Hexcel Corporation (HXL) Earnings Call Transcript & Summary

[Audio Gap] Webinar today. My name is Darren Waltier and I'm a Business Development Manager here at Hexcel based at our aerostructures facility in Seattle, Washington. And as we prepare our presentation today, please answer the poll question as we get ready. This is our second webinar in a series as we maintain our engagement with existing and new clients in many market spaces that we support today. In today's webinar, we will discuss at a high level, the Advanced Air Mobility and Unmanned Aerial Vehicle markets. The UAV market is growing rapidly for both defense and commercial applications, ranging from small drones to large cargo vehicles. The AAM market is emerging quickly as the next-generation of efficiently transporting people on cargo in urban environments and underserved regions. Both markets require advanced composite materials for lightweight and efficient operations. At the same time, both industries have requirements that are different from traditional aviation, including production volume, scalability, low acoustic signatures and constantly evolving sensor and cargo packages. Today's webinar will cover the structural material challenges, opportunities and solutions for the UAV and AAM industries. Please feel free to ask questions via the chat window throughout the presentation, and we'll field as many as possible at the conclusion of the presentation. We also hope to connect with anyone interested in follow-up calls and presentations in the days following this webinar. Leading our presentation today will be Mr. Imad Atallah and Dr. Robert Yancey. Imad leads Strategic Marketing for Hexcel's America's business and has been with Hexcel since 2011. His experience includes leadership roles at Hexcel and Honeywell in business management, marketing, product management and engineering. He has technical experience in various aspects of aircraft design, such as avionics and aircraft systems, in addition to material science and aircraft structures. He holds a Bachelor of Science Degree in Mechanical Engineering from the McGill University. Bob has held numerous roles in his career, including research, technology development, sales, management, business development and executive roles. He currently leads Business Development for Hexcel in the Americas, which includes advanced materials, manufacturing and engineered products. He has a technical background in composite materials, composite mechanics, micromechanics, design optimization, additive manufacturing, finite element modeling and nonobstructive evaluation. He holds a Bachelor of Science Degree in Aeronautics and Astronautics from MIT, Master of Science Degree in Engineering Mechanics from Virginia Tech and a PhD in Materials Engineering from the University of Dayton. He's an AIAA associate technical fellow in Industry 4.0 Emerging Technologies lead for SAMPE. So with that, I'll turn it over to Imad and Bob.

