Earnings call transcript Q2 2023

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Operator

Good morning ladies and gentlemen and welcome to Spirit AeroSystems Holdings, Inc.

Second Quarter 2023 Earnings Conference Call. My name is Jordan and I'll be your coordinator today. [Operator Instructions]

I'd now like to turn the presentation over to Ryan Avey, Senior Director of Investor Relations and FP&A. proceed. Please

Ryan Avey

and and are I'm Executive Commercial Spirit's Gentile; Vice Jordan with Avey Officer, and morning Mark Senior today Officer, Sam me President President Chief good Operating you, President Marnick. Ryan everyone. and Tom Suchinski; Officer, Thank and Financial of Chief and Chief

our include our to risks, today discussion are filings to involve Before need that the at projections our remind we forward-looking begin, and or this the in any those earnings detailed and in end in including you SEC web I goals release we may statement presentation. likely of

In of earnings release non-GAAP addition, our and reconciliation use to we and discussing when disclosures we refer measures results. you presentation our for

Executive With that, I'd to the like Chief Tom Officer, turn call our Gentile. to over

Tom Gentile

everyone. vertical and providing to progress. attached call. the Ryan quarter results by morning XXX begin and IAM contract you, the second fin good I'll on Spirit's today discussing fitting update Welcome an Thank

pleased contract the to the have On are place for which their our gratitude represented with a reflects we contributions. IAM employees, in have IAM contract, we very four-year

vote stoppage first we expect went reached with XXX XXX to resolution. stoppage, between year. and we the union the to strike, the While in table a back our to Due and XXX a from partners resulted the work work quickly deliver now fuselages this

new in financial walk impacts full contract our the will site. of fully be at Wichita the work production to break airplanes the per through and resumption to XX able stoppage starting the month days you to of his but front to work and of line the August, we production The subsequent won't comments. is our lost stoppage Mark in related some from recover manufacturing

fin vertical fittings. the On attached

last on quarter, was our all the completed we and the estimates that in of during XXX within second provided. was we provided financial ahead the which on line call the available the fuselages time Wichita rework First,

and the to process schedule want a operations able and the made the it were recognize our implement quickly for develop prioritize team develop to I repair, the budget. they We repair to and maintain rework. effort incredible

the potential performed have also in a the Boeing, to recorded repair claim to the regards a date liability for quarter second units at Boeing. related work With provisional to we at

Additionally, financial previously we a do airplanes expect associated the material with not fleet. delivered impact in

exceeding be turning Now, X% is domestic to approaching business. and of XX% with commercial levels. traffic by recovery international traffic XX% at levels. now levels, on continues strong air to full to levels air XXXX May results, demand XXXX our XXXX Commercial approving Based global to pre-COVID is traffic air and of

improved with capacity This large orders strong demand efficiency new has recovery booked in seating traffic, airplanes for fueled with the fuel airline airlines. combined recent robust from and

billion grew $XX to in Airbus a at As billion orders, includes quarter, backlog on the and our of Spirit from second backlog. these $XX commercial which platforms the Boeing packages in work result all

focused We strong the the in rate meet to demand. increases are executing upcoming on recovery

examples of supply our which see address. suppliers, smaller have had we've lines. to While distressed be making significantly there to disrupted in continues we chain, We because progress, which have of our challenges even ones, destabilized production operations the shortages still are

programs. the of supply supply have individual impacts earnings. million some chain and recorded been approaching last suppliers AXXX AXXX, These losses in distressed which incurred past Over we quarter, second on the the the challenges $XXX also our XXX, other and in have the the forward drove months, XX from the pressures, primarily reflected chain in

increases. meet Our half chain priority remains of year the supply for second to production managing within on execution our and these the factories rate challenges

we in impacts. challenges, to expect mitigate continue have place to the supply we put plans While help chain

offloading and release helping readiness, working employees regularly, the extending Spirit them in with suppliers rate contracts the addressing pressure. some to have buy work of field, We material,

As past new in a in help employees we've than earlier smoother are ensure our we the in have bringing rate we to breaks. mentioned factories, transition previously, own on production

Expectations as XX ship sets sets about XXX ship sets XX our to and are the the XX the ship ship on sets follows: deliveries programs XX the XXX, on year for to on for AXXX, AXXX. XX other AXXX on on

let's which XXXX our our to defense to move businesses Now well continue an aftermarket update toward and of targets. both perform

Our quarter produced up quarter again strong growth, XX% Space revenue second compared to business of Defense once this & XXXX. the

commercial pipeline inroads the business new continue we displaying remains build robust, defense and with best and also good to The make practices. design capabilities primes, our

contracts different won in million XX total. $XXX Year-to-date, we worth more than have

large track on to Defense target continue by in our and reach $X revenue are on We Space bid to defense of XXXX. programs billion and

remains Aftermarket XXXX revenue operating million. margins of reach Our XX%, driven to of last increased XX% target on the quarter revenue compared quarter up items. one-time team another strong their spares solid aftermarket growth, same by plan and also business to had by of volume also MRO year, with $XXX The some helped

I'll Over Mark. our Mark you, now financials you over through results. to of for more to the turn the take call to some

