Scott Donnelly: I think — for sure, Sheila, I think our revenues were higher than that on FLRAA probably for the year. We won’t break out all the details, but it was certainly just south of a few hundred million dollars. But we do expect as we go into ’24, the program is reacting very nicely. As you know, like the number was lighter than we originally expected, just because of the delay with the protest in the early part of the year. But the ramp — as we’ve ramped after the contract award is going really well. So I would expect a number closer to the $900 million range in 2024 on the FLRAA program.
Sheila Kahyaoglu: Thank you.
Operator: Next, we go to a question from Peter Arment with Baird. Please go ahead.
Peter Arment: Yeah. Good morning, Scott, Frank, David. Just maybe — just circle back just on how you’re thinking about kind of the margin leverage in Aviation, Scott, when you think about just because you called out some of the pricing that you continue to get. How are we thinking about just kind of that flowing through? I mean just given the margin outlook of 12% to 13% kind of at the low end of the range, it’s flat, but at the upper end, obviously, 100 basis points. Just how are you thinking about that?
Scott Donnelly: Sure. Look, Peter, I think we definitely expect to continue to see price net of inflation is a positive for us. It won’t be as significant as it was in 2023, but we still have good pricing in the backlog, and I think it will be a tailwind for us. So if you look at the guide and the numbers, you’re right. Look, I mean, we’re — as I said, I think we saw some improved performance in Q4 on the manufacturing conversion side. So we’re bringing — we’re certainly baking some of that in as we go into 2024, but as you move towards the high side of the guidance, you get up into that 20-plus-percent conversion, which is where we historically like the business to be. So it’s something we’ve got to work on, obviously. We still have some of those headwinds that we faced all this year on the operating side, but the combination of improved performance and continued price over inflation is positive, while it’s not as big a positive, I think, will help us get towards that 20-plus range.
Peter Arment: Got it. That’s helpful. And then just Frank quickly, the interest expense increase, just maybe what’s going on there specifically? Thanks.
Scott Donnelly: Well, yeah, go ahead.
Frank Connor: Yeah, a little. We’ve got slightly higher borrowing costs from the bond deal that we did last year. So that’s a little bit of the rollover on the financing. It assumes slightly lower cash balances and a little bit of conservatism around the interest rate that we earn on that excess cash.
Peter Arment: Thanks again. Thanks, Frank.
Operator: And next, we go to David Strauss with Barclays.
David Strauss: Thanks. Good morning, everyone.
Scott Donnelly: Good morning, David.
David Strauss: Scott, I wanted to ask about the V-22 grounding. Does that impact Bell at all? I know you have a pretty big aftermarket business on the V-22?
Scott Donnelly: No, David, I don’t think it’s a material impact. The services, frankly, are using the opportunity — the grounding to continue to do their maintenance activities and get aircraft ready to fly. So we probably can’t say much more about that situation than that. But no, I don’t expect it to be a material impact.
David Strauss: Okay. And Frank, free cash flow, the guidance were flat, I know you had a pretty big inventory build in ’23, but you also had positive advances. What are you assuming for working capital? And in terms of the adjusted EPS guide, what are you baking in as far as share count and share repo in ’24? Thanks.
Frank Connor: Yeah. From a cash standpoint, we obviously are anticipating volume growth in the year. So that’s going to put a little continued pressure on inventory levels as we look kind of to ’24 and ’25 volume growth, not a lot. There is a little bit of working capital pressure with the timing of some customer payment activity, particularly on the military side. Bell, in particular, had a very good year in ’23 in terms of the timing of payment activity that puts a little bit of a headwind on cash flow. And then as you heard a little higher CapEx guidance kind of — in terms of the spend there. So it’s not any one item. It’s kind of a little bit of headwinds on working capital associated with the things I mentioned and a little bit higher levels of investment.
But we still think we’re — there’s still very solid cash flow performance for the year. In terms of the share count, we talked about 191 million average shares. So kind of roughly 5% or so reduction in average share count for the year.
David Strauss: Thank you.
Operator: Next, we go to Jason Gursky with Citi. Please go ahead.
Jason Gursky: Yeah. Good morning, everybody. Scott, I was wondering if you could just spend a few more minutes on systems and talk about the pipeline of opportunities there and the timing of potential awards kind of with the backdrop of what’s going on with the budget in mind and whether things like continuing resolutions to go out half a year have any impact on kind of your expectations around those?
Scott Donnelly: So the CR situation right now doesn’t really worry me very much on the system side of things. As we indicated, Jason, we’re going to be relatively flattish on the revenue in 2024, I’d say the pipeline is very strong. You look at some of these down selects on FTUAS, the ARV program, what used to be the [indiscernible] program. A lot of these things are significant opportunities for us are really important down selects that we achieved last year. We’ll execute on those, and they’re not big growth programs so they don’t really have a CR impact that I’m too concerned about. And there are virtually all programs that will have their next significant contractual award down select in 2025. So that’s why you see us kind of flattish.
We had — I think 2023 was a hugely important year for the down selects on those really important programs, execute this year and you start to see the revenue growth driven by ultimately being final selection awards, EMD programs that award in 2025.
Jason Gursky: Okay. Great. Thank you. And then just quickly on eAviation. We’ve got widening profitability losses, they’re projected for ’24 on higher revenue. I was wondering if you could just kind of give us a broad brush update on the plans for that business? And at what point does the revenue potentially pick up here and you begin to see those profitability losses begin to contract? And kind of your overall vision for that business over the next, I don’t know, three to five years?
Scott Donnelly: Sure. Absolutely. Look, keep in mind, there’s two things going on in that eAviation segment, right? There’s Pipistrel, which is our current — it’s a real business, real sales, roughly doubling the volume of aircraft sales from ’22 to ’23, roughly doubling ’23 to ’24. So I think the product lineup at Pipistrel is doing quite well. We’re expanding distribution channels. It’s a relatively small business, but it’s doing well. What’s driving the losses is these investments in R&D, particularly around the Nexus program, that’s something that won’t generate revenue probably for several years and investment on, say, the Nuuva 300 which is our hybrid unmanned cargo, which again, this is a few years from revenue. And so that’s part of why is we broke this thing out, right?
