Howmet Aerospace Inc (HWM) — Q3 2025 Earnings Call Transcript

Thank you, Drew. Good morning, and welcome to the Howmet Aerospace Third Quarter 2025 Results Conference Call. I'm joined by John Plant, Executive Chairman and Chief Executive Officer; and Ken Giacobbe, Executive Vice President and Chief Financial Officer. After comments by John and Ken, we will have a question-and-answer session. I would like to remind you that today's discussion will contain forward-looking statements relating to future events and expectations. You can find factors that could cause the company's actual results to differ materially from these projections listed in today's presentation and earnings press release and in our most recent SEC filings. In today's presentation, references to EBITDA, operating income and EPS mean adjusted EBITDA, excluding special items, adjusted operating income, excluding special items, and adjusted EPS, excluding special items. These measures are among the non-GAAP financial measures that we've included in our discussion. Reconciliations to the most directly comparable GAAP financial measures can be found in today's press release and in the appendix in today's presentation. In addition, unless otherwise stated, all comparisons are on a year-over-year basis. With that, I'd like to turn the call over to John.

Thank you, PT, and welcome to the Howmet Q3 call. Let's start with the company highlights on Slide 4. Q3 was a very strong quarter for Howmet. Revenue growth continues to accelerate and was up 14% compared to 8% in the first half. Within this revenue growth, Commercial Aerospace increased 15% and within this number, commercial aero part sales increased by 38% for a total spares increase of 31%. EBITDA was up 26% and operating income up 29%. Cash flow was also healthy at $423 million after capital expenditure of $108 million. Year-to-date capital expenditure is approximately $330 million. Regarding share buyback, $200 million of cash was deployed to buybacks in Q3 with an additional $100 million buyback in October. October year-to-date buyback is now $600 million, which is $100 million higher than the 2024 full year. We also paid off the balance of $63 million of the U.S. term loan early, which was due in November 2026, and with the resulting net leverage now stands at 1.1x net debt-to-EBITDA. Dividend payments were also increased in August by a further 20% versus the prior quarter and earnings per share increased by just over 34%. Other commentary, which may be helpful is that working capital days improved year-over-year, allowing for the increased capital expenditure for future growth and all within the free cash flow number previously referenced. Headcount did increase by a further 265 people, mainly within the engines business as we staff our new manufacturing plants. As planned, the increase in headcount has slowed as we go into the second half, although we envisage hiring again as we pick up in early 2026. Now let me turn the call over to Ken to cover the markets and segment performance.

