Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Hexcel Fourth Quarter 2023 Earnings Conference Call. Today's conference is being recorded. 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 the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. At this time, I would like to turn the conference over to Patrick Winterlich, Chief Financial Officer. Please go ahead, sir. Thank you, Audra. Good morning, everyone. Welcome to Hexcel Corporation's fourth quarter and full year 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 for 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 fourth quarter and full year 2023 results, detailed in our news release issued yesterday. Now let me turn the call over to Nick. Thanks, Patrick. Good morning, everyone, and thank you for joining us today as we share our fourth quarter and full year 2023 results. Hexcel completed another solid year with double-digit sales growth, a significant YoY increase in our adjusted earnings per share, and strong cash generation. Although supply chain challenges limited build rates in a number of programs from increasing as fast as we expected when 2023 began, most notably narrow-body aircraft, we continue to focus on ensuring operational readiness for the expected growth ahead. This involves training new labor across our manufacturing sites, driving operational excellence programs for yield and efficiency gains, and bringing assets online for the expected increase in demand. All these efforts will position Hexcel to maximize our margin opportunity in the coming years as build rates ramp upwards. We continue to emphasize investing in employee training as we increase headcount in advance of program ramps. We now have around 5,600 employees who continue to gain experience and are ready and eager for the challenge ahead. In fact, even though about a third of our direct labor workforce has less than two years of experience with Hexcel, we just completed our safest year on record. This is an outstanding achievement, and I commend every member of our One Hexcel team for their diligence and commitment in taking the necessary steps to ensure that they and their colleagues go home injury-free every day. When you couple our legacy and lightweight products and long-term customer collaborations with a talented team driven by innovation and excellence in everything we do, it is clear that Hexcel is well positioned to benefit as the aerospace market strengthens. Many reports now show a rebound in passenger air travel to pre-pandemic levels was achieved at the end of 2023. Hexcel advanced composite materials are squarely at the center of this recovery and are benefiting the industry and society by enabling enhanced sustainability for decades to come. Now let's turn to some specifics reported in our earnings release last night. First, I'll cover the fourth quarter results and then full year 2023. Fourth quarter sales of roughly $457 million are 6.5% higher than Q4 2022. Adjusted Diluted EPS in the fourth quarter was $0.43, up 7.5% compared to last year. Turning to our three markets, commercial aerospace, fourth quarter sales of more than $267 million represented an increase of more than 5% in constant currency on increasing wide-body sales, partially offset by lower narrow-body sales YoY. Other commercial aerospace increased modestly in the fourth quarter of 2023, led by continued growth in business jets. Our customers continue to ramp as fast as the complex supply chains can support. There's tremendous backlog demand for narrow-body aircraft, and the OEMs continue to work to maximize their output.... The wide-body supply chain is ramping up robustly, and we benefited with strong sales growth in 2023 in both the Airbus A350 and Boeing 787 programs, and we expect this growth to continue in 2024. We were pleased to see at the end of 2023, the first Airbus A321 roll out from the new final assembly line that Airbus configured in France at the former site of the A380 assembly. Airbus now has 10 final assembly lines globally for the A320 family to support their rate ramp. Now for some highlights from the quarter. With the tallest and widest cabin in business aviation, the Dassault Falcon 6X entered service on November 30th, following a two-year certification achieved in August. We have great content on this new 6X platform. We're also looking forward to Dassault's introduction of the large cabin 10X, which will be the first business jet with an all-composite wing made from Hexcel materials, where we will see another significant step up in business jet content. As you may remember from previous discussions, at the end of 2021, Hexcel transferred a significant portion of our part fabrication work from our Kent, Washington, site to Aerospace Composites Malaysia, ACM, our 50/50 joint venture with Boeing, as we shifted toward higher complexity, advanced part manufacturing at Kent. Following this transition, we determined that our ownership in the ACM JV was no longer strategic for Hexcel, and as a result, we sold our 50% interest to Boeing at the end of December. The ACM joint venture with Boeing has been a tremendous business collaboration for many years, and we thank Boeing for being an excellent JV partner, going back to the inception of the ACM plant over 20 years ago. We now wish Boeing and the ACM team great success for the future. Moving to space and defense, sales in this segment hit an all-time high in Q4, exceeding $152 million, or an increase of about 20% YoY. Growth has been particularly strong in both space and in classified programs. Industrial sales of just under $38 million in Q4 were down 22% YoY in constant