Scott Donnelly: Well, we’re not going to get into quarterly guidance for sure, Seth. I mean, you certainly should expect to see a nice progression in terms of the revenue on a quarter-to-quarter basis over 2023, consistent with the guide of $6 billion of revenue for the total year.
Seth Seifman: Okay. Okay. Great. And then maybe just following up a little bit different twist on Rob’s question. I know you probably won’t comment on specific M&A reports. But the reports that we have read tend to deal mainly with the space end market. I wonder if you could comment on — do you view that as an important and/or attractive end market into which to expand?
Scott Donnelly: I wouldn’t comment.
Seth Seifman: Fair enough. All right. Thank you very much.
Scott Donnelly: Thanks, Seth.
Operator: And next, we go to the line of Kristine Liwag with Morgan Stanley. Please go ahead.
Kristine Liwag: Hey guys. Can you hear me okay?
Scott Donnelly: Yep, we can hear you fine.
Kristine Liwag: Okay, great. Hey, Scott, Frank, Dave. Thanks. On your restructuring actions, can you provide more details on what you’re doing and what your expectations are for the timing and the size of the payback from your investments?
Scott Donnelly: Well, Kristine, as we kind of put out there, there’s a sizable piece that’s going into Bell, and that’s really aligning our cost structure with the lower production rates on some of the historic military programs like H1 and V-22. That’s a very — in terms of cost and the mix of people within the business, the ramp obviously is net positive, but it’s largely in the engineering program side of the FLRAA program. So it’s a necessary action to align costs with the old historic production programs. As we also indicated, we’re just — we’re aligning some of our plans on the auto side to understand where is demand around the world and rationalizing where we think it’s appropriate to keep that business healthy with a high return and cash flow.
So just — there’s bits in a number of other places. But we believe on a run rate basis, it’s going to be about $75 million a year positive impact to the business. And so that’s, I think, a good return and why we decided to proceed with the program.
Kristine Liwag: Great. Thanks for the color. And maybe on Aviation, if I could do a follow-up. $100 million in pricing power for new aircraft is very healthy. And so if we’re seeing — if you’re continuing to see bottlenecks in new aircraft production, can you talk about the demand environment for aircraft services then? And what’s the pricing power in services, especially with the lack of new airplanes coming into the market?
Scott Donnelly: Look, I think what we saw this year, which was strong growth, 6.5% on the services side. Obviously, that’s a mixture between volume and pricing. I expect we’ll continue to see good demand on that side. We certainly have that baked into our forecast. Aircraft are flying. Our customers are running the aircraft. They’re doing the necessary maintenance. So I think it will continue to be a healthy part. Certainly, what we’ve incorporated in the guide for next year is good growth in the service business, both our service centers as well as the parts. And as always, that’s going to be a function of both volume increases as well as annual expected pricing in the aftermarket side.
Kristine Liwag: Great. Thanks, Scott.
Operator: Next, we go to the line of George Shapiro with Shapiro Research. Please go ahead.
George Shapiro: Yes, good morning.
Scott Donnelly: George.
George Shapiro: Scott, I was just curious, you were saying that the supply chain seems better, yet the deliveries in the fourth quarter were a lot lighter than what most of us were looking for. So if you could kind of just connect the two dots there?
Scott Donnelly: Look, George, as you know, it takes many months to build an aircraft. So the improvements in both the labor side and the parts side takes a while to push through the system. So the higher cost and a lot of the impacts that we kind of saw through the course of the year were full year impact. So — but I do feel like as we look at the numbers, and what we experience on a day-to-day basis, we did see improvements. And I think that’s — as a result, you’ll start to see that improvement as you get into 2024.
George Shapiro: And then one other one. The book-to-bill in the quarter was 0.9 and the orders were like only $1.4 billion. So that was really down a lot from last year as well as from the third quarter now. I guess you’re just looking at as timing or have anything to do with Noah’s comment that people are concerned about a recession in the fourth quarter, we get a pickup this year. But if you could just comment on that as well.
Scott Donnelly: George, I think it’s largely timing. We always have a little bit of lumpiness in terms of when deposits are coming in on some of our larger customers, but there’s — I don’t think there’s anything concerning there. We’ve said all along, we expect there’s going to be some quarters where it’s going to be below 1:1, probably some quarters where it’s above 1:1. But again, our assumption full year going all the way back through ’23 was 1:1. We did better than that. Our assumption in 2024 is it’s going to be 1:1, and obviously, we’ll see how the market plays out. But I still think we feel good about the end market. We feel good about demand, and I think it’s healthy.
George Shapiro: And one last one. The strong Bell margin in the quarter, I mean, does that just really reflect the commercial delivery strength, which has much higher margins, more than offsetting the drag from the lower-margin FLRAA program. And if that would continue next year, the margins would probably be somewhat higher than what you’ve guided to?
Scott Donnelly: George, I think we’re continuing to see good margins on our military business, obviously outside of the FLRAA side. It certainly helps to have higher commercial deliveries. We — I think we’ll get some benefit of higher commercial deliveries as we talked about in 2024. But look, there’s going to continue to be some pressure on the margin just because we are seeing significant growth in the FLRAA program. The reason we did the cost action and did the restructuring was to try to shore up the profitability of the business on the legacy production programs. And so part of the guide is, obviously, we continue to see some benefit of that. But again, there will be overall margin rate pressure going into the future. But I think as we talked about, even with that and the growth of the FLRAA program, we’re going to see significant revenue growth, and we’re going to see absolute up profit increases and accretion to EPS for the business.
