Good morning, and welcome to the Moog First Quarter Fiscal Year 2023 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Aaron Astrachan. Please go ahead, sir. Good morning, thank you for joining Moog's first quarter 2023 earnings release conference call. I'm Aaron Astrachan, Director of Investor Relations. With me today is Pat Roche, our new Chief Executive Officer, Jennifer Walter, Chief Financial Officer, and Ann Luhr, Manager Investor Relations. I'm excited to join Ann as we serve the information needs of the investor community. We've taken Pat's first investor call as an opportunity to update the format of our prepared remarks. Pat will share his perspective on our strategic direction, priorities, and the business's performance, while Jennifer will provide further commentary on the quarter's results and guidance for the year. You may notice our prepared remarks are shorter than they have been in the past, as we are now focusing on the key drivers of our results. We released our results earlier this morning. Our results and our supplemental financial schedules are available on our website. Our earnings press release, our supplemental financial schedules, and remarks made during our call today contain adjusted non-GAAP results. Reconciliations for these adjusted results to GAAP results are contained within the provided materials. Lastly, our comments today may include statements related to expected future results and other forward-looking statements. These are not guarantees, as our actual results may differ materially from those described in our forward-looking statements and are subject to a variety of risks and uncertainties that are described in our earnings press release and in our other SEC filings. Now, I'm pleased to turn the call over to Pat. Hello, and good morning to you all. It is an honor and a privilege for me to lead our amazing company. I look forward during this call to share my thoughts on the future and together with Jennifer, reflect on a great quarter and a year that is holding together nicely. Before I proceed, I would like to acknowledge John's leadership. Over the last 11 years, John has led with passion, conviction, and integrity. Under his guidance, we have become financially stronger, with sales growth from $2.3 billion-$3 billion, and more innovative, which has led to new startup opportunities. John's compassion for our people shone through in his leadership through the global pandemic, with a focus on protecting the well-being of our employees and the financial health of our company. On behalf of all Moog employees, thank you, John, for your wonderful contributions. Now, turning to the future, I want to highlight my thoughts on our vision for the company and my key priorities. Over the last 23 years with the company, I've been inspired by the energy, passion, and creativity that our talented staff apply in solving real-world problems for our customers. It all started with a spark of inspiration, Bill Moog's innovative servo valves and an application to defend naval ships and crew members. Over the last 70 years, our positive impact on people and our planet has grown significantly. At heart, we are a technology company with deep capabilities in motion control systems and critical components. Our highly collaborative culture delivers innovative solutions for our customers' most difficult technical challenges. We target applications when performance really matters across a range of end markets. Today, our people, products, and technologies affect the lives of millions across the globe. Moog solutions are critical to our national security, to safe transportation, to reducing factory emissions, and to enhancing patients' lives, just to name a few. To continue on our path of growth and success, I see our talented people making a difference together by building a sustainable Moog for current and future generations. We will do that by concentrating on three areas: customer focus. People, community, and planet. Financial strength. I'll share some brief details on each. First, customer focus. Customer focus is about meeting our commitments, delivering programs on schedule, shipping products on time. It's about creating value now and in the future by being responsive to changing needs. It's about having a clear advantage over our competitors and being able to sustain that advantage. Second, people, community, and planet. Our culture defines us as a company. It enables great collaboration with customers and across the company. Our culture is a competitive advantage for Moog and a key attraction for our employees. I want to ensure that we remain true to our values, that we have a clear sense of purpose across the company, and that we create the opportunities to challenge and develop our people. Furthermore, I believe that our workforce should be more diverse and reflective of the communities that host us. I'm convinced that this will strengthen our company. Turning attention to our planet, I believe that we all share a moral responsibility to be good stewards of our planet for the next generations. The solutions we develop for our customers are part of our contribution to a better planet. In addition, we will do more to reduce emissions from our own manufacturing operations. Third, financial strength. I believe that we must do better financially and that we have a clear view of how to do it. Our focus is on enhancing our operating margins. We will simplify our business. We will focus on businesses, customers, and