Hey, good morning, everyone. Welcome back to day three of Laguna. Thanks for bearing with us. I know it's, it's a bit of a slog, but as they say, "If you're gonna hoot with the owls, you gotta soar with the eagles." Thanks for joining us this morning. We're gonna kick off with the team from General Electric. I'm joined on stage by CFO, Rahul Ghai. Rahul, thanks for joining us. Always a pleasure. Appreciate you guys for having us here. Absolutely. No, wouldn't miss it. Yeah. Maybe you could just, you know, start us off with a bit of an overview of what you're seeing and, you know, any other kind of prepared remarks you want to make, and then we'll dive into some Q&A, if that works. Yes. Yeah, absolutely. So listen, I'm excited. Excited as we, you know, get ready to launch two new public companies, Vernova and GE Aerospace, along with just driving performance both for 2023 and the medium term. And on separation, the momentum is building. You know, Steve and I were just together at our Greenville, South Carolina facility with 125 of our colleagues as we prepare for departure, and people are jazzed. I mean, people are jazzed about the culture we're building, about what Lean can do for them, and how it can drive operating performance, and what a stand-alone public company means for GE Aerospace. So all three front people are really excited. And as we think about Vernova, clearly, you know, the senior leadership team is coming together. We just made two big appointments. Ken Parks, as the CFO, three-time sitting public company CFO. I've known Ken for 20+ years from our days at UTC together. He's gonna be a great partner for Scott. Fantastic, add to the team. And Vic, who's been running onshore wind for us and has driven a remarkable turnaround in that business. I mean, you think about what the business looked like last year with approximately $1.5 billion of losses to break even this year in the second half, and improvement in 2024. I mean, that's a huge turnaround, and now he's gonna run all of wind. So, you know, two, two key senior positions getting filled there. And then in terms of just the mechanics that are needed to separate two companies, you know, legal entity, separation, Form 10, all that, you know, everything's on, everything's on track. And then with the work that Larry, Carolina, and the rest of the team has done in terms of the significant deleveraging that you've seen with the repayment of debt, and we're just adding to that by this month, retiring the rest of the preferred equity. We're continuing to liquidate our equity stakes, including actions earlier this week. So just this gives us significant capacity to ensure that both Vernova and Aerospace have a strong balance sheet that's been achieved investment-grade ratings. And with Vernova, they're gonna spin it with a net cash position, when we launch them. So, you know, really excited, proud of the work the team's doing on separation. So really, really good. You know, two leading industrial franchises in their industries, both with majority of the revenue coming from services. So things couldn't be better set up for both businesses. Now, switching to performance, I mean, let's talk about Aerospace first. Continuing to build on the leading positions that we have in commercial and defense propulsion systems, services, all of that. And as we think about what's happening in 2023, clearly the demand is very, very robust, and we are trying to ensure that we meet the ramp expectations from our customers on the defense side, on the airframers, with the airlines. So a lot of work is going in there, and things are looking good. And for commercial, we expect OE, we expect, you know, mid- to high-20s. Services, given the robust market outlook and the disciplined execution, we expect more than 20% growth on services. On the defense side, we continue to innovate the future of combat. You know, the book to bill has been really strong. Book to bill in the first half of the year is in more than 1.3. So that ensures robust and continued revenue growth in the outer years. And if you look at both the House and the Senate, excited about the funding of the advanced engine development for the F-35, so things are looking good there as well. So overall, just, you know, it's a, it's a good place to be for, for GE Aerospace. And, and then if you switch over to Vernova, as I'm getting to learn the business, I'm, I'm just impressed by the secular demand drivers and the execution that Scott and team are driving. You know, what they are doing with Lean is just absolutely amazing. I was at their Greenville facility last week with our board, and, you know, just getting to learn how they manage outages. I mean, what they've done to fix an outage in the field, they've taken 25% of the time out. They've digitized the whole process. So every technician out in the field has, instead of getting paper on how to fix an outage, goes out with an iPad and knows exactly what to do. We talk about standard work, and then can provide feedback to the people back home on what needs to get better. So talk about continued improvement. I mean, it's just a remarkable thing. They have standardized the tools, created new tools, have dedicated crews. I