Okay. Thank you, John. Let's move to Slide 5. End markets continue to be strong, with total revenue up 14%. Commercial Aerospace was up 15%, exceeding $1.1 billion in the quarter. Commercial Aerospace growth is driven by accelerating demand for engine spares and a record backlog for new, more fuel-efficient aircraft with reduced carbon emissions. Defense Aerospace growth continued to be robust at 24%. Growth was driven by engine spares, which increased 33% and new F-35 aircraft builds. As expected, commercial transportation was challenging, with revenue down 3% in the third quarter, including the pass-through of higher aluminum costs and tariffs. On a volume basis, wheel volume was down 16%. Finally, industrial and other markets were up a healthy 18%, driven by oil and gas, up 33%, and IGT up 23%. In the future, it's likely that we will combine oil and gas and IGT when reporting revenue by market. The definition of oil and gas versus mid- to small IGT has become somewhat blurred since many turbines now have increasing end use for data centers. So in summary, continued strong performance in Commercial Aerospace, Defense Aerospace and Industrial, partially offset by commercial transportation. Within Howmet's markets, the combination of spares for Commercial Aero, Defense Aero, IGT, and oil and gas was up 31% in the third quarter. Now let's move to Slide 6. So starting with the P&L. Q3 revenue, EBITDA, EBITDA margin and earnings per share were all records and exceeded the high end of guidance. Revenue was up 14%, EBITDA exceeded $600 million as it outpaced revenue growth and was up 26%. EBITDA margin increased 290 basis points to 29.4% while absorbing the cost of approximately 265 net headcount additions. Earnings per share was $0.95, which was up a solid 34%. Moving to the balance sheet and free cash flow, the balance sheet continues to strengthen. Free cash flow was excellent at $423 million. Free cash flow included the acceleration of capital expenditures with $108 million invested in the quarter and approximately $330 million year-to-date, which is higher than the full year 2024 capital expenditures. About 70% of the capital expenditures year-to-date is for our engines business as we continue to invest for growth in Commercial Aerospace and IGT. Investments are backed by customer contracts. Quarter-end cash was a healthy $660 million. Year-to-date, debt has been reduced by $140 million as we paid off at par the U.S. term loan, which was due in November of 2026. The early prepayments will reduce annualized interest expense drag by approximately $8 million. Net debt to trailing EBITDA continues to improve to a record low of 1.1x. All long-term debt is unsecured and at fixed rates. Howmet's improved financial leverage and strong cash generation were reflected in S&P's Q3 rating upgrade from BBB to BBB+, which is 3 notches into investment grade. Liquidity remains strong with a healthy cash balance and a $1 billion undrawn revolver, complemented by the flexibility of a $1 billion commercial paper program, both of which have not been utilized. Regarding capital deployment, we deployed approximately $770 million of cash, common stock repurchases, debt paydown, and quarterly dividends year-to-date through September. In the quarter, we repurchased $200 million of common stock at an average price of approximately $182 per share. Q3 was the 18th consecutive quarter of common stock repurchases. The average diluted share count improved to a Q3 exit rate of 405 million shares. Additionally, in October, we repurchased $100 million of common stock at an average price of approximately $192 per share. October year-to-date common stock repurchases are $600 million at an average price of approximately $156 per share. Remaining authorization from the Board of Directors for share repurchases is approximately $1.6 billion as of the end of October. Finally, we continue to be confident in free cash flow. We increased the quarterly dividend by 20% in the third quarter to $0.12 per share, which is up 50% higher than Q3 of last year. Now let's move to Slide 7 to cover the segment results for the third quarter. The Engines products team delivered another record quarter for revenue, EBITDA and EBITDA margin. Quarterly revenue increased 17% to $1.1 billion. Commercial Aerospace was up 13%. Defense Aerospace was up 23%. Oil and gas was up 33% and IGT was up 23%. Demand continues to be strong across all of our engines markets with strong engine spares volume. EBITDA outpaced revenue growth with an increase of 20% to $368 million. EBITDA margin increased 80 basis points year-over-year to 33.3% while absorbing approximately 265 net new employees in the quarter. Year-to-date, engines have invested in approximately 1,125 incremental headcount, which has a near-term margin drag but positions us well for future growth. Now let's move to Slide 8. The Fastening Systems team also delivered a record quarter for revenue, EBITDA and EBITDA margin. Revenue increased 14% to $448 million. Commercial Aerospace was up 27%, Defense Aerospace was up 2%, General Industrial was up 3% and Commercial Transportation, which represents approximately 12% of Faster's revenue was down 17%. EBITDA continues to outpace revenue growth with an increase of 35% to $138 million despite the sluggish recovery of wide-body aircraft builds along with weakness in commercial transportation. EBITDA margin increased a robust 480 basis points year-over-year to 30.8% as the team has continued to expand margins through commercial and operational performance. Now let's move to Slide 9. Engineered Structures had a solid quarter. Revenue increased 14% to $289 million. Commercial Aero was up 7% and Defense Aerospace was up 42%, primarily driven by the end of the destocking of the F-35 program. EBITDA outpaced revenue growth with an increase of 53% to $58 million. EBITDA margin increased 510 basis points to 20.1% as we continue to optimize the structures manufacturing footprint and rationalize the product mix to maximize profitability. Finally, let's move to Slide 10. Forged Wheels revenue was essentially flat as a 16% decrease in volume was largely offset by higher aluminum costs, tariff pass-through, and favorable foreign currency. EBITDA was strong at $73 million, an increase of 14% despite a challenging market. EBITDA margin increased 350 basis points to 29.6%. The unfavorable margin impact of lower volumes and higher pass-throughs were more than offset by flexing of costs, favorable product mix driven by our premium products and favorable foreign currency. The Wheels team has continued to expand margins despite market metal cost and tariff uncertainty. Now let me turn it back over to John.

