Honeywell International Inc. (HON) Earnings Call Transcript & Summary

Welcome. And thank you for standing by. This call is for JPMorgan clients only. [Operator Instructions] I'd now like to turn the call over to Mr. Steve Tusa. Sir, you may begin.

Thanks, operator, and good morning, everybody. Thanks for joining us for the virtual edition of the JPMorgan Industrials Conference. Hopefully, everyone has all their appropriate dial-ins and is ready to go for a good couple of days of virtual content, and we're very happy to start here with Honeywell. Just as a reminder, there will be these calls throughout the day. We will open it up for Q&A at the end. So if you want to queue up, feel free. But I'm just going to start by handing it off to them. They're going to give a few comments, and then we'll go through the standard fireside chat. If there's any questions that you want me to ask also, as usual, feel free to shoot me an e-mail, and I'll be sure to get that covered. But we're very happy to have CFO, Greg Lewis ; as well as Head of Digital Initiatives, Tim Mahoney, former Head of Aerospace. With that, guys, I'll hand it off to you. And then we'll get right to it.

Okay. Good morning. Thanks, Steve, and thanks for the introduction and for finding a creative way to host the conference while keeping everybody safe and healthy. As you know, we really wanted to take the opportunity today to emphasize at the conference everything Tim is doing to transform our digital footprint. But given all the developments that have materialized in the macros, I thought it would be helpful for me to join the discussion as well so I can provide some brief comments about our guidance. And then we'll turn it to Tim to talk about our Honeywell Digital transformation as the main thrust today. Honeywell Digital is probably the least understood of our 3 transformation initiatives. As a reminder, those are Honeywell Connected Enterprise, our integrated supply chain transformation and Honeywell Digital. And those 3 things really do underpin the confidence that we have in delivering our financial framework of mid-single-digit growth through the cycle, 30 to 50 basis points of margin expansion and strong cash conversion. There is a lot of value to create with, frankly, an emphasis on growth enablement through our Honeywell Digital. And so it's going to be a great opportunity here directly from Tim himself on how that's going. But let's start with guidance though on our first slide. So during the earnings call at the end of January, we highlighted several notable uncertainties ahead of us in 2020, things like the long-term trade agreement with China, the execution of Brexit, tensions in the Middle East, the election year, 737 MAX and the emerging threat from the coronavirus. And we talked about the fact that these are changing pretty quickly, which creates some ongoing uncertainty in the environment in that our short-cycle outcomes for the year will be difficult to forecast. But we do have confidence with our substantial bookings in 2019 and the long-cycle backlog that we entered the year with, and that would be a nice counterbalance to those uncertainties. And all that remains true as we sit here today. We did also talk about the planning assumptions that underpin the guidance, including, among other things, our expectation that there'll be minimal economic impact from China and the global economy from the coronavirus as well as the assumption that the macroeconomic environment as we exited the fourth quarter would remain pretty consistent throughout 2020. Those last 2 things obviously are being challenged real time. And the corona situation and its implications are changing day by day as, frankly, evidenced even by what's happening real time even now in places like Italy. Despite all that and based on our best possible forecast, as we see things today, we are reaffirming our original guidance for the first quarter. Keep in mind our quarters tend to be back end loaded in general, with about 50% of our sales happening in the third month of every quarter. And with some of the challenges that have been going on this year, that's probably even a bit more true than usual. That does make things a bit more difficult to call, which means, among our guided metrics, organic sales growth will likely experience the most pressure when all is said and done. But we do know how to execute in environments like this, and we're going to continue to operate the company for the long term for value creation. We do think this is a transitory impact at this stage. We're implementing the playbook that we have come to -- you've come to expect from us, take the appropriate actions to adapt to the changing circumstances, and we're continuing to invest in our key initiatives. As it pertains to the full year guidance, it is early. There are a lot of moving parts. The oil situation, for example, it's too soon to really call what the impact of that will be. But at this point, we still see our guidance for the full year as unchanged. We will revisit and reassess that though as the quarter closes. At this stage, we're expecting the coronavirus to be short-term disruption, as I mentioned, but that really does continue to evolve daily. In fact, I just got out of our morning call probably 30 minutes ago with our team to understand what the effects of that are real time. We do remain uniquely positioned, as you know and we've highlighted before, for times just such as these. Our diversified end markets; our local-for-local supply chains; our modest leverage; our overfunded pension plan, which was -- as we talked about, was over 110% funded at the end of the year; our access to capital; our significant liquidity, we ended the year with over $10 billion of cash on hand, really does give us significant opportunities also to deploy capital into acquisitions and buybacks and, at this moment, at increasingly attractive valuation. So we remain cautious, but we feel like we're well positioned. And I'll turn it over with that to Tim, and he can take you through some of the significant opportunities that we have to transform our operations through Honeywell Digital, and then I can take some questions when Tim is done. So over to you, Tim.