mean, this is absolutely remarkable. So you think about what that does for the business, you know, double-digit cost reduction, incremental capacity to do all that, and that's what gives us confidence that power will remain on track. And if you switch over to the renewables side, as I said earlier, turnaround in onshore and grid, you know, break even in the second half of the year, continued improvement in 2024. You know, offshore, we're just working through the challenging backlog that we have right now. It's gonna take some time, but it remains in line with the expectations that we had outlined back in, back in July. So you wrap all that up and say, "Okay, what does that mean?" For 2023, we had a fantastic first half. EPS, that was greater than all of 2022. Free cash flow improvement of more than $1.5 billion over last year. So really, really strong first half, gave us the confidence to raise our outlook for the rest of the year on revenue, EPS, free cash flow, so really good on, on all fronts. And as we sit here today, you know, the aerospace services continues to do well. Renewables and power are on track. So we think we are tracking to the higher end of our EPS and free cash flow guidance for the third quarter. So that's, that's good, and, you know, we are in the middle of our strategies reviews right now, and as you go through these strategy reviews, it clearly highlights the both the significant opportunities and strengths of these businesses. So things couldn't be more, you know, things could be better. Really excited about where we are and what lies ahead of us. Excellent. It sounds like you guys have a lot of momentum, obviously, top to bottom in the organization. I think the one piece that folks struggle with in the context of, commercial, particularly commercial services, is that demand has been so strong. Clearly, there are bottlenecks in the system, some of which you guys have experienced. Yep Some of which come from your suppliers or others in the space. I'd like to spend a few minutes, if we can, just trying to understand maybe where some of those friction points are and how we should think about that in the context of GE. So maybe just to rewind a little bit to 2Q, commercial services up 30, internal shop visits up 10. I know there's a lot going on with spare parts and probably some price. Yeah - and other pieces in there. What are the pieces that we really need to be cognizant of and kind of watching, or that you're watching just to try to understand, you know, how those two may be coming to alignment over time or how that divergence continues? Yeah. So on services, just to kind of set the stage, you know, we raised our full year expectations, so now we think we're gonna be growth of greater more than 20%. Most of that is gonna come from a robust spare parts demand. So spares, when we started the year, we were thinking high teens to 20%. Now, we think spares growth is more than 20, and it's coming from a couple of places. One, the departure growth is now stronger, right? I mean, we got into the year thinking, "Hey, it's high teens, year-over-year growth." Now, we think it's kind of 20%, something like that. So, you know, the market environment is a little bit better. Plus, what we've really seen is really good execution by the team in terms of, you know, pricing discipline, driving price increases in the market, so that is helping. The other part is that the demand out of China was really robust. I mean, if you go back to 2022, you know, things were completely shut down. Right. So huge catch-up in the first half of the year as is, you know, China departures come back. I mean, China departures are probably gonna be up, you know, double over last year, close to, right? So huge uptick in China departures, so that's driving demand out of China, and then the customer mix is good as well. So all that... You know, so the spares outlook looks better today than it did back in January or back in April. On the shop visit side, you know, we started the year thinking, "Hey, it's gonna be somewhere around the 20% mark." Now, the demand outlook continues to be really strong. As I said, departures are looking better, all that. The challenge just comes down to, you know, supply chain shortages and challenges. So, you know, the turnaround times are longer than we expected. So with that, we think the shop visits this year are kind of more in the mid-teens than closer to 20, so that's what we're thinking on, on shop visits right now. But all that is doing is, it's just pushing the demand out. I mean, the demand is not going anywhere, so just like, you know, we were expecting high single-digit growth between 2023 and 2025 when we were out in Paris with the, on shop visits. Now, it's just gonna be north of that because some of the shop visits that we're gonna do this year have been pushed out. So overall, I think the services looks really good. I mean, the fact is that, you know, 20%+ growth this year is, is going to be good, and on the OE side, we raised our outlook as well, and now we're thinking it's, you know, mid-20s to high 20s. Understood. Following up on just a couple of things you mentioned there, I guess first on spare parts. Obviously, spare engines in a