All right. Thank you, Darren. Thanks for the introductions. Hello, everyone. Good morning, good afternoon, good evening. Thank you all for joining us. What we're going to do today is give you an idea of our thoughts on the UAV and AAM space. We're going to start with giving you a little bit of a market overview. Goes through what we understand the needs and challenges for composite materials are and dive into several areas that we think will be very helpful and insightful for everyone involved in this space to understand. We're going to talk a little bit about acoustics noise suppression, fast rate or high rate matrix systems. We're going to look at the thermoplastics versus thermoset question, talk about modeling and simulation, give a little bit of an update on engineered structures and tooling, additive manufacturing and electromagnetic material. We are excited about this market space. We have a team that we have formed to focus on this area in light of all the challenges that we have now, Hexcel has been still committed to move -- bring this forward and committed to this team. Really, the purpose today is to shed light on those key elements of materials, design and structures, manufacturing, really give an overview and highlight what Hexcel is doing. We're not trying to prescribe a particular solution, but give the audience here an idea of what are some of the things to consider while thinking about composite materials and structures. I do want to highlight resources for you. You can check out our website for really good information. Good technical resources, both about the Urban Air Mobility space and UAV space. Here are the address for the links. So please check them out. There's good information out there as we go through it or after the webinar that you can have access to. So just a little bit of terminology first. We're going to talk about Advanced Air Mobility. This is a new term that NASA had adopted and really did acknowledge that the Urban Air Mobility that everyone's familiar with is really focused on the urban space. But when you think about this industry, there's a variety of different segments to it beyond what we really think of urban. So we think that the Advanced Air Mobility term is pretty impactful to look at this space. The package and cargo deliveries, regionality of network, intercity potential, all those things are important, and it's important really to get it right because it will impact segmentation and making sure that the right solutions have been developed for each case. So you can see that different vehicles have different uses, depending on where the application is. And conversely, we think it's important to highlight the Agility Prime effort that the Air Force had launched earlier this year. And it's really to accelerate the commercial market of AAM. The main idea there is to leverage the resources and capability of the United States government really to bring together industry and operators and enable this industry. And the key thing is do it without tailoring it to military requirements. I think that's going to be key. So similar to the AAM kind of view and the picture that you saw, you'll see that there's different use cases. You'll quickly realize that the application can be varied. There's going to be common denominators when it comes to material science and composites and structures, but there are also some differences. Those will drive different solutions to people, designs and assumptions. What is clear really for us is that the UAV concept is broadening. Really autonomous technology, aerospace management technology is making this happen. So you can see it throughout the different layers here is that the different technologies are enabling different uses and volume, obviously, is going to be a big component just similar to the AAM space. So this is more for a background really. The main point that we want to make here is that different missions will require different materials requirements. There will be commonality, but it's important to understand as we think through this. For us, we're not trying to kind of present a full market study here. Most of the audience is probably very familiar with all of those. For us, the AAM, UAV problem statement, regardless of kind of how you look at it, it's clear around one thing, the demand is large and really the technology is here. The question will be how we execute on it. That being said, the demand is driving the need for materials and structures and the manufacturing processes to support a very high build rate, much higher than what's common today in the aerospace industry. A lot of people talk about more similarities with the automotive industry. It's actually somewhere in between, and that's going to be a key theme to think about as we go through this. So the way Hexcel looks at it is really around those imperatives. We think higher build rates is important, lower material and processing cost. And I'll just plant a thought in everyone's mind here is that there's going to be discussion around material cost as well as processing costs to keep in mind. And really aerospace grade and quality is important. The FAA, EASA and certification authorities have made it clear that this really needs to be safe and high integrity to fly. The pillars for us is really efficiency, reliability and being cost effective. So those are the driving elements for us as we think through this space. So a little bit of time line. And again, what we are -- we're not trying here to put specificity in those dates, but what seems to be the consensus around the market analysis is that there's going to be a variety of vehicles that are going through a certification process. There seems to be a race right now to try to get certification in what we're seeing, the 2021 to 2023 time frame, potentially some commercial flight for what we're calling EV tolls or electric vertical take-off lift vehicles. But the consensus seems to be that any large-scale operation is really around the 2030 time frame. Now there could be a debate on those dates. But really the point for us is it's being organized in what we're calling Phase 1 around that early certification and getting to kind of a first commercial flight and a Phase 2 that's going to support the high rate adoption of these vehicles. So what's really important for us here to think about is there will be a variety of vehicles that are going to be certified, so the early time frame. There's going to be 2 phases. And rate and costs are going to be critical for that next phase. That's where technology is going to have to be supporting those elements. Another key thing to point out here is that the initiation or the discussion that needs to support that next phase really need to be happening now. When you look at the long cycle development for some of these elements, that's going to be really important to understand. So as we are focusing on getting vehicles certified with what we are thinking is today's technology and existing qualified materials, databases, in parallel to that, we need to be thinking about how to bring new technology for that larger scale operation. So thinking about Phase 1, anyone that's kind of been involved with material certification, will know that qualification and certification are key. Traditionally, composite materials are developed to undergo really long series of testing and validation to ensure that they're performing as expected and safe to use. Everyone knows that, that process is long and costly. The data that's generated from this extensive testing is what is used to support the certification of the vehicle or the aircraft. We think that both the AAM and the UAV space is going to require the material composites -- element is used in structure is performing as intended, obviously. However, there will be different requirements. Everyone's talking about beyond visual line sight, flying over a populated area. And all of that will come into play in the decision-making process