Okay. Thanks very much, Greg. Steve, thanks very much for including me in the JPMorgan Industrials Conference. I feel very fortunate to be able to join you. This is 1 of the 3 very exciting areas that Greg just referenced, areas of interest that are across Honeywell. And certainly, there's a very, very significant commitment from Darius and the entire leadership team of the organization relative to this effort here. It's well underway. This is not a start-up area. Actually, before Greg took his CFO position a number of years ago, he initiated, I would say, this transformation. It wasn't called the digital transformation at that time, but it certainly was -- the foundational work was started then. And I feel fortunate that Darius has asked me to lead this effort, which is -- it's called digital transformation, but to a great extent, it's business transformation across the corporation. If we can go to the Chart 3, which is titled Digital Transformation Overview, I want to touch on a couple of points. I'll make -- I'll limit my points here and be brief so that we have time for Q&A. But if you look at the upper left, this has been the strategy that we've had for a number of years, which is how do we develop standardization and enable it across the corporation. So meaning that regardless of the 5 strategic business groups, how would we standardize our business models and then deploy them on an enterprise-wide basis across those? How would we enable that with data governance? Meaning that all of the 9 masters of data that drive our systems is standardized across that and then enabled from a technology perspective. And I think, as we did some benchmarking, we found that some companies spend an enormous amount of time talking about the technology, whereas we talk significantly about the substantial enhancement relative to business outcomes. So if you look at on the right-hand side here, where it says Our Strategy, it is company-wide best practices. So this is across Aerospace, HBT, SPS, PMT and connected. So it's enterprise-wide solutions that we're pursuing. And we, I would say, maniacally continue to ask ourselves how is this going to accelerate our organic growth, how will that expand our margins and how will this increase our free cash flow. Those are the 3 things that for each of the areas that I delve into from a business transformation standardization and so on. Will it be -- how will it translate to those different set of business changes and of course, differentiating the customer experience and also focusing on how do we do our processes? Either from outside in with customers or internally, how do we do them in a much more seamless and [ dauntless ] way? And on the bottom of the chart, you can see that these are the elements that are here. Obviously, real-time data enhances our decision-making, having this closed loop such that here's what the expected benefits are and then being able to measure those on a periodic basis. We're using very contemporary systems. I'll talk a little bit on the next chart about the foundational work that has been done up to this point. And then, of course, the realization of business realizations. So I'm very excited about the challenges, the business opportunities that are here across the enterprise. It is highly dependent on the business transformation and the standardization that's enabled by 2 things. One is the data management, and two is the technology. And of course, these are solutions that are across the enterprise-wide, not specific to a strategic business group. My last point in this area is that we really think in terms, Steve, of 4 work streams: foundational work, business blueprinting and definition, technology enablement and the cultural changes that go along with this because, certainly, this is a big shift relative to that. And understandably, there's different levels of maturity across the different strategic business groups across the corporation. If we can turn to the next chart that's titled Digital Roadmap Evolution. I'd like to make a couple of points here. On the upper left, you'll see where we were, where we were at the end of 2019 and where we are going