different. Yeah Discussion there entirely. Not a lot of extra lying around- Yeah - to sell, even if you wanted to. But on the parts side, are folks building up inventories? I certainly understand there's a lot of different, you know, other points of friction there. Is that something where, you know, there's gonna be a normalization, or is that just really emblematic of how strong demand is? No, it is emblematic of how strong demand is and how we're driving the business. So keep in mind that in that, you know, part of the reason why spares- spare parts growth, just to be clear, different than spare engines. Spare parts growth is more than departure growth, is just coming from the pricing discipline. You know, so there's a part of that is just like, okay, we are driving... You know, we are doing a much better job of managing the demand. Customer mix is a factor. So we monitor the inventory situation in our MRO shops very, very carefully, and we have very, very good insight into how much inventory each of our MRO, you know, MRO partners are carrying. And so we don't see any build-up, and that's where we feel as you look, you know, between 2023 and 2025, we do expect the commercial business to be up mid-teens over the next two years. The other thing I wanted to follow up on, though, was that price comment. Yeah. Clearly, there's so much tightness in the system that it definitely affords a more forward look on price. Does that tend to be sticky? So at some point, hopefully, we come into greater balance. Are you gonna get people knocking on your door at that point in time, or does price tend to be fairly sticky once you get it? So it is fairly sticky. Historically, we've driven price kind of in the mid-single-digit range, you know, so that's been the historical trend. Or, of course, the last couple of years, inflation's been high, so the price increases have been higher than normal. Now, as we look forward into 2023-2025, we do expect, you know, the outlook that we've shared for 2025 in terms of $2 billion of profit growth, that factors in mid, you know, mid-single-digit price increase. So price increase is going back to historical norms. You know, so we kind of... You know, as the inflation comes down, we do expect the price increases to come down as well. So that's what's built into our outlook that we provided for 2025. Understood. I do think there is some concern kind of, you know, lingering in the background that maybe, air traffic slows just because it's been so strong. Yeah. Clearly, with all the shortages in the industry, you can still grow through that, and obviously, fleet age and GE's fleet age specifically falls into that. But, do you need sort of a specific flight hour or air traffic backdrop to support that 25 outlook, or is that a little, you know, call it decoupled from air traffic in the medium term? So what we are expecting between 2023 and 2025 is kind of that mid-single-digit + kind of traffic growth. So that's what we built in. So it's not the 20% that we are seeing this year, because we clearly expect, okay, there's a recovery in 2023. We're getting back to 2019 levels. You know, things are stable. China's coming back, so China is a big contributor to the growth this year, year-over-year. But as we get into 2024, China continues to drive overall departures, but we do expect that, hey, it's kind of in that high single-digit range, maybe for 2024, maybe go down to mid-single-digit for 2025. So that's kind of what's baked in here. So more normalized growth. Then in terms of the other drivers, so other drivers, I spoke about the pricing, and we spoke, we touched on the shop visits earlier, right? The shop visits have actually lagged behind departures growth. So if you look between 2019 and 2023, even though air traffic is now kind of back to where it was in 2019, the shop visits are not back. Sure. Shop visits are still, you know, trailing where they were back in 2019. So there's a little bit of catch-up that's going to go into 2024 and 2025. So you put all that together, that gives us confidence that services continues to grow. And then the, the commercial OE is gonna lead that mid-teens growth because, you know, you see the demand out there for new engines. That is clearly we said about 1,700 in LEAP engines this year and then 2,000 for next year, and then growth from that point on. So LEAP engines continue to grow, and that drives the commercial growth as well. Got it. And I do want to spend a minute on LEAP here, if we can. Yeah. We're gonna be approaching break-even here over the next couple of years. You know, how should we think about the timing of that? And I guess, you know, maybe sort of the subpart B to the question is, competitive landscape might be changing here a little bit. Does that accelerate maybe the path toward break-even on, you know, something like better pricing power or, you know, just higher win rates? Yeah. So just to level set the stage, and then we can get into the recent events here. What we've previously communicated, service becomes profitable next year, and I'll come back and, you know, speak another word on why. Overall program becomes profitable in 2025, and then OE becomes profitable in 2026. So that's kind of the