HXL Q3 2026 earnings call transcript, October 22, 2026

Hello, everyone. Thank you for joining us and welcome to the HXL third quarter 2026 earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, please press star one again. I will now hand the conference over to Kurt Goddard, Vice President, Investor Relations. Kurt, please go ahead.

Lord. Everyone, welcome to HXL Corporation's third quarter earnings conference call. Before beginning, let me cover the formalities. I would like to remind everyone about the safe harbor provisions related to any forward-looking statements we may make during 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 earnings release. We will be referencing a supporting presentation today that is available on the webcast. In the earnings release and in today's webcast and the supporting presentation, we reference non-GAAP financial measures. Reconciliations to the most directly comparable GAAP measures are provided in the earnings release and in the appendix to the presentation. A replay of this call will be available on the Investor Relations page of our website. Lastly, this call is being recorded by HXL Corporation and is copyrighted material. It cannot be recorded or rebroadcast without our express permission. Your participation on this call constitutes your consent to that request. With me today are Tom Gentile, our Chairman, CEO, and President, and Jamie Coogan, our Chief Financial Officer.

The purpose of the call is to review our third quarter 2026 results detailed in our news release issued yesterday. Now let me turn the call over to Tom. Tom? Thanks, Kurt. Hello, everyone, and thank you for joining us today for HXL's third quarter 2026 earnings call. Beginning with slide four of the slide gap, increasing customer demand across commercial aerospace, defense, and space continues to provide a strong long-term outlook for the advanced lightweight material HXL provides. As commercial aircraft production rates recover, and we work

to capture defense and space growth, our focus is on executing the ramp to deliver for customers and capture the significant growth opportunities ahead. As discussed in our previous earnings call, third-quarter results reflected the typical seasonality we experienced during the summer months with extended European holidays. With a strong demand outlook in Q4 in 2027, we continued to return vital manufacturing lines to production and to recruit new employees to meet the higher production rates. While restarting production lines and hiring new workers to support the production rate ramp pressures margins in the short term, it positions HXL to benefit from greater operating leverage in future periods. HXL has a compelling value proposition with a broad and differentiated portfolio of advanced lightweight composite material solutions, decades of technical expertise, vertically integrated capabilities at scale, and longstanding relationships with leading aerospace and defense manufacturers. We are also building relationships with new market entrants, including defense tech, space and commercial aerospace companies. These strengths position us well as customers increase production and introduce new platforms that drive demand for HXL's lightweight, high-performance materials. In the third quarter, referring to slide five, HXL generated sales of $496 million, up 9% from the same period last year. Adjusted operating margins were 11%, up from 9.8% compared to the third quarter in 2025. And adjusted diluted earnings per share of $0.50 compared with $0.36

in the third quarter of last year. Turning to slide 6, commercial aerospace sales were $330 million for the quarter, up 21% year-over-year. Volumes increased across all our major commercial platforms, including the Airbus A350, the A320neo, the Boeing 787, and the 737 MAX. As we have pointed out previously, HXL is an upstream material supplier and generally ships several months ahead of final aircraft assembly. We manage the business based on production demand and purchase orders we receive, not reported OEM aircraft deliveries. The demand signals we see continue to support the production ramp and our current hiring plans. Consequently, we are reaffirming our financial guidance for 2026, with revenues between $2.025 billion and $2.15 billion, diluted EPS of $2.30 to $2.40, and free cash flow greater than $195 million. Specific quickly on the A350, purchase orders received through year-end 2026 support our guidance of at least 80 ship sets. Looking into 2027, current demand signals indicate around 100 A350 ship sets. As we prepare for that step-up in production, we will do so with a focus on maintaining the safety, quality, and delivery performance our customers expect. Turning to defensive space and other, on slide 7. Sales for this market were 166. billion dollars for the quarter. The year-over-year decline primarily reflects the previously disclosed divestiture of our non-core industrial business in Austria and closure of non-core industrial operations at our Leicester UK facility. These actions streamlined our footprint and increased our focus on niche industrial markets that value HXL's high-performance, aerospace-grade composite materials. Sales and defense in space were also impacted by temporary softness in space launchers and rocket motors in the US market.

