Good morning. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to the Hexcel First Quarter 2023 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press Star followed by One on your telephone keypad. If you'd like to withdraw your question, again, press the Star One. Thank you. Patrick Winterlich, Chief Financial Officer, you may begin your conference. Thanks, Rob. Good morning, everyone. Welcome to Hexcel Corporation's First Quarter 2023 Earnings Conference Call. Before beginning, let me cover the formalities. I want to remind everyone about the safe harbor provisions related to any forward-looking statements we may make during the course of this call. Certain statements contained in this call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. They involve estimates, assumptions, judgments, and uncertainties caused by a variety of factors that could cause future actual results or outcomes to differ materially from our forward-looking statements today. Such factors are detailed in the company's SEC filings and last night's news release. A replay of this call will be available on the investor relations page of our website. Lastly, this call is being recorded by Hexcel Corporation and is copyrighted material. It cannot be recorded or rebroadcast without our express permission. Your participation on this call constitutes your consent to that request. With me today are Nick Stanage, our Chairman, CEO, and President, and Kurt Goddard, our Vice President of Investor Relations. The purpose of the call is to review our first quarter 2023 results detailed in our news release issued yesterday. Let me turn the call over to Nick. Thanks, Patrick. Good morning, everyone. Thank you for joining us today as we share our first quarter 2023 results. Our first quarter results reflect a strong recovery in demand with overall sales up 18% year-over-year, bolstered by a 30% increase in commercial aerospace sales. We delivered strong margin leverage on the increased production volumes, leading to robust operating income for the third quarter. The strong demand for new aircraft is clear, with a combined backlog for Airbus and Boeing now at roughly 12,600 aircraft. Airline orders are increasing for new, lightweight, composite-intensive planes to replace older, less fuel-efficient fleets and to meet growth in passenger demand. Indications are that domestic air travel has not stopped accelerating in recent months despite inflation, and now many expect that passenger demand could recover to 2019 levels by the end of this year as China reopens. International air travel is also coming back strongly, including both leisure and business, and is recovering more quickly than many had expected. During the first quarter of 2023 alone, there have been 6 different wide-body orders and options announced from Asia, the Middle East, and Europe, for a total of 215 wide-body aircraft for Airbus and Boeing. Announced orders for options for narrow bodies, including the Airbus A320neo family, the A220, and the Boeing 737 MAX, remain strong and steady at 464 aircraft in the first quarter. We remain aligned with our customers and ready to support their growing demand. We recognize, though, that there are broader challenges in the aerospace industry relating to supply chain constraints, labor shortages, and workforce inexperience. We are staying vigilant and agile in order to provide support as required to our customers. While our optimism may be tempered by these factors, we could not be more pleased to start 2023 with such positive momentum. Our confidence is strong as we reaffirm our full year 2023 guidance that we provided in January. Let me highlight some of the results. Patrick will then provide more detail on the numbers. Commercial aerospace sales of $285 million increased 30% compared to the first quarter of 2022, led by growth in the Airbus A350 and A320neo programs. Other commercial aerospace increased more than 23% for the first quarter on expanding business jet demand. The outlook for narrow bodies, wide bodies, and business jets is extremely encouraging. They are all growing and creating further demand for more Hexcel composite material. Space and defense sales of $126 million increased 7.6% in constant currency, with growth across a number of platforms globally, including fixed-wing aircraft and both military and civilian rotorcraft. We see a period of increased space and defense spending, including Europe and Asia Pacific, which for the first quarter of 2023 represented approximately one-third of our total space and defense sales. Total industrial sales of $47 million decreased about 9% in constant currency due to lower wind energy sales that were partially offset by sales growth in recreation, automotive, and general industrial markets. Marine continues as an emerging growth market for us. In fact, this week at the JEC World trade show in Paris, Hexcel was recognized along with one of our customers and a consortium of other partners for our work on new composite technologies for the marine sector that will eventually lead to quieter and more environmentally sustainable cruise and cargo ships. As with every quarter, I want to thank our One Hexcel team for their focus on execution and efficiency through operational excellence, ensuring that we deliver quality products to our customers on time. The labor market remains tight, and certainly, the necessary talent takes longer to find. Yet we have been filling jobs both on the plant floor and in our offices with great success over the past several months as job seekers are attracted to our collaborative culture and our compelling business outlook with our sustainability-oriented lightweighting products. Our success as a company is not just what we do but how we do it. Our growth position today is supported by how Hexcel managed during the downturn by quickly ramping down, yet without sitting still. A prime example of that is our decision to invest in a new research and development site adjacent to our largest carbon fiber and matrix plant in North America