Spirit AeroSystems (SPR) 4 May 222022 Q1 Earnings call transcript

Good morning, ladies and gentlemen. And welcome to Spirit AeroSystems Holdings Inc., First Quarter 2022 Earnings Conference Call. My name is Victoria, and I will be your coordinator today. [Operator Instructions]. I'd now like to pass the presentation over to Aaron Hunt, Director of Investor Relations. ahead. go Please

and we And President, quarter Victoria. Sam of everyone. to Spirit's Welcome Relations. Spirit's Tom performance Division, Thank Financial Vice Senior results After Sam Officer, good call. Vice first President President are today XXXX with Director Executive opening and take and and I'm our Officer Spirit's Officer, And Gentile; you, will comments me morning, Chief Spirit's Aaron Investor Suchinski, Chief Operating outlook, President Tom, Mark questions. Marnick. and regarding and Executive by Mark Chief your of Commercial Hunt,

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

for of website discussing to Chief addition, Tom refer today's call and With you Gentile. to the our can our you slide And use broadcast I would when that, our release investor.spiritaero.com. turn earnings over we follow and reconciliation Executive presentation disclosures presentation our to a reminder, measures on In at Officer, and as results. like we non-GAAP

on we to future. morning, positive you, many had call. from the factories Based We those with opportunity prepare our glad are some to Day feedback Spirit's of the Investor improvements everyone. to are travel we enjoyed received of in making who we Wichita, everyone you share and Thank the the Aaron, first good March. in meeting to Welcome quarter earnings at our for

Russia-Ukraine the and from conflict, inflation chain Our recovery supply continues despite challenges COVID-XX disruptions. pandemic, ongoing the

downward we our execute continue factories seen to schedule programs. some some in on to Our customers, revisions to although deliveries have

Airbus uncertainty The new other the Boeing, Ukraine recovery. scenarios this rate in invasion our on We Russia to a element dynamic and with of environment. customers production work of continue to adds

small a aftermarket only ERCOT we have for revenue, the that of amount have MC-XX sales date. and of terms In to commercial affected been

we Boeing XX% chain, stockpiles supply needs. them pine of meet through have purchased terms consortiums, our titanium to of hand Airbus immediate about our on In and both sufficient of and

Increased we to alternative In percentage months items to on terms are Even able accelerating The put of sources also that consortium requirements, earlier titanium. requirements. of logistics small had titanium XX offset have operations. our inflation in approximately Boeing and buying the XX been Both quarter. are overall procure utility for a have have our and costs, teams supply our own other developing been the already these increases. of of both pressure costs to conflict begun is we Airbus chain the and though working our

In suppliers natural of term through pricing of chain agreements. with MAX with to in out a the One mitigate supply hedge long-term XXX our short-term cases, we to agreements mitigate our is contract which to Boeing, XXXX, go our the inflation ways providing work help inflationary some pressure. matches the on

inflation material our most address in and offset of increase pricing, ability some customer of the that agreements clauses both provide and of help terms have labor the In to costs.

driving supply delevering faced, X with challenges $X in take we our to we remarks and actions have billion of are issues. Sam years, more go healthy our over maintain we Despite As margins the some labor addressing secure a focused how our will are priorities: XX.X% a on over progressing supply beginning in at production suppliers. diversifying start of signs approvals to three we sharply remain stress and few availability chain our her to target. key details on revenues, at us to we to system. leading order higher rates, see produce challenges Skilled qualifications are to OEM parts and

site Belfast to a diversification is contributor our efforts. key Our

Our Spirit's AXXX strengthened of the fuselage as integrated significantly work and the and one wing increased acquisition Airbus center of to this position Airbus. addition from the top with packages external suppliers

employees We of will the business Xpress. the program we associated the is the on One content April, top United planned. two with addition Mark Industrial represented a mutually than December agreement early [ph] with development arrangement, into pay we the Energy Department more Unite is that Belfast our significant XXXX an The future. in for significant partners, Belfast. launch beneficial financial became go to than GMV commercial remarks. to which Kingdom's an segment's details element and this our Challenger new the Bombardier Union jet his earlier also in X,XXX and a on transaction also AXXX that working recently through and Global of negotiated in supplier agreement Business, In retire with investment reached more Strategy with important covers runs

program, planning right MAX XXX per rest of the for stay we are a year. and month are the of to On now to production aircraft XX the just there moving rate

is XXXX. Our that XXX produce XXX expectation MAX during will units we

Given buffer what originally of longer production XX it expected Boeing of we likely will take now units system in the to future. Boeing-owned inventory cushion the their production will has Wichita communicated reach rate, that the in than about help a permanent

the to XXX program. Turning

the created to reduction units inventory forward some schedule, this quarter a in bullish and production currently XX to On we the rate for expectations publicly. the the extremely programs, are in plans to Airbus and line that hit the on expecting We targets which contributed in to program. on with headwinds the they Airbus deliver communicated remains are XXXX, about loss generally AXXX demand for and have AXXX year.

which work has AXXX, into the in Airbus engineering for entry service freighter, we XXXX. begun have new announced on On the

development engine in the Space contract winning support Defense great the first current to team that program. in programs the solid mature. see of quarter year Our growth Commercial pick Defense Space announced wins half The quarter, business we to back & the replacement and expect had showed this & up Boeing, by B-XX growth as in the including some

were the on facility. for the that responsible the and is cells our Wichita be today service currently built of in will program. pylons engine interesting this in An note We B-XXH all

