Steve Griffin: Yes, I’d say direct corollary not a ton. Obviously, we don’t support that forum today. But I’d say to the second part of your question, will that lead to a longer life on some of these legacy assets and, therefore, more repair opportunities. We believe the answer is yes. And we continue to want to make sure that we’re there to support our programs, whether it may be on the newer side or on the end of life side. So, we’re kind of trying to support all legs of the aircraft. And I think at this point, we continue to see robust demand. I think when we get to the Investor Day, we’ll share more about our outlook headed in the 2024 and 2025, give you a sense of where we think the markets are headed. They’re certainly going to slow down from a year-over-year comp perspective, commercial at this point has seen such a strong 2023, it will start to moderate. We’re seeing that in our business even in the third quarter on a year-over-year comp basis.
Michael Ciarmoli: Yes, of course. Got it. All right. I’ll jump back in the queue. Thanks guys.
John Cuomo: Thanks Mike.
Operator: Thank you. The next question comes from Josh Sullivan with The Benchmark Company. Please go ahead.
John Cuomo: Good morning Josh.
Josh Sullivan: Good morning. Just as far as the Honeywell IP acquisition, what does that ramp look like? You talked about expanding the supply chain. Is there a qualification time line or a hiring need that we should think about?
John Cuomo: There is both actually, you’re thinking about it the right way. So, to say is this is a great entry for us into this market. We — I highlighted that we both have been distributing the product and repairing the product. This is much more of an assembly than a pure manufacturing. So, we’re working with the supply base and essentially assembling the fuel controls, that’s our portion of the manufacturing. So, if you think about it in our repair business today, we disassemble it, and we assemble it. So, we’ve got tremendous experience but we do need the FAA approvals, from a manufacturing perspective. That takes weeks and months, not years. And then we have a very strong team who understands this product line, but obviously, we’re increasing staffing around that.
The second thing I would add, because you see the revenue and earnings forecast, that we had put out with the initial release and that Steve highlighted again today, is that we’re sitting on legacy inventory. So, we acquired inventory from Honeywell with obviously a Honeywell markup on it. We have to burn through that inventory and then that margin capture that went to them now will come to us in the future. So, as you look at the ramp, those are the steps to us getting to kind of the full ramp of both revenue and earnings potential on this program.
Josh Sullivan: And then curious if the deal has driven any incoming from other aerospace OEMs looking at the transaction is attractive or is this still in the outgoing effort?
John Cuomo: Yes, what I would say is that — and I’ll highlight this more on the Investor Day. When you look at the life cycle of the product, you have at some point in time, many times an OEM says, okay, this is still in production, but it’s a majority of the uses in the aftermarket. I want to use my R&D dollars and my shop floor space, to focus on newer production products that they’re looking for an alternative source for that production. And there are suppliers and companies in the industry that do this. . I think we have pleasantly surprised the market with our ability to additionally support this. And this, coupled with our ability to distribute the product successfully and repair the products successfully, which is what our core business is, this really just adds an additional channel for us.
And we are having dialogue with OEMs at this point. What I would tell you though is don’t expect — and I don’t normally give forecast on deals. Don’t expect us to announce another deal like this in the coming months. We really want to make sure we do this right. This is the first time we’re doing this, and we’re going to do this right and really impress the market before we consider another transaction of this type. But there are definitely others out there for the future.
Josh Sullivan: Got it. And then maybe just switching over to fleet. The expansion of the installed USPS fleet. We’ve seen some large auto OEMs pull back on some EV development plans. How is the post office looking at its existing ICE fleet at this point?
John Cuomo: Yes, I think the numbers — the forecasts that have been previously shared, there doesn’t appear to be any tremendous shift in that forecast. So, there will be a small portion of their fleet that will be EV. But the biggest thing that’s happened is, number one, they’ve grown the fleet size, and that’s a permanent growth to the fleet size. The second thing is how they’ve grown that is not through the NGDV, the next-generation vehicle. Whether electric or combustible engine, what they’re doing is buying commercial off-the-shelf vehicles. So, whether they’re Mercedes metrics, whether they’re some other types of commercial off-the-shelf vehicles. So they’re building a more complex fleet type, that will continue to have a tremendous amount of non-EV type vehicles.
That said, our plan is to support all fleet types. And we look at the Postal Service is a really launch pilot customer to us in supporting EV medium-duty fleet vehicles. So, continue to see strong activity there for the near term. And we don’t have the real forecast yet of when that NGDV will be delivered as we get that, we’ll share any impacts we think that may have to the business.
Josh Sullivan: Great. Thank you for the time.
John Cuomo: Thanks Josh.
Operator: Thank you. [Operator Instructions] The next question comes from Jeff Van Sinderen with B. Riley. Please go ahead.
Jeff Van Sinderen: Good morning everyone. Just wanted to follow-up on the [Indiscernible] facility. Just wondering, maybe if you can touch on incremental efficiencies to be realized there in the future.
John Cuomo: Yes. Thanks Jeff. Good morning. The way that we’ve built this this kind of model. Remember, we started literally from zero in January. We launched in the middle of the first quarter, completely new IT system, new facility, new infrastructure. So, we’re essentially, if you look at a chart, you’re kind of increasing productivity and revenue out of the site, then we’re plateauing and stabilizing and then we’re doing the same thing again, plateauing and stabilizing. So, what you in the third quarter was really a more plateau period. And what you’ll see in the fourth quarter, is the next phase of kind of revenue ramp and then, again, plateau again. So, as we go through that ramp, we continue to look at where we’re going to have productivity improvements.
What is going to drive margin improvement over time. There’s an element on supply chain on cost and pricing. But the other element is just a scale through that facility; and b, then we look at continuous improvement, both in terms of processes. And really in late 2024, we’ll talk about automation and the impacts that will make. But we’ve got to get the facility stabilized before we add the automation in. But you can expect this to be a continuous improvement in margin improvement plan over the next two years.