products where the value that we create is reflected in the profits we make. We will focus our manufacturing capability by end market, located as necessary to serve our customers and of sufficient scale to be economically sound. We will drive further profitability through continuous improvement activities and the convergence of systems and processes. We will grow revenue through established businesses and new areas of activity. We have a solid core with positive growth drivers, higher defense spending, the recovery of commercial travel, more investment in energy efficiency, and ever-increasing health spending. In addition, we have really exciting growth opportunities beyond the core. We're entering new markets and redefining our position within existing markets. We will also focus on our cash generation. We will work to reduce the amount of cash it takes to run the business. For example, we see opportunities to increase our inventory turns. Let me briefly summarize. We're building a sustainable business that has a positive impact on people and planet for generations to come. We have three areas of focus with our immediate priorities in each being as follows: Customer focus, enhancing our operational performance. People, community, and planet, driving employee engagement and workforce diversity. Financial strength, driving business simplification. I look forward to sharing more specific information on our key initiatives and on our long-term goals during an investor day to be held later this year. Let me turn our attention to the quarter. First, from a macroeconomic perspective, the war in Ukraine, close to one year on, has strengthened the resolve of Western governments to support Ukraine and to increase domestic spending on defense. The deployment of increasingly sophisticated defense systems to Ukraine could boost sales of our existing defense components and systems. The planned increase in defense spending long term will lead to increased sales of existing platforms and increased development activity. The recovery of global air travel continues. Wide-body aircraft flight hours are already above pre-pandemic levels, demonstrating the value of these efficient aircraft to the airline industry. The opening of travel to and from China should further accelerate that recovery. We were pleased to see the resumption of 737 MAX flights in China. On another note, COMAC C919 achieved flight certification in China during the first quarter. The potential impact of recession in our major industrial markets appears to have lessened, being either less severe or less imminent than first anticipated. Several risk factors have diminished. European economic activity appears more resilient to the pressures of inflation, high interest rates, energy constraints, and war. China could rebound now that it has abandoned its zero-COVID policy. Inflation appears to have peaked in the U.S., U.K., and Europe. Industrial markets have begun to soften following a post-pandemic surge with a manufacturing Purchasing Managers' Index for our main industrial markets indicating contraction. Given our increased backlog quarter-over-quarter, we are confident in our FY 2023 forecast. From an operational perspective, winter storms in Western New York led to the closure of our manufacturing operations for a few days in the quarter. We estimate this at a $0.07 EPS drag on our performance. We managed to overcome that impact through other operational gains. Supply chain challenges are a continuing cause of uncertainty that is no better or worse than 90 days ago. While some component constraints have eased, sporadic decommits interfere with production shipments and productivity. We continue to diligently work these issues in order to meet customer commitments, but recognize the impact on both past due and inventory. We anticipate that supply chain constraints will begin to ease later in FY 2023. Labor attrition has slowed over the last number of months, but we do see some specific hiring challenges. As supply chain constraints are resolved, the ability to quickly clear past due is somewhat constrained by labor. Turning our attention to notable events in the quarter, Bell Textron won the Future Long-Range Assault Aircraft award from the U.S. Army on December 5th. We have been part of the Bell Textron team for nine years, and we are excited by this success. The award was protested by Lockheed, and we look forward to a favorable ruling by the Government Accountability Office in April. FLRAA will drive development activity over the next few years and substantial production orders throughout the 2030s and beyond. Hopefully, we can start to ramp our activities in April, albeit three months later than originally anticipated. Our customer, NASA, successfully launched the uncrewed Artemis I on November 15. This restarts lunar exploration with many more launches anticipated over the next decade. Moog components play a crucial role in thrust vector control of the Artemis rocket and environmental control within the Orion crew module. Space market expansion is driven by exploration, commercialization and defense. We are seeing growth in our core component business and space vehicle business. Our partner Komatsu exhibited a full electric wheel loader in October at bauma, the world's largest construction trade show held every three years in Germany. This demonstrates another original equipment manufacturer in the construction industry turning to Moog for solutions as electrification and