in 2021. And I just want to make sure that we have a road map that goes across our strategic planning process. But in order to make this very actionable, I just convey what's happening year-to-year. I wanted to just decompose this and show what's happening by the end of 2021. So you can see in the upper left that it says that, from an ERP systems perspective, we're above 148 previously. We ended the year at 51. We are presently at 48. And by the end of 2021, we will be at 10 or less. I would say that just to kind of highlight and amplify, this is in the foundational area. So significant benefits of the reduced ERP systems is much greater transparency of real information across the entire value chain. So it gives us that real-time data which enables much more real-time or near real-time decision-making and ease of management. If you think about websites as an example, going from 1,500 to ending the year at 175 and being down to 25, that has a -- this has a very profound impact relative to the customer experience that has a radically different customer experience and enables cross-selling, right? So many of our customers can actually be buyers within multiple strategic business groups. And the way that we have architected this experience has been that the customer goes into one portal and is able to go across the entire corporation and do cross-selling in that area. So a radical difference relative to the customer experience. And application decommissioning, the real benefit here is that there's one source of truth. So we have -- resulting in really, I would say, unified, more real-time decision-making. And what ends up happening is, as you have less applications, the debate shifts from which data set is correct to actually focusing on the decision-making and what you need to do from a business standpoint. You can see the call centers here. So historically, we had 200 call centers, and you can imagine shifting from that to 1 cloud-based system has really enabled a very different customer experience. But more importantly, it enables us to harvest the information about what the customers need the most and be able to aggregate those demands and be able to set up self-service and different customer solutions in that area. Now of course, like any other -- any good business, you can see in the lower right-hand corner, Steve, that each of these transformation projects or efforts has a business case with it, right? So -- and we think in terms of 3 different business results realization. One would be accelerating organic growth, two is expanding margins, and third is increasing our cash flow in those areas. So there's -- that also ties back to the closed-loop process, where we have -- as the honest brokers within finance, looks at what is the returns, what did we say we were going to realize and what are we actually realizing. So if you think about this, there's -- to recap, there's areas of variability across the 5 different strategic business groups, and they're at different levels of maturity. But the exciting part for me having come from aerospace is that there's actually, I would say, a different degree of the foundational work, the business results realization, the technology enablement and the cultural adoption across the corporation, but one thing is very, very consistent. There's only one set of lenses that we use relative to this transformation, and that is, to repeat it, how will this accelerate the organic growth, how much will this expand the margins and how much will this increase cash flow. And it's been very exciting for, I think, the corporation. We're well underway, and I think that much of the foundational work that I referenced will be concluded in 2021. And I just want to highlight that, if you think about the investments that have been made in that, to a great extent, the lion's share of the investments on the foundational work will conclude in 2021. And of course, we'll make further investments as we are now relative to those changes that are very contemporary and disruptive or differentiate us in the marketplace or with our customers. With that, Steve, I'll turn it back over to you for Q&A.