currency. YoY high-level comparisons, however, mask the growing strength in our automotive and marine markets. While our industrial business is now smaller than it has been for some years, it remains an attractive market where we are pursuing multiple value-adding technology opportunities in a number of different submarkets. Now let's turn to our full year 2023 results. Sales were about $1.79 billion, up 13% YoY. Adjusted Diluted EPS for the year was $1.81, up more than 41% over 2022. Adjusted operating income increased 33% to $216.7 million or 12.1% of sales. Commercial aerospace is now 60% of our total sales, and in 2023, sales of more than $1 billion represented an increase of 17%, with growth led by wide-body sales as demand for fuel-efficient and lightweight composite aircraft, especially for international travel, continues to be strong. Other commercial aerospace increased 14.1% for the full year of 2023 compared to the same period in 2022, driven by increasing composite adoption on large cabin business jets. 2023 space and defense sales of about $545 million increased almost 17% in constant currency for the full year compared to 2022. This segment represented 30% of our total sales. Growth in 2023 was across numerous programs, including fixed wing and space programs globally and helicopters in Europe and Asia Pacific. Hexcel composites are the benchmark in this market, and our products are on more than 100 programs around the world, which provides us with a diversified foundation for a strong future. Finally, industrial sales in 2023 were $176 million, representing a decrease of approximately 13% in constant currency. Industrial sales are now about 10% of our business and are led by automotive sales, primarily in high-end sports cars and carbon fiber wheels. Marine is a market with longer-term growth potential, especially so in lightweighting parts, such as masts, that reduce reliance on fuel and reduce emissions by large ocean vessels, including cruise and transport ships, incorporating wind-assisted ship propulsion. We remain very disciplined about the industrial business we pursue. Our team targets growth areas where we can differentiate our technology.... Reflecting confidence in our return to growth and our capacity to generate strong cash in the coming years, the Hexcel Board announced yesterday a 20% increase in our quarterly dividend from $0.125 to $0.15 per share. In February, we're going to hold an Investor Day in New York and via webcast, where we will discuss our roadmap for innovation and market growth in the coming years, as well as providing our medium-term outlook for the company in relation to sales, EPS, and cash generation. We're looking forward to seeing many of you there. In the meantime, for 2024, as reported in our news release last night, we are guiding to $1.925 billion-$2.025 billion in sales, with adjusted diluted earnings per share of $2.10-$2.30. We're also guiding to greater than $200 million of free cash flow. Further details around 2024 will be provided in our Investor Day next month. Now let me 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. However, our cost base is a mix of dollars, euros, and British pounds, as we have a significant presence in Europe, including both manufacturing and R&D. As a result, 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. Conversely, a weak dollar is a headwind for our financial results. We hedge this currency exposure over a 10-quarter horizon to protect our operating income. As a result, currency changes are layered into our financial results over time. As a reminder, the YoY 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 60% of total fourth quarter 2023 sales. Fourth quarter commercial aerospace sales of $267.5 million increased 5.3% compared to the fourth quarter of 2022, led by strong growth in the Airbus A350 and Boeing 787 programs. Total fourth quarter narrow-body sales were lower YoY, including declines in Airbus A320neo, Airbus A220, and the Boeing 737 MAX programs. The other commercial aerospace category grew 2.3%, with continued growth in business jets, partially offset by softer sales in other markets served by this category. Space and defense represented approximately 30% of fourth quarter sales and totaled $152.3 million, increasing 19.7% from the same period in 2022. Classified programs grew strongly YoY, and space programs were strong, including launches, rocket motors, and satellites. European military and civilian helicopter sales also strengthened notably. Industrial comprised approximately 10% of fourth quarter 2023 sales. Industrial sales totaled $37.7 million, decreasing 22.3% compared to the fourth quarter of 2022. Sales grew strongly YoY in the performance-orientated automotive market, although this growth was more than offset with lower sales across our other industrial markets. On a consolidated basis, gross margin for the fourth quarter was 22.5%, compared to 23.1% last year. Similar to our commentary last quarter, we have invested ahead of our customers in order to support aircraft production rate ramps. This involves spending on infrastructure, headcount, and higher levels of employee training. Demand pull-through for narrow-body programs, lower than we expected, is a near-term headwind, as the full cost of our increased infrastructure base was not absorbed by the actual sales level. This should lessen through the first half of 2024 as the overall narrow-body supply chain stabilizes to support the narrow-body rate ramps. As a percentage of sales, selling, general and administrative expenses and R&D expenses were 11.8% in the fourth quarter, compared to 12.3% in