trajectory we are on. So why do we feel good about the services profitability for next year? A couple of things. One, we start getting into now revenue recognition shop visits, right? So far, we've been majority quick turns. We haven't done a lot of, you know, restorative shop visits. As we get into 2024, we start that, so that drives a certain amount of revenue recognition. We've also previously said, you know, as we've encountered some problems and challenges on, on the launch, whether it's a radial drive shaft, shroud, higher than expected shop visits in, in the Middle East, you know, we've been taking specific warranty reserves or specific reserves, I should say, on those, you know, on those events. Now, as you get into 2024, the performance is getting better. We don't need to take the same level of reserves, and those costs that are coming in are gonna get charged to those reserves. So put that together, we feel that, hey, we can, you know, we can drive LEAP service profitability into 2024, and then it just goes from that point on. You've seen what we said on, on the NX back at Paris. You know, with the NX, our profit margins are 4x in a 10-year period. So, you know, we're following the exact same playbook on LEAP, so the margin should grow from that point on. We can come back, if you want, on that topic. On the recent events, it doesn't change much on LEAP for the near term. We are very... Yeah, you know, we feel we're in a good market spot right now. So it shouldn't change much for the near term, because clearly, we're living in a supply-constrained environment, so we are trying to do the best we can to meet airframer expectation, airline expectations, so no change expected in the near term. Understood. And then just sort of zooming out on LEAP, you know, generationally, a tough comp versus CFM56. Yeah. Sort of thing, best engine ever created by a man. How do you get comfortable with the aftermarket kind of life cycle value there compared to LEAP? Obviously, LEAP has, you know, a couple different, you know, designations that don't have a lot of part commonality, certainly a more complicated engine. When will we know sort of how that aftermarket profitability compares to something like 56? Yeah. So, you know, it's a great question. First, I would say, you know, again, let's spend a minute on NX, and because it should... You know, our belief is it should follow the same trajectory. You launch a program, there are always some issues, right? And you get the performance figured out first, right? You get that done. As you go deeper into the life cycle of a product, you drive productivity when an engine comes for a shop visit. So the turnaround times continue to shrink over time. You embed advanced technology in those shop visits as well, right? So NX, you know, we did foam washing. That takes a huge amount of cycle time out of the process. So and then you kind of work on the contract restructuring, pricing, all that other things go in. So that's the playbook that we followed in NX, and that is where we saw that if you look between 2012 and 2022, you know, the profitability was up 4x. And, you know, on LEAP, it's the exact same playbook, right? So the playbook on LEAP is gonna be exactly what we did on NX. So there's no reason why we should not see improvement on the profitability, and that's where our strategic plan would suggest, hey, we become profitable in 2024. It improves from there in 2025 and then continues to grow from that point on in terms of margins on the LEAP service revenue into the latter part of this decade. Understood. Then maybe just a wrap-up, kind of the fundamental performance on aero, on supply chain. Obviously, you know, you've mentioned it several times, everyone is aware of just how tight that, that is for the industry. What are the areas that would be particularly helpful to improve, from GE's perspective? You could just, you know, wave the wand, say the Latin, you know, is it the forgings and castings? Is it more on the service labor? You know, where, where would you kind of like to see the most improvement that would be helpful? Yeah, listen, it's supply chain is. It, it's across a lot of different factors. It's, it's not in one area. If it was in one area, it would have been easy. It's across multiple fronts. It's on electronics, it's in forging and casting, it's, it's across, you know, multiple fronts. So I think everybody's working really hard trying to meet the, the demand. Keep in mind, I mean, you look at what happened in the second quarter, our LEAP engine output up 80% year-over-year, right? And commercial total output up more than 50% year-over-year. And if you look at our material deliveries, material deliveries were up kind of low double digits, right? So we drove a huge amount of engine output increase on a fairly, you know, a decent material input increase, but not to the same level as the commercial output increase. So clearly, there's a lot going on there, where we are trying to drive Lean in our facilities, making sure that, you know, we are reducing our cycle times, we understand what's coming, but we need that material input to grow, and it needs to grow across. To answer your question, it needs to grow across multiple