in Salt Lake City, Utah, which some of you have visited on previous investor days. We broke ground in October 2021, then on March 22nd of this year, our Center of Research and Technology Excellence officially opened. Customers from about 20 companies joined us for an event where we celebrated with local public officials and employees, with everyone having the chance to tour our state-of-the-art labs and meet our researchers and scientists who now are calling this remarkable innovation center their home. With about 100,000 sq ft of floor space, our new R&T Center of Excellence provides us with an amazing opportunity to expand our research and broaden our technology portfolio. It is also an ideal platform for us to collaborate with our customers on the latest innovation in lightweight, sustainable solutions and the latest developments in carbon fiber and matrix technologies for aerospace, space and defense, and industrial applications. It will quickly become a showcase that demonstrates our world-leading composites technology. Lastly, as you read in our news release last night, we are reaffirming our guidance at $1.725 billion-$1.825 billion in sales for 2023, with adjusted diluted earnings per share of $1.70-$1.90. Our guidance on free cash flow is to generate more than $140 million while continuing to manage accrued capital expenditures with approximately $90 million of spend forecasted. Now, I'll turn it over to Patrick to provide more details on the numbers. Thank you, Nick. As a reminder, the majority of our sales are denominated in dollars. Our cost base is a mix of dollars, euros, and British pounds, as we have a significant manufacturing presence in Europe. When the dollar strengthens against the euro and the pound, our sales translate lower while our costs also translate lower, leading to a net benefit to our margins. A weak dollar is a headwind to our financial results. We hedge this currency exposure over a 10-quarter horizon to protect our operating income. Currency changes are laid into financial results over time. As a reminder, the year-over-year sales comparisons I will provide are in constant currency, which thereby removes the foreign exchange impact to sales. Turning to our three markets, commercial aerospace represented approximately 62% of total first quarter 2023 sales. First quarter commercial aerospace sales of $284.5 million increased 30% compared to the first quarter of 2022, led by both the Airbus A350 and A320neo programs. Airbus raised the production rate of the A350 in early 2023, which led to increased first quarter sales, including some restocking. The other commercial aerospace category grew 23.5%, led by strength in business jets. I would like to highlight that our first quarter 2023 business jet sales exceeded pre-pandemic levels, which is supported by the growing secular adoption of composites for lightweighting by business jet manufacturers. Space and defense represented 28% of first quarter sales and totaled $126.2 million, increasing 7.6% from the same period in 2022. The growth continues to be across multiple platforms globally, including fixed-wing aircraft and both military and civilian rotorcraft, partially offset by softer space sales. Industrial comprised 10% of first quarter 2023 sales. Industrial sales totaled $47 million, decreasing 9.1% compared to the first quarter of 2022 on lower wind energy sales. As we mentioned last quarter, wind energy sales stabilized in the second half of 2022. Recreation, automotive, and other general industrial sales grew year-over-year. On a consolidated basis, gross margin for the quarter was 27.9% compared to 22.2% in the first quarter of 2022. Higher production levels and robust margin leverage were the principal drivers of this strong performance. However, I want to caution that the gross margin this quarter was particularly strong for a number of reasons. Sales mix was favorable with strong demand for Hexcel fiber-rich products. There was a favorable absorption impact as a result of increasing finished goods inventory, and foreign exchange was also a tailwind this quarter due to the significant dollar strength compared to the first quarter of 2022. As a percentage of sales, selling, general, and administrative expenses and R&T expenses were 14.1% in the first quarter, compared to 14.2% in the first quarter of 2022. Consistent with past trends, first quarter SG&A expenses were elevated on stock-based compensation. SG&A is expected to moderate for the remainder of the year. R&T expenses were higher on more material development costs as we pursue new opportunities with our innovative composite light weighting solutions. Adjusted operating income in the first quarter was $63 million or 13.8% of sales, compared to $31.1 million or 8% of sales in the comparable prior year period. The year-over-year impact of exchange rates in the first quarter to adjusted operating income was favorable by approximately 80 basis points. Now turning to our two segments. The Composite Materials segment represented 83% of total sales and generated an 18.4% operating margin, strengthening year-over-year on higher sales and production volume as well as mix. The operating margin in the comparable prior year period was 12.9%. The Engineered Products segment, which is comprised of our structures and engineered core businesses, represented 17% of total sales and generated a 14.9% operating income margin as compared to 13.7% in the comparable prior year period. The effective tax rate for the first quarter of 2023 was 21.9%. Net cash used for operating activities in Q1 2023 was $23.4 million compared to a use of $19 million in the first quarter of 2022. Working capital with the use of cash of $104 million in the first quarter to support higher sales. This working capital increase was consistent with expectations and past trends as working capital increased $74.3 million in the first quarter of 2022. Capital expenditures on an accrual basis were $16.8 million in the first quarter of 2023, compared to $11.1 million in the prior