A slow quarter for the F-35 program from timing and customer schedule shifts, and a slower quarter for the Rafale from summer sales seasonality. The defensive space market is a strategic priority for organic growth with its compelling long-term potential. Government budgeting, procurement, and program funding can take time to translate into production and ultimately sales, particularly for companies further back in the supply chain, such as HXL. We have strong positions across rotorcraft, fixed wing, and other programs. with traditional defense primes, many of which are expected to be in service for decades. Also, we are expanding our work with new aerospace and defense entrants. HXL's advanced, lightweight materials provide the high performance required for defense and space and platforms, and we are confident in long-term demand in this market. Taken together, these demand trends across our portfolio support a promising growth trend. As Airbus and Boeing reach their publicly announced peak production rates, we expect approximately $500 million So, let's see. in incremental commercial aerospace sales annually from our existing contracts compared to fiscal year 2025 sales. We also see approximately $200 million of additional growth opportunities across defensive space, regional, and business jets. As these higher volumes move through our existing capacity, we will realize better fixed cost absorption that will generate greater operating leverage. Combined with pricing increases as contracts renew, productivity improvements, and disciplined cost control, the production ramp provides

the path to approximately 18% adjusted operating margins before the end of the decade. We also see potential upside beyond that 18% as we focus more aggressively on pricing that reflects the value we deliver and the barriers to entry that exist to produce lightweight aerospace grade carbon fiber composite. I have asked Jamie to take the lead on driving a multi-year margin expansion initiative, which we will describe in more detail on future calls. Looking at capital allocation, our cash generation profile and our cash generation profile. allows us to invest in the business while maintaining a strong balance sheet. Following the increase in debt from our accelerated share repurchase last October, we are on track to return our leverage to our targeted range of one and a half to two times net debt to adjusted EBITDA by the end of 2026. Reflecting confidence in HXL's growth and cash generation potential, our board has increased the share repurchase authorization to $750 million from the $381 million remaining as of September 30th. of this year. We will evaluate share repurchases once we return to our targeted leverage range sometime during Q4 of 2026. Also, as we announced last night, the board has declared a quarterly dividend of $0.18 per share. On slide 8, turning to innovation, our team recently attended CAMEX, the largest composites and advanced materials show in North America. We engaged with customers, suppliers, and industry partners at the event, demonstrating how HXL's advanced materials

and vertically integrated operations support growing demand for commercial aerospace defense and space platforms. At CAMEX, we announced three advances across our honeycomb and prepack portfolio. The announcements highlighted how HXL innovation enables customers to build next-generation platforms that are lighter and stronger and can be manufactured faster at higher rates. This focus on material and manufacturing innovation supports broader adoption of HXL advanced composites and positions us to secure positions on future HXL. aerospace and space platforms. The lower image you see on slide 8 is an aerospace honeycomb that we recently qualified with an aerospace database called NCAMP, which is part of NIAR at the Wichita State University, which enables engineers at our customers and prospective customers to evaluate design-ready products. This is one example of how we are supporting new A&D entrants as we streamline the process for evaluating and adopting our composite solutions. To summarize before I turn the call over again. The third question. This quarter reflected normal summer seasonality, the restart of idle production lines, and our accelerated hiring to meet rising customer demand. At the same time, commercial aerospace sales volumes continue to increase with a 21% increase. The production rate recovery is taking hold, and we are continuing to focus on execution to meet the rate ramps. Our differentiated portfolio, technical expertise, strong global reputation, and deep customer relationships, combined with our global manufacturing footprint, positions us well to capture growth

improve operating leverage, and generate cash going forward. This supports our confidence in HXL's long-term outlook and reinforces our 2026 financial guidance. With that, I'll turn the call over to Jamie to discuss the third quarter financial results in more detail. Jamie? Thank you, Tom. I've now been with HXL about six months, and as you heard Tom comment, the key priority and focus for me is margin expansion. I'm working very closely with our global team to improve price realization while tightly managing our costs and concerns.