Mark Suchinski

IAM by and items attached occurred significant rework Tom vertical the everyone. that the negotiations. morning I Thanks during good fitting second XXX quarter, fin discussing want to begin and the the two Wichita

the million April. diligently fitting XXX call. have quality We're $XX worked the related in we on attached the the to rework vertical the Wichita available that the cost fin earnings we issue explained estimate last rework teams throughout units discussed within required in resolved pleased on The to on quarter

charge to of believe $XX facility, about which units. the in of half their work we Boeing repair We million recorded a at to-date to potential represents estimate account the a contra-revenue quarter the related for from of our claim

be any claim Boeing different receive potential we may from I However, materially emphasize our to could from estimate. want that

of XXX Kansas the mostly negotiations strike programs the Now, as which relates at the all was to it Wichita, our IAM. IAM and disruption site, program affected impacted. The

strike employee $X million benefits, impacts including wages disruption higher million as to included the excess $XX Financial capacity contract during AIM of quarter higher new related charges estimates from charges in the costs. and the as well of primarily

be Additionally, life $XX margins approximately the as to the addition forward of over an we pressures more basis. costs going on in ahead on broader we experiencing. will labor million we union pressure look contract, This inflationary to are the put new are annual forecasting

factory production new executing in quality With in focus customer labor resolved the commitments, towards increases. and place, our contract our directed upcoming on a issue our including entire the is rate

slide details from quarter take second let up for through so the the financial of quarter the our Now, me to was Revenue XXXX. move $X.X let's X% you billion, quarter results, second two. of

by as revenue work from disruption IAM XXXX stoppage. quarter fitting fin vertical was the as attached well impacted Second the issue

higher was to XXX and the primarily XXX partially improvement production & on lower program. due revenue, Defense by the and programs AXXX on year-over-year offset production increased The Space

segment with growth strong Overall, increasing XX% growth on quarter Space & robust XX% the revenue The basis. and increased $XX million. about a a with line margins. deliveries Defense of revenue had top by performance Also, X% had quarter XX%, for year-over-year aftermarket a

attention reported Now, let's $X.XX the We negative $X.XX to our of compared in XXXX. negative per share turn second to earnings of EPS. quarter

Excluding prior $X.XX certain year. was to the $X.XX negative in compared items, negative adjusted EPS

I during my increased as related the sanctions and XXXX, partially of claim XXXX in in compared slightly higher negative decreased to the in quarter well margin estimates by period X% Operating to opening that driven the by losses as remarks, recognized offset second discussed negative X% Russian earnings. of aftermarket potential the the of changes same to customer absence

the Second $XXX in million compared were cumulative forward catch-up adjustments and $XX quarter XXXX. second catch-up unfavorable million, unfavorable losses of million. $X forward is $XX losses of totaled of cumulative This million adjustments to and quarter

programs. AXXX production-related chain from The well costs. AXXX current other XXX of the losses losses million relate increased supply union quarter primarily forward and $XX the IAM contract The as to forward new and XXX, resulted as

AXXX were was currency to of loss of higher by production currency charges million increased recovery primarily AXXX chain fluctuations. unfavorable foreign rate and to including and related as freight of $XX $XX million movements, costs unfavorable estimates foreign as due driven supply The efforts, well costs the

adjustments well increased IAM from Additionally, chain the reflecting labor program, higher negotiations supply costs. to relate XXX cumulative catch-up the as as costs primarily the Union unfavorable

variance settlement this quarter income $XX $XX in year the million the to second This of recorded second in compared to of the of foreign in Industrial UK losses of recognized due gain expense million currency Other year. was well related the quarter as was Business, as Strategy of repayable investment the Department Energy lower agreement in the XXXX and higher prior of with other to the quarter. and million $XX income pension

the and working quality from to the impacts resulting the to for increase. third Cash rate and well XXX the negative rework Now, IAM disruption cash cash as production related the largely the issue work quarter let's flow. was the of increased usage to million. usage $XXX to compared same for XXXX, by turn driven Free period quarter flow stoppage free as capital preparation

$XX of XXXX termination $XX included Second cash related as excise operations also value payment from million well advances as pension of to of million an Plan the A. quarter the was customer tax

Looking free union was in line flow with ahead, XXXX the cash our contract new expectations.

XXX to half work full made be up that the will We be units. to the However, XXX IAM led able to year resulting in fewer work stoppage back be expect XXX the of to deliveries the stoppage deliveries not year. now from of in range XXX the

during combination free the our to items, pressure inventory periods cash with continue caused year during to chain, support supply cash these and Additionally, of will quarter forward These which negatively own losses full flows. materials additional to we in taken disruption, receive additional impact flows.

This Given of year which -- on $XXX $XXX slide. cash million. million range our be detail next flow of includes more the $XXX million the explain updated free of in now benefit to these full are customer will headwinds, range negative advances, we the I free expecting to in

With the $X.X slide to We and now of cash and cash debt. billion three. ended debt $XXX that, with balances turn on our quarter million of let's

discussed during advances. second entered call, customers we our discussion, our on into to cash earnings provide part the As with agreements subsequent I quarter as of event last the

million which in $XX the As repay quarter. and in million $XXX a the $XXX to $XX of million received was second receive in be million payments we this year, We quarter and in $XXX with XXXX advances will plan XXXX. result, million fourth these will received of

$XXX is balance advances and The included therefore, statement cash these categorized in cash reflected of million as cash cash the million sheet from are on flows. of the on sheet as Boeing reflected and on free received financing and from as operations $XXX from were advances as categorized flow. and remaining liabilities the balance other

help lower buildup cushion the the increases. as these we for production additional near-term rate financial impacts provide the Receiving incur from XXX and inventory deliveries advances will of

access overall maturities at as to all well public to liquidity. available financing we'll XXXX our markets, options our financing to continue and We address be have debt looking as

on same the performance, slide with over segment to our of quarter and attached Commercial the Commercial IAM period starting second partially XXXX, segment and by impacted discuss XXX programs, due AXXX offset Commercial of fitting increased by disruptions lower from production the vertical work the let's XXX stoppage. issue volumes revenue production. negatively was on revenue Next, higher fin the In four. XXXX, X%

driven X% sanctions year, the operating estimates changes Quarterly, the decreased in X% period margin by of customer XXXX. negative quarter the related prior negative by higher Russian compared current absence and unfavorable to the the second potential claim of recognized the during to offset losses in to in

discussed, The of in $XX quarter, second the cumulative million. of during $XXX catch-up which unfavorable million adjustments included changes and forward previously I losses estimates

quarter segment adjustments. losses and charges cumulative second of the to million of unfavorable comparison of $XX forward XXXX, the $X million catch-up recorded In of