year period. As previously disclosed, 2023 capital expenditure included further construction related to the partially completed carbon fiber line at our facility in Decatur, Alabama to support future growth. Free cash flow was -$41.5 million in the first quarter of 2023, which was similar to the -$39.9 million in the prior year period. For an alternative metric of cash generation, adjusted EBITDA in the first quarter of 2023 was $106.6 million, up 44.6% from $73.7 million in the first quarter of 2022. I am pleased to let you know that we have just renewed and extended the maturity date of our bank syndicated $750 million revolver to April 2028. The terms and conditions were basically unchanged with two key revisions to highlight. First is that the borrowing base rate was revised from LIBOR to SOFR as expected. The other change is beneficial to Hexcel as the leverage covenant calculation was revised to net debt, whereas previously it was measured on a gross debt basis. Successfully concluding this refinancing during a period of banking turmoil speaks to the financial strength of Hexcel and the support of our bank group. The board of directors declared a twelve and a half cent quarterly dividend yesterday, payable to stockholders of record as of May fifth, with a payment date of May twelfth. We did not repurchase any common stock during the first quarter of 2023. The remaining authorization under the share repurchase program on March 31st, 2023 was $217 million. As Nick stated, our full year 2023 guidance is reaffirmed. Let me turn the call back to Nick. Thanks, Patrick. We welcome the return to growth and ramp up in programs. Our customer relationships have never been better. Thanks in part to our flexibility, transparency, and reliability. Pent-up demand for air travel is loading up seats on airplanes, which is expanding backlogs for new, more fuel-efficient aircraft. As the market recovers, Hexcel benefits from the continued penetration of lightweight composite materials as well as our never-ending commitment to innovate with our customers on new materials and solutions for next-generation programs. Supply chain issues remain a watch item for us as they do for most other suppliers in our industry. However, global demand for advanced composite technology, for lighter weight, stronger, and more durable materials in all of our markets is growing, and our technology and products remain unrivaled in our industry. The disciplined actions we have taken and our focus on execution will ensure that Hexcel continues providing long-term shareholder value. Rob, that concludes our prepared remarks. We're now ready to take questions. At this time, I would like to remind everyone in order to ask a question, press star, then the number 1 on your telephone keypad. We ask that you please limit yourself to one question and one follow-up. Your first question comes from the line of John McNulty from BMO Capital Markets. Your line is open. Yeah, good morning. Thanks for taking my question. A question regarding the maintenance of your full-year guide. Your first quarter came in really strong, and it did sound like maybe there was a little bit of continued restocking of inventory, so maybe that is part of the answer. I guess when we think about the seasonality of the business, you know, your strength in the first quarter would imply maybe a better range for the full year. I guess, can you help us to understand maybe some of the puts and takes there or some of your conservativism as to the full-year guide and no changes there? Yeah, John. Well, thanks for the question. First off, clearly, we started the year strong, and we're seeing improvements in many of the supply chain aspects that are creating some uncertainty and continued pressure in the industry. For one, we're early in the year. We just gave guidance in January, and the guidance has pretty wide ranges on it. To tweak it at this point in time just didn't make sense to us. Secondly, the supply chain risks, not necessarily only to us, but for other components that could ultimately impact build rate ramps, I can't say those have gone away. They're still there. We probably are taking a conservative view on that, and some of the other shortages that are driving some challenges in various areas of discrete part manufacturing within the industry. Maybe a little bit conservative, but at this point in the year, that's really the position, we wanted to take and convey. Got it. Fair enough. Maybe just as a follow-up, you know, your balance sheet strengthened a lot. Your leverage, if I'm looking at it right, is now below 2 times, and you actually have that maybe better covenant flexibility as well. How should we think about cash flows and the uses as we go forward? Can we see maybe a push into buying back some stock throughout the year? Are there opportunities on the M&A front just given your strength maybe relative to others out there where maybe that's more attractive? I guess maybe you can give us some color around that. Yeah. I'd say it's, unfortunately for you, it may be a boring answer, but it's consistently with what we've said for quite a few quarters, certainly since I've been talking and sharing our earnings results. First and foremost, our team are pushing innovation, new technologies, innovative new fibers, new processing, new solutions for our customers to help them not only on existing platforms and various derivatives that are being worked, but to prepare for the next generation of platforms. There's also new programs out there that awards are not set yet. For example, on the V-280 Valor or many military programs that we continue to work and continue to innovate. Organic growth is priority number one. Priority number two is we really look at the M&A landscape. We look at all terms. We look at our technology portfolio and how we might expand that to be able to offer our customers even broader, more, value-driving solutions for their lightweight needs. That pipeline, we've been looking at that continually. We're disciplined. We're very