the fourth quarter of 2022. We continue our strong focus on operating cost control as our top line grows to maximize volume leverage. Adjusted operating income in the fourth quarter was $49.1 million, or 10.7% of sales, compared to $46.3 million, or 10.8% of sales in the comparable prior year period. The YoY impact of exchange rates in the fourth quarter to adjusted operating income was favorable by approximately 30 basis points. Now turning to our two segments. The Composite Materials segment represented 82% of total sales and generated an operating margin of 14.4%. The operating margin in the comparable prior year period was 12.7%. The Engineered Products segment, which is comprised of our structures and engineered core businesses, represented 18% of total sales and generated a 9.6% operating margin, as compared to 14.4% in the comparable prior year period. The softer margin YoY reflects the impact of higher infrastructure investments to support expected narrow-body rate ramps. Net cash provided by operating activities was $257 million in fiscal year 2023, compared to $173 million for the comparable period in 2022. Working capital, with a cash use of $27 million in 2023 to support higher sales. For the comparable prior year period, working capital increased $72 million. Throughout 2023, we focused on improving the efficiency of our inventory holdings, particularly reducing on our buffer or safety stock that we had previously expanded when global logistics were strained. We are pleased with the actions by our team, and sequentially, inventory decreased $16.4 million from the end of the third quarter of 2023. We will continue to tightly manage our working capital. Capital expenditures on an accrual basis were $121.6 million in 2023, which included the previously disclosed Amesbury, Massachusetts, property purchase for approximately $38 million. Excluding this property purchase, 2023 accrued capital expenditures would have been approximately $83.6 million, compared to $69.8 million in the prior year period. Free cash flow in 2023 was $148.9 million, which includes $7.5 million dividend received as part of the ACM joint venture sale, as well as a $1.9 million surplus received from the U.K. pension transaction. For comparison, free cash flow in 2022 was $96.8 million. Hexcel generated a strong free cash flow to adjusted net income cash conversion ratio in 2023 of just over 96%. Going forward, we expect a conversion ratio of 100% or higher for a period of time while CapEx remains at lower levels. Our strong free cash flow generation in 2023 resulted in us paying off our revolver balance during the fourth quarter. Our net debt position was $472.5 million by December 31, 2023, leading to a leverage ratio of approximately 1.3 times on a net basis, on a net debt basis. Our ongoing net debt leverage ratio target remains at 1.5-2.0 times EBITDA. I would like to highlight the strategic de-risking of the balance sheet by transferring a deferred pension plan in the UK to a third-party insurer, who assumed all risks and liability and now administers the plan. With this action, Hexcel received $1.9 million of free cash pre-tax, representing the surplus in the plan. There was also a non-cash charge of $70.5 million resulting from the required GAAP accounting. The board of directors declared a $0.15 quarterly dividend yesterday, which is an increase of 20% from the prior level. The dividend is payable to stockholders of record as of February ninth, with a payment date of February sixteenth. We did not repurchase any stock during the fourth quarter. The remaining authorization under the share repurchase program on December 31, 2023, was $187 million. Expanding on Nick's comments regarding our 2024 sales and adjusted EPS guidance, we are forecasting 10.4% sales growth at the midpoint and 21.5% adjusted EPS growth at the midpoint. In terms of our three markets, we expect 2024 commercial aerospace sales to increase mid-teens%. We forecast space and defense sales to increase mid-single digits%, and we forecast industrial sales to increase low- to mid-single digits%. We are guiding to free cash flow in excess of $200 million. We will provide guidance on additional financial metrics at the February Investor Day, as well as provide our midterm outlook. With that, let me turn the call back to Nick. Thanks, Patrick. As we begin 2024, we do so with the largest backlog in commercial aerospace history of more than 14,800 aircraft. That currently represents almost a decade of production for the OEMs, and based on our shipset content, over $9 billion of future sales to Hexcel. The demand and the need for latest generation aircraft is quite apparent. The challenge for the industry is how fast the supply chain can ramp to meet that demand. Moreover, we recognize that a key element of the future of aerospace is light weighting. Lightweight materials for better performing, fuel-efficient, more sustainable aircraft are being pulled and driven harder than they ever have in my history with Hexcel.... Hexcel has the deepest and broadest portfolio of modern advanced composites, and we are focused on delivering solutions to our customers. Our market positions, customer relationships, and sought-after technology lead our industry. Our Hexcel team is driving forward innovation to deliver lightweight and sustainable advanced composite solutions to make a better world. Everything we do at Hexcel is driven by our long-term relationships with customers who trust us to collaborate, innovate, and perform. The opportunity ahead is larger and more exciting than ever. Audra, that wraps it up for the prepared remarks. We're