for both companies and to the advantage of our customers in offering more efficient and optimized solutions. Aftermarket is certainly a nice piece of business that helps diversify away from all we and can stabilize markets during different type of macro events. It certainly is attractive, but it’s not what drives our strategy, our strategy is driven around lightweight, innovative solutions to help our customers meet their efficiency and sustainable requirements going forward. And if there happens to be some aftermarket tied to that. That’s great. But we don’t target or make that a priority.
Operator: Your next question comes from the line of Mike Sison with Wells Fargo. Your line is now open.
Mike Sison: Hey, guys. Nice end of the year. Just curious sort of an interesting time most pundits are looking for a downturn in the U.S. to battle inflation. How do you think that affects the industry this time around, if there is a meaningful slowdown in the U.S. and are the indicators still seeing pretty pause for us bit, but just your thoughts there?
Nick Stanage: Yeah. Mike, it has a certain Space and Defense. We have seen that that market segment is fairly resilient to short-term recessions or economic impacts and we see the same. Commercial Aerospace if you look at where we are coming out of the pandemic, if you look at the strong demand and if you look at the supply chain challenges, perhaps, a little slowdown in other areas may actually be an enhancement to help with the supply chain catch-up and just a new aircraft in customers hands that are looking for them. So we see minimal to no short-term impact in our Commercial markets. Even in our Industrial segments. If you look at our strategy and the way we differentiate it tends to focus on the high end, whether you are talking automotive or marine or recreation and sports, those are high performing applications that really are pretty resilient to recessions.
Electronics and Consumer Goods certainly there could be an impact there. But right now, we do not see the impact of significance based on what we are looking at today.
Mike Sison: Great. Thank you.
Nick Stanage: Thanks, Mike.
Operator: Your next question comes from the line of Michael Ciarmoli with Truist Securities. Your line is now open.
Michael Ciarmoli: Hey. Good morning, guys. Thanks for taking the question and nice results. If I can just to go back to the guidance and I guess the implied midpoint of the growth rate for Aero, you had a really strong sequential uptick in this current quarter. Hadn’t really been much change in rates? And I guess, it seems like that revenue run rate is just going to be flattish through 2023 to get to the midpoint. I mean is that the right way to look at it? I mean, it sounds like the 87 ramp will be a bit later, but anything from a cadence perspective, we should be thinking about?
Nick Stanage: I think we will see some steady growth sort of going into the first half of 2023. I think the seasonality that we always historically saw and we saw what we did state in 2022 with Q3 being a bit softer reflecting the European sort of holidays in that region is likely to happen again and now sort of going forward in future years. I think we will see that seasonality. And we will see how the year finishes, which is really going to depend on where the OEMs are with that build rates. But I think Q4 over Q3 2022 was clearly aligned step out that you have got that kind of seasonality effect. We talked about the strong underlying demand and our ability to get product out of the door. And yes, so we are going to see another step up again into the first half of 2023 and our Q3 we will back of a little bit to seasonal lines, and then hopefully, finish the year strong again.
But a fairly solid stable robust growth year. But double-digit in all our markets, which is what you will see, Commercial Aerospace, Space and Defense and Industrial.