continuous improvement efforts to expand our operating margins. Whilst too soon to provide specific details and actions of these initiatives, we continue to see the benefits of price in our margins during 2026. Now turning to our financial results for the period, starting with slide nine. Third quarter 2026 sales of $496 million grew 8.8%. Strong commercial aerospace growth was partially offset by lower defense, space, and other sales. By market, commercial aerospace sales for the third quarter of 2026 were $330 million, an increase of 21% compared to the third quarter of 2025. Commercial aerospace comprised approximately 67% of the total quarterly sales. All four of our primary platforms grew year over year, including A350, 787, A320 NEO, and 737 MAX, as Airbus and Boeing continue to ramp their aircraft production. Sales for other commercial aerospace in the third quarter increased 1% year over year. Defense space and other third quarter sales of $166 million represented approximately 33% of total sales. Third quarter sales decreased 9% on lower space volume, the two fighter programs that Tom described, and the absence of sales from the industrial businesses we exited in 2025 in 2026. Lower space volume was largely attributable to lower launchers and rocket motors which are going through a temporary soft spot due to some unique industry dynamics here in the U.S. As a reminder, we have exited non-core industrial markets through the divestment of the Austrian industrial business on September 30th, 2025, and the winding down of the industrial business at our Leicester UK site earlier this year. Our industrial business is now solely focused on niche industrial opportunities

that demand high performance of aerospace-grade composite solutions. Gross margin of 23.3% in the third quarter of 2026 increased from 21.9% in the third quarter of 2025 on improved operating leverage and price realization. The use of hedges in procurement contracts continues to mute the near-term impact of higher oil prices. If oil remains elevated, the impact to energy and cost will be layered into our business over time. I would also like to remind listeners that HXL is vertically integrated, with value added all along the production process, and that we have a broad product line in addition to carbon fiber. AN is not a significant driver of our cost base at only low single digits as a percentage of sales. And of course, the flip side of elevated oil prices is that higher energy costs further drive the value proposition for lightweight HXL composites to support aircraft fuel efficiency. As a percentage of sales, selling general and administrative expenses were 9% in the third quarter of 2026, unchanged from the comparable prior year period. R&D expenses were 3.3% in the third quarter of 2026 compared to 3.1% in the third quarter of 2025, as we continue to drive innovation to position HXL to win work packages on next generation platforms, including the next gen single aisle aircraft under development. Foreign exchange remains a headwind year-over-year due to the weaker dollar. Third quarter of 2026 operating margin was negatively impacted by approximately 30 basis points due to foreign exchange.

Adjusted operating income in the third quarter was $54 million, or 11% of sales, compared to $45 million, or 9.8% of sales in the comparable prior year period. Adjusted EBITDA totaled $304 million, or 19.9% of sales, for the nine-month sentence. September 30th, 2026. This compares to $249 million, or 17.8% of sales, for the nine months ended September 30th, 2025. And as a reference, trailing 12-month adjusted EBITDA through September 30th, 2026, was $401 million. Adjusted EPS of 50 cents increased 35% from the comparable prior year period on volume and price, and was also supported by a lower tax rate. So I'll see you. Third quarter tax rate largely benefited from the implementation of tax planning strategies in the quarter, resulting in a true-up to our rate for the full year. And of course, a lower tax rate leads to lower cash taxes. Now turning to our segments. Per slide 10, the composite materials segment represented 79% of the total third quarter quarter sales and generated an adjusted operating margin. or 14.6%. This compares to an adjusted operating margin of 11.2% in the prior year period. The engineer product segment, which is comprised of our structures and engineer core businesses, represented 21% of total sales and generated an adjusted operating margin of 11.8%. This compares to an adjusted operating margin of 15.5% in the prior year period. net cash provided by operating activities in the first nine months.

2026 was $171 million compared to $105 million in the first nine months of 2025. Working capital was a cash use of $78 million in the first nine months of 2026 compared to a cash use of $64 million in the first nine months of 2025. Capital expenditures on an accrual basis for the first nine months of 2026 were $61 million compared to $50 million in a comparable prior year period. Now turning to slide 11. Free cash flow in the nine months ended September 30th, 2026, was $103 million compared to $50 million in the nine months ended September 30th, 2025. Leverage, defined as net debt to last 12 months adjusted ETHDOT, was about 2.1 times as September 30th, 2026, which compares favorably to the year-end 2025 leverage of just under 2.7 times. Leverage, defined as net debt to last 12 months adjusted ETHDOT, 2026, was about 2.7 times. We are on track to return to our target leverage ratio of 1.5 to 2 times during the fourth quarter of 2026. The company did not repurchase any shares of common stock in the third quarter of 2026, with the remaining authorization under our program as of September 30th, 2026, totaling $381 million. As Tom noted earlier, yesterday, the board of directors increased our share repurchase authorization to $750 million, and we will look to recommence our share repurchase. Purchase activity once we've reached our target leverage levels. In addition, yesterday, the board of directors declared an $0.18 quarterly dividend. The dividend is payable to stockholders of record as of November 2nd, with a payment date of November 9th. Finally, on slide 12, as Tom highlighted, our 2026 financial guidance is reaffirmed and unchanged. With that, let me turn the call back to Tom.