autonomy continue to disrupt that market. We see construction as a significant growth opportunity for Moog. Financial headlines. I would now like to turn our attention to the strong performance in the quarter. Organic sales grew 9%. Adjusted EPS grew 14%. We delivered in line with our forecast due to strong operational performance. Our sales growth was driven by robust commercial aftermarket, higher Reconfigurable Integrated-weapons Platform production and stronger Industrial Automation activity. Adjusted margins improved 130 basis points year-over-year. This was supported by increased Industrial Systems volumes, sales mix in aircraft and operational improvements. Adjusted EPS was in line with forecast at $1.25, an increase of $0.15 or 14% versus prior year, $1.10. Our cash flow was pressured due to continuing supply chain challenges already mentioned, leading to increased past due and higher inventory as we purchased additional stock in certain circumstances to partly mitigate material lead time and availability issues. I'll hand over to Jennifer for a more detailed analysis of our performance in the quarter and the outlook for the year. Thank you, Pat. I'll provide an update on our guidance for all of FY 2023. It was a great start to the year from an operational performance perspective. We achieved our adjusted earnings per share guidance of $1.25, overcoming the negative impact from the storms in Western New York. Operating margins were up nicely over last year. Sales in the first quarter of $760 million were 5% higher than last year. Excluding the impact of foreign currency movements and divestitures, sales were up 9%. Sales increased in each of our segments. The largest increase in segment sales was in Industrial Systems. Sales of $232 million increased 9% over the same quarter a year ago. Excluding foreign currency movements and the divestiture of an offshore energy business last year, sales were up an impressive 17%. Sales increased in each of our markets, most notably in Industrial Automation and Simulation and Test. The growth in sales reflects the recovery from the effects of the pandemic on our business. Demand for our industrial products remains solid while we continue to face supply chain challenges. Sales in Space and Defense Controls of $218 million increased 5% over the first quarter last year. Adjusting for the divestiture of a security business last year, sales increased 8%. The sales growth was driven by the ramp up in production on the Reconfigurable turret program, which is now running at full rate production levels. Aircraft control sales were also up this quarter, increasing 2% to $310 million. Adjusting for the sale of the Navigation Aids business and foreign currency movements, sales were up 5%. Commercial aftermarket sales in the quarter were particularly strong, driven by market recovery in wide body platforms. Airlines are bringing their most efficient airplanes back into service first, we're seeing higher utilization of the 787 and A350 aircraft fleet. We expect this trend to continue throughout 2023. We also benefited from retrofit activity for the 787 program, boosting aftermarket sales this quarter. Military aircraft sales declined in the first quarter compared to the same quarter a year ago. The military sales decrease largely reflects supply chain pressures as incoming materials were delayed. In addition, B2A development activity on the FLRAA program decreased due to the timing of starting the next phase of the program post-award. We'll now shift to operating margins. Adjusted operating margin of 10.4% in the first quarter increased 130 basis points from the first quarter last year. Adjustments this quarter consisted of a $10 million gain on the sale of 2 buildings and $2 million of restructuring and other charges. Adjustments for last year's first quarter consisted of a $16 million gain on the sale of an offshore energy business and $2 million of an inventory write down. Adjusted operating margins increased in Industrial Systems and Aircraft Controls and decreased in Space and Defense Controls. Industrial Systems generated a significant improvement in margins, increasing over 400 basis points to 12.3%. Incremental margin from strong sales drove the increase along with a favorable sales mix. Operating margin in Aircraft Controls increased to 9.6% in the first quarter from 8.5% in the same quarter a year ago. The 110 basis point increase resulted from a favorable sales mix driven by strong commercial aftermarket sales along with lower R&D expenses. Operating margin in Space and Defense Controls was 9.4%, down from 11.0% a year ago. We incurred charges on space vehicle programs for the second quarter in a row and continue to feel supply chain pressures. Interest expense is another area that's impacting our financial results. In the first quarter, interest expense was $13 million, up $5 million over the first quarter last year. The increase in interest expense relates to higher interest rates and is consistent with our forecast from a quarter ago. Putting it all together, adjusted earnings per share came in at $1.25, in line with our guidance from a quarter ago. The $1.25 adjusted earnings per share this quarter is up 14% over the same quarter a year ago. Let's shift over to cash flow. For the quarter, we had a use of free cash flow of $22 million. The negative free cash flow this quarter was driven by working capital growth. Working capital grew this quarter related to supply chain pressures, our