We are many for excited future. into years to the the B-XX's mission support

strong pipeline, yet around We offering in Defense of programs have not our Department are & entirely development, Defense but Space Space almost long-term currently upside focused business. which significant that fielded, & a is Defense to

on this business MCXX loss had first revenues. The achieved the a also even Aftermarket aftermarket Our margins. offsetting very XX% quarter, growing of strong delivering team top-line after XX% and growth the

also Our aggressively opportunities. pursuing aftermarket team has new been

and XXX repairs. Boeing week, last Global nacelle Just MAX flight Spirit surface Services as their partner control for selected

enable customers were Boeing's Aircraft industry-leading announce with to turnaround the partnership around Company, Our Guangzhou also serve with efforts We as us MRO times. growth segment. serve build a repair world Engineering pleased now footprint to it in also Spirit to new Maintenance global China. over known commercial an authorized productivity, turn as rate center Sam our to to readiness driving I'll are GAMECO in Sam? we and describe to how a

Thank you, Tom. quarter. in We've first seen challenges the some

to it furloughed to the the were demand to per for recall during improvement XXXX, that production However, talent which all recently support plan, that XX% domestic recruiting rates just we're for The been meet list gaining margins producing a those recovery has narrow-body tracking recently and we're of our labor staffing execution. needs. from drive strength. With that at in be needs, for improved the is implementation aircraft. also aviation tap draw. favorable as commercial requested. issued future. have to productivity parts To The our The Airbus is which mind, we're will of will the able positioning traffic our now pool Airbus ourselves appears approximately programs, driving and in backlog to air rates in focused increased, final of we from world has projects digitization of and travel In can in higher staffing month. new which be of benefit continued the strong in employees Spirit meet automation narrow-body many Wichita, and requirements staffing our XXX date, single-aisle the to rate we a order to we we and of On we've is the future recall XX tied to place remain on rate air segment

also to working suppliers with We our readiness. are rate support their closely

with the suppliers have that some rest and terms inventory sourcing the challenges. our have needed. are demonstrated risk Examples industry, the to mitigate chain cases, in risk. excellent we and supply mitigate raw parts experiencing And of where some logistics, sourcing of supply parts also some world-class to types is cases, Just material support extending include chain performance. management. suppliers fabrication when fortunate of we to contract even like providing also the dual some Street and work to Blue can In assist we're We're team are a

growth. also is team commercial Our focused on

development This Airbus quarter, aircraft be signed exploration supporting aircraft for an prototype. design. NextGen We're wings And also to we of work the of Airbus' Tom. back with City have it the manufacturing on Airbus that announced Airbus support that, Tom the addition, I'll emerging for other disruptive the freighter. market. responsible over actively agreement AXXX We'll and we developing and the begun in eVTOL Tom? turn options exploring mentioned, we as to With

Sam. Thanks,

stabilized on quarter to and consumed in month higher rates, at the to the When will has working XXX our been XX position year. one support break those additional per As the the first AXXX. the aircraft the improve challenging increase we continue programs expected, partly rate cash throughout a attributed rate capital to cash in on to the

in be previously the communicated, XXX program advance repaying Boeing year XXXX. on As this million will the we for we have $XXX

$XXX $XX Given XXXX, usage all for the be you additional the that negative million details through million Mark $XXX of which of and negative finances means million. our we expect will this Mark? the quarter $XXX results. cash for expect we year between to first million current take an to for now outlook, now pressure of

good and morning, Tom, everyone. Thanks,

in be we AXXX on first quarter with last results improvements the the year programs. driven by of . discussed narrow-body and specifically we lowest XXXX, As the financial half the meaningful quarter's increased XXX would anticipated of call, deliveries, second the

flow the margin rest reflected many the created unexpected of start see around to world, XXXX, others year. expect pressure. deliveries, and to our we, the cases throughout some the We of At surging this which in like COVID-XX improvements revenue, experienced cash

Then schedule experiencing. factories, pressures to to began, along Russia have and Ukraine the business, our the chain materials we in parts the exacerbation uncertainty. impacted the that initiatives which the aggressively of These customer our including rates we pandemic, and be on mitigate of help supply the are disruptions those conflict adversely impacts. inflation by challenges, adding created near-term continue were other case of working impacted and changes to has procurement with declined and While additional globe

by program. the AXXX from of at first XXXX, to and lower revenue. to XXXX XX% Please production primarily on year. to These quarter first well the the deliveries. as higher was to with each XX% XXXX was When same quarter programs programs for of were our same move the last in had partially results. quarter first AXXX deliveries, the and production to billion, improvement in AXXX compared look narrow-body quarter Revenue XXX XXXX let's $X.X compared aftermarket AXXX increases XXX, the increased in due XXX the last offset were on first turn Now year. This of X. XXX, Slide as increased quarter higher quarter XXX programs deliveries as we up The the

XX of deliveries XXX quarter were in first driven Overall, mainly of the the quarter of last to first XX were compared down XXX 'XX, compared units deliveries to XX in units to to program year. deliveries last XXX first increased the to by in XX% period year. XX compared program. XXX the quarter MAX same Wide-body units The

EPS changes X% saw XXXX year. $X.XX to earnings we first and EPS XXXX to restructuring reported focus in negative same share the recorded XXXX. deferred M&A quarter turn in as quarter reflecting to adjusted per compared We negative period adjusted negative Adjusted the estimates earnings asset lower the related deferred production and compared allowance. compared of negative the Slide cost of $X.XX allowance. in share positive We on let's first operating compared quarter in $X.XX to Now costs valuation to EPS X. during the well tax last to with excess current $X.XX excludes the per same per negative excludes asset XX% on associated improvements year. increasing share of margin, as last the was period XXXX valuation capacity tax rates

rate increased Forward In of decreases and million rate on million, first cost XXXX program $XX cost were losses rework and quality production of quarter further supply the well and lower chain, catch-up losses the cumulative program. on in and were increased of XXX catch-up XXX as million driven estimates decreases the Unfavorable and of $X primarily the on AXXX as million production totaled first driven recorded adjustments. the other XXXX, costs the forward and cumulative XXX during of by $XX rates adjustments by AXXX program. quarter unfavorable $XX raw material we for driven by on production programs comparison, of