Great. Thanks for that, Tim. And just stepping back to Greg for a second here, get this kind of near-term discussion out of the way. Just to clarify -- I know you guys hosted a webcast with your new head of Aerospace. I think it was last week. It's been a bit of a blur the last few days. Can you just clarify kind of the messaging there? I think it was basically that you're -- the exposed commercial aftermarket is a certain percentage of Aerospace. And just remind us of -- I think you had guided to just as a standing guidance for that part of the business, it had probably been up mid-single digits or something like that. Maybe just clarify where -- give a little bit of context on where that specific pressure point is. And then talk for maybe a minute about other than maybe Defense & Space and the obvious, what is -- are there any kind of offsets from connected or anything like that that's growing beyond just kind of the flight hour-related stuff.

Okay. Yes. So I think what Mike was referencing was just a little bit below 20% of the Aerospace revenues are exposed to the ATR aftermarket and flight hours. And I think he was highlighting the R&O work as well as the on-purpose spares that go into that. And so yes, we did expect to have continued, call it, mid-single-digit growth in our overall aftermarket. And as what we're seeing now, we will have some softness probably in March, specifically based on the flight hours coming down with what's been happening in the environment. That will probably carry over into the second quarter as well. I would think about that as, let's say, less than $100 million of impact in Q1, and the magnitude of Q2 will, I think, unfold as we see travel recovering or remaining down. As it relates to offsets to that, we did talk about the fact that we are trying to burn down some of the backlog that we have in other parts of the business, Defense & Space as an example. So we're going to continue to do that. We talked in general about the fact that our Aerospace overall revenue had some range around that as well. So again, at this stage, I would say, where we are today, the guide around Aerospace is still not materially different, but obviously, there are some pressures on that top line.

And that $100 million, is that a revenue number or a profit number?

That's revenues, yes. And again, it's well less than $100 million in the first quarter. I'd say it's tens of millions, probably under $50 million in the first quarter itself. Q2, again, will depend on how far this travel constraint stays as we head into March and April.

Yes. Absolutely helpful color on kind of the near-term impact from what you know. We totally understand that it's a pretty fluid situation. And just one more item, again kind of historical context. How is today different than where you were kind of in -- at the peak of the last oil and gas cycle? I mean you guys -- your PMT business performed extraordinarily well through that cycle. Is there anything, off the top of your mind, you can think of that's kind of different about your business today? I know backlogs and orders have been pretty good. Maybe they're not quite as long as they were or the coverage is not quite as good as it was back then. But to the extent that you can just give us some context on how -- again, I'm not asking you to forecast the future, but how this time could be different versus '14 and '15, the last oil downturn. And that's probably the last thing we needed, but it's happened. So maybe a little bit of context around how PMT is positioned versus last oil downturn.

Sure. So as I said earlier, we're obviously still going through the impacts of what happened over the weekend with the situation with OPEC-Plus, as they're called. But as we think about it, as you highlighted, I mean we came into the year with a pretty strong backlog in both UOP and in Process Solutions. What I think about in terms of maybe the near-term impact of lower oil prices, we'll probably feel that most in the downstream gas processing business. So while that will be a bit of a challenge for us, it's a smaller portion of the business. It's also a bit on the lower-margin side from a profile perspective. As you think about the pressures that will come to refiners and petrochemical companies, they generally would want to keep things like catalysts, reloads and services going. And so we feel good about our services business and UOP in particular. And I don't know yet whether the projects will get pushed to the right for Process Solutions and for the UOP equipment business. That remains to be seen. But I would say -- without the numbers in front of me right now as to the '14, '15 backlog, I would say we're going into this year, again, with a pretty healthy backlog. So I would expect we'll be in a good fighting position, although there will be challenges.

Yes. And then I think this will bridge the gap to talk to Tim about some of his initiatives. But he mentioned $500 million in benefits. Some of that's cost, some of that's sales. Can you just remind us of what you have -- you guys have taken a lot of restructuring in the last year. You kind of stepped that up. One of the -- there are a few companies that I think are positioned well to batten down the hatches, and they're ahead of the game. What are roughly the amount of benefits that you kind of have baked in year-over-year in your guide today from restructuring?