production decision on the 787, and delayed milestones for billings. Supply chain constraints continue to impact our inventory levels. We purchase certain components in advance of requirements to reduce the risk of shipment delays. Despite that, we've experienced situations in which we couldn't ship product because a necessary component wasn't available. We continue to prioritize meeting customer commitments. We're maintaining a steady level of production on the 787 program to ensure our supply chain remains healthy and to keep our facilities operating efficiently. This level of production exceeds the rate at which Boeing is taking deliveries, which puts pressure on our working capital. Reaching milestones in our space vehicles business was delayed associated with our challenges in that business and caused a growth in our receivables. Capital expenditures came in at a relatively light $30 million, which is about 4% of sales. Over the past several quarters, as we look to the rest of this year, we're spending closer to 4.5% of sales. Our focus continues to be on investment in facilities and infrastructure to support our growth and investment in next generation manufacturing capabilities to drive efficiencies. The lighter quarter simply reflects timing of these major activities. Our leverage ratio, calculated on a net debt basis, was 2.3x as of the end of our first quarter. Our leverage ratio continues to be around the low end of our target range of 2.25x-2.75x. Our capital deployment priorities, both long-term and near-term, are unchanged. We are committed to our dividend policy, as just announced, we're increasing our quarterly dividend by 4% to $0.27 per share. We look to have a balanced approach to capital deployment, growing our business both organically and through acquisition, while also returning capital to shareholders in the form of dividends as well as share repurchases. Our current priority, and where we see the greatest potential return, is investing for organic growth. We're building up new businesses that we believe have huge potential, like the electrification of construction equipment. We're also investing in our core businesses. Capital expenditures are part of these investments. We will continue to look for strategic acquisitions to complement our portfolio, and we will continue to be disciplined from a financial perspective. We'll now shift over to guidance for the full year. We are reiterating our fiscal year 2023 guidance for sales, adjusted operating margin, and adjusted earnings per share. Our backlog is strong, and our performance is on track to achieve these results. Let's take a more detailed look at our guidance. We're projecting sales of $3.2 billion in FY 2023. That's a 5% increase over FY 2022 and 6% when we adjust for divestitures over the past year. We expect sales growth in each of our segments, with the biggest drivers being commercial aircraft and Space and Defense. Aircraft Controls sales are projected to increase 6% to $1.3 billion. The increase is all on the commercial side of the business. commercial OE will be up across the board with growth on Boeing aircraft, Airbus platforms, business jets, and the Genesys business we acquired a couple years ago. We'll also see growth in an already strong commercial aftermarket business. To account for our very strong start to the year, we're increasing our commercial aftermarket forecast sales by $15 million. We expect a modest decline in military aircraft sales with not too much of a change in mix from last year. We're projecting $25 million of sales for the FLRAA program, down from our previous forecast of $40 million due to the delay associated with the protest. Space and Defense Controls sales are projected to increase 5% to $920 million. Adjusting for the divestiture of a security business late last fiscal year, sales will be up 8%. When looking at our numbers within the segment, it's helpful to remember that we shifted a product line from Defense into Space at the beginning of our first quarter. Adjusting for the shift, we're expecting nice increases in both Space and Defense. The increase in Space sales relates to launch vehicles and our growing integrated space vehicles products. The increase in Defense sales reflects a production ramp for the reconfigurable turret and growth across all major areas of the business. Our sales forecast reflects a $10 million decrease from our previous forecast. Industrial Systems sales are projected to increase 2% to $925 million. Adjusting Adjusting for the sale of the offshore energy business, the increase is 3%. Growth will come from each of our submarkets reflecting our strong backlog. Our sales forecast is up $10 million from our previous forecast on our strong start to the year. We're forecasting an 11.0% adjusted operating margin in FY 2023, up from 10.2% in FY 2022. We're expecting stronger performance in each of our segments. Industrial Systems will increase 140 basis points to 10.9%, largely due to capturing efficiencies on the higher level of sales and realizing benefits associated with our portfolio shaping activities. Space and Defense Controls will increase 110 basis points to 12.0% on higher sales. Aircraft Controls will increase 20 basis points to 10.3%, will benefit from factory utilization of sales in the commercial OE business increase. However, this benefit will largely be offset by an unfavorable mix with a relative increase in commercial OE. Higher interest expense and a higher tax rate will