selective, but that's how I look at number two. Then lastly, we always look at our balance sheet. We look at our debt ratio, and we review with our board on a regular basis, our dividend strategy and our share buyback strategy. As you see, the cash generation is ramping up as our sales grow. I would expect we'll continue to look at all three of those priorities. Without guiding too definitively, I'd say all of them are in play going forward. Great. Thanks very much for the color. Thank you, John. Your next question comes from the line of Robert Spingarn from Melius Research. Your line is open. Hi. Good morning. Good morning, Rob. You know, Nick, obviously, just on the back of that last question, you know, strong numbers here in the first quarter. You talked about the OE, you know, and the build rates, but I wanted to get a little bit more specific and see if you could take us through your plans for the major programs, say A320, A350, 737, 787, et cetera. I'm particularly focused on the MAX, because there's talk of higher rates, but what we're not clear on is whether some of those aircraft are mods coming out of Moses Lake, and therefore, you wouldn't participate because you're already those aircraft are already largely built from a Hexcel perspective. That's essentially the question. How do rates flow throughout the year on those programs for you? Well, let me start with Boeing. I mean, there's a lot of momentum and positive news coming out of Boeing. I know they've had the recent issue that they're working through with Spirit. Just before that, they're really looking at potentially getting to a point of increasing rates from where they have been around below thirties. We feel real good about the MAX. We see China continuing to issue reports that make it more possible for airlines to take new MAX deliveries. We know Boeing have inventory that have been built and structured for the Chinese market. That would be another tailwind that would help the MAX. The aircraft, obviously, with the orders you're seeing, the length of time it takes to get a new aircraft, there is plenty of demand for the MAX as the supply chain stabilizes and Boeing can increase rates. That's the MAX. On 787, I would point out, even though we highlighted the A350 and the A320neo, we were up year-over-year on the MAX and the 787. We were up sequentially on both those platforms. I don't wanna diminish the strength of Boeing. We just called out the biggest market drivers for the revenue dollars. If you look at the 787, again, it was up. It has been at low rates. We saw a nice uptick in Q1. Again, Boeing is targeting to be closer to 5 by the end of the year. We expect that to continue to provide strength going forward. Switching to the Airbus side, if you look at the A220, orders continue to come in strongly. We have a nice position there. A320neo is on a glide path to ramp up to the mid-60s by the end of next year. Still targeting to be in the mid-70s by 2025 timeframe. Continued growth, strong positions we have there. The A350 has recently moved up to 6, and Airbus has been vocal and public on targeting to ramp up to 9 per month by the end of 2025. The A330neo, where again, we have strong position, is at 4 per month, and we see that maintaining a consistent level going forward. Overall, we still see tailwinds on build rates. And again, we're very bullish on the market, with the caveat that the supply chain is still questionable with respect to how quickly it can ramp up and if it might impact build rates, in the next 12, 24 months. Okay. That's great color, so I appreciate that. Patrick, just briefly on the biz jet. I think you talked about biz jet before and how content per aircraft is up versus 2019, and that's one of the reasons why you're above 2019 levels in revenue. Is there any way to measure that, where what your content is as a, as a percent of, of an aircraft's value and how that's moved and where it's going to move over the next couple of years? How much confidence do you and Nick have in the biz jet production rate hikes? The way I would talk about biz jets is we saw some fantastic growth in build rates over the last couple of years, and we're now at an elevated level. The growth rate may not continue at the same pace, but I do expect to see it remain at this elevated level of demand. That's pulling through a lot of Hexcel composite material. To answer your question about sort of content, the more modern, the larger, more modern jets are pulling through significant ship sets. I think we called out the large business jets are in the $200,000-$500,000 range, and some of the larger ones, the largest sort of Gulfstream and the Dassault, sort of Falcon 10X with the carbon wing, are gonna push beyond that. We're extremely excited about further secular penetration of composites onto those platforms, which we expect to remain at elevated demand level for some time for the foreseeable future and beyond. We're very confident on the outlook for business jets. Thank you both for the color. Thanks, Rob. Your next question comes from a line of Kenneth Herbert from RBC. Your line is open. Yes. Hi, good morning, Patrick and Nick. Hi. Morning. Morning, Ken. Yeah. Maybe Patrick, really nice gross margins in the quarter. You called out sales mix and absorption. As we look at where the incrementals were this quarter, with the build rate plans, it doesn't sound like, you know, maybe those tailwinds necessarily moderate too much, at least through this year. How should we think, you know, about incrementals on the gross margin line? Is the current margin rate sustainable? How much are you expecting or thinking we should see that moderate over the year? I mean, it was a great margin quarter and the volume leverage was the key driver. I think as I said in my script, I would moderate expectations a little bit. We had a particularly sort of Hexcel fiber-rich product mix in Q1, which helped. It gave us a bit of punch. And going forward, inventory, I would not expect to continue to grow. If anything, we will now be stabilizing that