Yes. So that's a great point. Thank you. And maybe just a couple of things to highlight before I hit the specific thing on that. Restructuring for us is not sort of a knee-jerk reaction or event. I mean we literally run a restructuring pipeline call every single quarter with the businesses to make sure that we've always got that optionality there, and that's why we hold the repositioning funding in our forecast. And I think, as you know, we entered the year with about $600 million of reserves on the balance sheet for projects that we had already funded going into the year. And I would say we probably have close to $200 million of benefits in our expectations for 2020 for us to be able to offset and generate some earnings power. So that's -- it's a little bit of a mild step-up from where we were in 2019, and we will continue to utilize that part of the playbook as the year progresses to add to that as the year goes on, as we always do. So that's about where we are with that. And then maybe just, if you don't mind, one other comment. I mean the other -- I just want to talk a little bit about the cash situation. Again, we ended the year with about $10.5 million of cash on the balance sheet. We talked about a baseline assumption of 1% net share reduction, and we've got lots of flexibility. We liked the Honeywell repurchase at $180 a share. And at $150 to $160, we like it even that much more.

Right. Great point. I'm going to move on from the CFO part of this discussion to the digital aspect. Thanks a lot for the color. That's really super helpful in a time that is less than clear right now. Tim, so maybe talk about that kind of $500 million plus, how you kind of break that down and what visibility you have. Is there a timing dynamic where maybe the cost comes a little bit earlier and sales come a little bit later? How do we see that kind of phasing in over the next few years? And maybe break that down a bit more.

Right. Okay. Yes. So one is, Steve, I see it -- if you think about the distribution of that, I see it pretty evenly spread across organic growth or incremental organic growth, operating income and cost out and free cash flow. So there's the 3 buckets. The benefit is, is that we have a very dedicated finance organization that is the honest broker relative to the measurement system. So that's been in place for some time. So there's probably -- when I look at it, I actually think that there's more upside from a sales perspective and from a cost side of that. So -- but what I've done is I've looked at all of the growth at the -- across the corporation by the strategic business groups. And if we think about -- just a couple of things. So let me touch on incremental growth, which is, in that area, be it between pricing optimization and being able to do cross-selling and being able to provide information to customers that want to acquire, so really, there's a lot of customers that want to look at the -- they want to understand is the inventory available, is the price -- what's the price, order placement and then order management, right? So when I think about that going into place in Aerospace, historically, what it did was it had a number of benefits. One is the customer experience was quite different. Two is we are able to customize the experience that the customer had. Three is that our, actually, cost to serve decreased in that area, and it drove our growth, right? So we were able to actually specifically look in the most extreme case blue birds. So customers that actually had never acquired from Honeywell is now buying parts online from a Honeywell perspective. So from a growth perspective, I think there's more upside in that area. And then from a cost side, if you think about from the entire value chain, and I'll just touch on one area here around automation and touchless orders with customers. So as we have been moving off of the systems -- the legacy systems that I highlighted, including the websites, the applications and the ERP systems, of course, foundationally, our cost -- our operating and maintaining costs go down. But to a greater extent, now we have visibility and higher degree of transparency around actually where we have opportunities for automation. So Darius chartered me at the end of last year in order to put together an automation plan which has very different -- a lot of different dimensions to it, whether they're interfaces between systems, so a system speaking to a system, whereas, right now, there are 2 different systems and they're not speaking to each other and people are making inputs. So an automation plan that has implications directly for operating income perspective, right? So -- and we've been -- and then third, we've been very active. We meet with Darius actually and Greg and others every Friday morning at 7:00 around free cash flow. So -- and it's all of the elements of that. Whether it's receivables, inventory, payables, et cetera, how do we digitize this and get a much greater visibility and transparency, right? So if you connect this to the integrated supply chain transparency that Greg talked about before, the fact that that's one of the areas of transformation. So in summary, I think that it's -- to a great extent, we're on a good run rate basis. It does show up over years, and to a great extent, this becomes an annuity that will continue to give over the years. Back to you, Steve.

Great. And when you talk about this -- these ERP dynamics, maybe just mechanically, I mean, how does this move down really kind of help you with that? Is that more of at a high level, it's just easier to manage? Like maybe give some sort of -- I know every company says, "Oh, we're going to 500 ERP systems to like 1 or whatever." I know GE had that target several years ago, but it was always kind of unclear to me. For some companies like 3M, it takes a little bit longer to do this. And you never like quite see the benefits. What mechanically kind of does that kind of ERP standardization do?