$XX the XXXX impact a million same million, to XXXX the at decrease beginning first year. million XXXX of of of of well the $X capacity of related $XX costs cases abnormal us quarter over million of earnings COVID-XX hit included of First costs, quarter over that period and of the $XX excess as as to an increase the COVID-XX the due

during Manufacturing Other awarded the the quarter million first better the to related period earnings of Jobs XXXX last was for Protection income than same quarter foreign resulting $XX Additionally, year, Program, mainly which was currency from XXXX. $XX the gains. third exchange million of included Aviation

we benefit-related XX payments. to repayment increased related XXXX. quarter turn on Slide same year-end receipts driven million. period working for by cash the due XXXX in free higher the by $XXX been cash let's well Boeing the Historically, million production holiday as $XX $XXX higher the Cash usage was shutdown as Now cash this quarterly X. always to employee as impacted of the first of activities of as usage flow to quarter annual cash to cash has million was to seasonality advance free flow capital received related compared well Free quarter flow

that added made also Strategy cash within a UK is Industrial to resulted the in payment outflows system. inventory, repayable Then to of including at payment agreement cases surge free address additional on with million. Russia We of the our cash COVID-XX the of production and reflected Energy The mitigate beginning flow. Business, $XX potential conflict in $XX we the to of investment and Department million and titanium in XXXX Ukraine, disruptions

million program be of first and the XXXX. of $XX the remainder grant quarter the $XX During this anticipated is remaining million received the to XXXX received of Spirit year, awarded in in AMJP

burn will to production on schedules on than down the pressures, the XXX programs some previously revisions cash Looking program ahead, inventory downward and recent for slower of additional expected program. related the add to earnings our XXX specifically and

estimated the inflationary XXXX disruptions, $XXX inclusive and free Given the Ukraine customer schedule of changes, the are to $XXX $X.X billion be we reflects supply now balances This of billion expenditures be Strategy chain we to million part of with Bombardier of This of acquisition and debt. agreement, interest in In outflows as outstanding Industrial $XXX I agreement payment the Energy that in would in retire transaction assets of April. XXXX. million resulted annually debt usage Boeing cash million year roughly expecting repayment. and million that, ended X. in Russia $XXX we the Advance cash flow full add conflict, cash April, pressures, million, which XXXX between will the to on with future. Slide $XXX quarter cash reached This the of our investment We related repayable $XXX our and and With second capital financials. $X.X quarter reflected Business made million. an to of turn let's cash acquired Department and to will this a reduce UK's into selected of

catch-up catch-up the to improvement of million to well higher cumulative the unfavorable for operating lower commercial in volumes and turn of the segment capacity $XX breakeven to XXXX. AXXX, $XX of first comparison, million on $XX XXX, costs, as we'll increased the same production primarily margin million. losses production to quarter million segment let's commercial revenue margin income due first Slide increased program forward compared the lower same changes of on to segment XXXX, the the unfavorable excess forward with higher of compared of lower $X XXXX, the in The quarter of recorded volumes Now quarter estimates of losses cumulative due XXXX, and million the to XXX. XX% In XXX, performance, related $XX period adjustments. XX% begin during on of negative net AXXX, adjustments in as In XXXX. the and AMJP The was to quarter during by on partially offset Operating recorded X.

program due and improved The same the Now by favorable segment let's Operating $X turn compared & XX% development to and prior margin X% excess loss driven to first compared Defense losses to compared estimates production and of to capacity to $X and Space & in X. solid Space execution, capacity to by recorded excess The on of quarter quarter for million costs Defense was the PA the revenue quarter XXXX in quarter $X the of segment of improved in Slide compared adjustments capacity year. XXXX. of operating XXXX. excess first favorable of margin million costs the activity. changes lower X% increased forward cost was forward each million

quarter For our up as as sales same turn XXXX, maintenance to revenues Slide X. higher let's compared were aftermarket the quarter recognized to XXXX, of Aftermarket and higher first the segment part to results, XX% period well favorable repair driven XX% product quarter driven now XXXX. by activity. spare XX% Operating by of of in improved margin compared the to during overall for the mix first

continues we will schedules and revisions add programs of this downward new of about XXX team In excited production our to specifically are potential pressure, programs. recent XXX and the growth business, aftermarket segment. Our to win the closing, on the some for

and are has that caused We strategically and inventory putting chain down costs. minimize facing supply as pressures production to and on are the challenges material some us pressure geopolitical road. to well Russia conflict utilities increase freight, The inflationary also logistical as Ukraine disruptions

Although in from term, execution preparing an that these to near ourselves and challenges for we have are in we on focused we remaining the remain air rate months. will traffic the coming focused on impact and increases various benefit recovery, will positioning see the

Tom over back over to turn comments. let's this some Now closing for

Mark. Thanks,

we increased well milestone, has MAX rate given and benefit responded The aircraft recovery business per team sync we has rate an Airbus that programs achieve of be to the narrow-body the Spirit Our in is through AXXX XX The AXXX rates continue increased circumstances. challenging year. important that future and announced. remainder the expect programs from increases. The to on to sustain production XXX the Airbus, and plan commercial the will with and to month continue remain to

Our diversification progress on had commercial three the segment new across all solid The an aircraft. segments. Airbus important work efforts eVTOL secured package

won B-XX replacement business program partnerships for team Boeing engine defense GAMECO. Our work commercial the the with and Aftermarket and announced