Russian in XXXX, $XX business losses of quarter to relation second sanctioned activities, the the net of segment the in million. recognized Additionally,

Now, segment increased development second on higher quarter of to program XX% Space slide to five. or Defense due Defense last and grew P-X than higher Space & year to & million production. revenue the activity turn let's $XXX

the due compared the Operating and in on decreased the well CH-XXK negotiations KC-XX as higher onetime chain to XXXX, margin and costs program. IAM the the for resulting costs quarter tanker, from Sikorsky on as PA to supply primarily charges increased X% union to X%

capacity cost XXXX. The segment $X losses million to of million of million forward in $X of catch-up excess forward recorded losses and of $X compared quarter second and $X capacity cumulative the million cost adjustments of of $X unfavorable excess million,

due results, Aftermarket six. spare slide primarily segment MRO XXXX, turn let's higher our the and million, to quarter up XX% activity. For compared sales Aftermarket revenues were to part to $XX second of

XX%. the continues on for margin and global for the growth the to at air the be strong track supported travel plan in was Aftermarket by recovery meet Operating very is year. to quarter

it expect forward. level don't going However, to this at continue

will XXXX The period not benefit XXXX repeat to of and increase the was due primarily increased activity, onetime that sanction a compared losses quarter million. margins of of higher to the second the on of recognized same during Russian absence $X

believe the the challenges, direction. are in Despite we recent we moving right

our we business. the long-term on of are trajectory Going focused forward,

Our top year our the increases XXXX factories and in stability back of in well is rate XXXX. execution and with on as priority this in as the half

remains to financial do, strong, will the and to chain the improve strength. Supply our industry to continue very working recover. to we impact continues challenged, is efforts work and our predictability mitigate but and are but we There operational is hard demand as restore

Now, me to Tom back for closing let comments. turn some it over

Tom Gentile

issues In fin aerospace through Wichita. Thanks the and Mark. attached We demand. the we with take second best the contract two summary, rework strong, platforms quarter IAM in is advantage commercial this recent are to vertical demand challenging on worked the of and in

associated chain with We the stabilizing supply factories going our expect be that continued forward. and there will challenges

mitigate challenges. in right and applying investments places help these to prudent are We resources making the

the is all production executing half focus the year on increases rate Our across our back in of programs.

actions to in flows drive us cash improvement these sustained going expect enable help forward. will We

your we'll be happy that, With to questions. take

Operator

Instructions] [Operator

of from Myles, Our first question comes Myles line yours. Research. the is Wolfe Walton

Myles Walton

Thanks. Good morning. you Mark, flow. with start maybe the free can cash

I up $XXX to for some have certainly discrete advance, you've items. million thinking as the adjust million. add by about think I $XXX guess $XXX I lowered was opposed And might the it I to million. when

So, maybe a -- bit elements more $XXX of little revision? the that walk us through you can the discretely just million maybe

Mark Suchinski

work will our big on I XXX the really is on with program in an cover morning, are impact Sure most June good Myles. tried XXth. deliveries had first -- to it, out deliveries from obviously, the it's Hey, Wichita, we essentially but year think good happened the -- I've work you. as hear Yes, that there on and a the to foremost, the have significant fall impacts programs few of and other well, stoppage stoppage

make to be that there's the won't up. be so we to going of And deliveries some able

year, on challenges that of to back half seen more continue the inventory We're cost bring mitigator on disruption. of our some to and the support the that the supply for There's inventory the taking in increase of more rate a as we've chain. we in

first loss also to would look you in if going loss, of at tell additional in I quarter, cash you the and booked pressure that both the put forward charges we our that the second back forward half on that's year.

taking that protect Boeing forward So, will summarize having deliveries system by really, that on XXX, book and to production more charges I lower inventory end led to higher loss us impact think a up it, on the then we negative cash.

new And to this really we I and goal think those will put and us meet that flow within deliver guide to set targets we we've sure that you. cash guidance you, the the have this that provided make is the for here on

Tom Gentile

$XXX million. In now look And had negative to we Myles, I'd just was year. is negative million. add at it way right are one which where in the QX, other we QX, $XX it a In

and QX. that in QX be So, to breakeven goal at negative is put million. us our And essentially $XXX

Mark the as advance And going from is treated said, cash as million flow. customer the to be next $XX

put right million, to the $XXX $XXX is in at million. our million would middle negative of range us that of which $XXX So,

Operator

Markets. Our RBC Herbert next question Ken ahead. of Ken, please comes from go Capital

Steve Strackhouse

a those per for on Steve you Tom cost another the on about for the aircraft, and quarter amount aircraft had completed of Boeing's This Herbert. is is Boeing about Mark, has this what half call, of about half last said field. and $XX inventory. which the the $XX,XXX for we rework was in of revenue it million. had contract Last in yourselves. guys implies about Potentially XX% is Strackhouse The of Ken XXX discussed XXX

them? the fair a effectively us us on or can of color XXXX Or to give the should the more identified is bit for to has a you fair it this to double? -- Is that Boeing number aircraft little think way that cost

Tom Gentile

Yes. they No, or the about a few units think and me things that go it. let that repair half that's call XX% -- through XX%. so repaired Ken, so We to -- it, highlight they've that need there's

million. So, the XX% a that of less bit than the little is $XXX

to So, repair they've that the it's repaired, aligns really the estimate that. million $XX XX%

estimates. tried nothing we've to are make some on the in fleet. Boeing, that so it's just at the units based And conservative And

the the is in material in view for as that disposition fleet. impact don't of fleet our current expect is So, any units our the we understanding

Boeing $XX estimate make. only we it to that the at yes, half be we So, best units But million are what of going the eventually. is that and represents was the represents need to could think done

the on charge end took we the of so that And estimate. based low

Mark Suchinski

Yes.

unit. significantly per So, I that, quoted repair you you think on number a math than the if cost you do on get the different

Tom Gentile

that had I think, I think you wrong. yes,

Operator

of Our yours. Strauss next line Barclays. David question is comes David, the from

David Strauss

morning. Good Thanks.