now ready to take questions. Thank you. At this time, I would like to remind everyone, in order to ask a question, press Star, then the number one on your telephone keypad. We ask that you please limit yourself to one question and one brief follow-up to allow everyone an opportunity to ask a question. We'll go first to Michael Ciarmoli at Truist Securities. Hey, good morning, guys. Thanks for taking the question. I guess, Patrick or Nick, maybe, just thinking about the 2024 revenue guidance on commercial aero, you know, you just did 17% growth, the guides for mid-teens. You know, we've got rates ramping. Obviously, MAX news is still fresh, but what would really cause growth deceleration there? And maybe could you just give us some of the expected production rates sort of underpinning that outlook by platform, if you can? So Michael, thanks, thanks for the question. You know, as we have exited the pandemic, clearly, the supply chain went through some challenging times with respect to deliveries, lead times, et cetera. And although those are getting better, there's still some uncertainty and some impact being driven. So I think if you look at the platforms in the commercial space, you can go down the list, A350, A320, and A220, with plans to be anywhere from 10-75 on the A320 in the 2026 time frame, 14 on the A220. A similar story for Boeing, getting to 10 per month on the 787 in 2025-2026 time frame, 50 for the 737 in the 2025-2026 time. I think there clearly is the demand for those platforms and those aircrafts and those ramp rates. Again, the question will be working through some near-term issues on the Boeing side, working through some continued stress and continued recovery on the supply chain. And we feel very good about our plan and the balance we put into it, and feel comfortable that we have some conservatism in there. And quite frankly, if the supply chain performs, we see a potential upside for 2024 and beyond. Got it. Okay. Helpful. Thanks, guys. I'll just stick to one and jump back in the queue. Thanks, Michael. We'll move to our next question from David Strauss at Barclays. Thanks. Good morning. Good morning. Morning. Nick, could you maybe just expand a little bit on, you know, why narrow-body? I guess narrow-body was flat for you guys last quarter and down or in Q3 and now down in Q4. Exactly what are you seeing there? Are you seeing destocking or what? Because this seems to be unique. We're not hearing about this from any other companies at this point. So, a couple of data points, just to educate. We've talked about this before, and that is the complexity of a supply chain. So if you just think of the A320, we have over 80 ship-to locations when you look at engines, nacelles, structures, and airframes. On the 737, it's less. It's closer to 30+, but it just gives you an idea for the complexity of the supply chain. Again, I would remind the listeners that the A320 we've shared tends to be at the high end of our shipset content of the range we provided, the $200,000-$500,000, whereas the 737 tends to be at the low end. So having said all that, entering 2023, there was an expectation that build rates perhaps were going to ramp more quickly than they did. In that, some of that supply chain added buffer, added safety stocks so that they could not, so that they could deliver and not end up shorting the customer. Working through the year, the ramp rates were not accelerating the way some expected, and then there's no doubt in my mind that fourth quarter, and particularly December, some of the supply base put the brakes on managing cash, managing their buffer stock, and, and took some of that inventory out. So again, it, it's tough to look at quarter to quarter. You really need to look at multiple quarters and average it out to really know what's going on, to get aligned with what-... the OEs are doing on their final assembly lines. Okay, thank you for that color. A follow-up on the margin side, Patrick. It, you know, backing into it, looks like you're implying about a 14% margin all in, in 2024. I guess, I mean, you talked about things getting, you know, improving as you absorb labor as you go through the year, but can you kind of compare, you know, that 14% to, I think prior you had said closer to 15%, 16%. And obviously, you know, back several years ago when you were a similar revenue level, as you're projecting for 2024, I think you were doing closer to, you know, 17%, 18% margins. Thanks. Yeah, thanks, David. So to call out, I mean, well, one of the first differences which we put in our statement was that there's, if you look at YoY margins, and you look at the total company in EPS, obviously, I just want to point out the $0.09 around ACM, which won't be there now going forward. And I think if you kind of look at the volume difference between our guidance and sort of the street guidance, again, there's kind of a volume step down. And I think if you put all that together, the EPSs start to get much closer. But in terms of the operating margin that you're talking about, yes, I think you're backing into a number where somewhere in that 13.5%-14% range. I think that's about right. And I think there are a number of headwinds. I think as Nick was just talking about, we started 2023 extremely strongly, and I think everyone was excited about the narrow body ramps and things moving forward, and a lot of inventory got pulled into the pipeline. And as Nick said, I think in the second half of the year, there was a bit of an adjustment and then pullback. But as we went into the year, we don't have that ability to turn and change. We've been bringing in labor, we're training