As expected, we challenging a quarter one. the was first

improve. As increase With on that, are be year, continue to on the rates financial MAX, the production an the throughout narrow-body questions. we'll to your take to happy AXXX stabilized results the our positioned

you. Thank

question Research. now our go Robert And will ahead. session. Please Instructions] Spingarn from Q&A [Operator from start We our Melius comes first

open. is line Your

Either or expiring Good should of year. your Sam, or either upcoming ask wanted where contracts part you in with up inflation. your machines that, your to contract contracts about not next how fixed risk we And price about think then morning. Tom as inflation keep I protections may

people. might hit that I And about the your margin. XX.X% think it to your factor into covers costs future and how ability X,XXX

inflation of responsible costs. and But works it on and absorbed we obviously different. we somewhat the we is they the the up split contracts, But are Airbus that. first them inflation, threshold a contracts and the have in examples, of Boeing both material Well, and essentially all typically, escalation way raw that amount Boeing for to then above different on lots are the

Boeing for the their care And protect I for so combed programs that have they of against respective consortia inflation. us all helps these mentioned, Airbus. of and for raw materials that TMX And buying we take buying and mitigate

which out our also have MAX far place pricing that with XXXX, hedge. our out in a mentioned, natural creates as lot I we as example, go As long-term agreements suppliers contract, to a for of

contract contracts XXXX. with we'll our So is and partners been the ways with that. in them XXXX, our are the With We in to the in extended beginning continue already way the mitigate of of of -- of that we regard in inflation work. work anticipation June about and discussions some to that, those and union due at IM, that we've the

we have about margins. think We the that XX.X% our and taken account projections long-term into contract as

said, have in our headwinds stand always industry, to you things run like driving operations, of I've utilities. and this to As have in though increases, labor we other or still. we're fast supply material and raw logistics And increases, inflation productivity and terms in even chain factory

all And taking offset are XX.X%, so we as projections. those that we to account those in the make have we to order achieve into and

the guess And on I well as you price step if down about XX, get XX.

as that taken well. account into Yes, we've

Okay. Tom. Thanks,

don't XX, even once Because dollars pricing a delivering -- more units and when though revenue be a forget, above lot lot above a we profit generating go we'll the more obviously goes and production into XX. goes total discount we --

Got it. Thank you.

thank right, much All your Robert for so question. you

JPMorgan. question Please Seifman from comes Seth next from go ahead. Our

Your open. line is

and seen then Thanks much. guess, I question those Can a much more shortages versus right them good remaining? dig how I to of and how want temporary to size And think enduring with bit have XXX materials thus it little is XXX it much this they there you leave two. in how And potentially of how block us you up now pressures, for cost might in the we'll of is large these morning. about certain the tell how on extent tied profitability. the that are do of be you and very

jump in add Tom and don't color could why some here. then Seth, I

ship XXX Our the here April is we sets. contract current that accounting on just started in XXX roughly

our purchase typical are the tied customer. contracts, accounting which commitments size to our by that's so XX And of

the and the think you we year. about majority the comments the rest The Just year. when of couple us a -- of end a out XX month up holding close should through that for Obviously, of get of rest through me. before we contract

about margins we're it. could seeing the put inflationary -- XXX And X.X%. it's pressure measures the March, we obvious month think on inflation we're I near-term mean, looked the as of we XXXX. at any So

rate course significantly we're next months so working hard rate we that of sustained pressure increase and that help other a costs several it. could significantly from absorb The excess the some production significant. the on XXXX we'll have XX put higher XX% And capacity will XX significant on mentioned. earnings, or our on increase to is costs. But inflation labor and revenue over It's the reduce costs a and also costs overhead

to We're month production So delivering first week. protected XX We're a it. that invested we're looking the forward it. rate decisions at We sure in that rate increase. excited ready We make starting some quarter is heavily. for made we the our this system to

that's of where And so in near the thing that term. where here things stand kind

Seth, just I add to would that.

Most long-term this already contracts and are then You with of pressures we locked our about cost costs up asked our our in suppliers, customer really year. have contracts.

goes June as in so talked up. locked And contract are next we biggest raw those through labor our terms with and materials just of about, of union already parts, detailed And our year.

So even those subject stable our percentage as utilities comments, to like some some market the if year, this And some we're see said I some in we pressures increases. we of things my inflationary have we're buy inflationary as relatively cost total some a logistics. to seeing small pressures. are and in those incrementally But though are was spot looking this commodities or at on where fairly

contracts say in the So overall, we just are the pressures place. cost long-term because have I that of would mitigated

you Thank much. very Okay, great.

Welcome.

much so your for you Thank question.

RBC Our question Ken go next Please from from Capital comes Markets. Herbert ahead.

upper the lower now but end sort can obviously, of changed, the or about there range morning. talk in and for flow to about what's the sort good of -- over the what's the I'm the free And of and months as the helping risk, sort Mark, the wondering this bracket the you key the Yeah, incremental year. with moving you pieces of just where the the range? last the cash incremental key change guide think Tom few and costs, pieces in between end guide the

start. Yeah. I'll Ken,

back XXX specifically The first we from to thing had getting on as customer, some has schedule down it is have the changes through continues Boeing delivery. come work our into

The that the earlier we in We were at year, other the year. anticipate now. XXX this on rate be break another where there scenarios is yet don't might looking

expect that the rest the year. of at We we'll stay for XX%

So a those were headwinds. initial couple of

having is, supply as with or discussing, on-site help get case moving as some other raw we've into disruptions. to The support may been distress material suppliers We're that some be. chain purchases or parts the

that a challenge. So is

the quarter, have material buy some $XX heads sure some we and had good million was We that titanium to on supplies about to the that a adequate protect we stockpiles secure production raw make had especially in investment first but felt system. was

on that variant of January As particularly and $XX with some heavy about Mark mentioned, then and utilities. January, in was inflation the created logistics Omicron million pressure. And as mentioned, I

million drive that to headwind those going additional of $XX all we $XXX to of million said. that things So are