So, of you nonrecurring free cash updated -- I $XXX positive, you've got million flow mean got the forecast, in advances. of terms

You've million pension got $XXX benefit. the

$XXX kind a flow million So, in there any burn to Is the of way apples-to-apples, positive this it's year. cash still bridge XXXX? free

Tom Gentile

I mean this primarily the is the to increases, on half answer the back XXX. And going help also year. simple of that's rate

basically and we're rest cycling rate As year aircraft August, the then continue our per this for XX of to that I and next point. year, that moving in mentioned, will month starting be at we'll

XXX. more in flow improvement the primarily to the really going be delivering cash So, is aircraft,

Mark Suchinski

healthy. David, also parts inventory chain build as won't store's need the -- as much And inventory and to continues as the spare then, supply to we get

prepare this production -- we're there's higher on to no we're So, rates those point a lot stability. in of doubt taking time to inventory for at drive

which the will drivers two deliveries, gross which think I generate profit, are primary said, more Tom as higher cash. So, generates

additional better cash one-off place putting flow. forward some rates cash inventory us getting past on and of getting the component as that costs, charges pressure will and these are current year that's third to then the loss And it mitigated. to relates much excess more production higher absorb help cost be that The is a will

David Strauss

MAX Okay. reconcile Tom, month. your a second Can guidance quick follow-up just A implied breaking half here -- the averaging looks on term, over near kind I you're year XX said the think, of still but the you delivery the you rate. like XX it's of

reconcile you can just So, that?

stock a And the in buffer they're to does to this to that Boeing shortfall is looks enough given to allow it rate achieve. now Thanks. relative at there trying XX or here hit Boeing Boeing's point like month what

Tom Gentile

Right.

you're So, right.

guidance to If XXX on for way for we're if the six month. XX XXX at the and months, we're XXX cycling year delivered half the of you units is that of the back But it which just take say do would to to date you XXX imply per the our math, midpoint is I XX. would at XXX,

So, place. We've aircraft XX in producing each we've lines, per got the X month. got headcount full

So, XX cycling at we are month. per

reason little we of XX a actually The is just days, in building. the are it's than days bit unscheduled back half so M that the year less

So you so forth. Thanksgiving, think Thanksgiving about Labor after and Day, day

So unscheduled there's days. several

we'll be increase that, then to cushion And firing addition into just line the production. blanks capacity surge through the as in we to do and normally some production provide

So, at now XX. But the cycling that's we month. XX is are average why per

at the be and month, the starting point per that end will will year. We -- XX delivering at year for next

disruption and In and during were to MAX and at month. terms both per units fin building still from able we to that the the period XX you were month is delivering the was of at We The the to XX buffer we grounded, very buffer of help good deliver news up minimize more time issue Boeing. buffer, in the vertical the buffer know, as handy came to that, Boeing strike. a built when during

to in there's up have down, buffer we that has Wichita, then units held the others gone XX Seattle. and so still And some XX about in but are

aren't the near Boeing's meet as for those going a ensure for like, deliver up. go rates to they example, we and valuable are is to for of very Some the term, But buffer function in performing China. that still as that units customers production go up we can

Operator

comes go Seifman JPMorgan. ahead. Our next Seth please question of Seth from

Seth Seifman

there, we continued seems as AXXX We'll guess I a the the chain the for AXXX very like when of think to challenges losing customer, a at there. on Good Spirit Spirit money charges and lose morning. to supply having When while. look kind it much. Airbus forward we Thanks continue about and the money loss is absorb there

I that at sustainable from know to some core continue says working internal what continue to them. for And make Airbus they point, plan a we -- them? does not mean capability with structures is it to this

Tom Gentile

yes. Yes,

this I expands as And are Spirit is defense. Seth. They thanks, valued is very aerostructure and commercial So, would a that one world. two well into provider important as Boeing big Airbus aircraft as customer. of them of supports manufacturers the an say the also in it's

I that would to customer, important Airbus So, relationship. develop an and further we to say is and want continue

have And you're been air challenged look the But strong forward as said absolutely and recovering, AXXX the is I'd been I we there's AXXX also huge that have programs right, traffic in and industry say the very obviously as aircraft. my broadly losses. in and remarks, in for demand

saw in we air orders. at which was ever that third actually show highest And terms the Paris, of

supply-constrained environment. So, demand to And a up here aircraft. value rates. during very particularly period, we're financially chain go for really for aerospace important entire the we healthy production as very it's high in industry And this in be yet,

labor, in per fluctuating there's increased million to And schedules. you so year. that that, Spirit, labor add see in our top expectations about heightened including of on on And costs, in cost which just in are materials, way inflation the utilities, on saw it of suppliers, logistics, are experiencing going quality, is $XX we

conversations we driving XXX that on but right will programs, are that programs, also and our these with program the address having need higher OEMs and costs are AXXX, And So, customers. things and with in Boeing. important all of the to the Airbus issues these now these are our our AXXX are long-term including important on

Seth Seifman

Thanks very much.

Operator

you. Thank

please comes of Robert, Robert Spingarn next go question Our from Research. Melius ahead.