labor, we're investing in infrastructure, we've got our lines up and running, we're maintaining them, and so we're positioned for higher growth, and we're ready for that ramp rate, certainly through 2024. So that currently, and we called it out in 2023, and perhaps for another quarter or two, is a headwind. It is a headwind to our margin, and it's pushing us down to where we want it to be, where we expected to be. So that mid-teens, and we kind of called 14-16, clearly, we're knocking at the bottom end of that range rather than the middle or going beyond as we would have ideally desired. I think a little bit of inflation over the last couple of years is sticking. That's definitely kind of an increased headwind compared to past margins. Labor was slightly inflated, but certainly some raw materials around the edges have caused us some headwinds, as well as some of the energy costs, which are not increasing today, but they certainly haven't returned to sort of pre-pandemic, lower cost levels. I mean, if you're really then looking back to 2016, 2017 margin, we've got another $50 million or $60 million of depreciation today, again, ready to support that higher ramp. But I mean, that will give you at least 200 basis points of difference in our margin performance. So when you add all that together, we believe our underlying performance is moving in the right direction. We're certainly strongly positioned and very deliberately positioned for the growth ahead. As we move through 2024 and into the back half of 2024, we will be driving those margins and the leverage as strong as we can. Thank you very much. We'll go next to Bert Subin at Stifel. Hi. Hey, good morning, and thanks for the question. Hi. Good morning. Patrick, just following up on that, as we think further out, I guess, would you say there's anything structurally different about the business today as you think about Hexcel's ability to get back to that margin profile once sales are back to those same levels? I guess you noted inflation as a headwind, potentially some material costs. Are there other things like mix, competition, or a different view on production potential that impact where you think you're heading? No, we're absolutely driving back to where we were historically. Now, it's taking longer. Now, that's frustrating us. It's clearly frustrating you, but we are very deliberately there to support our customers. We've put the infrastructure in. We have this headwind, which was never going to just be one quarter. It was always gonna be a period of time. But yes, we are confident that when the top line continues to grow and the ramp rates continue to come through, there's no fundamental mix change, there's no kind of competition shift. We are just as well positioned as we were historically to bring through our products, to drive leverage, but we have to get that top line coverage. We've got to cover that depreciation I just mentioned, which is obviously higher, and we have to get that sort of just leverage over our overhead, that basic sort of economies of scale leverage, and that will come. It will come as we drive through, as I say, the back half of 2024, and then we go into 2025. We will be driving back to those historic levels of margin. Got it. Okay, on the, just as a follow-up on, on the other two segments, Space and Defense and Industrial. Space and Defense coming off of, of a really strong year and sort of talking about maybe a little bit of lower growth there, and then Industrial coming off a weaker year and a little bit of a rebound. Can you just talk through the dynamics of, of your expectations and, and what you guided there? Yeah, sure. So in space and defense, I mean, 2023, quite honestly, was an extraordinary year at 17%. I'm sure that's certainly a record in my time, and I think we'd have to look a long back a long time in Hexcel's history to find another year of such growth. There was just very solid growth across a number of platforms. We called out helicopters, we called out the classified, a lot of one-time buys there, which really do help, and then just general strength in the fixed-wing fighter jets. So very, very solid. Now, as we go look forward, we continue to be confident. It's a great market for us, and we're driving growth opportunities, the CH-53K, further down the road, the V-280, but many sort of smaller platforms as well, where we can penetrate. So we're calling mid-single digits. We think that's sensible. Obviously, there's budget challenges and other sort of geopolitical aspects to it, which make military and space and defense from time to time lumpy, as you know. But anyway, another solid year of mid-single-digit growth. Industrial, clearly, 2023 was a tough year. Probably the first time wind has been mentioned today. There, I've just mentioned it. Wind is now a much smaller sort of factor in our industrial segment, but it's come down dramatically and perhaps a little bit faster than we even expected over the last couple of years. That really is now going to stabilize, we believe. Automotive is now our largest industrial submarket. We're seeing nice growth in high-end cars, aesthetic details, carbon fiber wheels, as I think Nick mentioned. So we're positive, and we see continued investment. And then around things like marine and other pure industrial plays, we will be very focused, very targeted on value add plays. So we don't see the sector going down further. We don't see dramatic growth. We see some small growth ahead, but hopefully no more declines. Thank you. We'll go next to Ken Herbert at RBC Capital Markets. Hi, good morning, Nick and Patrick. Morning, Ken. Morning, Ken. Hey, maybe