depress earnings per share by $0.64 relative to FY 2022. For FY 2023, we're projecting adjusted earnings per share of $5.70 ±$0.20, which is up 3% over FY 2022. Adjusting for interest and taxes, EPS would be $6.34, an increase of 14%, reflecting strong operational performance. We're forecasting earnings per share for our second quarter to be $1.40 ±$0.15. We're projecting free cash flow for FY 2023 to be $100 million, representing a 55% conversion ratio. Our cash flow generation reflects working capital requirements associated with an increase in sales and a deliberate investment in capital expenditures. It also reflects a reduction in working capital associated with operational improvements. We've decreased our free cash flow forecast from a quarter ago by $30 million as we've changed our assumption related to the repeal of the R&D expense amortization law. While there still seems to be bipartisan support for innovation, the challenges of Congress getting a bill passed are becoming more evident. As always, our aim is to share a forecast that represents a balanced outlook for the year. We're assuming that supply chain disruptions continue but moderate in the back half of the year. Other external factors such as the geopolitical landscape could also impact our performance. Overall, we had a good start to the year and our outlook for the rest of the year looks strong. We're positioned nicely from a liquidity and leverage standpoint, enabling us to invest for future growth in our business. With that, we'll open it up to questions. Thank you very much. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star one on your telephone keypads. If you're using a speakerphone, make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star one. We'll pause for just a moment. We'll take our first question from Christina Cheng from Morgan Stanley. Hey, good morning, guys. Hi, Christine. Hi, Christine. Great. Pat, congratulations in your role. Maybe one of the things that you mentioned in your press release and also in your prepared remarks, you touched on optimizing the business to expand margins. In these past few years, Moog has been restructuring costs and improving the supply chain to unlock higher margins. Can you provide a little bit more color on how you think about cost optimization and how your approach is different? Okay. Thanks for the question, Christine. I mean, as you know, I've been in the chief operating role for the last year, and I've had quite an opportunity to work with the leaders of each of the businesses and get to understand where these opportunities might be. I believe that we can simplify how we work within the organization, and through that simplification, we can drive improved operational performance and improved margins within our business. Our focus is to continue many of the initiatives that we have talked about in the past, portfolio shaping, footprint optimization, focused factories, and they add on to what we have been doing for years in continuous improvement and lean. Where you have seen progress being made on taking businesses out, such as the NavAids business back in quarter. I think that was quarter one of fiscal 2022 to the offshore business that we divested in this current quarter. We have begun to take out businesses that we feel are not strategically aligned. There are examples of that. That will continue into the future. We continue to review the portfolio of businesses that we have. I think about the footprint that we operate, we have grown over the years through acquisition to have quite a diverse collection of operations around the world, and we have an opportunity to do things more efficiently. We are working on that. That involves product line transfers from some sites to other sites so that we can consolidate volumes of like products. We get all our defense products into a defense factory. We have our industrial products in an industrial factory. Through that focus, we believe that we can drive efficiency in those manufacturing plants. So it's a collection of different approaches, Christine, which all together will help drive the margin improvement. I think if we think about our approach to it as a leadership team, it is our number one focus as a leadership team to improve those margins. We're looking at how we organize the business and how we get decisions done within each of those business to allow us to drive that margin improvement forward at a quicker pace maybe than in the past. It's a focus of all our internal review activities to see what progress we're making on those margin enhancement programs. So part of it is behavioral, part of it is continuing some of the initiatives that have started before and driving those to fruition. Thanks, Pat. I'm looking forward to learning more about that at your Investor Day. I know. Maybe if I could do a follow-up on cash. Sure. You know, Jennifer, on free cash flow, you mentioned that, you know, there was a change in milestones that kind of put pressure on free cash flow generated in the quarter. Could you provide more details on that? Was that a contractual change in milestone payments of when you get the cash? Or was that just your ability to hit these milestones? You know, as the 787 ramps back up to 10 per month, how should we think of the flows of cash? Actually the biggest driver of cash flow was actually inventory. We described that before, and that's very similar. It's just the buying ahead or missing components that things get caught up in