Rob Spingarn

morning. good Hi,

think yet, Tom, not establish because don't do Is you you question fin and the then and you any it Mark of that. vertical haven't -- we're the said, a fleet, to clarification I in have you just terms occurred have on there there inspections a a way that and when haven't or But margins. isn't issues and exposure? Just installed the

clarification. the that's So

XXXX, lot And back talked back go then, then, margin, When is conversion Mark, if segment you Investor we said XX, things since Tom, the the then, that XXX a X% since you'll more to gets that's Day now higher year have IAM X% you of of about a rates, inflation interest free XX.X% cash just exit March changed to million at but this level, to expensive. sales. $XX new and the deal

all bake things we that we about when how in? think in, do So, your margins various factoring those

Tom Gentile

Yes.

fin, Spirit on as material for very the understand it's impact So, it do be disposition, this that to disposition vertical any clear. let so on will me Based the way, that okay. there the not it we financial based we say on fleet, expect

So, expect material [Indiscernible] we any financial don't

Rob Spingarn

Because need they to-- don't

Tom Gentile

right disposition we a financial our how a of now, we that it are that expect disposition material there impact don't is financial to the Spirit. will as communicating and is for of that's be work, being way And understanding finalized, The impact, it. still but

Okay.

build your lot terms part of the month. this Obviously, free before contract, how second environment, XX.X% with changes, conversion before to we we expectations cash margins, when per a were aircraft the So, XX regard of our those new labor schedule hyperinflationary to lot of before X% get of question, in aircraft. a flow to the made different before X%

estimates right what because of there's occurred. projections we be pressure for those say there's and But more will yes, And obviously, future. those revisit more so were the made pressure. we what get Once now now, stabilized, today what know determine is, before lot a would we we'll

Rob Spingarn

what what Okay. now? that And will a that on million? are then you contemplate? the $XX things flex does size production cost Is business $XX Is when million, just that stabilize, that where volume

Tom Gentile

we on contract. years what and the are It's of at currently four next project over we the based term what of the

Mark Suchinski

Yes.

today. -- Rob, that more Obviously, rates go period. as it's an people an the next up, four-year but couple little hiring So, lower a is average. over over years of the average We'll be it's that

three, in little today, higher year a lower So, four.

Rob Spingarn

Appreciate clarifying. it. Thanks Okay. for

Mark Suchinski

Rob. Thanks Okay.

Operator

comes Sheila, question Sheila ahead. of Jefferies. next from go Our Kahyaoglu please

Sheila Kahyaoglu

flow and today the Good the thank and guys about pauses step change MAX morning I XXXX, cash focusing does do stoppages, from just think free agreements IAM XXXX and wanted specifically XXXX cash in XXXX and and MAX XXXX. you. how that outflows depletion to in the on in work Obviously, progress? and and you inventory the maybe contribution of profile How back the XXXX. rate

Tom Gentile

a I'll of first is, first Mark us, a the then of provide Sheila, we But bit you're and deliveries MAX thing in lowered detail. our stoppage the as and little result. let terms answer did in for right, XXXX, the the impact guidance work

our gratitude we is competitive to But that. it's that with news place and the do contributions. satisfied IAM, and in good the the have it years, It's very reflects now contract we're that four we with contract and IAM their for a have our colleagues for

on our be rate go XXXX, execute will higher. and we and we will able those to that have on front the And rates and as that but increases be now we into stability delivering. expect be XXXX impacted it XXXX So, we to

aircraft next we'll that cycling. that And we XX. and have year said, expect are we're starting where will what the I of one least as as rate end at be increase point year. do for in XX So, per to the already over terms We'll in the moving that at we well XXXX month

the to mirror. the and now going will in lay have So, our a you rearview going deliveries stable we environment that contract is MAX more with And flow. are free up program, if drive cash is our more biggest be out, that because

Mark Suchinski

morning. Yes. Sheila, good

quarter. it add more taking year. deliveries It second the the obviously right? of for cash start out to in the serious thing the to And deliveries had lower us. projection much was not flow people. I is overall fin, would issue, disruption year, think planned the Significant, significant had we're the that We've add work the the impacts -- of We've quality the I vertical at the plan. to caused stoppage, that

chain move and on It's about meeting And quality right? the stoppage. It's Tom producing our past the said, moved we delivery commitments factories time on work as into XXXX, in moved -- move our and execution. supply about issue. we we time, all We stabilizing as past

we execute to and with flow can the is do further got the flow much in better, got so cash execute. if we've based cash we And free all go supply chain cash profitability meeting And We've Operationally, to lead have on a internally. to that's XXX% production higher that, and improvement see and significant production and the better that do. overall commitments will what flow. our positive rates of stabilization we'll to

Sheila Kahyaoglu

per how Like all does close like instead flow XXX just aircraft XX% I'm bps? before, $X down if at changes? So, million you're to So, MAX? that the MAX, to on change of $X.X it million it thinking free margin like cash with was per these does your lower

Mark Suchinski

say as you, IAM mean, be impacts it we I to you IAM And the as relates cash look to per Well, I'd biggest I granular just said, we on the as would impact. of the really think when tell tried Sheila. XXX really, driver contract. this, is the unit, the you about, forward the

a relates of over than higher it's that Wichita. to XX% it our revenues that company much but know as You as

the a on cost some and I negative our going or so think And higher is portion math overall the going and the big hit that the of pressure that's you business that to to put put to can impacts XXX.

Tom Gentile

as knew additional you the did pressures. Sheila, we financial and to mitigate facing to work it and always this way to need our pressure, still. industry is create would going through continue have stand to is I We're fast that in contract productivity the And IAM it to We was run to say before, initiatives. also always said we've

Sheila Kahyaoglu

you. Thank Great.

Tom Gentile

Sheila. Thanks

Operator

Bernstein. question comes Harned next of Our please from ahead. Doug, go Doug

Doug Harned

forward, you what Good numbers? you And you're are morning. look high us go to by, and Thank XX nine over have wide-bodies. are XXXX. those you at the XXXX, at And end XXXX, the how the and the AXXX get month when you in And you when can the on producing at tell now? of XXX, a you rates wanted to look XXX now? Airbus you. Boeing do to standing month Where I the a

Tom Gentile

now in terms delivering really as per both at Right. of five at. sits it we're now, XXX, what about Well, right and XX right we're on month Doug,

remarks, or And XX on so year But right both to between about the as and deliver I X. this mentioned rate about programs and XXs XX is AXXXs. we're now in so going XX my

Now, XXXX. I Airbus nine which the of Boeing as high going has include would has think some at to they're up said, go as XXXX, XX end in high And said to freighters.