either one of you, I wanted to start off first, you didn't buy any of your stock in the fourth quarter, and I wanted to see if that reflected just maybe uncertainty around just sort of the outlook or anything else. But I guess more importantly, can you refresh us on how you would view capital allocation here in 2024 and the potential for some more return to shareholders as you look at relatively low leverage, the significant step up in cash generation, and other maybe priorities as you think about investments, working capital, et cetera. But how should we think about the opportunity for more capital to shareholders in 2024? Yeah, Ken, thanks for the question. I'll approach that a couple of ways. First, our outlook had absolutely nothing to do with the fact that we chose not to buy back shares in the fourth quarter. Quite the opposite. We're very bullish on our expected cash generation looking forward, and we discuss that regularly with the board and how we're going to prioritize. I guess I want to take the opportunity on your question to really highlight our focus and utilization of our cash is prioritized on organic growth, and that's investing in fiber and resin technologies. It's investing in new weaving technologies that basically advance composites, make them even more attractive than they are today, make them even more manageable for different and expanded part production going forward, which ultimately will drive lower cost solutions, lower, lower weight solutions, and more efficient solutions for our customers. So when you think about the the products that are being envisioned and worked on, you can go through the new platforms, wings, empennage, central wing box, whether it's for the next new narrow-body, the next new business jet, or the next new commercial application, where there's a conversion from metal to to composites to get a weight advantage. Lots of opportunities around new engine technology with the Rolls-Royce UltraFan, the RISE platform, the new nacelles. Remember, we have great content on engine and nacelles, which are included in our total shipset value. When you look at on the military side, the FLRAA, the V-280, the combat drones, the Next Generation Air Dominance, all the technology initiatives we're working on are going to help us win even more content on these applications. And then when I look internally, I look at things like infrastructure, efficiency, productivity, modifying our assets so that we get even higher utilization out of our legacy assets to, one, make us more cost-effective, and secondly, to be able to defer our CapEx investment further to the right. So future factory, process improvement, productivity improvement are front and center. So clearly, organic growth is our priority. Now, as always, we look at our balance sheet, we look at our debt leverage ratio, and we look at how we manage that efficiently and effectively. And clearly, share buybacks and dividend increases are front and center as we evaluate M&A options and actionability, and whether or not we can find something that enhances our portfolio and allows us to grow our core competency. So that's kind of a summary and the priorities that we're working on. Remember, we built our new R&T Center of Excellence in Salt Lake City. We've been adding talented scientists and technicians, and we're doing that because, as I said in my remarks, I've never seen the pull, I've never seen a request from customers higher than I do today, and that's for applications that are midterm and applications that some are longer term. But overall, that's what we're investing in, Ken. Thanks, Nick. Appreciate all the color. You're welcome. We'll go next to Pete Skibitski at Alembic Global Advisors. Hey, good morning, guys. Patrick, just a couple of points of clarity. Just on the fourth quarter gross margin, you've obviously talked about the labor and similar volumes to the first half of 2023. But was there any mix issue in the fourth quarter that impacted gross margin, or was that all the impact of labor? And to that point, should we think about a similar gross margin in the first half of 2024? Yeah, I, I mean, it's certainly, it's not really a mix issue. It is more fundamentally, I, I would say, a broad overhead infrastructure cost issue. I wouldn't just say labor. Labor is definitely part of that, but it, but it's also maintaining the plant, running the plant, operating, general kind of input costs and support, infrastructure costs. That, that's really the headwind right now and, and why we need that volume leverage. And what I... I mean, in terms of margin, yes, we're, we're going to see a gradual margin growth, an improved leverage over that infrastructure, overhead base as 2024 continues, and then in 2025 and, and, and beyond. So yeah, it, it's not going to be a sudden snap change. We're going to gradually see increase with maybe the odd lump here or there, but we should see a gradual increase as volumes grow. Okay. And then just, it was a great free cash flow year, obviously, and, you know, pretty strong 2024 cash outlook as well. And just as you think about your, your midterm top-line growth over the next two to three years, you know, with what you've done with inventory, do you really not expect to have to grow inventory over the next couple of years, even with the growth that you're expecting? So obviously, we'll talk about our medium-term growth in a lot more detail in February. But essentially, I'm not going to say there's going to be no dollar inventory growth, but I actually think we've got, we actually sort of focus on a relative days metric, how many days of inventory we're holding. And