Thanks, Jamie. Let me close with a few key takeaways from the quarter. On page 13, customer demand continues to increase, and we are restarting idle lines early and investing now in hiring people to prepare HXL for higher production levels in 2027 and beyond. These hiring and training costs do impact near-term margins, but they position us to execute the production ramp and deliver for our customers. As higher volumes move through our existing capacity, we will benefit from improved cost absorption and operating levels. Importantly, we are maintaining our fiscal guidance in 2020. We see the production rate ramp up continuing into 2027 with very strong demand. Our initial outlook on the A350, our largest program, is that we will deliver around 100 chipsets in 2027. Approximately a 25% increase over 2026. We also remain on track to achieve our target leverage of less than two times net debt to EBITDA, and our Board of Directors has approved an increase in our share repurchase authorization to $750 million.

As the OEMs reach their target levels of production for each program, we have a clear path to return our margins to the pre-pandemic level of 18%, with upside based on the price realization that we are now seeing in the market. With our differentiated portfolio, technical capabilities, and strong customer positions, we are confident in HXL's ability to convert this growth into stronger margins, cash generation, and long-term value for our stockholders. With that, Hilary, we are now ready to take questions.

We will now begin the question-and-answer session. For the courtesy of others who would like to ask a question, please limit yourself to one question and one follow-up. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, please press star 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please press star 1 to raise your hand.

Your next question comes from the line of Gavin Parsons from UBS. Your line is open. Please go ahead.

Got it. Thank you. Okay. You're welcome. Your next question comes from the line of Scott Micas from Mellius Research.

Your next question comes from the line of Richard Safran from Seaport Research Partners. Your line is open. Please go ahead.

Of David Strauss from Wells Fargo. Your line is open. Please go ahead.

Thanks, Maureen. Tom, on the A350 and your forecast to get to 100 in 27, I would have thought if Airbus is actually going to get to 28, or sorry, 12 a month in 2028, that you would actually, given your lead times that you know, we would be looking at actually more than 100 chipsets in, in 2027.

Well, what I would say is we've looked at it, and that's the number that we think is consistent with that target. And it'll go up a little bit more in 2028. When they say they're going to get to 12 aircraft per month in 2028 won't be on a full year run rate, you probably won't see that until 2029. So if you think about 132 in 2029, which is 12 aircraft per month. for Airbus, you know, with the one month off in August, we see the run rate in 2028 and then feeding it to 132 and 29 as consistent. So 100 next year is right in line with that outlook. Okay, and a quick follow up. I don't know if you wanted to offer any comments, you know, as we're looking at 2027, you know, consensus right now is for low double digit revenue growth. And I think so. we're kind of in the low 30% incremental margins. Is that a, is that a reasonable framework to think about for, for 2027 at this point? Yeah. Yeah. So I think, you know, as we, we're, we're going through right now, pulling together our expected performance for 2027, we wanted to make sure we talked about our expectations around 8, 350. He said, you know, so we'll have more information on our full year outlook and expectations across the portfolio products. when we issue our results for 2020, uh, when we issue results at the end of the year for 20. 26. So more to come on that. But, you know, generally speaking, we expect revenue growth into the next year. We expect that to result in some higher absorption of the fixed cost base over that period of time. And we're going to see some of the near term headwinds that we have today will result in some favorable performance as we move through next year. But we have to remind folks that, you know, some of the hiring that we've done here in the second half of 2026 is going to continue to provide a little bit of headwinds going into the first part of the year, given that, um,

there's some training and inefficiencies that come with onboarding the number of folks that we're bringing on board. All right. Thanks very much. Yeah.

Your next question comes from the line of Jason Holcomb from Morgan Stanley.

Hi, Dom. Uh, hi, Tom.