of this certification path. The bottom line in this is really that collaboration with the FAA, EASA and the local certification authority is really key depending on where the application is. That's really recommended in any approach. The other element that we're going to cover here is that the modeling and simulation is going to be key in developing the right materials and design, and that's going to be key to shortening the development cycle. So when you think about today's certification path, having materials that are already qualified and data available is really key. And the element here is that it's going to reduce the risk, it's going to reduce the cost, and it's going to get the vehicle manufacturer to that certification and qualification step a lot easier. There are a lot of these materials that are available. There's a lot of data that is available. I show here, obviously, the IR group, at Wichita State University probably has the biggest database of available materials out there. It has several Hexcel material as well as some of our colleagues and other material design companies. So for us, we have probably the broadest used material out there with the HexPly 8552, epoxy matrix system, both with an intermediate modulus fiber, IM7, as well as high-strength fiber, AS4. Those are very broadly used materials. They're both available in unidirectional tape and reinforcement fabric. And those materials are available in that database. And the other thing to note is we have a ton of data that we have also produced over time that can be made available. So as companies are thinking about using different types of materials, best thing is to talk to us about what are the constraints, what are the needs and we can come up with kind of the right set of materials, data that will support you in reducing the cost and the time line risk to certification. Now when you think about Phase 2 a little bit more, the materials and structures approach needs to combine the aerospace category and quality and material integrity with a higher rate, lower cost and high-quality of the automotive processes. We talked a lot about volume. We talked a lot about what the UAM space is going to enable. It's going to be in volume somewhere in between that aerospace and automotive kind of processes. The Hexcel advantage is really -- is we supply materials into both. So we understand what are the critical elements for both. And our team that's informed and our focus right now is to come up with the right solutions in between those spaces. The comment that resonated is a comment that Dana Jensen had made, of Agility Prime, is that there are industries that produce aerostructures and actuators, but they're too early for these applications. And conversely, there are automotive solutions for energy solutions, but they're not exactly optimized for the way they should be for [ EGITAL ]. And the key is that these vehicles occupy that kind of small space in between helicopter, airplane and auto that makes it tough to build a supply chain. Now with our experience, we think that, that's really what's needed and we can bring both of those to come into play. So we think that the intersection of aerospace, automotive brought by technology is kind of how to think about it. So diving in a little bit more, and we'll get into each of those areas as Bob walks through this. When you start breaking down the different components and the different needs for those vehicles, you'll start seeing that there's different type of functionality, different type of technology that's coming in play. So it's not going to be simply about one thing. It's not going to be simply about tape or about thermoplastics or about fabrics. There's going to be a variety of different elements and our experience across primary, secondary structures, rotor blade materials, interiors and seats, brackets, ducting, parts manufacturing, our experience in engine in the cells, we think that what's going to happen is there's going to be a variety of threads into the composite materials and structures that's going to be key. So when you think about fast rate, the material space is really set between what we call thermoset prepregs and thermoplastic prepregs. The buzzword seems to be in the UAM space is thermoplastic. Our experience has shown that there will probably be room for both of those materials, depending on what the use is and the need is. But those are going to be key things to think about when you think about high rate. The value proposition for composite materials is clear. We understand how these -- that we're bringing the cost down and enable the parts to be manufactured and the expectations of the high rate. So we're going to really be managing the material science and the formulation, as well as the parts and manufacturing processes that's on the right side of the slide here. The thermosets have been the composite of choice for a long time. They are attractive in aerospace for highly stressed parts, high carbon fiber volume, better adhesion to fibers, high temp resistance. But thermoplastic products do bring in a lot of value that we'll cover here in the next few slides. So we think that it's important to distinguish the difference between the 2 and understand the use that is intended. For Hexcel, to be frank, we were late to the thermoplastic development. We started about 2, 3 years ago, we launched a joint venture with Arkema. That brought in a lot of experience of the thermoplastics polymers. We do -- we have observed as well as some of our customers that there has been a clear advantage of the unsized nature of our carbon fiber in terms of [ impregnation ] with thermoplastics polymers. So we think that, that's a key advantage. But the key theme is to recognize the need for both and what's going to bring the advantage into the application, and Bob will cover that in a little bit more detail. So when it comes to carbon fibers, I won't cover this in a lot of detail. Hexcel has the broadest range of carbon fiber used in aerospace. There's what we call high strength, high modulus and several solutions that are more on the lower cost that serve specific needs and purpose. Really, the message here is that there's a variety of potential material solution for use, and it's really through the discussions and the engagement with the material designer that you're going to come up with the right solution. Now, so I'm going to end it on a couple of items before turning it over to Bob. Noise supression is key. I think everyone that's been involved in this space understands that. The adoption -- the public adoption around urban areas is going to be key. One of the things that we've done in the engine in the sales marketplace is we've developed a product in commercial aviation, that's called Acousti-Cap and it brings a really double degree of freedom, multi degree of freedom, triple degree of freedom solutions into the honeycomb structure around the cells. Now as you know, suppression of noise is going to be more complicated as you have open rotors and different technologies, design of the blades themselves comes into factor. Where we think that we can help is really around the shielding. So applications where you have ducting and shielding, we think that this is a product that's going to be very key in having significant reduction on noise. We've seen that in the commercial aviation space around 40% noise reduction on the platform that it's on. So that's going to be a key element to consider. And since we're talking about honeycomb, there is a variety of products that we have around honeycomb structures and honeycomb types, interiors that's going to be a key element primary and secondary structure in any movable surfaces or housing in the cells. So something to keep in mind. So as I turn it over to Bob here to get into some of those key areas, there is a poll that should be on your console. So we feel free to go head and answer that poll as we move on into the details. Go ahead, Bob.