$XXX negative the $XXX year, on going to everybody includes million looking million but work to quarter payment to we're -- give that we we're Now Boeing. for the just $XXX that, which outlook continue wanted at right or negative to the the for million now, to

Great.

to It the use. sounds between and just million that the like potentially really visibility million XXX $XX clarify, So delta in about on you or supply incremental risk pretty $XXX now. should good chain feel is MAX as

That's correct.

you. Thank great. Okay,

Thank you.

question. for your you so much Thank

question go next from comes ahead. from Strauss David Our Barclays. Please

good morning. Thanks,

similar think or guess And wanted today, because now I XXX guess I it before -- MAX little before confused gives production low Thanks. implied flow units of I you're I forecast. setting just but a MAX up a follow an you delivered number, taking revisions, think kind as because this implied rate So on cash I'm I about comment certainly Tom, year. talking the to calling downward to Boeing a actual XXX for you reason free these without in you're the range, level specifically had but down out the the something

and Yeah. we're the we think now for earlier year. at the another XX aircraft earnings Well, going the increase might thought of last mentioned year, as XXX be to yet as I year. we at the rate be per for call, the level don't happen, that month in there year, stay this the will We at rest

that's So situation. the really

terms And is the what think currently now? down do any level. expectation frame your around it's you What -- guess, time XX down of XXX in the that inventory drawing from, is on to that now I I buffer guess,

it's XX, at about going been XX. And It's bouncing are Well, kind as it's of a Boeing. the for here little I currently low Yeah. while same to around plateau expect we bit. as as it's rate but

I depends next take it's burn to Don't we down. increases above know to level. year their to rate when we really on XX going when get that now go exactly to before the longer. going and down Boeing XX expect production start it it's so And the into

right. very Thanks much. All

Welcome.

you Thank much. so

Our comes Kahyaoglu Sheila go from next from ahead. Jefferies. Please question

morning, guys. Good Thank Hi. you.

eating about that? the what a the sticking constraint? demand to or for stable the you do cost labor see think think inventory could MAX, the on When contracts, Tom, available negotiate you how And Do we of 'XX? potentially the 'XX, where that XX% up in that Just do month do supply pressures, have how think constraint you think be or be Like do about you at you those could think you that you about a potentially if a if you're going you cost -- don't like available that? of course. MAX Mark, -- how XX do or

-- will Boeing that. hasn't we in don't know communicated we yet. be first of 'XX the Well, what all, Right. rates

supply see. supply, With wait we constraints. don't And regard so we'll to any anticipate to

have we capabilities. We supply in we very ourselves. Blue we a operation. some it. we're lot have fabrication thing mitigating And that And parts make over Street chain, we what have strong have one XX,XXX of We but disruption a is call our

we So quickly of we part. trouble, the shops. can parts fabrication of into and are in and supplier if out our a that things to own used moving gets always manufacture Many ourselves, manufacture

of Boeing in year. going terms we're will those any rate be future. no But So constraint right wait meeting there what this we'll And XX to increases at now, is the from in production to expecting for the we're of be. in supply rest see

you. Thank Okay.

Thank Welcome. you.

Thank you so much.

ahead. go Please Bernstein. from Harned Doug from comes question next Our

Thank you. morning. Good

morning, Doug. Good

the to the goes terms you margin, On assumptions that been you on that other has But programs on expect? in How get the about XX-month of all MAX -- the AXXX, this tied also margin, to you the do your number, is XX.X% you MAX. the talk have this assuming XXX. get what on to rate can XX.X% to implied tied as

Yeah, driver of Doug. our major Well, for still a as know, overall MAX is economics. one, you

OEMs have And of surrogate publicly on for terms their use assuming a production we month stability. as of in per less But just aircraft what kind rates. a also communicated so we're or more XX the long-term MAX just

the they'll give So right again, the you on offset near But on on some it incorporated of the by freighters indication into the 'XX. our starts long-term planning Boeing of we've we but in of rates. delay once this a introduction that that for assumptions those announcements XXX, example, to Boeing kind some margin. of the on term. we're increase be try now delivering year, at in looking the are for made will And And terms some XXXX,

then the XXX. communicated. really haven't changed on Airbus just really any programs, we're the on in lockstep Airbus where we has And So with assumptions

So to into or as per by aircraft about of be get for mid example, XX the we've five six AXXX, XXXX. up they that's they've at And month said what going to incorporated. AXXX, on they're XXXX, they're get on so and the to planning

to So that's between by the planning what XX on we're and the aircraft they're middle AXXX, get about per XXXX. month, included. of right we've now six And five to at and

are XX.X% is at sustained we assumptions driver the again, to is when is XX that's a we when basic that going biggest built those be get we And to XX.X% So can said the MAX. have projection. we the think what we've rate the into that But margins. hit

and signal? at month to XX words, through were get to the Well, breakup let's MAX, say, to advance in you the terms in it? a typical go How this of other a let's do the lead a talk if that Boeing. going on far about rest to of time and year, looking to the what's when are XX able signal In say, react you typically be you

increases years. there's had nothing it's much times typically, couple shorter last decreases. both But typical the and months. Well, lead for We've six about of

with to based will look, what got to agile, market. and are. ready their So listen requirements to on we Boeing on and make work going we've we've we're sure and to both got deliver them be Airbus we And be agile the and are to

Okay, great. Thank you.