Hi, Jamie. Can you talk, can you talk more about what you're seeing for demand and for Q and 20 and 2027, but it's driving the pull forward and hiring and the new lines coming on. Is it primarily the higher commercial rates? Is it a greater pull from maybe defense and space? I mean, any additional details you can share would be great. Thanks. Yeah. Well, on the commercial programs, um, let's just go through them. A350, they, in the last quarter, they were at about seven per month. And we expect that to continue into the fourth quarter, maybe tick up a little bit, uh, as, as Airbus pushes for the fourth quarter. And then I explained the outlook for 2027 based on the different triangulations that we do. On the 320, Airbus is running about 55. That probably will step up. Airbus is still saying they're going to get to 870 deliveries for the full year. So they're, they're pushing hard in Q4. And they said that everything they need to produce those aircraft is already in their final assembly line, uh, in Toulouse and Hamburg and Tianjin and Mobile. So, you know, so I, I, I think they have good confidence in that, uh, in Airbus, we actually saw a pull of 10 on the 787, uh, in the last quarter. And we've been calling 90 to a hundred for the year, and they're on track for that, maybe even a little bit above. And on the 737, they've been pulling at about 41 for us. We're estimating at 500 for the year, and they seem to be on track for that, maybe even a little bit higher. So, so on all the commercial programs, we see fourth quarter continuing in the, in the same trend with, with some strong upside. Boeing and Airbus always close the year strong, and we don't expect this year

to be any different. And then we also expect Q4 to be a little bit better on, on defense and space. As we said, our fighter programs had off, off quarters. F-35 was kind of soft, but you just saw the big deal this morning on Lockheed, 10 years at 156 aircraft a year. So, you know, we're not worried about the F-35 being soft in a quarter. That's just some choppiness and that's not going to continue. So we've got great confidence in, in, in defense and space continuing to increase. What we saw, as I mentioned in my, in my comments, and so. phase, for example, is launchers were pretty slow. Launches seem this year to be a little bit lower than they were last year. SpaceX has been, you know, the dominant player on that. They don't use much composite today on their launching systems. We have some content, but not a lot. And the other launchers have been slower this year as they, as they regroup for some, from some issues that they had. And, and so we expect that to start to pick up, if not the fourth quarter, then into 2027.

Thank you. Appreciate it.

Your next question comes from the line of Noah Popinock from Goldman Sachs. Your line is open. Please go ahead.

Yeah. As we go forward, we don't need to do any significant capital expenditure until the early 2030s if rates go up on the A350 or when we start to contemplate the next generation single aisle. But for the near term, it's going to be in the range that we've described. And Tom, just on P&L spending. So in the quarter, the discussion of incremental spending related to hiring and other drivers of forward growth. And then you guys have... Discussed, you know, maybe there's a little bit more of that in the near term that maybe pressures what the incremental would otherwise be. Can you quantify over the next few quarters, how long do you have to do that? And what does it do to the incremental or the year-over-year change? Or what is it in absolute dollars? Any framing you can help with for modeling the near-term margins? Right, right. Well, as we said, for this year, we're holding... into our guidance. And so that gets us to about, you know, 13% for the full year in terms of operating margin. And in terms of incrementals, we've always said mid-30s, mid-to-high 30s, and it's going to end up in that range. And then going into next year, we expect with, you know, continued operating leverage as these hires come on board, that will also support the margins. And as Jamie said, you know, we've got a clear path to the 18%, but we're going to be, you know, looking at higher potentially up to 20% as we go forward.

We're going to be, you know, looking at higher potentially up to 20% as we go forward. It'll be a straight line from 2027 as the volume comes in.

Your next question comes from the line of Ken Herbert from RBC. Your line is open. Please go ahead.

Your next question comes from the line of Ronald Epstein from Bank of America. Your line is open. Please go ahead.

HXLs at because it's five times stronger than aluminum and 30% lighter. And so it does help increase range and reduce fuel consumption. And it also enables architectures that promote low observability. Got it. Got it. And then in the press release and in the presentation, you guys mentioned that there was a little bit of softness with launchers and rocket motors. It seems a little counterintuitive with what's going on. Just curious if it's a timing thing or what's going on. Well, as I was saying, launches this year look a little bit lighter than last year and most of them are SpaceX. And SpaceX has been pretty public about not using composite yet in their launch vehicles. And so some of the other launch launchers that use a lot of carbon fiber composite haven't had as many launches this year if you look at the numbers. And so we have bigger ship sets on some of those other folks. And for various reasons that have been well documented in the press, they are in a pause. That will start to pick up as they resolve the issues that they encounter. Got it, got it. Thank you. Okay, thanks.

Your next question comes from the line of Pete Skibitzky from Allen Beck Global. Your line is open. Please go ahead.