Thank you, Ken. Let's move to Slide 11 to discuss the outlook. In summary, before I go into details, the outlook is solid. Air travel continues to grow year-over-year after a strong summer period. The backlog of commercial aircraft extends for many years, even with anticipated increases in production rates over the next five years. The current aircraft fleet is aging. These factors combined provide healthy demand for original equipment and a growing need for aftermarket aircraft parts, especially engine components like turbine blades in the hot gas path. Defense sales remain strong with consistent F-35 original equipment sales and a rise in legacy fighter jets such as the F-15 and F-16. This growth is complemented by an increase in defense spare parts sales. In the oil and gas sector, demand remains steady, while growth in industrial gas turbines is exceptionally strong, both in original equipment and aftermarket segments. The midsized turbines of up to 45 megawatts, which I haven't previously commented on, are expected to see growth in both aero-derivative engines and dedicated midsized turbines for many years, primarily driven by the expansion of data centers that require reliable electricity supply or quick-response turbines to maintain an uninterrupted energy supply. It is becoming increasingly difficult to distinguish the end market for these turbines between oil and gas and industrial gas turbines. Commercial truck volumes continue to face challenges, particularly with smaller fleets hesitant to purchase trucks due to low freight rates and significant price increases for Class 8 trucks driven by tariffs. Ongoing tariff changes create uncertainty for Howmet, though the overall impact remains modest at around $5 million. The revenue outlook for the remainder of 2025 has improved compared to previous estimates, boosted by stronger Boeing 737 builds and engine spares sales. Our footprint expansion with five new manufacturing plants or extensions is progressing. The most crucial part of our expansion going into 2026 is the new Michigan Aero Engine core and casting plant, which is on schedule, with some parts already being produced. There is still much more equipment to be installed in the next six months, but progress is on track. The new tooling plant is now fully equipped, and staffing is well underway. Regarding the 2026 outlook, we anticipate revenues of around $9 billion, marking an approximate 10% year-over-year increase. This forecast will be further detailed in our February 2026 earnings call, where we will provide additional guidance. For the fourth quarter of 2025, we expect revenue of $2.1 billion, plus or minus $10 million, EBITDA of $610 million, plus or minus $5 million, and earnings per share of $0.95, plus or minus $0.01. For the year, we project revenue of $8.15 billion, plus or minus $10 million, EBITDA of $2.375 billion, plus or minus $5 million, an earnings per share of $3.67, plus or minus $0.01, and free cash flow of $1.3 billion, plus or minus $25 million. In summary, 2025 is set to be another strong year for Howmet, with free cash flow projections significantly higher than previously predicted, even after accounting for increased capital expenditures aimed at future growth. Before we move to Q&A, I want to take a moment to thank Ken Giacobbe for his years of dedicated service. It has been quite a journey for Ken, and I have valued his partnership throughout, from his time at Alcoa to Howmet, which is now worth more than the whole of Alcoa ever was. I wish Ken all the best in his well-deserved retirement.

Thank you, John.

I just want to offer you the opportunity of adding any comments.

Yes John, thank you for your kind words and for the partnership. It has been a privilege and a pleasure to work with you, the Board of Directors, and the Howmet team. The results have been outstanding. Much of this is due to the positive culture you have cultivated over the years. We've often discussed this culture, which emphasizes focus, innovation in everything we do, empowerment, accountability, shared purpose, and a winning mindset, all of which is refreshing. Looking ahead, I believe Howmet is well positioned for the future with a clear path forward and an exceptional leadership team in place. As I conclude my 21-year tenure with immense gratitude and confidence in Howmet's future, I want to express my thanks for the opportunity to be part of such a remarkable organization. I wish you and the team continued success. Now, Drew, we can move on to Q&A.

Ken, congratulations on your retirement. Thank you for all the thoughtful insights over the years and hope you've got something very fun planned. So maybe, John, the investments in technology you've made in Aerospace have yielded in Howmet being a clear leader in this area, especially for the hot section of the jet engine. Now pivoting to this data center build, we're starting to see this industry really gain a lot of traction. You've called out CapEx increases last quarter and also this quarter. Can you just take a step back and provide us more color on what the competitive landscape is like for turbines and IGT? How differentiated is your technology, the pricing environment? And what's your expected returns in this sector and how that compares with aerospace?

Okay. So that's a very broad question. It gives me the opportunity to talk now for at least an hour...

I'll keep it to that question though, John.