different areas. So that is what we're dealing with. I mean, if you look at... We've previously spoken about the engineering help that we are providing to our vendors. I mean, that number is up 30% year-over-year, you know, in the second quarter, probably in the first half, so and sequential step up in the second half of the year. So we are doing everything that we can to work with our vendors, making sure they get the support they need from us. So it's a work in progress, you know, both on availability of skilled labor and then on output from the tier three, tier four vendors that moves up the supply chain. Understood. And then how should we think about capital allocation for aerospace over the next few years? I mean, obviously, the balance sheet is in much better shape. Is there an appetite for M&A? Obviously, there's some niches like systems where we don't talk about it a lot, but, you know, these are large businesses, maybe some fragmentation out there in the market. What do you guys see? What's interesting to you? Listen, first, I would say, you know, as we sit here today, we feel really comfortable with the position we are in. I mean, if you look across, there's no burning platforms and no itchy fingers. I mean, we feel really comfortable with the position we have, both on the commercial side and on the defense side. So we feel absolutely, you know, and I think Larry said it at Investor Day. You know, he said, "Hey, if M&A was banned, he wouldn't lose any sleep over it." So, I like, I think everybody in the company kind of shares that view that we feel very good, and there's no, like, driver that we have to go do something. You know, there are a couple of places, like we did this small acquisition called, you know, Innoveering on the defense side. It has accelerated our journey into a lot of classified programs, into hypersonic. So it is, you know, taking probably a couple of years off our development cycle. So we'll keep looking at things that make strategic sense, that make operational sense, that make financial sense, but we are at peace with ourselves, right? So no rush to do anything here. Understood. Maybe just pivoting it over to Vernova, and I want to start first on renewables. Obviously, big profit improvement expected over the next couple of years. Yeah. And the IRA certainly has a lot to do with that. Yeah. Just remind folks or, you know, maybe update folks if there is, you know, anything to, to add, how much of the improvement you expect over the next few years is really a function of this kind of distinguished volume price environment? Yeah. versus some of the work you've done on, you know, productivity or restructuring or selectivity, in the portfolio? I suspect those are kind of the bigger buckets, but, you know, maybe give us any kind of walk that would, you know, would help spell that out. Yeah. So let's just spend a minute on onshore and then grid. I mean, if you look at between the two businesses, again, going from, you know, $1.5 billion or so of losses last year to break even this year in onshore grid, I think we've said previously, we're expecting low double-digit + kind of margins. So, and the improvement is coming from three areas. One, working through the warranty issues that we kind of found out last year, right? Obviously, lack of those warranty reserves is helping us this year. The second is huge improvement in cost takeout. I gave you one example at the outset on what we're doing, you know, on the outages side in power. There's similar actions like that. I mean, when I walked the floor with Vic the other day on what he's doing on onshore wind, I mean, the projects are astounding, right? He's done such a good job on just driving lean and an operating rhythm into everything that he does, both in the manufacturing area and then out in the field as well. And if you look at the headcount in that business, that headcount is down 30% year-over-year. So a big part of the improvement over the next few years is gonna be just coming down that cost curve, both in the field and in SG&A. So that's the second piece of improvement. And the third is gonna come from just the selectivity of projects that the team is picking up. So if you look at our backlog margins, the backlog margins are kind of in the low double-digit range now, so which is a huge change from where we were. So all those pieces add up. We work through our warranty issues, you know, we've taken the reserve, we feel good about that. We're burning through the warranty issues that are outstanding. We keep working the cost side, and then through selectivity of projects, that drives improvement in backlog margins, which shows up in the P&L. And then on the grid side, you know, as I'm learning the business, it, you know, you learn the fact is that we're probably going through a generational improvement in the grid infrastructure in the U.S. You know, some of the projects that that the team was talking about, I mean, those grids have not been updated for 60 years. So there's a huge demand out there that should help as well. So that is what turns this thing around. In offshore, obviously, we need to work through our projects in the early stages of that. Understood. I guess, you know, maybe