Right, right. Okay. So let me -- and I'm going to reference Aerospace probably in this area. So one is 93% -- 93.3% of the entire corporation is on the 10 core ERP systems. So we've gone from, like I said before, 148 to -- we're down to actually 48 this year, and we'll be down to 10. I actually think -- we're meeting on Thursday with Greg, and we're going to lay out our road map for the next 5 years. So actually, our plan right now is to be down to 10 core ERP systems, but we're going to -- we're challenging ourselves to say, "Is that actually the defined end state?" But having said that, let's say it's 10 right now, okay. So what ends up happening is, is that -- think about ERP systems as it is the business mechanism. It is the business machine that from the point of order entry all the way through support runs our businesses, and the data that is in those systems needs to be correct, the customer masters, the material masters. So this -- it -- that is the -- think of the data as it is the lubricant for that system. And when that data is right, and we've gone through an enormous cleansing process. And what ends up happening is, is that -- so as you rationalize down your ERP systems, there's a couple of things. So the most obvious one is that the operate and maintain cost of less ERP systems is a lower cost. So as you have less ERP systems, the operate and maintain cost is less. You also have volume-related discounts with your licenses from the companies that license -- provide your licenses for that. But more importantly, what it ends up allowing you to do is, one, have a much greater degree of transparency of what's happening in your business systems, and it allows you to really, I would say, make much better real-time decisions. So for instance, when I say that, Aerospace is entirely -- its 100% of the business is on 1 ERP system, an SAP system. And so you can look at the 6 different business processes that have been implemented over the last 1 to 2 years, right, so that standardization of those 6 different business models that are associated with products, services, software, project-based recurring revenue, et cetera, you're able to actually prosecute that data on a real-time basis, right? And so that has a huge benefit both from a maintenance cost reduction standpoint, but also from a transparency standpoint of being able to make much better real-time or near real-time decisions on all of those 6 different business models associated with growth, operating income and also from a free cash flow perspective. So it's vitally important in order to gain that type of transparency in order to be able to make those much better real-time decisions out of that consolidated less ERP systems. And again, it's not just the ERP systems. It's the applications because you need to rationalize and decommission your applications. Of course, there's a cost associated with applications. But the much greater benefit is, as you dismantle and decommission those applications, what ends up happening is there is only 1 source of truth. That's -- there's only 1 set of data between those 2 elements, and therefore, the discussion and the business decisions are predicated on that 1 source of data versus debating about which and whose set of data is correct and then moving on there.

Tim, if I can just maybe augment just very quickly. The other thing I like about it, Steve, as well is if you can imagine trying -- with all of the other platforms that Tim highlighted that we're putting in place, whether it's our CRM system, our digital marketing platform, the customer experience thing, imagine trying to connect those dots around 148 ERPs. Impossible, right? So now that you get it down to a manageable number, you can actually start creating this broader digital ecosystem, and it's a manageable environment to go do that in. Which -- again, that was not possible before we got down to this 90% plus of our business around these 10 core.

Right. And then, Tim, just for a couple of minutes here, I know your Aerospace business is always a -- everybody kind of debates your approach versus others. Others are scaling up and going after major platforms of engines. And I think there is kind of a misunderstanding of how your business there is positioned versus others. But maybe just from a historical context and just a couple of minutes, talk about what it was like to make those strategic decisions and swim in a bit of a different direction than perhaps some of your large-cap Tier 1 supplier peers and why maybe that business is positioned a little bit differently than others today. What was kind of the mindset around that? Several years ago, and as you kind of turned the page into today, it looks like it was a pretty smart decision to kind of stick to the knitting of serving a diversified customer base and going in a little bit of a different direction.