Yes, this is just one question. First, the expansion of data centers and their electricity needs, not only for the processing of advanced microchips but also for cooling them, is creating significant demand. We know that utility companies and the power grid are struggling to meet this demand, which raises the question of how it can be addressed. The situation changed with the new administration earlier this year, which has shifted focus towards fossil fuels, particularly natural gas, rather than renewables. This has prompted us to reassess our investment strategy. The fundamentals look strong, and over the next few years, the demand is extraordinary. However, what the landscape will look like at the turn of the decade in terms of future growth remains uncertain. That said, the need for data centers—both for AI applications and storage—means that electricity demand will persist. This gives us confidence to invest, even though we lack the same clarity on backlog numbers compared to the Commercial Aerospace market. As a result, we have continuously reevaluated our investments, and we've increased our capital expenditures this year. We anticipate that CapEx in 2026 and into 2027 will remain high while still aiming to convert 90% of our net income into free cash flow. It’s a challenging goal, but we are enthusiastic about the growth opportunities. The market for large industrial gas turbines, utilized by utility companies for electricity, continues to grow. Additionally, many gas turbines are being installed at data centers or clusters of data centers to provide necessary electricity. However, there is currently a shortage of large gas turbines, leading to longer lead times for new orders, potentially extending into the 2030s. Consequently, many midsized turbines are being deployed, not only for electricity generation but also for their rapid responsiveness, ensuring uninterrupted electricity supply to the data centers. This has greatly increased the demand for aero-derivative turbines. Caterpillar, one of our major customers in this space, has recently reported strong results. There’s also a technological shift similar to what we experienced in aerospace, moving from solid turbine blades to those with internal air paths for cooling, allowing turbines to run at higher temperatures. Over the next few years, we are enhancing our capabilities to produce these advanced turbine blades for both midsized and large turbines that utilities purchase. Recent developments indicate that some of these new turbine blades rival the most sophisticated commercial aerospace designs in terms of air pathways, which adds value and enhances electricity generation capabilities beyond what was achievable with older turbine designs. This is an exciting period for us as we leverage more advanced technology. We are expanding our manufacturing facilities, including a new plant that will be finished by the end of this year, which will allow us to introduce new capabilities and machinery in early 2026. This expansion will cater to customers in Japan, like Mitsubishi Heavy, as well as others like Siemens and GE. In addition, we are significantly expanding our European plant and investing in our existing U.S. facility. We are excited to be part of this evolving journey, parallel to the aerospace business, not just for midsized turbines but also for large gas turbines. This is indeed a thrilling time for our company.

John, I'll try to ask a question that won't let you go on too long. But the end market implied growth in your $9 billion, could you share that as well as perhaps you've been running, obviously, well ahead of long-term incrementals the 30% to 40% that you had previously spoken of long been blown past. Is '26 another year of very high incrementals as we've seen in the last couple of years?

Let me address your second point about margins and incrementals first. As you may know, I typically do not provide detailed information at this time of year; that's more appropriate for the call in February. Therefore, I will reserve any profit guidance for that time. In the third quarter, our incrementals were quite strong at 50%. We have already provided guidance for the fourth quarter, which I believe will be in line with that figure, though Ken might clarify that further. Overall, this year has been strong. Looking ahead to next year, the numbers might disappoint you because we often struggle to meet expectations. However, I am confident that whatever we present will be satisfactory for 2026. As for your first question about end market growth, I think it's too early to provide precise guidance at this point. I am optimistic that Commercial Aerospace will improve in 2026, with increased production rates for both Airbus and Boeing narrow bodies compared to 2025. The wide bodies, especially the Airbus A350 and the Boeing 787, are also expected to see higher build rates than this year. Therefore, I anticipate that Commercial Aero will grow a few percentage points compared to 2025. In defense, after a strong year of over 20% growth, I expect mid-single-digit growth into 2026. I am confident in our defense position. Regarding the industrial segment—which encompasses gas turbines, oil and gas, and general industrial—we anticipate that it will achieve double-digit growth overall. This gives a general sense of the major segments for next year. While discussing Commercial Aero, I understand you may have a follow-up question about our assumptions. I believe the Boeing 737 production will increase, likely reaching around 40. For the A320, it could rise to the early 60s, possibly 62 or 63, while the 787 might be around 7.5, and the A350 could be about 6.5 to 7. These are rough estimates to give you a directional sense without being too precise. I want to evaluate how our customers wrap up this year, considering their stated inventory levels, as some airframe customers have been reducing inventory. This will require assessing the strength and consistency of their production while managing inventory, and I hope to see improved consistency into 2026, similar to the more predictable trends we have seen over the last couple of quarters.