and, if anything, bringing it down. I wouldn't expect an absorption tailwind either going forward. I mean, we do expect good quality margins, but I would moderate down a little bit from what I would see is a little bit of an exceptional Q1 margin performance. No, that's helpful. As I think about headcount and bringing staff back to support the higher rates, where are you in that process and maybe at which level of staffing are you to support future rates, or how much of that do you still have to go? So as you know, we took our headcount down from about 7,000 heading into the pandemic to about 4,500. Today, we're actually probably pushing 5,500. So we've almost brought back 1,000 people, which reflects the growth from the trough of the pandemic. I mean, our direct headcount will just pro rata. It will grow as demand grows. I mean, you can see sort of our guidance this year, $1.8 billion, roughly just under the midpoint if you look at the midpoint. If you compare that to the $2.4 billion, so that's about a three-quarter level. We, we will nudge up again this year a bit more and in the coming years. We will manage indirect labor, very prudently, but we will obviously not constrain ourselves to the growth opportunities, the R&T opportunities in front of us, and we will invest in people, going forward. The biggest mover on headcount is obviously direct labor, and that will follow revenue. Great. Thank you very much. Your next question comes from the line of Myles Walton from Wolfe Research. Your line is open. Thanks. With FLRAA now decided, and you alluded to it, but I was hoping you could talk to some of the relative content you'd have on the V-280 Valor. Is the shipset closer to a V-22 or a CH-53K? I guess how much of the content is still up for bid? Well, Myles, I would say the content will certainly be up above the Black Hawk. We're still working on multiple packages for the Valor, so it's really premature for us to give a shipset at this point in time, other than it's going to be nice, it's gonna be a materials driver for us, and it'll be more than the Black Hawk. All right. Patrick, you mentioned the restock benefit on the A350. Any way to size that? The reason I ask is it's hard to imagine that commercial aerospace sales don't sequentially grow in some way, shape, or form through the course of the year, which I guess is implied at the top end of your guidance still. Maybe if you can size that or give us any way to stay in the range. Yeah. I mean, we did, as Nick said, I mean, we entered the year around 6, and we're now on a ramp towards 9 in 2025, so we're going to be in some sort of slope. It won't be a perfect straight line. I think what we saw in the first quarter that perhaps was a little bit of a surprise was a lot of demand. That must have included some restocking. The A350 is a very Hexcel fiber-rich platform. You have heard us say before, whenever we get that sort of pull through of mix, it boosts our margins. I do agree we're going to see steady growth. Whether we will get the same sort of restocking fiber-rich mix every time, I doubt. That definitely gave us a margin% boost in the first quarter this year. I, I, I would just- Okay I would just add to Patrick's comments that in addition to the A350 in production, we're also providing materials for the freighter. Airbus has recently completed a central wing box that, again, has all Hexcel fibers on. Lastly, remember, our supply chain for the A350 are over 40 ship-to locations. It's quite a complex, broad supply chain that does require some safety stock and some provisioning of materials, which we think some of that came through in Q1. Okay. All right. Thank you. Thanks, Myles. Thanks. Your next question comes from the line of Kristine Liwag from Morgan Stanley. Your line is open. Great. Hey, you know, Patrick, Nick, you know, following up on the earlier questions on cash use. With a new Boeing airplane seemingly not in the horizon for this decade, the balance sheet where it is, you know, the relatively minimal CapEx requirement. I mean, you're gonna be in a period of unprecedented growing free cash flow in this upcycle. What's your appetite to use the balance sheet or this cash for a transformative M&A? Do you think you need it? Are there anything of interest or potentially just returning 100% of that free cash flow to shareholders through dividends or buybacks? Yeah, Kristine. Thanks for the question. First I would remind everyone that the lead time for material selection before a new airplane is launched is in the vicinity of 5 years to 10 years. You shouldn't think that we're not investing, working with our customers on the next generation materials, processes, and solutions for those type of platforms, which we are. Secondly, do we need to do M&A? We don't view that we need to. That's really how we drive our discipline and the value proposition to how it enhances our portfolio. As you say, we have plenty of powder. We're looking at various areas and targets and technology that we think would fit very well. That's an active process that we have our team working on. Again, could we return more to shareholders depending on the availability and the actionability of those targets? Again, it could fluctuate based on those factors. Great. In terms of the investment dollars, can you size that? Is this, you know, 5% of sales, annually or less? How should we think about that level of investment that you'd have to do for the next airplane program? Yeah. We really don't go there. We're working with our customers on various new technologies, whether you're talking about fibers, whether you're talking about matrix systems, whether you're talking about in autoclave, out of autoclave, thermoset, thermoplastic. There's a wide variety of technologies that will be used in different parts of the aircraft. I'd also say we're firm believers that the penetration, the secular penetration of composites will continue to grow. As we can make our materials more flexible, more adaptable to new processing, it opens up the window of the next