And so up up we've XX to rates been on because high already as capital get have we the XXX. -- way those the we as

some to changed, in some pressure process the issue But up the the lot fitting XXX is and some there of the to it because in and have XX. has build on which things it. puts Now, capital process, we build tooling on force, more get pull-up pressure resulted change have finish the a on

And adding XXX. into and some of process. how so take in question we a that's And and account sure happen of really the on adjust changes it's headcount the it making build will the

XX. On capitalized aircraft for per high been as AXXX, month, XX we've we're and as

there as differences increase Saint-Nazaire our some right well, the lower it's rate And is so There's rates Airbus but really we're to at of much now. process plant people of question our to in build hiring and expecting. plant Kinston terms in the a obviously, a what

I a development to thing is be other though, is a substantially right it. of the to going mean now The different aircraft. is I derivative, it's but a in lot freighter, which would say, changes there's

little also XX. kind of on the pressure system. a of will And put a that so bit it's the of version And

place rate meet And time those at in and to to But is get rate to let's so the nine that say, right the start Airbus hiring some another up the increases. that expecting, they're people additional ready mix, so so creates need is just to period minor complexity. model capital we as

Doug Harned

expect on trying and shouldn't cash going we requirements. investment Well, expect that dimension of just capital any is additional margins and terms pressure what that just suggest year, ramp-up But next your in to standpoint, year? from to we a staffing should the next this pressure

Tom Gentile

built cost projections Yes. get into when rates, Well, head you have higher loss, years, support in out the our in the type also pressure. but to We've that's higher those since course, absorption. count better in fixed the of of both you benefit of programs forward increase rates, the of are normal

will And offsetting benefit. an be so that

is inflation our which levels demand little have cost having a this to are asked the conversations environment, just healthy partners. when high what do to get all on in a suppliers that the loss addressed with the incurring an bit the very these kind are higher are that of Seth we're constraints, said I And But and charges, as problem the labor, be also earlier, is and OEM of logistics has suppliers back it's as long-term, well and material about forward and and question these utilities. I'll industry-wide supply a important in

Doug Harned

you. Thank Okay.

Tom Gentile

Thanks Doug.

Operator

Next of line yours. Shapiro Research. Shapiro is the question comes George from George,

George Shapiro

if like a the just XXXX Mark, at $XX they mean, wage morning. XX% go good I look to an up was you Yes, from The XXXX. clarification. average. I said changes, million

So, the $XX was got million average forgetting people right? to kind per was individual, that, you hire. a That number, I wage XXXX just that like just assume of really the

Mark Suchinski

about it's Yes, George. right,

George Shapiro

What Okay. the be Airbus Airbus that And from Boeing Boeing and agreement then lets financing? flow counted one as clarification. between the is other different quick on is advance you free have versus cash

Mark Suchinski

George. Sure

money fundamental So, from Boeing We've customer from the Boeing advance collected one-time and we to the $XXX $XX is make we that back to the just XXXX. difference in first the of like them a in do of the million, paid Boeing we payment quarter a us. million is from that million $XXX to paying XXXX main got Advance and the another between payment bank, and

the reasons. other end at own its day structure wanted their customer the of The differently for

that so paying in we're XXXX. in one And a set back ship per quantity

XXXX. back in we're essentially, it So, paying

you that as results ASC accounting so received an way item. that a us us against that in at accounting and XXXX to So, as in cash the we more can standpoint, an it, in operations that technical really treat from so we're that from I $XXX -- a deliveries of it's again, requires other XXX and it's prepayment making look think million advance

of to will in having free results accounting to us It's technical wise, it not it's XXXX, free XXXX. a favorable in negative that as in in and flow cash to -- impact operational, XXXX be flow cash at but day, the the end have to it treat

George Shapiro

Thanks much. clear. very Okay, very

Mark Suchinski

George. Thanks

Operator

Rumohr go Our from comes ahead. TD von Cai of please next Cai, Cowen. question

Cai von Rumohr

much. so thanks Yes,

questions flow. cash on two So,

the and AXXX the XXX while build are XXX, First, a plus, is losers. basically big XXX

the what is loss build, terms forward rates burn build of incremental off? those the as in So,

And reduce period, the then repayments to are be below Boeing you debt? have over secondly, the your and because XXXX the line, you able, will XXXX

Tom Gentile

Yes. address Well, issue. let just the forward loss me

the on As impact XX will on XXX. positive be you and said, XXX,

loss, of projections of into up. taken the forward terms the schedules the terms In going forward in going account we've

account So that has into all been the forward terms taking of in loss.

of In below the payment what is. was terms Cai, that being second part? then, the of Boeing the second line, it your But the question part is how

Cai von Rumohr

as then presumably the so forward, mean, loss cash have I took have you you That's you that the with you Airbus, payments the those cash get. why least to Well, and increase's. loss. Boeing the the building, move do programs at cash you three forward payment And don't

So, the debt. you overall to net your over will two-year able reduce period, be

Mark Suchinski

Cai, let Yes, me quick. in real jump

cash production the those. in Even produce XXXX. right? programs. forward we XXXX, first have we're to restart on off, up I XXX, you We until about to would of loss-making think of than though those we year. higher do going August more in amount We didn't those -- on programs burn ramp started loss talk be tell So, that will I XXXX last

of the changed. from costs, to slowly of And one five, curve, three we build on we as started process to units way up go had a lot the a higher to lot learning

So, additional an we XXXX. you're in the first per and unit seeing high abnormally the XXX on we're in build booked second reflected And quarters. some seeing in that of losses cost forward that

boats additional Very unit what all that And to into happen in the those would got recover on down. we putting call move an AXXX We've standpoint XXXX. programs more overstaffing I per as similar loss-making on pressure factories. plan on recovered what is the is as moving cash we in stability from production XXXX, should that then expedited we're

fixed us The higher costs. more help rates will absorb

Some of XXXX rate, a little in saw in XXXX, are the we nice up still we in will pressure loss-making abate XXXX. will that There in AXXX programs. move which goes help. as tick-up