we have the opportunity to reduce that and add several more days down. And so as our top line grows, we need to minimize the growth in inventory. As I say, I'm not saying it will be zero, but it shouldn't have to grow too much more. Certainly significantly at a much lower growth rate than the top line grows, which will then give us that improvement in relative days of holding. Okay, that's great. Thank you. Next, we'll go to Robert Spingarn at Melius Research. Hey, good morning, Nick, Patrick, Kurt. Good morning, Robert. Nick, you talked about what I'm going to call destocking in the narrow-body business, first half of 2024. And we're going with this. Sounds like it gets better in the second half, but, you know, can we think about the destocking relative between Airbus and Boeing? Is it greater for Boeing, given what's going on there? And how much risk would you say we have when we think about the news that came out yesterday? I know Michael referred to this in the beginning. It is very fresh news. I'm trying to get an idea of when you will be at rate parity on these narrow-body programs. Yeah, Robert. So again, pointing out one platform versus the other is really driving the stocking in the first half of the year and some of the destocking in the second half is really not as relevant as the shipset content and at what rates they are. So it's relative to that consumption and where they are. So there was not one that jumped out. Now, clearly, with the news that's been coming out and as some of the issues get resolved, and I'm very excited to see the shipments to China appear to have resumed, and the grounding of the Dash 9 sounds like it's been lifted. So I think Boeing and their supply chain are working through putting in some enhancements to ensure that they deliver what the FAA is looking for. And again, if you look at what we rolled up in our plan, we still feel, even given the news yesterday, which probably will continue to evolve, we still feel good with our guidance. We think we were conservative enough in the right areas that we're holding to that. Okay. Okay, and then I just have a follow-up. Well, I don't know if it's a follow-up, but the 787 737 MAX 7 and 10 have this anti-icing issue waiver situation? And, with the nacelle and the composite materials, wanted to ask if you guys are involved there, and if there is a redesign, is that a headwind or a tailwind? Well, you can assume anything with our customers where we can help provide a solution, we're gonna be involved. So it's really too early to say what a redesign might entail, what it might be involved with, but historically, anytime there's an enhancement or a new engine or nacelle or component, there tend to be more composites involved, and we tend to get a greater portion of that. So again, it'll take some time to work through the details there, and it'd be premature for me to comment on what direction that'll go specifically. Are you on the existing nacelle? Yes. Okay. Thank you. You're welcome. We'll take our next question from Gavin Parsons at UBS. Thanks, guys. Good morning. Good morning. Good morning. If I'm interpreting it right, it seems like maybe there are three buckets of costs that are really impacting margins. Right, you mentioned inflation, lower volume on narrow body than you expected, and cost ahead of growth. And I kind of wanted to focus on that last one. The press release talks about training new labor, driving operational excellence, and bringing assets online. But is there a way to think about how much of that is, you know, abnormal or elevated cost versus normal course of business before the volume has come through? Yeah. I'm not sure I'd describe any of it as abnormal. I mean, as we've called out many times, we focus very strongly on supporting our customers. We are not gonna be the bottleneck, and we're gonna be ahead of the ramp rate. Now, that, as I'm sure you all understand, is difficult to judge, especially in the narrow-body market right now, which is quite erratic. There are complicated supply chains. As Nick described, we have dozens of ship-to points for both of those planes. And so it's complicated, and we have to be ahead of that. And so it's really about bringing in costs, bringing in labor, training that labor, making sure the plant and equipment is maintained and ready. And so we've got machines running, but they're not fully utilized, and they're not truly efficient at the moment. But you have to support them, and you have to have general infrastructure across the business to be ready. And we, following the first half of 2023, we were obviously anticipating a stronger second half of 2023 than we saw. I mean, we raised guidance, perhaps mistakenly now, in July, but we did. And then that second half didn't materialize as we thought it might. But we are prepared, we are positioned now as we go into 2024, ready to support our customers. And so I wouldn't call it abnormal. It's part of being prepared for growth ahead. Okay, that's helpful. And then, any sense you can give us about energy and raw material costs today, again, relative to where they were pre-COVID? Oh, pre-COVID. So I mean, energy costs, I would say, is still higher. They've come down a bit. They're not growing now, or at least that they might be in very small degree in certain pockets, but largely they've come down. I'm not sure they're as low as well, I'm pretty sure they're not as low as they were pre-pandemic, but they're not growing. It's not a big YoY headwind at all for us. In terms of other raw materials, we're seeing a little bit of inflationary pressure, but it's nothing like the pressure we saw over