Okay. Thanks, Imad, and thanks to all that are attending from wherever you are in the world. So let me start off talking about high-volume automotive applications. As Imad pointed to, the industry will need aerospace grade materials, but at automotive like volumes. And so this slide is talking about our M77 product, which is a Snap-Cure resin system. You can see 90-second cure time. It's got capabilities for automation. This product has been -- was developed for high rate applications, but we have current customers in the UAV space that are using this material. And it has a lot of great advantage, excellent mechanical properties and fast cure time. So that's one of the solutions that will help address the rate issue that this industry will face. I do point out that there is a video on our website. If you go into M77, you can see that, and actually showcases as well as talking about the product, talks about a company that makes skis using this product, and you can see a demonstration of how it's used in a high rate volume application. Now we will continue to develop this product. So as you can see on the chart on the right, I've got cure time versus cure temperature. And cure temperature relates to the glass transition temperature. So that relates also to the temperature range and in which the material can operate. So you see M77 there. We have active development on a version of that. We call M-701, which will have a higher glass transition temperature, but a slightly longer cure time. But then we are continuing to develop with the goal of having a high glass transition capable material with a cure time that's at the same level or possibly faster than the M-77 product. And our goal out of this is to create an aerospace grade material that can cure quickly, which will be very attractive to both the UAV and the Advanced Air Mobility markets. Okay. In addition to fast cure resin systems, we have very active efforts in infusion. So -- and there's 2 products that apply to this. So we have the HiTape and the HiMax products. HiTape is a unidirectional tape and HiMax is a biaxial noncrimp fabric. Both of these have -- are essentially just the fiber, but they have a thin thermoplastic veil on them that allows people to be able to lay-up this material and the thermoplastic veil allows it to tack down so that you can build up a dry fiber structure. And then we have resin processes -- resin materials and processes for infusion. So this is vacuum-assisted resin transfer molding. So we have the RTM6 and 10 78 (sic) [ M78 ]. And this is a very efficient way to lay up complicated structures. So the dry fiber materials can be laid up very quickly if you're using an AFP or ATL machine. They can often run at twice the rate normally because they don't have the resin impregnated in it. So they can lay that up quickly and then infusion is a rapid process to be able to infuse the resin into the part and cure it all in a single step. We do have a facility in Seattle, Washington, where we can make parts, but we can also develop processes for particular applications in this space. And so if you're interested in exploring our infusion technology more, get in touch with us, and we can introduce you to the folks in Seattle that are doing this work. Next slide. So for Advanced Air Mobility, they will carry passengers, and so they will need materials for the interior cabin that can meet both the structural and environmental requirements for interiors. So we've all flown on airplanes. We understand the materials that are used on the interior. There's a couple of things happening in the industry. One is there's a lot of phenolics that are used currently in aircraft interiors. And phenolics have some environmental concerns with some of the materials that are used to create the phenolic and so there's a movement to get away from phenolics in the interiors. And a lot of the -- most of the composites that are used for structural applications in aviation today are thermosets which often do not meet the flame, smoke and toxicity requirements for the interior, called the FST. And so we've been actively working on a thermoset material, epoxy material, that gets away from phenolics and can meet the flame, smoke and toxicity requirements for the interior cabins. And so we have that available now. We're just introducing that to the market. Next slide. So it's called M95, and it is an epoxy resin, cures in about 20 minutes. It can be used in a press hot loading, so it doesn't require an autoclave. No post cure is required and suitable for AFP and ATL equipment and meets all of the FST requirements in interiors today. Next slide. Okay. So Imad touched on thermoplastic composites. There are some areas -- there are some technical drivers of interest in thermoplastics and a lot of talk about thermoplastics for both the Advanced Air Mobility and the UAV industry. So the technical drivers are increased toughness, improved impact resistance. Since they can be heated and reformed, they have some advantages in terms of repair and maintenance, and they are more recyclable than thermosets. So those are some of the technical drivers that are raising the interest in thermoplastics for these markets. The economic benefits is generally thermoplastics require less cost for manufacturing. They quite often can be manufactured at higher rates. They don't require autoclaves which allows you to increase your production rates, lower facility costs, i.e. the material can be stored at room temperature and doesn't require a freezer. So those are some of the economic benefits that get people to look at thermoplastics. Next slide. So there's a -- it's an interesting dynamic. So what I've got on the left is material cost versus manufacturing cost. So today, thermoplastic composites are higher cost than thermosets. And the volume today in aerospace is relatively small. So the view is that as the volume increases for thermoplastic composites, the cost of the material will go down, and I'm sure that, that will happen. If you look at thermosets, thermosets have been developing -- Hexcel has been developing technology for out-of-autoclave and Snap-Cure systems, which is driving down the manufacturing costs. So it's actually a complex business trade-off and it's highly dependent on the application, on the use, on the volume, on the types of parts that you need to make. And so if you're looking at thermoplastics, but not convinced that, that's the right solution, encourage you to come and speak with us. We're agnostic. We supply both materials. We're going to help you develop the right business case and choose the right material for your application. And as the technology and the volume changes in these materials, the choice of material may change and we can help guide you in choosing the right material for that and for your application. Next slide. So one of the challenges today with thermoplastics is that -- and it's listed as an advantage, is that since you can reheat the material and reform it, it is amenable to welding. So you can take 2 thermoplastic composite structures and weld them together. But unfortunately, to date, the quality at the weld line has not been up to what is required. So the goal is to be able to get to about 90% of the strength of the thermoplastic composite structures that you're trying to join. But today and a lot of times that strength has been in the 60% to 70% range. So it's been a limitation for application of thermoplastics. We have worked with partners. So the Welding Institute in France, Institut de Soudure and Arkema, the thermoplastic material provider and also STELIA Aerospace in France have worked together on a project to develop a welding technique that allows for high-strength out the weld line. And it's quite advanced. We will likely do another webinar on this topic so that we can do a deep dive on this, but pleased to say that this team received the JEC Innovation Award this year for this technology. Next slide. So as I mentioned, the goal is to be able to get the strength at the weld line of 85% to 90% of the reference thermoplastic composites that you're joining. And a lot of the testing to date that's been done on this project has actually showed the failure located in the substrates and not at the weld line, and we are achieving 85% to 90% of strength in that. So it's a really promising technology. There's more work that will be happening over the next year to test this out on various structural configurations. And like I said, we'll likely hold a webinar in the near future to explain this technology in more detail and have our partners on the webinar that can explain the technology that's been developed. Next slide. So some of you may have attended our webinar a few weeks ago given by Sanjay on modeling. I just pulled a few slides from that webinar to talk about the importance of modeling and simulation in both the development and materials and the use of materials and structures. If you're interested in more details on this, you can go to our website and