XXXX, and between consumption XXXX think I XXXX, cash will on So, the cash impactful about be and on I there you XXXX. in would But XXXX there's contracts based believe our less what we be -- than it when today, yes, tell you, loss-making say on would will XXXX. in

cash strike the therefore, right. couple quality won't a the generate the to around in cash XXXX. moved And XXXX of so years, obviously, we and flow has over flow And when you think the about able cash issues next be the flow and the bit significant issue to generation

some that which best can we'll we we down debt be cash as There move through to able will that. generate, pay we're use to as

really, game And so the that's plan.

next on I the bit think forward more loss year, burn this less little a year.

debt cash we debt, cash into about addressing and and think that's that's flow -- and financing the XXXX, down move our as on of overall XXXX use overall positive, liquidity we're and And how our will part that we we when strategy strategy we move pay our flow to balances. and cash

Tom Gentile

XXXX big excess that Yes. due we in of pay have will April say debt. chunk XXXX But we the And to use start cash about and to is Cai, what I in would a down XXXX. that's

that enough going of able generate pay cash not off. are to be to all We to

we So, we'll look refinancing are at look different and options, as his refinance we that all types in to to going some to debt. start options, XXXX comments, of as consider said Mark

Cai von Rumohr

Very helpful.

hikes. price mentioned You

is are One price of and Do that Paris pretty hikes. the forecast was messages everyone assume much and hikes? people your getting any for price your most from asking comments

Tom Gentile

do Not No, time. not. they at this

Cai von Rumohr

Thank you.

Tom Gentile

Cai. Thanks

Operator

Kristine yours. Stanley. comes question is next of the from Kristine, Morgan line Liwag Our

Kristine Liwag

guys. Thanks

largely for to and aerospace the like decade additional a pressures therefore, customers. XXX of and the So, AXXX cash But defense. been still and that duopoly follow-up Boeing got important programs free over in earlier, for and question I flow you've and got both Airbus the AXXX you've terms negative are mean is have even now,

back in and unsustainable. increase chain seems continue supply what of kind to fragile go these to be to the returning to with customer, willing I what's like costs of point of they're mean, pain I back labor their some still programs importance spots, your more to your and you At point do some customers? if With despite pricing? mean walkaway renegotiate And negotiate, not

Tom Gentile

impact a situation the of inflation Kristine, and side an large commercial on have points. the very good side a especially the that with contract you impact. defense Well, when exists on is it's raised primes fixed-price you And both the has

terms and pressures on industry that it's demand there's in schedules. I of supply the supply chain there right issue material out said, a there's and labor, build in there's fluctuating a as And terms new all the these recovers, processes, in constraints traffic but logistics of huge as inflation and their broader fact utilities, now

I meet contract, the are going the a OEMs our the important issue to standpoint, our But And very so defense are we customers. contractual have under we the -- really, and from the our are US to do commitments say and to have has would government highly And have to environment inflationary with it's that conversations recognize customers. these and environment. is changed a we

Kristine Liwag

getting even that I for your and mean we're in engine hearing of to And it terms pricing to guys. specifically with agreement make better increase? or more difficult something you get Is chain. peers long-term the there actuation they're Thanks of that joint from some alleviation, pricing different pricing your supply getting

Tom Gentile

Well, requirements contracts. typical, I the agreements their say, are would industry, our long-term

they're We on are at Boeing, we contracts the of look these that and on the fuselage. programs. the mean structure make entire our XX I of program, XXX, life we XX% including the for unique if that best contracts usually have sole are these fortunate you all And source. extremely the

XX% On structure the Airbus. the about wing XXX, the of we for with make

And a AXXX we the center of on the wing, the center make systems, the pile-on. make fixed XXX, sections We fuselage, have fuselage huge on with edge. entire all the and package the and including leading the three work we the

have important, the about think we work our on you so backlog. and the It's by XX% when far industry aircraft biggest being the programs. narrow-body packages So, narrow-body of

on that we very positions fortunate those contracts. have feel those So we

that material in has that inflation Yes, in labor, lower were still overall big environment rates different logistics, a there we in XXXX. build both different so are with and change and been processes, than back the utilities

said, are are the fully the time. And to And and with those are at having OEMs I OEMs it. as be discussions aware so these realities of need we this that

Kristine Liwag

Thank you very much.

Operator

ahead. of from please Michael, Ciarmoli comes Truist question Securities. Our next go Michael

Michael Ciarmoli

seemingly, paid good for their some or but with mean question. morning on just point, Boeing the value I contracts? guess Kristine's just things best Hey, not these and you're And saying Thanks boasting you're Airbus, sense staying are these I you're providing. programs, compensated of on be getting you're the for of guys. I you're have urgency? to addressed. guess, How the receptive

get in looking can mean very think up some capture something that guess volumes. as I still something maybe go step-downs I you even closely I you then changed have, I do you in you And is here shorter to guess, the pricing. term price at. that you're mean, the

and optimal I start down. seems the going price think you're just It go XXX, but you if that, you sort can once the step remind us, XX above squeezed running for to getting of rate stay was for like all I think getting here. a should really but shareholders. to urgency doesn't be you're still, more good I it proposition fast from maybe there that get sound sides like And

Tom Gentile

now we contracts, I there. well. as and you I've problem environment, all that. new challenging material. labor a because it's these labor that in with more in And It's see And said, demand much industry-wide It's clearly is inflationary recognize think an as

costs. of rates production these coming orders challenges up, level in, with but are going The are all facing are suppliers higher

that do issue it's the need so And an to address. important systemic OEMs

with that just And on these to for important timeframe we it. put like any have that the have are are always conversations sort it's reasons of and Discussions I challenging. you prepared that outlined. them. difficult something it's But these And can't we

Mark Suchinski

Michael, sense on work be the urgency to to I by got add We just clear, team would of this try do understand. of is a just hear you. We here, Yes, management a lot there We've end. okay? to

Michael Ciarmoli

it. All right. Thanks. Got

Tom Gentile

you. Thank

Operator

please Ron, ahead. comes Epstein Our from next of Bank America. question Ron of go

Ron Epstein

afternoon. good guys. Morning Hey

Tom Gentile

Good morning Ron.