Welcome.

Thank you so much.

Our next Shapiro from Shapiro question from George comes Research. go Please ahead.

in if X%. costs, kind commercial underlying don't AMJP Yes. excess you of the Mark, you take ask, and was about I take out and in X% the know the quarter, the so around I all margin would to wanted of be costs excess out I

the rest Going would how expect change? to the year, number you that for forward of

question, the for thanks Well, George.

I talked about past. the think in we've this

program our at financial As and an have performing now about to you that month But on on of we help the And increase specifically expect aircraft think margins, we're program, the talked the the ballpark lift help we delivering revenue. incremental XX%. XX% is standpoint, going production by would XXX per strongest on basis our our a that XX% when here, program. producing which to XX from to obviously, profitability somewhere we're in

Okay.

So would it the be margin you're to XX%. saying XX% incremental

Okay.

Yeah.

valuation other the running rate year. And runs to of it the but just last this and a me probably some a higher tax deferred quarter high one, was minor seemed than little XX% -- tax the higher question,

the So got can on what's between deferred you the you quarter? just asset explain benefits tax valuation going tax this and

quarter we based complicated, tax the me but where to The actual performance in you let rate, a looked that. rate try look little on our George. tax your recorded walk get the you at old your through nuances tax of that. at When Sure, tax just rules you

a based We rate of our have tax at to on look tax earnings. -- full effective expectation year rate our

drive and money we're And in the it, to is a example, of have just, actually we an in if is. of it income in so lose that significant smooth half income pretax money call to year, what you relates variation course out as then pretax your quarter, if over to situation, you standpoint back the the make but can compared real this first the and some the earnings, overall the the what year, book from true tax a

asking on it and over expect the look a why new although So of at I rules kind course normalize force The understand us you're that. looks quarterly then of the it abnormal, the rate year tax basis. to

through normalized as tax make see the valuation we the and start course to recover you. so earnings more move to to of year that more rate, And revenue, tax our the sense as reserve you'll we generate excluding

Thanks Okay. much. very

George. Thanks,

much, George Thank your question. so for you

Kristine ahead. question Stanley. from Morgan from go comes Liwag Our Please next

Hey, guys.

XXX should unit, Following like catch-up. we negative is Because about should I consider? accounting in per that cumulative there mean the $XX XXX. XXX -- it? Or margin how should the on something take the over the we sounds it block? X% about million that that about headwind for up think airplanes we Is else it's we think if

some there in just Kristine, system in of added is chain to caused in so supply aircraft disruption month, end just were costs the to of And the that jump -- ended we to the Supply as then the production the related in our disruption costs accounting seamlessly to take me building per here, Tom support those sourcing, that contract ourselves least accounting catch-up rate up disruptive that unfavorable Let quarter. the closed. want dual an closed can are standpoint you XX -- we as 'XX some that from block add and at contract incurred establishing we were protect that that first costs inventory to And incurred chain first pressure here, 'XX. our Really, that and increase half and what that. costs, happened to may type from at quarter. that costs

our those doesn't perfect quarter chain disruptions. or our costs forward we've we to contract, higher we the the supply worked that Now see the into forward delivering production mitigate chain move It rate, we're rates. higher And that were as supply supplier in protect first in we those of mean health, as which then at that we're but move should as the move is system. we at here, now, accounting costs forward and current supplier disruption minimize through incurred some we

a expect I that So and job and of of through recur. it's contract, really to kind on accounting wouldn't challenges amount previous manage it's contained significant our profitability. And our to protect those our

was So do lot protect us we our that than system, protect If again, production would rate. cost the more the don't million. a that well, production it $XX

talked Last Boeing now thought Can to per off. a about I if have little really be it'd ship production the you understand would helpful. what's MAX on production up producing help a burn rate? changed? Yeah, And is And follow why month at could inventory than less that's us XXXX just the set rate. allow XX lower? you five guys quarter, I rate

is already Boeing been the to Well, I Right. us a has plans given this stable, has make that And and sure in think it for while. signal. its chain wants supply the

gone XX So to planned. at up XX we have now. staying They're the as

the going same for rate longer. we're be so to And at

manage that will news ability the the the those have we it that out. buffer production health. chain But So burned to the to get means good trade-offs preserve is in order

it. though they're this what for us while. And has And overall to in XX to Boeing matching been that's is planning we're And to for even But XX at and as decided so to it, the happened -- break terms do continue chain what supply has Boeing that's stay do, to well. we've of asked going a protect

And that the the factoring just your is just, cash of a inventory burn I guess, then? lower free for guide off lower for in flow year,

No, Kristine.

talking see rates don't happening. in we current current fourth expectations, our quarter. that you're If we on expecting XXX schedules were a production in and specifically tick the And our up

to program, than on revenue XXX is and we there'll so cause as cash expected. flow which a And previously of earnings going lower result the lower that, be

at we're stabilizing benefits to a month and to I on positive our going time. production is of we're Now at work month a side, for to on back see relates stability lot And lot a continue going to at suppliers drive longer We're improvements. period as to the rate. aggressively a of up be of staying our XX XX going XX helping before a in go we stabilize it system think

our a revenue, But long long-cycle over long business little think a little earnings got -- near I So and to less a think less it's and business. I the we term, We're cash. term. think about term

to next positive Spirit good system. over our as get break that study And and production chain, for us. think suppliers rate We'll stabilized stability. be XX prepare rate to of more drive drumbeat, the XX generate and well our I for will supply the think this we is going when right? is revenue that the earnings I that us will higher with We the for next a better course going on We're work and for comes. to months, it as Boeing

much. very Great. Thank you

Thanks, Kristine.