composite airplane to be above 50%. Who knows? Maybe 70%. Well, 70 would be a lot. Well, great. Thank you very much. Thank you, Kristine. Your next question comes from a line of Pete Skibitski from Alembic Global. Your line is open. Hey, good morning, Nick and Patrick and Kurt. Nice quarter, guys. Good morning. Thanks, Pete. Hey, guys, on industrial, the sales decline, I think the release mentioned wind. Was European wind down in the quarter? What's kind of the prospects of that going forward? Have you bottomed there or not? Last one is, can you just touch on, are you seeing any headwinds in the balance of the industrial portfolio or not? On wind, really all our sales now are European-focused. As you'll remember, Vestas pulled out essentially of prepreg blade making in the US in 2020. We closed our Windsor, Colorado plant. We announced at the end of last year the closure of our Taizhou, China plant. Those have now gone. Really all our wind energy focus, or at least the vast majority of it, is in Europe out of our European production base. I think, as I said in my script, we're now sort of stabilizing on wind. The last three quarters have been relatively level, but certainly a step down, fairly significant step down year-over-year if you look at Q1 2022 to Q1 2023. We expect to continue to support the wind energy business at this rough level for some period of time, and we're innovating some resin coating gel products which we hope to see grow around the world actually. In terms of the rest of automotive, nearly every segment was up. Automotive was up, recreation was up, and one or two of the key other industrial places were up. We're seeing general strength around the wind business. Wind has kind of merged back, if you like, to be one of three or four key elements of our industrial market. Thanks, guys. Thanks, Pete. Your next question comes from a line of Sheila Kahyaoglu from Jefferies. Your line is open. Thank you. Good morning, Nick and Patrick. Thanks so much. You guys seem to be, you know, beating numbers without breaking a sweat here. Nick, I think you alluded to it too. You're watching labor inefficiency, supply chain. Others are stumbling on this. I guess what has improved over the last six months for you guys, and what are you guys watching most carefully going forward? Well, I would be remiss if I said it was easy. I can tell you our team have been working incredibly hard on managing the supply chain, putting out fires, which were coming up quite frequently, a few quarters back. They're not completely out, but they have slowed down. I'd say from our supply base, our supply consistency, lead times, we're definitely seeing an improvement, but it's still not as steady and stable as it was pre-pandemic, and we need to keep an eye on it because we have items pop up regularly. I'd also say on logistics, and especially international freight on ships, the lead times have significantly improved, and we're seeing a downward trend there that it's too early to claim victory. It's too early to claim that it is back to 2019 levels. Again, we're seeing positive movements in that area, from our logistics and supply chain capabilities. Great. I wanted to ask one on defense and space. I don't know if you've ever given your breakout of how much space contributes, and I wanted to know if your contracts are structured differently there, both within defense and space, just given the customer bases. Pure space sales are a smaller portion of our space and defense. I mean, space and defense dominates. It's the vast majority of that segment that we call out. I mean, in terms of the contracts, they're probably slightly shorter in duration, but we have the same sort of commercial agreements and set up with those customers as we would with many other commercial customers, commercial aerospace customers, I should say. Probably we don't have decade-long contracts as we do see in the commercial aerospace world. Over time, that may develop as well. Similar structure contracts, probably slightly shorter term in nature, but nothing massively different. Okay. Thank you. Your next question comes from the line of Richard Safran from Seaport Research Partners. Your line is open. Nick, Patrick, Kurt, good morning. How are you? Morning. Good morning, Richard. I wanted to ask you a V-280 question, a bit of a different perspective, though. you know, I think you made the point, correct me if I'm wrong, that you're agnostic whoever won, you know, FLRAA. now that the award's been made and the protest over, could you comment on the transition to the V-280 from the UH-60, when the V-280 should start to impact your PNL, and how long you're expecting UH-60 program to last? Yeah. Rich, I mean, a good question. There's gonna be an overlap, I would expect. I mean, in terms of the V-280, we wouldn't expect to see any real significant revenue probably for a couple of years into 2025. As Nick said, we're still working on a number of packages to try and get more content on that aircraft, and it's too soon to declare our shipset status. I would expect the Black Hawk program and the transition over to take several years. I think we're gonna see strength and replacement blade demand around the Black Hawk for some period to come. There could even be a little bit of a bump where we're supplying to both programs for a period. I think it will be a steady transition. I don't think there'll be a sudden drop in Black Hawk before the V-280 ramps. I think there'll be an overlap, and we'll see a fairly gradual transition over time. Thanks. I just wanted to ask a quick one on labor here. Nick, really kind of like if you mentioned this in your remarks and I missed it, I apologize. You know, given the headcount increases, I wanted to know if you could offer a comment or two on how the training has been progressing, how quickly you've been seeing the workforce been ramping. You know, given the tight labor market you even mentioned, if you're getting the right people. I just have to think that based on your results, I mean, things seem