be able to view that webinar recording. The point here is that we are a materials company, and with that, we need to be developing the materials all the way down to the molecular level and then being able to scale that up to a macro scale structures model that somebody that's designing an aircraft can use in order to be able to get the design right and make sure that it's going to meet the requirements -- structural requirements of the vehicle. So with a combination of commercial software and some in-house routines that we've developed, we've developed that connection from atoms to airplanes to be able to use the molecular modeling and constituent microscale modeling to help develop materials given a particular structural requirement or a material requirement, and then be able to get that material data in a form that can be used by the designers and the analysts using that material in their structure. Next slide. And the goal of this is really to speed up both materials development and materials adoption. So by incorporating this in a simulation virtual framework, we can iterate much faster, so we can do things like optimization or design of experiments to be able to play with different parameters that we have at our disposal, both in the materials development and the structural configuration to be able to come up with materials and structural designs that meet those requirements. And it just will accelerate the whole materials development and getting those new materials in a form such that designers can design with them with confidence. Next slide. In addition to being a materials company, we also do engineered structures work. So we do engineered core work. So the honeycomb material that Imad talked about often needs to be shaped and formed. And so we have those capabilities. And then this is showing our facility in Seattle, Washington, where we develop and produce aerostructures. These are high-end aerostructures used by premier OEMs in the world. We have -- it's a large facility, 400,000 square feet. We've got kitting and cutting capabilities, advanced machining capabilities, several autoclaves, ovens and advanced non-destructive evaluation technology as well as our infusion lab. And so we are talking with a number of companies in the UAV and AAM spaces who need a partner to help build the structures. They will design them. And so we can provide both the material solutions and the structure solutions for these markets. Next slide. I also want to highlight technology that we introduced several years ago called HexMC. So the idea here was -- is that Hexcel has a number of materials that are in use today in aerospace that are well understood, that they're qualified and certified, but looking for applications where they could be used in more forming type of applications. And so the HexMC is taking standard tape that we are producing, chopping that up into segments that might be 2 to 3 inches in length and then forming that in a random manner into a mat, that can then be used in a forming operation. So you can see in the upper right, the window frames on the Boeing 77 use HexMC. That would be difficult to lay-up using an AFP or ATL machine, but they needed the lightweight and the performance on that. And so HexMC was a great solution to be able to use that material and be able to use a thermal forming process in order to be able to create the structure. And so we can use that technology again to address the rate issues that this industry will need where you need aerospace grade materials, but you need to be able to form complex parts in a rapid fashion, and this is a great solution for that. Next slide. HexMC can also be used for tooling materials. And so we call that HexTool. So again, it's using the HexMC material to rather than creating a part to create a tool. The nice thing about HexMC for tooling applications is that it's much lighter weight than the traditional material used for tooling, which is in bar. It has a similar coefficient of thermal expansion as the material that you're going to use to produce the parts so you don't have issues with mismatches and thermal expansion. We can lay up the material very quickly. It's machinable. And so it turns out to be a really excellent material for tooling, for creating your composite parts. Next slide. And here's just a case study, CFAN. They make the fan blades for several engines. As you can see here, they went through an extensive evaluation of composite tooling technologies, chose the HexTool material. And so that's used for all of the tooling for these fan blades. They found that it has very high levels of dimensional stability and very good durability. And they were able to use this tool material with no real change in their standard operational practices. And as I mentioned, it's got excellent thermal properties that match very closely the material that you're going to be producing and reduced weight. Next slide. So I want to shift now to HexAM. This is our additive manufacturing technology. As you know, there's lots of buzz around additive manufacturing. And so we've developed a technology that uses our milled carbon fiber loaded into PEKK, which is a high-performance thermoplastic. And then use a selective laser centering process to be able to produce structural parts with this. As you know, with additive manufacturing, you don't need tooling, you can produce parts very quickly, you can produce parts with very complicated geometries, interior structures. And because of the high mechanical properties from the HexAM material, we are often competitive from a mechanical performance standpoint with cast aluminum or machined aluminum. Because of the lack of the need of tooling, we can often produce those parts at lower cost than machined aluminum or cast aluminum and has excellent thermal characteristics, excellent mechanical properties and much less weight than aluminum. So a lot of advantages for this. We don't sell the machines or the material, we produce the parts, and we're finding lots of interest in this technology for the UAV and AAM industries, both for prototyping and for production applications. Next slide. We exclusively focus on aerospace with this technology. So we've worked with both military and commercial aviation with this. Recently were approved by Boeing as -- for their commercial aircraft platforms. And so working closely with them as well as another -- a number of other OEMs to be able to find use cases and these will be production applications for using this material for things like ducting and control systems and so forth where the complexity of the geometry would create very high cost items if they were produced in a traditional fashion, but because additive provides you all of that flexibility and able to produce complex parts, it turns out to be a very economical solution for these applications. Next slide. And then a lot of these systems will require good communication. So communication vehicle to vehicle or communication vehicle to ground. And so they will need dielectric tune structures to enable those communications. Hexcel acquired ARC Technologies a few years ago, which is really a world expert in dielectric tuned materials solutions. Also for military applications, stealth will become increasingly important to avoid detection. And so our technology has expertise in RF inference, EMI control, radar absorbing materials, controlled dielectrics and a full materials characterization capability. So for applications, whether it's the outside structure or the honeycomb structure, the ARC technology combined with the rest of Hexcel technologies can produce dielectric tuned structures that meet your requirements. Next. So to just summarize here, as Imad touched on, this market of UAV and Advanced Air Mobility has a range of different missions, different mission requirements, different material requirements and so forth. So there's not a one-size-fits-all for this industry. Hexcel is a global leader in advanced composite technologies in aerospace and automotive. So we have the technology to meet the high rate demand, and we'll continue to develop technologies that meet the high rate demands of this industry, while maintaining the aerospace quality. We have a wide breadth of material and engineered structured solutions for this industry. And so would encourage you to engage with us and work with us to help figure out what material solutions we have today to meet your needs, what material solutions you may need in the future that we can work on, and what structural solutions you need as a partner to be able to build the vehicles that you're designing. So next slide. So with that, I will turn it back over to Darren for some Q&A. Just on this slide, we have both of our contact information. So feel free to reach out to us if you've got specific questions or would like to engage in further dialogue and then also repeat of the website links down below where you can get some of the resources that we have available for these industries. So back to Darren.