Thank for Kristine your question. you,

comes ahead. Our next go UBS. Myles from from Please Walton question

to previously Thanks, little XXX another morning. rate bit be that dynamic. to the Boeing and rate I liquidate just Is previously above inventory. of that XX short get previously booked year? liquidate the the wanted presumably, a were think Is end you're you basically, a before rate to rate they're put to on year. So you of going fair to not that revenue you're going back the were now good production at assuming MAXs in it? Boeing it And is XX assuming stay there half going hike thinking the the XXX is and to to was of to going going

rate in to already Mark we've question expect our and fourth Well, quarter, first storing because answer But we expect just now. them units of we your said, Wichita. delivered is, yes, a did Boeing, inventory all, we're it's here and to don't the increase those as not just in that

the difference. And so that's major

against that expecting you in had sitting were you to And revenue the booked Wichita. liquidate units were

Correct.

going that We out. it's now burn be slower and to off, burn expected a to

at deal we deal do now, What from. Boeing of opine to a their the end the of of challenges can't the systems At we Boeing I on day, what Right produce, And end requirements, production are day, here. we really they'll burn deliver the off. think our delivers lot and Boeing's with expected is And what is pretty expected there's really focused what We and higher the disconnected. system. production on with we their deliveries. will we're what

Boeing and stored over they requirements, trying what deliver see give to they to So of do has you we eight our the and what we're can months. seven relates really and know what over to we what produce as We kind what's aircraft. That's our it obligations their color next as of out something what address. are to new best production,

And be that much now no should above excess? minimis cost is XX to expect specifically how above it. XX longer XX, everything de Got you're the is we of excess excess costs the and

that. We'll to No. see still continue

XXXX, we of it in incurred it here XXXX be to would XXXX XXX. in million expect XXX that I to think XX% rate I about because increase. excess around $XXX of to in was costs XX% lower

Yeah. But Mark, until XX. the get excess we will continue back costs to

go will 'XX. it again -- down down It in again. we go have But it Right. We'll costs if rate, up go we're still some in excess will expecting in XXXX.

Yeah. you. Thank All right.

you. Thank

Thank question. your much you for so

von Cai from ahead. Rumohr comes from Cowen. question Please next Our go

Yes. Thanks so much.

you the first to programs. the about pretty the you AXXX in gave year gone us AXXX. rate for be Because two What So and hot the seem quarter. plan AXXX those for the Boeing your on

units. XXX expecting the AXXX, XX expecting by we're you just XX just on middle of number, the a right over to XXXX. the we're look AXXX. we're Yeah. -- now, Well, we're XX, about planning so to from results, Cai, $XXX you saw probably on at the delivered we AXXX and we're if at But total And on about million -- our go as

So four year. bit for -- it the a and will between be five over four average little

Boeing you savings, mentioned then, that happening retirement? the $XXX savings advances And because going below you're rate the interest interest the helpful. prepaid UK line. what the to above are royalty the rate Mark, I the is assume million. Very line have on that's And

the financing Cai. -- this the cash It's And fourth the liability. flow in interest end it's And interest I were debt-like rate was $XXX of paying our -- of deal, X% correct, a had rate. Bombardier when section about statement that at term free to X.XX%. million the majority the we a cut the loan you through -- it fall our flowing up about will it we last think we a majority we $XXX guys You're X% year, base told talked about increased million, of in this at by did because

go-forward the effectively, under $XXX on little $XXX to of loan from million going have. cash the X% million So expense to cash we and than a million from of we $XXX balance basis. And used the see balance to we interest $XX our term expect cash benefit million X%, a sheet more with we're off roughly a

at second quarter of one last the quarter much all when like the in look it the you're first quarter, my mean, Q-to-Q the of revenues in likely increase at I be you pretty And terms model, look I where is as XXX. looks to to Excellent. is in XXX second

have big XX How you that step costs gate up? So quarter? get not as big. a second going margin that should we assume going Or to should up it's in still you step-up to we think from be the so about

now as Well, of delivering we're I said, at at here in month XX the May.

it, about still a June April, May XX we'll month. XX month. think be you and will a if So at at

going second of the quarter. to month the incremental benefit see a not full we're producing So at in XX

relates I little we that April. to that as the think still of to in trailing breaking it you'll costs -- of bit month rate a incurred see

see pickup nice to going a you're in So revenue.

after going tick see to You're we'll flow that. in cash earnings, a and follows and up --

up really expecting see to time, earnings we'll measure benefits we'll XX in to flow month. rates of you be through revenue the fully cash revenue to quarter, production And peak when us really, full at we third and aircraft think those in be that quarter. that the want point start get the on get I improved, really and meaningfully at would delivering to We'll I'm flow. per

Thank you. Terrific.

your you question. for Thank

Ronald from Our Bank Epstein ahead. of comes question Please from go next America.

death Yeah. has sort Hey. beaten there. Good of morning, like seems been XX It guys. to

So maybe little change bit. a topics

with you months maybe on were business Do through defense anticipating going what's more defense than you in Tom, flow six of previously markets ago? today? So expect your nine kind to

we in a is have a gone just proposals. more for seen broadly. of defense some certainly terms What there's budget pickup new been what's in lot going and activity reflect bids activity requirements has on to of Well, in the but and the Ukraine, up of

we back only that earlier, over XXXX, were and we As in had programs. over such mentioned we XX $X programs now million four have

for And So for before, composite we wide-body said as be what's fabrication. happening. a that's capacity that have to of lot used I've

placement autoclaves, some defense, So machines, us and that trim things like were that's that offer helped inspecting, immediately that win new to fiber able capital the to of to equipment able nondestructive kind and automated to we're repurpose and heavy drill, primes, defense we programs.