to be doing a little bit better than you were expecting. Well, I don't know that I'd say they're doing better than we expected. I think, clearly they are improving rapidly. We did expect that. We continue to work our training programs. We continue to work our processes to try to eliminate as much of the potential human error out of our processes as we can. At the same time, during the pandemic, we took the opportunity to work productivity and efficiency improvements within our processes. You're seeing some of that flow through. Overall, I'd say the quality of the talent has been outstanding, and the ramp-up has been, I'd say, as we expected, which has translated into efficiencies that are climbing rapidly. Okay. Thank you. Thanks, Richard. Your next question comes from the line of Michael Ciarmoli from Truist Securities. Your line is open. Hey. Good morning, guys. Thanks for taking the questions here. Yeah. Maybe Nick, you know, last quarter, I think it came up that the longer term kind of margin goals were becoming a bit more challenged. You know, clearly you guys had some mix, and you covered all the kind of tailwinds this quarter. Has anything changed? I mean, you know, I think last quarter we were focusing a lot on energy, inflation. Mm-hmm. Just general cost pressures. Maybe can you give us a sense, has anything sort of shifted or given you more or less confidence in getting to those longer term targets? Any color you might be able to add on pricing as well there? Michael. I'd say nothing has really shifted negatively. Actually, probably some positive shifts. Number one, energy. We've seen a decline in the energy, especially in Europe, as those markets stabilize and come down. I think the team has done a great job working with our customers to recover some of the inflationary items on labor and oil, and we've translated that well. Again, we've always driven for productivity improvements year-over-year, for efficiency improvements year-over-year, which is never ending in an operations environment. I'd say I feel good about where we are. We have a way to go. We're gonna continue to leverage the volume growth. We're gonna continue to be tight on adding costs and certainly, salaried resources, continuing to drive leverage and productivity going forward. As we grow, clearly we're going to be hiring both, as Patrick mentioned, to support the operations and the direct heads virtually follow the revenue. On the salary side, we're going to continue to add the technologists, add the positions to help drive the growth for us to deliver well beyond the recovery. Got it. That's helpful. Just one more, if I may, maybe going back to Rob's questions on rates. On the MAX, I mean, if we're gonna see production at 42 a month potentially by year end, I think there's been some commentary that, you know, maybe 300 LEAP composite shipsets were built last year. Is that creating a bit of a headwind for you guys, just some of the composite-rich engine shipsets that need to be destocked or any other color there on MAX that you could talk about? You know, we don't see the MAX as being a headwind for us at all. We see it as being an opportunity and a, and a, and a tailwind as the issues get resolved and as Boeing ramps up engines. I'm sure the engine manufacturers are working aggressively to maintain and to support the rates required by the OEs. We're certainly not prevented from or have any obstacles in preventing us from supplying composite components for engines and nacelles going forward. Okay a headwind for us. Okay. Got. Yeah, I was meaning one of your suppliers had shipped maybe 300, you know, extra shipsets at the end of last year and having, you know, to burn those down. They were kind of producing at flat levels for the LEAP this year. That's kind of what I was alluding to. Yeah. I think we've got that figured into our plan. Okay. It's not a, it's not a big obstacle for us. Got it. Perfect. Thanks, guys. Your next question comes from the line of David Strauss from Barclays. Your line is open. Thanks. Good morning, everyone. Good morning. Morning, David. I know you guys, you know, you maintained all your guidance for this year, including your revenue guidance. Within that, is there any change in terms of how you're thinking about by end market? I think your implied growth in commercial aerospace based on your, you know, the 58% you were guiding to of total sales implied only 13% commercial aero growth for the year. Does that still hold, or are you now assuming it's higher than that? I mean, we're not, we're not ready at this point to adjust. We'll, we'll watch the trend of sales through the midyear point, if we're gonna kind of call out a revision to guidance, we would do it all at the same time. Clearly stating the obvious, and you kind of just pointed to it, Q1 commercial aerospace was strong, perhaps a little bit stronger than we expected. At this time of the year, as Nick talked about, there is still supply chain challenges for the OEMs. Whether that's engines or whether it's other structural or electronic components, we don't know what's gonna happen to the build rates. Yes, a good quarter for commercial aerospace to start the year, but a long way still to go and too early for us to sort of look at the color within our guidance, which we will obviously look at as we move through the year. Okay. On A350, you said you're at 6, you know, headed towards 9 over the next couple of years. Has there been any change recently in that demand signal from, you know, from Airbus, just in light of the fact, you know, based on their deliveries, there's some sort of... it looks like some sort of issue there where they only delivered, you know, 5 aircraft in the 1st quarter, so way below the production rate? We, we're obviously very close with Airbus and Boeing and our customers. You know, we see movements in the skyline that provide pretty significant detail. We have not seen any changes that cause us to change our belief or forecast on the A350 ramp schedule. One quick one to finish up. The in the