Ron Epstein

fundamental whip, less great just room, it change elephant it. the the beating a they said, in sort the People right business to Maybe you seem Spirits Michael bring have to helping always around that you you be they're OEs? more up. like of programs make they're end of just guys seems don't it there I'll been but make on AXXX, Is have the in volatile now, tail predictable it although the XXX, up helping because like AXXX, to and

stick, mean, less you some easier, swinging seems how to you're but I with the volatile like seem end markets a strategy can feeling guys just up and public Because more over of the say make to It and about business right? us could give fair. -- for could end don't view that that You thinking viable, you how short want you all the the if doesn't must, always it change things Spirit place. I

Tom Gentile

program as on wider challenging body our And have work now. contracts we packages. and challenge been we it's said, up. contracts, And rates have has going I right and sole-source environment of a really the great composite are life those So, more on some programs. narrow-body the The of of

come the three are would composite are programs XXX XX, that We've forward curve we fast if all the those that has So, all the programs, the they down learning you and when loss, as the as challenging. thought we look started. not and been first at in XXX, more

how And the so environment address the conversations to inflationary given we about in. need we're have we that do that

are improve we improve But investments we've these last three, digitization of we going and the Spirit. in way. robotics over let a years are our more in improve and during And making can in me and and it go change much changes our system. to start automation see, is the fundamental And of lot to pandemic those flow pay to A the to rate. you up do dividends production quality in drive said, what fundamental four factories, as been

you that. So see will

other too you about were Boeing were equipment. from the when We of were our strategy concentrated. said original about pandemic, The MAX. commercial. We I and is were went we say, We into broader too We XX% XX% XX% thing, XX% came would we concentrated. were revenue

effort so the made concerted to start years, we've a last And the four pandemic, during to over diversify. including

in Bombardier us give four to Dallas aftermarket and we and us a as twice of much Belfast, acquisition give big Morocco more diversification, the it content, business times from much Airbus was as yet. And made to that part

And diversification so pay to time. the will start over dividends

XXXX. we've in $X be said, want want by We by billion to XXXX. $XXX we million aftermarket be to defense in As

to of those that so all the productivity we're the the fundamentally things delivering some change are initiatives. advanced doing different improving manufacturing Spirit factory through and is And of

programs discussions having & over a we're about the material and to broader the the exposure Space time the then challenges well and with said, Defense and continuing the I composite that so we've in less Spirit diversification incurred system aftermarket. as future the OEMs of concentrated as with that

Ron Epstein

I When at may, it point? we has mean follow-on. value, Belfast, I I a do mean, created so? And expect any this when would specifically, as to look that And to if you

Tom Gentile

through we the going It's little to lower, expected losses. But forward middle to million was it $XXX where of would we be. or And we XXXX. be rates about XXXX. a some bit a we it are a that's the purchase and XX challenge. to XX We Rates the accounting of expected get driven that took when of the charge did program, knew by up

program. XXX right we Airbus is could fuselage, that it passengers It Now, passengers. a saying. think, still XXX and all a is It's great composite it's and take a engine It's we what lightweight make. up wing, fully the got of which that's pushed XXX turbo a to fan. get a about brand-new but is The from out, XXX AXXX, and now geared

it. know a get through they're aircraft. they'll so airlines working And very I that is had a some program. which it's it The it's efficient But like and do great right. operational challenges,

XXX And someday, to which rate even the would it to increase extend which further. it they XXX, might take would up up passengers,

it's happy long-term, we the bet. taking strategic We're did bit AXXX program. made big a It's longer the realize. with bet it great So, in a little good We're move. We think that to was happy it. a a on strategic we program. But

aftermarket, business because amount the doubled got we times out It's addition that going and program the AXXX to our jet in got help of work. Belfast, four to Spirit we also of we diversify

off it a good and So in pay was deal will we think long-term. the it

Ron Epstein

you. Thank it. Got

Operator

line Our of comes Peter Peter, from yours. Baird. final is the question Arment

Peter Arment

very maybe afternoon. Mark, or try a Good note, on just Thanks. this quarter. to where margins end strong was mix aftermarket I'll it the positive

Just and again Or it any Thanks mix Mark. call was how out? one time sustainable to just it? is

Mark Suchinski

margin from delivery targets hear It's with really operational a It's happy perspective to good we've to business. for and talked our Peter aftermarket. thanks about revenue an It hitting you. being the from grow. performance Hey it year. XX%-plus margin continues We're performing and

the second small third congratulate are for There that won't we quarter. repeat a to that the happened about the revenue the quarter couple is of big things fourth the They're performing team team. in But executing. their I our They're when goals and well customers. hitting want for aftermarket year. think

We portfolio. continue our to grow and geographically expand

so And really with we're that. pleased

nice the million, large we continue years. grow And as it's margins. track, of to as drive business, a of talked it year, the $XXX be doesn't going balance margins. over Tom And to we're about, hit commercial we're seem next as as execution the going the right we move XX%-plus as through And to on and our XX%-plus contributor although couple

marks, team. making I and continuing produces question. business very, it focused So, that the asking on are appreciate we with the hitting We're and margins. very Peter, the that happy We're accretive you sure growing

Peter Arment

Thanks Mark.

Mark Suchinski

Thank you.

Operator

We have call. further you Thank questions With line. today's this that, on concludes for joining. the no

You disconnect. may now

Spirit AeroSystems (SPR) 2 Aug 232023 Q2 Earnings call transcript