Okay. Thank you, Bob. So we've got a number of questions that have come in. I'm hearing a little bit of feedback, but I'll try to get through these questions. I think the first one is a good question for Bob. Is there a push for domestic supply in materials for defense applications?

Yes. Interesting question. Imad referred to Agility Prime that's been very focused on making sure that the supply chains for this emerging Advanced Air Mobility and the UAV markets remain domestic or at least European supply, obvious. And it seems like that there's an increased focus from the DoD to have domestic supply of materials. We know that there's lots of things going on in the world and lots of disruption. And we've seen through COVID-19, what can happen if supply chains are located in areas where they're not as friendly to the U.S. And so there is an increased focus on domestic supply chains, and Hexcel is a U.S. company. We have our entire supply chain for our materials here in the U.S. And so we're eager to meet those domestic supply chain requirements for this emerging industry.

Okay. Thank you, Bob. This one looks like one for Imad. Are there any advancements for materials and manufacturing for rotor blades that will be used in these systems?

Absolutely. Thank you, Darren. The need that rotor blades present in this space, the high volume, the quick manufacturing processing expectations, we think that, that's an area where there's going to be an evolution. So we do have actually a focus on that specifics, as I highlighted in one of the tables earlier in the slides. So that's going to be bringing some innovation into the space, both for cost and volume.

Thank you, Imad. Bob, can simulation be used for materials qualification?