Hey, Tom, you alluded earlier to the new Lockheed F-35 contract, the 10-year. Just curious. I don't know if they let suppliers in yet, kind of in terms of the terms and conditions as they were working the contract with the Pentagon or if it was brand new to you today. But I was just wondering, conceptually, how you think about the impact of HXL from that level of visibility on that program? Oh, yeah, we don't know yet. I mean, I literally just read it before I came onto this call in the trade press. You know, 10-year deal that is looking at 156 aircraft per year. So it goes out quite a long way. Don't know what the conditions are and how those will flow down. I assume there'll be pretty typical. The program's already been in existence for a long time. But I thought it was just encouraging is that there is a huge demand signal. It's multi-year. And that program is going to extend many years into the future, which is good for us because we have a significant position on it. But it's great, I think, for our defense forces and our warfighters, because that's a very capable aircraft, all three versions of it. So that was great news to read this morning. Okay, great. Just one follow-up for me, notwithstanding your prior comments about production rates on the commercial side, but you had the Airbus strikes in Spain over the quarter or so, and then obviously some riot issues in France. Have you noticed any incremental changes to demand pull that you thought might be a result of the strikes that'll be, you know, now that they're settled, that they would kind of, you know, accelerate now that they're complete? And then would the riots, do you think, impact either your supply chain or your French facilities at all, do you think?

Great. Well, going in Spain, as you said, they... We did resolve the labor issues, and we didn't see any impact at all on production or pull. And similarly with the situation in France, we haven't seen any impact as a result of that. We obviously will monitor it, and we read about it in the press. We talk to Airbus very frequently, but so far we have not seen any impact from those issues. Okay, great. Thank you. You're welcome.

Your next question comes down the line.

maybe if you could give us an update, like through Q3, how many ships that equivalents do you think you've actually moved into the channel? And just, again, fundamental question is really around like confidence that what happened last year doesn't happen maybe early next year where, you know, you're shipping ahead and then they just kind of pull back or keep you flatter for longer. You know, what gives you that? Thank you. Thank you. Well, so as I said last quarter, they pulled at about seven. So that would be 21. So we've had probably about, you know, the equivalent of 60, 65 already pulled for the year, which, which leaves them with another 20 or so for the last quarter, which is very achievable at a rate of seven. So, so we see them perfectly in line with, with what we have called in our guidance. And we, we talked to Airbus, we talked to all of the locations that I said, there was about 50, 15. You know, some of them are part of Airbus, like Airbus Atlantic, Mount Kinston, or Northrop in Salt Lake City, or Airbus air structures in Germany. So a lot of different locations that are getting material, we talked to them and we talked about their outlook. And that's why we have confidence in, in the fourth quarter outlook. In terms of inventory in the channel, you know, one of the things that Airbus has said is that the there, it's been interiors and seats that have been one of the drawbacks. Well, you can build a plane without interiors and seats. And then when they come, you can finish the airplane off and deliver it. And so there's, there's no doubt some of that that's, that's happening. But as we said, we're not too concerned about destocking in 2027, because we see this demand signal of 100 units next year, an increase from this year. So we see strong demand pull throughout the year, year to date, as I said, in the 60 to 65, strong demand signals with firm purchase orders.

for Q4, and then equally strong demand signals going into 2027.

I guess what I'm asking is how does that differ than how you felt a year ago? Because if you remember, there was a similar dynamic. Was there just not the same demand signals in late 25 or 2026? Well, demand signals in 2025 were the exact opposite. When we were in the middle 2024, indications that 25 might have 98 minutes, and then it dropped to 94. We built our plan at 84, and eventually they delivered 57. So it kind of dropped throughout the year, and we could see that. And we reflected it. If you recall, we actually dropped our guidance twice in 2025. This year, we've seen the opposite. We've seen the demand signals continue to strengthen and go up as we've gone throughout the year, which is why we pulled the trigger on all the hiring and the startup of the lines, because we're seeing the demand and we're leaning into it. And that's the big difference is last year was the other way. This year, it's all positive and growing. And the production rates have been increasing exactly in line with their public statements. Thanks a lot. I appreciate it.

Your next question comes from the line of Miles Walton with Wolf Research. Your line is open. Please go ahead.

Your next question comes from the line of Sheila Kayaolu from Jeffries. Your line is open. Please go ahead.