inventory. That was the biggest driver. We also did have unbilled growth on the 787 production. We are continuing to have that same level forecasted for the remainder of this year for ours. As Boeing ramps up, we will ramp up at a slower rate. That will provide us the opportunity to liquidate some of those physical inventories that we've been building up over the last two years or so. That's definitely a benefit when we're able to do that. We will see some benefit on that as we move forward in the year. You started off with the delayed milestones in space vehicles. That is basically due to some of the progress that we have been making on those contracts, where we've just achieved them later than we had anticipated achieving them. We will meet those milestones and be able to collect cash for those. As we look for the year, we are holding our guidance. There's a few things that are going into that. We're holding our operational guidance. We did make the adjustment for the cash taxes for the R&D amortization. We will see benefit in receivables as we move through the year. There's another thing that you see. There's actually a growth up that shows up in receivables and customer advances. We were able to bill a significant customer advance, but it got collected at the very beginning of Q2 as opposed to in Q1. That's, we didn't see any benefit from that in Q1, but we will see that benefit in Q2. That's another thing that's going for us. Overall, we're feeling that things will be better for the remainder of the year. We're gonna see less pressure from less growth in receivables from supply chain pressures, but still making sure that we've got commitments to our customers as our number one priority. Then we'll also see some benefit in receivables, you know, related to supply chain as, and as some of these other receivables are collected in their contractual terms. Thank you, Pat. Thank you, Jennifer. I really appreciate the time. You're welcome. Thank you. Thank you. Our next question comes from Cai von Rumohr from Cowen. Please go ahead. Yes, thanks so much, and Pat, welcome. Thank you. Jennifer, maybe give us a little more color, the $0.07 hit from the storms in the Buffalo area. You know, you know, where did it hit, you know, sales, earnings, you know, rough color? We had storms. We actually had storms in the Thanksgiving and right before Christmas time, and so different facilities were closed for a different amount of time. On average, I would say we had three days in Western New York that we were basically shut down in operation. Basically, if you think of it's production basically stops. During that time, there's no work that is being progressed, so you still have costs associated with that. However, you're not moving product forward. So it's really just a loss of that gets delayed into the next period. Those are things really just hard to catch up on. It does impact, you know, what sales because of our input that goes through, and we've quantified it from a margin perspective. Well, we've quantified it from an EPS perspective, but it goes into our margins. It's in Aircraft and Space and Defense because that's where we've got the more of a concentrated effort on our Western New York campus. Excellent, excellent. You know, as I look at your numbers, you kind of mention, you know, the commercial aftermarket being stronger and, you know, you had good numbers there. If I look at your numbers, it looks like you're assuming, you know, things slow down as we go through the year. I mean, what was there anything special to get to that $50 million in the first quarter? You know, is that a conservative number? You know, or what are, what are you assuming there? With respect to commercial aftermarket, it was really nice. We've got a really good growth in that business right now. We did have some retrofit activity. It's about $5 million that we had in the quarter, and that's expected to continue at a much lower level in the next couple of quarters. Maybe it gets to maybe a total of 10 for the year or something like that. This quarter, we did have a nice strength there. You remember last year we did have some retrofit activity as well, as well as some one-time test equipment. Overall, we're seeing some nice recovery in the business. The aftermarket is sometimes very hard to predict because it comes in in short lead times, but we're really happy with what we're seeing in the commercial aftermarket business. Great. Pat, you know, you talked about more portfolio shaping, footprint adjustment. You've done a fair amount already, certainly compared to, you know, Moog's history. Can you give us some sense as to where are we in this process? Have you done 2/3 of it? Have you done 10%? You know, I don't know if you could give any sort of rough color in terms of the operating margin potential you could get out of that. Well, thanks for the question, Cai. I refer to the portfolio shaping as an ongoing process for us. It's not a once and done activity. I think we've been at it for a number of years now, as you've referenced. Over that time, over the last three years, actually, we've divested about seven businesses or product lines, which had a combined annual sales of about $80 million. My expectation is that we continue that process. You were asking how far are we through it. I wouldn't characterize it at the low end, at we're 10% through. I think we've taken a quite a broad look at our business when we started into this process and made some decisions around