the playbook of that, if there is an analogy, is what you guys did in gas power equipment. Right. Obviously, a very squeaky wheel several years ago. Clearly, you know, a lot of improvement has been made, but how do you think about balancing things like share and profitability now. Yeah. I mean, I think the view on where that market stabilizes is much clearer today than it used to be. But, even though that's a focused sort of services business, how should we think about the interest in, you know, growing the install base, growing share. Yeah in things like large frame? Yeah. So, you know, if you think about our share in, in power, I mean, it... Maybe a 1/4, across the world, if you remove China, we are probably a third, and the share is stable. We are, we're the market leaders, with there on, on, in power outside of, you know, outside of China. So it's- we're in a really good spot. The share is stable, and I think we are- clearly, profitability is more important than share. You know, we wanna-- if we want incremental volume, we want incremental volume that is profitable, and it's profitable... You know, specifically, I think Scott and team are focused more on the OE profitability for the, for the projects up front. So that is clearly the focus here, and not just chasing share numbers. And then, you know, that OE profitability over time translates into both, you know, services profitability as well. So that's the focus. Understood. And then, yeah, I think what's been a nice story, maybe underneath the surface in gas power equipment is the strength that you guys have seen there in derivatives sort of pairs nicely with what you do in renewables. How long does that last? Does that accelerate as onshore deliveries ramp up? How should we think about that relationship, perhaps, over the next few years? Yeah. So on the aero derivatives, you know, again, I'm learning the business here, but what I've learned is that it is a really nice complement to the renewable cycles. And, you know, it is a competitive differentiator for us because our competitors do not have the same capability that we do there. So that's a really good thing for us. And as you, you know, as you grow the renewable infrastructure, the intermittency of the power supply increases. And having aero derivatives helps with that quick start, the backup power, you know, making sure the grid fluctuates at the... A grid operates at the, you know, at a stable level, and the renewables kick in when they're needed. So it's a really nice complement. So we do expect that business to continue to grow as the renewables infrastructure increases. Right now, again, going back to supply chain, you know, that product is one that we are constrained on supply chain, so we are not able to meet the demand. That should help, and it's a profitable piece for Scott and team. As we, you know, as we go into 2024 and 2025, and the supply chain constraints ease, that should be a nice lift to the business. Understood. And then maybe to tap into another sort of item that was a bigger legacy concern several years ago and has been nicely de-risked is on the insurance side. Yeah. As that has gotten de-risked, and you get, you know, the benefit of things like higher interest rates, how do you think about that long-term relationship? Have we reached this point where maybe it's, it's safer to look elsewhere, you know, jettison, or is it de-risked enough to where you truly can run it off internally? Yeah. So on insurance, listen, first, you know, Larry and the rest of the team has done a really good job putting really good operators in place, right? So that business is far more stable today than it was. So in terms of managing risk, driving premium increases where it makes sense, so all that, operationally, it's in a much, much better place than it was a few years ago. We expect the last payment to go in on insurance in first quarter of next year. You know, it's up to $1.008 billion. So that goes in, and after that, we think we've fully funded the liabilities on insurance. We don't expect any incremental contributions. So now in terms of, you know, to your question, we'll keep looking at options, but it is, you know, whether it's the whole, whether it's the part, so that is definitely you know, we will keep looking at things, but there's not an imminent solution to that problem. So it's, it's on the table, but we'll keep working it, but not, not imminent. Excellent. And I see we're coming up on time, but I do have one more question. Just as we approach separation, anything that we should be watching for or anything that you're cognizant of on the timing front or any kind of milestones that we should be aware of? No, I think, as I said at the opening, everything's on track here. I mean, the businesses are performing as expected in 2023, if not better than where we were back in March, right? Things have improved since then. You know, 2024 looks good, so businesses are on, are stable, improving. The balance sheet capacity has improved with everything that we are doing. Legal entity separation's on track, so we are... Everything looks good for early 2024. Excellent. Rahul, I see we're out of time. Thank you for the time. Appreciate you joining.