Yes, there's been activity in this space for quite some time. Imad touched on the expense and time required to qualify a new material system. Many a times, it takes years in development to get a material completely qualified. We have very sophisticated simulation capabilities now. As I mentioned, being able to model all the way from the molecular level up to the structural level. And so there have been active efforts both at NASA and the Air Force to figure out ways to be able to use more simulation in the qualification of materials. The general idea there is that there would be a smaller set of mechanical physical tests that are required and then simulation can fill in the gap on that, and so there's a lot of promise with that. My personal view is that these -- the Advanced Air Mobility and UAV markets may be the markets that really push that technology into full adoption or at least partial adoption. The existing commercial aviation market, they know how to qualify materials. They're comfortable with that process. They know how to work the time lines. But these new markets want to move at a much faster pace. And so I believe that simulation will be used more in the qualification of materials and that likely will bleed back over to the existing commercial aviation market that will speed their time line to be able to use new materials. It's important to note that there's a lot of new material developments out there, but it's often the qualification that inhibits their adoption there. And so we would definitely like to see a faster material qualification process, so that these material advances that we're developing can get into use quicker.

Thank you. And another real interesting question for you, Bob. Will there be 3D-printed drones?

Yes. There's actually 3D-printed drones today. They're smaller. And -- but there's a lot of interest in that. There's a kind of a new terminology that we've been hearing recently called low-cost attributable aeronautical vehicles. And so the idea there is that they kind of become disposable, a lot for military applications. And so the ability to be able to print the drone structure, almost on demand, is very attractive, and then the sensor packages can be loaded on to that at will. So there is a lot of interest in 3D-printing drones. We see in the additive manufacturing industry that the cost and throughput continue to improve on that. So we do see some today, and I see that, that as a trend in the future where we'll see more 3D printed drones.

Thank you, Bob. So this one looks like a good question for Imad. Are the acoustic issues for AAM for the passengers are more outside noise focused?

Good question. The majority of the issue when it comes to noise is really urban noise for the areas around the vertiports and what the public is going to hear from those vehicles. I think different vehicle manufacturers will probably cater to some elements to address noise for the passengers. Those types of solutions could be easy to implement or a little bit more complex, providing earplugs is probably the easiest for people who will -- passengers. But I think that the main issue with noise is really around the areas where those vertiports are going to be located. A lot of development and analysis is happening around that, studying areas where there is already existing noise and making decisions on where vertiports are located for urban air mobility based on the high-level noise areas where it's going to be less -- but we're going to hear them less. But shielding noise is really what we think a lot of the benefits that we can offer. Those are only available, obviously, in inducted motors. It's a little bit more difficult to shield noise or address it with open rotors, but there's also the designs of rotor blades and innovation that's happening in that area that's going to help that as well.

Yes. And one other point on that, part of the activity in this space is also looking at what the public is willing to sustain in regards to noise. So we know if you live in an urban environment, there's lots of noise. You hear vehicles and honking horns and people out on the street congregating. And so in general, we become accustomed to that, and that's okay. The Advanced Air Mobility and urban air mobility will create noises that maybe aren't at a higher decibel level than what people are used to, but it will be a different frequency of noise. And so will people adjust to that and be okay with that or will they complain about it? So it's an area of active interest, both in terms of technology and public adoption.

Okay. Thank you, Bob and Imad. And we have more questions and time, so I'll try to be real quick, just last couple here. Imad, how different will material solutions be between what gets certified in the short term, and what is needed for rate and cost of AAM?

Potentially very, very different, to be honest. It's -- I think that as vehicle manufacturers look to certified vehicles in the short term, there's decisions that are going to be made based on risk and the use of material that's been more common in aerospace. But some of those elements are really kind of contrary to what you need or some of those requirements for the high-volume and lower cost expectations. It's interesting, I can think of one comment that Mike Hirschberg said of Vertical Flight Society before on one of the webinars is that, "it's easy to build an airplane when you don't know how," and that's really what kind of makes me think about what those solutions really need to be. It's going to be a balancing act between using what's available today and ensuring that you have a path to certification and setting yourselves up on that solution for the next phase. What we've done and what we've known how to do for years is bring solutions to introduce that higher rate and low-cost over time on existing vehicles that are certified. So I think what's going to happen is, in some cases, those material solutions are going to be different. In other cases, if you put more thought into it upfront and plan for that, that may not be. So that's really the Phase 1, Phase 2 concept that we talked about at the beginning.

Okay. Thank you, Imad. I think we'll try one more, although we're running out of time here. This one looks like a good question for Bob. How do you define your allowables when designing with additive manufactured parts?