that. There are a number of others that remain open that we're working through, but I would say we're more further through it maybe than at least halfway. Got it. What sort of... Can you give any color in terms of, you mentioned, the potential to improve, margins? Any sort of rough sense how we should think about that? I'm hoping to get the opportunity, Cai, during the investor day to lay out all of the initiatives and how they contribute to driving that margin improvement. I think that's the time I'd like to really share the goals that we have for the company overall over the next three years and the means by which we're going to get them. I think that will help give a good holistic picture at that time rather than giving parts of it now. I think it would answer maybe some of the questions Christine was asking earlier as well, of how each of these elements contribute towards the overall goal. Right. The last one. You generate more cash as a result, you know, if you achieve that. Maybe give us some color in terms of relative priorities of what you do with the cash. In the short term, we would be looking to just pay down debt. Besides that, we wanna make sure that, you know, we're optimized from a, you know, a capital structure as well. Right now we're still seeing the opportunities in our organic business. You know, there's facilities, there's things of that nature, next generation manufacturing, really sets us up for the future as we grow the business. That's definitely where our priority is. We will continue to look for acquisitions as well so that we are complementing our business with other opportunities to. Certainly we said the dividend policy as we announced today, we just increased 4% from where we were before. That's a planned part of our capital structure. When it makes sense, share repurchase as well. Overall, right now, our focus is on growth in our core businesses. just building on. Terrific. Thank you very much. Just building on those comments, Cai, we continue to have a funnel of acquisition opportunities that we review. I think my interest is to try and find ways in which we can accelerate growth within those new markets and new businesses that we're pursuing. If we find acquisition targets that help boost our or accelerate our progress there, that would be my focus. Excellent. Thank you so much. You're welcome. Thank you. Our next question comes from Peter Osterland from Truist. Hey, good morning. I'm on for Michael Ciarmoli this morning. Thanks for taking our question. First I was just wondering if you could parse out about how much of the year-over-year margin decline that you saw in Space and Defense in the quarter was driven by supply chain pressures? It looks like from the guidance that margins should be recovering in that segment going forward. Is supply chain recovery the main driver of your expectations there, or is there anything else you could call out there? The biggest driver in space vehicles when we look at this year's margins compared to a year ago, is due to the challenges that we had on our space vehicle program. That's the main driver when we're looking at that. We did have challenges. They were actually much larger in the previous quarter, two quarters ago. We have made progress on those jobs. We have had, as I said, we've had some challenges. It's been on kind of some specific things that we've had in the development and testing areas on that. We've progressed further on that, so we're feeling confident that we're making progress and heading in the right direction on that front. We are seeing supply chain pressures. That's not the biggest part of the reason for the margin things. We certainly are having long lead components and challenges from that standpoint that we need to make sure that we're focusing on as we move forward. Peter, this is Pat. I think the space vehicle business is a real opportunity area for us, but we're repositioning ourselves in the value chain here. Taking on more of a system responsibility in these satellite buses. There's, I would say, a learning curve associated with that. We're further through the programs now that with this quarter behind us, and we've, we're getting towards the end line with these development activities, and so the risk associated with it diminishes as we progress through the project. What we are seeing here, something that I might describe as our tuition fees as we're getting into a new business area. That's helpful color. Thanks. Just wanted to get an update on commercial aero production rates. Are you still generally aligned with the underlying OEM build rates aside from the 787? Are you planning to continue producing at a rate of four a month on the 787 for the rest of the year? Yeah. For the 787 through FY 2023, we are continuing at four ship sets per month. For the other programs, we're in line with the OEM production rates. All right. Thanks a lot. No problem. Thank you. Thank you. Again, ladies and gentlemen, if you'd like to ask a question, that is star one on your telephone keypads. We'll pause for a moment. We have no further questions at this time. I'd like to turn it back to Pat. Thanks everyone for listening in to our quarterly call. We had a strong quarter. We're very pleased with our performance over the course of the quarter, and we look forward to giving you an update again in 90 days time. Thank you. Thank you. Ladies and gentlemen, that does conclude today's conference. We appreciate your participation, and have a wonderful day.