Yes. So Steve, yes, I certainly agree. I think you touched on a couple of things. One is diversification of your product and service portfolio, I think, was foundational for us, right? So I've always said that a portfolio of businesses is -- it's a blessing and it's a curse. But the only part of the curse is that you need to make different decisions around where you invest, but the benefits are that you can have this diversity across portfolio of services, et cetera. So one is the diversification was certainly right and across the 3 big market segments, air transport, business aviation and defense. Two is, I think, that there's others that really focused on acquisitions and integration, whereas we really focused on how do we focus on the customers and how do we have differentiated products and services and how do we be, I would say, really focused on the customers and the end customers to be able to retain, grow and expand the aftermarket. And I think you know from the times that we've talked that, that was -- that has been an area where we really -- where Honeywell has distinguished themselves in the area of growth. So I think both from getting on the -- doing marketing analysis at the platform level and picking the winners and then investing in aligning our sales strategy with that. Two is then retention in the -- well, excellence relative to development program experience with customers. So the customer has a high degree of experience that they're going to be able to bring their aircraft to market on the time line that they want to and that those products and services that we're going to provide -- that Honeywell is going to provide are going to be differentiated compared to our peers. And then third is how do we really capitalize on that in the area of both coupled and decoupled growth, right, in the aftermarket area. And that's been an area that has had very high returns from a Honeywell Aerospace perspective because those are very, very value-added services and offerings that have been there. So I think that, in contrast -- and I'm not saying acquisitions is wrong, but large-scale acquisitions has a tendency to have you take your eye off the outside world and focus maniacally inside during that integration process. And that's been an opportunity for Honeywell because we haven't had that distraction, but we have had some very, very nice and very fruitful acquisitions that were sizable that supplemented the business that we had at that time. Back to you, Steve.

And then just a question for Greg. How -- and perhaps Tim. But how big is that disconnected, if you will -- well, it's connected but kind of the bucket of revenue in Aerospace that you would characterize as kind of disconnected from something like flight hours? How big is that revenue base now, do you think?

Well, if I just flip back to what I've mentioned earlier. If roughly just a little bit under 20% of the total portfolio is connected to flight hours from an aftermarket perspective, I guess you could flip the math and say 80% is either OE-related or not connected to the ATR aftermarket.

Okay. But I guess just on the kind of initiatives, those kind of market-plus initiatives like Connected Aircraft and that kind of stuff.

Well, Connected Aircraft for -- that's, call it, almost $700 million of our $1.5 billion connected enterprise, around about. So that's a substantial portion of our overall connected enterprise portfolio today. So it's pretty sizable.

And then there are some other things that you do that are upgrades and that kind of stuff, so what we can consider to be disconnected -- like market-plus type of growth rates?

You got it.

Yes, that's correct, Steve. So if you think about that decoupled growth that we've talked about for a number of years, yes, it's really made up of 2 components. One is, as Greg said, it has the connected, which just falls into Que's wheelhouse now. I mean Aerospace and Que's. And two is then the RMUs, so the upgrades, the enhancements, et cetera. And if you recall, Honeywell made the commitment a couple of years ago that we actually vertically integrated because the returns were so good and the growth rate was so fast relative to those RMUs or those enhancements that we actually established a center of excellence from the point of marketing all the way through execution associated with that. And that's been an area of investment and high returns and, of course, very accretive from a Honeywell perspective with quite a bit of software upgrades.

And how much of those are -- how big are those RMUs at this stage, kind of that base?

Yes. That -- so the total decoupled eclipsed $1 billion 1 year ago.

Yes. Okay. That's great. Guys, we don't have any more time. Sorry for people that are waiting on the line. We got to kind of move on to the next call here at 8:45. But thank you so much for being flexible and doing the call here, and best of luck managing through whatever comes your way in the next few weeks. And here's to a healthy finish to the first quarter.

Okay. Thanks a lot, Steve. Really appreciate your time.

Thanks very much, Steve, thanks for including me. Best regards.

Yes, absolutely.

This concludes today's call. Thank you for your participation, you may disconnect at this time.