inventory side, Patrick, can you just give a little bit more color exactly what's going on there? I mean, your absolute inventory levels are pretty close to being back to where they were in 2019, yet your, you know, sales volumes are still 25% or so below. Why does inventory keep building from here, and how significant of a drawdown should we see? Great question, and great question for a CFO. Absolutely. As we talked to last year, we deliberately allowed our inventory to grow, recognizing some of the supply chain challenges and bringing in the materials, and we did that in order to make sure that we didn't delay or impact our customers, or at least we minimized that as much as we possibly could. Coming into this year, we saw the strong Q1 demand sort of late last year, so we built up some inventory levels, and that continued really into January and a bit into February to support the strong first quarter. What I would say going forward, and I think I said to an earlier question, we now expect inventory to stabilize and for inventory to come down. We think we've probably peaked at the moment. We'll be focusing on the relative days of inventory that we hold. I would expect and we'll be driving to release a bit of cash, I wouldn't overstate it, from inventory in the coming quarters. I certainly would not expect to see more inventory growth from this point onwards. It was really all about supporting what was actually quite a strong fourth quarter for us and then seeing an even stronger first quarter as we came into 2023. Great. Thanks very much. Your next question comes from the line of Gautam Khanna from Cowen. Your line is open. Yeah, thanks guys. Good morning. Morning. Patrick, you've probably answered this five different ways. I just wanna make sure I understood it. You know, sequentially, cost of sales was flat. Sales were up $28 million or whatever it was. That is just mix and productivity. Like you said, you built inventory, so it was an absorption benefit. There was nothing else that was sort of one time that explained that. No. drastic drop? It really was mix, which was good. All the Hexcel fiber that came through, the absorption into the finished goods always helps. As I said, I think that trend, literally to the last question, that trend is gonna now turn. I wouldn't expect to see favorable absorption. I mean, FX is strong if I look year-over-year, but you were talking sequentially. That FX margin benefit of 80 basis points is one of the strongest sort of quarter-over-quarter benefits we've ever seen. It was really about the Hexcel fiber-rich mix and about the level of absorption that came through, along with good cost control and the rest of it, but those should be ongoing and improving the efficiency and productivity that Nick talks about. Terrific. Could you tell us where you are on 787 rate? Where you think you are? Thank you. We're moving up towards rate 5. We're somewhere on that journey. We were kind of in the 2s, 3s last years. We're, we're now moving up towards rate 5. It's hard to be specific. Again, to Nick's point, we deliver to multiple endpoints, but we're on that ramp rate up towards 5. I mean, we will obviously get there ahead of Boeing shipping at that level. So that's the thing you should always bear in mind. Thank you, guys. Your final question comes from the line of Ron Epstein from Bank of America. Your line is open. Hey, good morning, guys. Morning. Seems like most everything's been asked, but maybe just to kind of speak to some big picture stuff. When we think about what potential new opportunities there are out there for you, I mean, it looks like, you know, Boeing and Airbus are gonna go on an airplane development vacation for a little while. What else is there out there? Is there some defense things you're looking at, or are there other things we should be looking for as, you know, you know, potential additional growth drivers for the company? Yeah, Ron. Again, there's always derivatives. You know, more frequently than new aircraft, you see re-engining and you should expect that that will continue, and that requires a new nacelle. Just as a reminder, we have very strong positions on engines and nacelles and continue to drive advanced materials for hotter temperatures, for better sound attenuation, for other applications that composites can't fulfill today, but can tomorrow. We're working on those. We're working on secondary structures and certain elements that are easier to qualify and replace on derivatives. The A220 is a big opportunity for us. We've got various materials on the fiber, on the pre-preg, on the technology side that could offer a great advantage and an opportunity going forward. We continue to work with our customers on that. In the, in the commercial aerospace, and Patrick touched on all the penetration and the secular growth on business jets, with Gulfstream, with Dassault, and others, big platforms, and again, just more and more of the aircraft transitioning over to composites. If I flip to space and defense, always a lot of technology opportunities there with respect to new platforms, on the FLRAA, on FATE. It's just a very diversified market, and we're working on multiple programs, along with sizable programs like the CH-53K, which is a very large program for us, and we're ramping up as we speak, in our Kent, Washington facility. There's a lot of opportunities out there. Again, we don't neglect the wind and the industrial and the automotive and all the other sub-segments in industrial that our teams are finding niches and areas where we can provide a sustainable competitive advantage. The growth opportunities, the areas where customers want stronger, tougher, more durable, lightweight materials is just continuing to expand. The question is on the economics and whether or not it fits within our target of what we want to invest in and where we wanna drive the business going forward. Got it. Got it. Super. Thank you. Thanks, Ron. This concludes today's conference call. We thank you for your participation. You may now disconnect.