Yes. So there are -- so I mentioned our HexAM technology. And so we work with America Makes on that to create design allowables for that material and are continuing that material testing capability. So for additive manufacturing, yes, you'll need design allowables, just like with any material. And so we'll make sure that those design allowables are available. It's one of the areas that has limited the application of additive manufacturing in load-bearing applications in aviation because there has not been that rigorous design-allowable framework for people to design with it, and so that you often see it in nonstructural load-bearing applications. And so that's why we focus very closely on making sure that those allowables are available for the design engineers out there using that system and that the FAA is involved with this, and it's partly why Boeing has qualified that material for use on their systems because we do have that allowable database. But it does require the extensive amount of testing that we alluded to prior to be able to create that allowable database.

Okay. Thank you, Bob. So another question here is probably for Imad. We had -- why is Hexcel developing HexPly M-701 prepreg when the goal is to achieve the quick cure time ranges of the HexPly M77?

Oh, great question. And that's one of the key points that Bob made. We -- there's going to be expectations for a quick cure resin that has higher performance on mechanicals. So M77 is great. It's a fast-cure resin today that could be used in a lot of applications. The performance of that material when it comes to expectations of a highly toughened epoxy solution for primary structures for some OEM designers may not be there. So we think that bringing the performance higher but keeping the quick cure element of the chemistry is where M701 goes to and potentially try to push that back further into the fast cure, as Bob talked about. So again, with all these systems, as I mentioned at the beginning, for different applications, different uses will be perfect. But what we want to do is make sure that we are leveraging the material science. And as we see the design trades are happening and what mechanical performance is needed, that's where we think M701 and potentially higher performance material systems are going to be needed, but still be fast cure systems.

Okay. We've got another one here. What's the progress of thermoplastic and honeycomb structures?

We've -- I'll take that. We've been looking at that, and it hasn't really been a strong focus area or a strong pull, but it's been in our kind of technology road map evaluation for a while. If there is a specific need or specific design trait, we'd be more than happy to look into it. We understand kind of the different elements of it. But it hasn't really kind of gotten to the point, where there's a strong push for specific product along those lines. So happy to -- we continue to evaluate it, but that's where it's at now.

Okay. Thanks, Imad. I've got another one. You referred to interiors, but won't the FST requirements be different for AAM versus commercial aircraft or like general aviation?

Yes, likely more like general aviation, but all of these certification requirements in the FA are in flux. And so there's a lot of activity, a lot of technical societies that are involved in this to define what those requirements are. So the material that I talked about, it meets the FST requirements for commercial aviation vehicles and the requirements may be more or less stringent for AAM. So -- but it's an important point that the certification requirements are all being evaluated now, and there's excellent material that's coming out on that -- on those working groups. I'm confident that we'll be able to get a more firm view of what the certification requirements will be in the near future.

Thanks, Bob. Would M79 be a recommended prepreg for a fixed-wing UAV production?

I don't know if we -- I mean, it's a good prepreg system. Again, I think I'd go back and say, what are your design constraints, what's your structure constraint before we can recommend a particular system. So I think that those are discussions that will need to happen or we had more in more detail. We have, in certain cases, recommended systems, but it really depends on your design of the vehicle.

Okay. What is the impact of COVID on the UAM/AAM industry?

Yes, I'll take that, and Bob, you can chime in. It's been interesting. We've seen some of the slowdown, especially around companies and funding and sources of funding. As you know, the market isn't really about now. It's about making it happen in the future. So there seems to be still commitment for a lot of the players in, what I would say, kind of the commercial side of UAV and AAM to continue development. Depending on the sources of funding and where it's coming from and how kind of under-pressure that is, it's been impacted on the military side. It's been as busy as ever in terms of pushing for some of those applications. So there's been some impact, and we may see more of it going forward in this kind of pandemic, but it's still pressing forward the teams.

Yes. On the military UAV market, we've seen some disruptions as everybody's experienced in terms of plant shutdowns because of state mandates and so forth. But we're actually seeing a lot of acceleration in military UAV activity, new programs being announced by the DoD on a regular basis and funds shifting around. So we don't think there's going to be any kind of long-term impact on military UAV acceleration.

I think we have time for one last one here. Are there any additive manufacturing parts that have been certified via allowables or FAA and not via full-part testing?

Yes, I'm not sure I've got all of the details to answer that question specifically. I will state that we have additively manufactured parts with our HexAM technology flying today, and a number that are under evaluation for application. And I know from the design standpoint, they use the allowables to design it. But I imagine with all of these, there is some part-level testing that is required.

We'll follow-up in more detail on that question. Since that was the last one, Darren, I would say that there's been -- there's still a long list of questions from the audience. We've got them, and we'll follow-up with them directly with the requester.

Yes, that sounds great. Thank you, Bob and Imad. And in closing, thank you so much, everyone, again for attending. And please keep an eye on our LinkedIn, Twitter and website pages for new informative and interesting webinars to come. In addition, all webinars, both future and recorded, can be found at www.excel.com/webinars. Please have a wonderful rest of your week, and thank you so much again for attending.