This is Mariana Perez Mora for Ron today. First of all, congratulations, Ken, on your retirement and for your contributions to the company and the industry overall. I would like to explore two topics as we look ahead to next year. First, how do we view the commercial aerospace sector in relation to destocking trends and aftermarket or spare engine trends, especially given the ramp-up we anticipate for original equipment? Secondly, regarding IGT, how reliant is the guidance on the capacity that is expected to come online at the end of this year and in the middle of next year? How much does the timing of that additional capacity impact the guidance?

Let's address the IGT part first and then return to commercial aerospace. This year, we've noticed benefits from slight increases in gas turbine production at large land-based turbines, along with a slightly higher increase in midsized turbines. Additionally, there has been a rise in spare parts due to the existing fleet of both turbine types working harder, particularly the midsized turbines. Looking ahead to 2026 and 2027, we expect fundamental demand for turbine builds to grow again into 2027. On the original equipment side, it will depend on whether all planned turbines will actually be built and how we can meet those production goals. This year has seen slightly stronger demand for spares while still maintaining solid original equipment growth. Next year, I anticipate an increase in original equipment demand compared to this year, alongside steady demand for spares. Overall, I feel optimistic about these segments, although it’s hard to determine which will outperform the other in a competitive sense. Regarding commercial aerospace, I’ve previously mentioned my thoughts on build rates, and I believe the destocking phase is essentially complete this quarter. There may be minimal remnants, primarily in the titanium sector where stockpiling occurred due to past supply concerns post-Russian invasion of Ukraine. As for spare parts and engine spares, I expect 2026 will be another strong year. For CFM, I anticipate robust demand for the CFM56 engines, as current fleets continue to operate intensively. There is still a backlog of parts and engines will be returning to service. There's also likely strong demand for the B2500 and GTF engines. With the transition to newer engine models, there will be both original equipment demand and retrofit needs to enhance engine durability and increase the number of engines back in operation. I believe that covers everything.

Yes. And if I may squeeze another one. It looks like Asian history now because of how hectic the year is, but it wasn't long ago that you guys have to call for force majeure on the tariffs and raw materials. Could you mind like giving us some color around like how is that today? And how you think about risks on raw materials and pricing and pass-throughs going into next year?

Well, I think we're pretty solid in terms of pass-through capabilities, either under existing contracts or with new agreements that we've made with our customers for each of our end markets. And so what was the gross effect that we could see, I think, originally, it was up to $100 million that with the delayed implementation and certain exemptions that have been provided maybe that number came down. And then recently, we've seen some of the tariffs increase again, thinking now on the Class 8 area. So it's been moving around and still continues to move around even as recently as yesterday. But the net effect is still sub $5 million for the year, and that essentially is the drag that's just in terms of timing of recovery. So as an issue for Howmet, it really is, I'll call it a non-issue, sub-$5 million, and therefore, hopefully, it disappears into the woodwork in 2026.

Congrats, John, on great results and Ken, on your retirement, although I'd argue with Kristine that working with John is plenty of fun. So I don't know what you'll do in retirement, that's even better. Can I...

I can agree with that, because you say stop there and Ken what are you thinking.

Ken, I'm going to actually put this one on you. Just given, I thought the comments on Howmet being more valuable than the 3 pieces was very interesting. So over the next few years, where do you see Howmet's end state just given where the balance sheet is, leverage is at record lows, margins in each segment are terrific. So lots of areas of expansion. How do you think about Howmet over the next few years?

Yes, Sheila, I think I'm going to have to let John answer that one. I don't want to get fired this late, right?

I believe if you consider the progress we've made in recent years, particularly in building a performance culture during the challenging times of COVID, which arrived suddenly, we have focused on investing in our technology and expanding the company. The growth trajectory looks promising. We've been managing multiple priorities effectively, and although we've seen growth and improved margins, I anticipate that growth will play a more crucial role in the next five years compared to margins. That said, we continue to strive for margin improvement every day. There are many areas yet to expand, including increased automation and the adoption of artificial intelligence and machine learning in our manufacturing processes. It's not just about basic automation; we're gathering unprecedented levels of data. Next March, during our planned Investor Day at one of our plants, we will showcase our advancements in manufacturing. Beyond the fundamental increase in robotics, we are moving to a new level. Equally important is the digital thread we've established throughout the manufacturing process, from chemical compounding to core preparation and into shell casting, enabling us to provide detailed traceability for the components we manufacture. With the vast amount of data we are collecting, we are positioning ourselves to harness artificial intelligence, as the scale of data exceeds what any individual can analyze. This should enhance our ability to improve yields, which inevitably improves our economics. Higher yields will allow us to tighten design tolerances further, paving the way for the next generation of product improvements and fuel efficiency, benefiting both our aerospace and gas turbine segments. The integration of automation and AI in our strategies will be advantageous for Howmet.