the last couple of years, where we saw significant headwinds. So we've still got some elevated costs, but they're not growing. Commodity-type raw materials have definitely softened a bit, and so that's very helpful. Others are a bit more sticky, but they're not growing, is the way I would describe the situation. Okay. Thank you. Next, we'll go to Noah Poponak at Goldman Sachs. Hey, good morning, everyone. Morning, Noah. Good morning, Noah. Are Boeing or any of the tier one suppliers on the MAX that you sell into communicating any change to the master schedule through the year to you at this point? So we work primarily with the OEs on rates, and although we get pull and see signals from the supply chain, they really don't provide guidance. I can just say, Boeing is staying very. We stay very aligned with them, and they communicate to us on a regular basis. Okay, fair enough. On the wide body side, you know, an equally complex supply chain, but also fewer units, and, you know, those facilities sort of look very ready to go to higher rates, and the order pace there has been surprisingly strong. I guess, you know, what are the prospects for—for getting to the planned rates faster or going higher than you recently were thinking on the wide body side? Yeah, Noah, so again, if you look at the wide-bodies and how they've ramped since 2021, how smoothly they've ramped with really no issues, granted lower volume, but still much larger, we have great confidence. We're not seeing or hearing anything that indicates that there's going to be bottlenecks or challenges.... Obviously, time will tell, and we'll stay aligned with our customers, but we're very optimistic and very bullish on, number one, all the orders that are coming in on wide-bodies, as well as the expected ramp rates over the next two-three years. Okay. And then just lastly, in your defense business, the growth rate is just kind of step functioned higher. I know you talk about that being diversified, but I guess I'll just ask again to try to better understand it. Is there any one main program driver? Is that the FLRAA ramp? What's behind that, you know, kind of tripling of the growth rate? Yeah. Hi, Noah. I'll grab that one. It's definitely not the FLRAA at this stage. I think that's still a few years out before that will really have any impact. I mean, the biggest kind of moving program for us is the CH-53K over the last two, three years, and probably in front of us still. We have such strong content, such a large shipset, $2.5 million-$3.5 million on that. And we're still adding elements and growing into that platform. That's probably the biggest single one to call out. I think Europe has stepped up a bit in the last, certainly, we saw that in 2023. So that's very positive for us. So, I mean, we're across so many programs, it's hard to be specific. So I'd call out the CH-53K, I'd call out Europe stepping up, but general positivity. And I would also echo what I said a little bit earlier, 2023 was exceptional, a 17% growth for space and defense. So, we're guiding to mid single digits. We'll obviously do as well as we can, but 2023 was a somewhat sort of a standout year, I would say. Okay. Thank you. Thank you. Thanks, Noah. We'll take our final question today from Myles Walton at Wolfe Research. Thanks. Good morning. I was wondering- Good morning, Myles. ... if you could say whether or not the level of composite materials commercial aerospace sales was about what you expected, or are you—is it a situation where, you know, the pull is just not coming through in real time? Or are you, you know, just seeing it and you have the ability to see that it's slow, you hope it gets better, but just trying to reconcile those two. I think there's nothing that really surprised us other than what we've mentioned, and that's around the narrow bodies and the ramp being more challenged than what we expected when we entered the year. And again, not knowing all the issues that are driving that, I can tell you it's not Hexcel's capability or capacity. We have not been a bottleneck for our customers, but clearly there's supply chain and/or internal challenges that just prevented those rates from getting where we expected. Other than that, Myles, I think we've got very good visibility. I believe the supply chain is improving. I believe the narrow body rates are going to increase. There may be some bumps in the road, but we cannot be caught short. We will not be caught short, and that's what's driving the pre-investment, the pre-training to make sure we deliver to our highest potential here in the coming quarters and years. Is it fair to think that you've done the hiring that you needed for 2024 and 2023 already, given what you experienced? In certain areas we have. There certainly will be additional hiring, but the scrutiny and the focus the team have on getting the line efficiencies, again, remember, we've got multiple lines, and we've been bringing them up, and that takes more headcount. And with the amount of direct labor that have minimal experience, it just takes a little bit more to get that efficiency where we're accustomed to back pre-pandemic levels. Clearly, we're confident that it's going to come, and we will get there, and we're working to make that happen as fast as possible. But it's not a step change. You'll grow into it, and I like the trajectory. I like where we are on the efficiency gains I'm seeing in the plants, and I know the team will do the right thing on managing the costs going forward. Okay. Thank you. Thanks, Myles. This concludes today's conference call. I want to thank you for your participation. You may now disconnect.