Congrats, Ken, on the retirement and the evolution of this financial model. I wanted to come back to incremental margins. Guys, you had this historical framework a few years ago of 30% to 35% on the incremental, and you've now created this kind of wall of tough compares, but you've now had 2 quarters in a row where you've had a well above the 30% to 35% despite comparing to well above that. And so I was hoping to better understand is price or productivity, the bigger driver at the moment. And then as you move into 2026, can you stay above that historical targeted range despite the tougher compares?

Yes, I'm going to avoid discussing 2026 for now. Any numerical estimate will always be a mix of various factors. In our incremental improvements, we have some advantages from increased volume, automation, yield, content, and pricing. However, the challenges we're facing include high labor intake, which requires significant training time and incurs recruitment costs, as well as an initial decline in yield from new employees. Moving forward, I anticipate that the impact of labor will lessen as our overall output increases. However, I believe we will need to hire a net higher number of staff as we progress through 2026, particularly at the beginning of the year when new equipment arrives, and as we prepare for an increase in 2027. If I had to estimate today, I would suggest we'll likely end up with a higher net headcount, which could put some pressure on us despite the expected productivity gains from automation and new equipment, leading to a much more automated environment than we had before. There are many variables at play, making it challenging to provide precise forecasts. Additionally, our content is set to improve next year as we transition to a new generation of technology for the LEAP 1B program during 2026. We also have the GTF advantage, which is currently produced in small batches but is expected to rise significantly as we head into 2026, aiming for a fuller production rate in 2027. With everything happening simultaneously, it is tough to provide exact projections. So far, we've managed reasonably well with strong incremental gains. If our EBITDA is at 29%, anything above that will be beneficial for the company. I’m optimistic we will exceed that next year, but I’m not ready to comment on whether we'll match our incremental gains from this year or if we will experience some flattening. Let's wait until February for more clarity on that.

John, I think you said CapEx will remain at high levels into 2026 as well as into 2027. So just to put a finer point on that, should we be thinking about flattish CapEx in those years relative to 2025? Or could that increase? And then does the mix of that CapEx shift more toward IGT and midsized turbines? Or is the majority of it still focused on aerospace?

In absolute terms, the majority of our spending will still be in aerospace, but the percentage mix may change. I believe that our investments in large and midsized turbines could represent a higher percentage than this year. I may have neglected to address a question regarding the economics of these turbines during the Q&A. Essentially, the economics for these turbines are similar to aerospace. If you look at our total and incremental figures for the IGT segment, both large and midsized, they are quite comparable to aerospace. It doesn't greatly matter which segment the capital expenditures go into, as both are strong. What matters more is the opportunities ahead of us. As I look towards 2026, we have a clearer vision of what we expect. Each time we have new discussions with customers—like my recent trip to Europe—I keep seeing more opportunities. This gives me confidence that 2027 will also see significant capital expenditures. This year, we've increased our expectations from what we thought would be around 350 to 370 to likely exceeding 400. Importantly, this will come with improved cash flow. I am excited about the possibility of deploying more capital next year. We don’t deploy capital lightly; it requires careful consideration of customer usage, commitment, and economic returns, along with our stringent criteria for investing new capital. I believe if we can invest in 2025, 2026, and 2027, that will be beneficial. We continue to see increasing opportunities to grow the business.

Yes. John, not to belabor the point, and I'll try to be quick here with the call closing out. But back to these incrementals I mean you're clearly benefiting from spares demand, a combination of legacy utilization, combination of durability issues. I mean, are you overearning on the aerospace spares now? And is that driving the strong incrementals? Does that normalize at some point as maybe some of these light work scopes or different kind of work scopes kind of trend back to normal?

Well, first of all, in the year, in the short term, pricing into the spares part and that OE part are exactly the same. Over a long-term basis, that are differentiated because of, let's say, parts going to pass model. So no, there's no case of the over-earning in the immediacy. If you go back to previous calls, I have said that what we see is our spares business in total increasing every year for the next 5 years, didn't really want to go beyond 5. We may discuss whether it's always going to be the same angle of increase, but there's no case that I can see where spares don't increase every year through the end of the decade. So that's pretty positive. Thanks, Mike. So it's 11:01. So Drew close the call.