classified So programs have we that continued those comments, as and very do But that development I drive won growth. get into those are production, expect, some mentioned through my as pipeline. should phase development in in we programs the phase. We've and a defense solid are

very on. about the areas key opportunity defense we're So optimistic focusing we're that the in

which in carbon, like So And things space. should but have at also part the our new with attributable XD the drones, of used big group looking that's also course, capability we hypersonics. which aircraft and high-temperature very And a a carbon of on missiles hypersonics in next-generation strong FMI force out Maine, future surfaces. of then be the then we're and makes the

is. these on of structures our and focused where heavily areas that's are expertise really All

we're space bullish the very and So outlook. market on defense

better what And cabin you. maybe Got than anticipated that going gears you. demand in you on what's aviation Belfast, for then jets. you. Belfast end Got Got given given would going business business got and changing doing to have in you've is market, large on

She Let address oversees me that. Sam ask to business.

Thanks, Tom.

bid from of and us of to We're to -- up side growth for on. lot coming lot seeing opportunities a seeing we're a So things. of the look at

little in to rates side opportunity second, pretty the business is on business production. that pick stable to talked is increased. certainly much, started that related say things, of bit EBITDA as the well. would certainly technical of of particularly the the engineering kind We a terms So services pretty market. up that pipeline emerging What about the market, And of I side has side the and consulting of staying that

it. the on opportunities at and So this that of own would business jet work say is point we're side of chasing. kind of its lot a it's There’s what holding I

new we business do couple programs. of And a have jet

announced. Yet Yes. to be

Well to. -- the was one Falcon

Falcon Yes.

Thank Great. you. Got you.

Welcome.

you. Thank

Poponak Goldman Please question comes from ahead. Noah from Our Sachs. next go

everyone. Hi,

Noah. morning. Hey, Good

morning. Good

business? manage then On the rate and timing making best and the MAX, were break, you? had next Or reverse it's you that on your assumption and size to your Boeing given you having

more It's the Noah. of latter,

we are working change always As based on on those circumstances. scenarios we've and said, rate

in XX% currently of to we expect stay Previously, at we that expected right have right increase don't that is now. now had Boeing rest schedules quarter, the a we the year. but rate the So with we're for going the fourth

different be flexible. so This but now, very scenarios, again, And be challenging going working on very we're to agile. to time is so we're have a we always dynamic, right and

Yeah. and Noah, Boeing update relates Airbus say, of seeing I would Russia, it just get kind skyline the we COVID it, routinely. now more the as and from, than challenges we've ever to in adjustments we're skyline a seen And with before. all call Ukraine, marketplace

to of which skyline, comes going, you day, right? got get the the are think it's you be formal purchase a so of end gives an you things And of the at order, kind indication right, through. that But where

more right? on a on there's the mean, recovery think the lot of I coming lot on delivering out a things uncertainty, the And I of COVID. their storage. got They of and side airline still is of end Boeing seeing We're the back issue so we're XXX. of seeing stability, but

uncertainty. have still we think some I So

those that commitments we to the Airbus adapt clear the side it's and But are to and think where flowed to purchase us. want I to then they have down guidelines adjust on change, go.

of MAX, you we for And And we wanted in our May. of now, clarity the see now give XXX said on is this right rest into units. now why year, we the plan what terms that's we're to that

Yeah.

on all also on as when just then will total issue China the but their like, backlog, of skyline. the And of That lot almost a size There's they're makes the a your lot to a of it in MAX and of percentage deliveries resume the sense, Mark, point, seems there's helpful. MAX. focus Okay. it's

certain has to even production there's have customers movement skyline that So enough are happen. rate, there if a aggregate to so much

almost can't it in a a just a You of bigger term the that's size fair to challenge that the take customer? the than take near rate. Is higher that,

move I slots their that and skyline know. don't knowledge they don't manages deep the work with they how Boeing airline customers. I how of how and have

at question think I've more I worked that's for not an of them. a OEM.

Boeing, XX to there's quite trying our stay we that important now. on to support to do us, manage But customer. how they deliver is we're best it. they and going can not to make their we to I'm important trying lockstep them sure time So and XX obviously, think on is customers. as a to airline and really support the deliver lot sure I And we're support right

anywhere also mosaic it's and see of MAX? could for any better -- opinions, big being your good system why question visibility and resumes have to part I a get of when in the the Does it's on Boeing, just here but of China anyone a answer business. the deliveries

what very it's complex dynamics. Boeing our customers, from from of Airbus lot We on we and do say, standpoint, But also we and a hear a with we read. obviously would what different our not. depend situation I

have And no. on any so we that, don't clarity

right. Okay. so questions. the for Thanks All much taking

Noah. Thanks,

Thank you.

question Our Truist Michael Please go ahead. from from Securities. comes Ciarmoli last

morning, question. my guys. take sticking for Good Hey. Thanks to on

excess I guess, Just for the it excess the with and is. you're mean, the at to just I in I into pretty costs XX%, going Mark, seems there's 'XX. million year capacity residual 'XX, it I costs $XX excess be I some we drag of XXX, ourselves times lead it, calibrate specifically a full big into if fourth kind brakes. mean I the range the mean to still where your of guess the on on call for cut increase sequential kind million by, what like just the should now to $XX costs, drove 'XX, from quarter? million $X given MAX And looking in mean going XX

aircraft go tick in we go rate, to, XXX-XXX. around if The excess see in we mean bigger we that going higher you reduce what -- help was call it, you'll to 'XX page we we're up, back that's in I breaking If -- a XX another Yeah, it down. to month. standpoint. and to that said half With XXX-XXX cut from see rate up of per the benefit if I XX%, an

fourth you you'll so the see didn't a excess start higher at really a compared quarter in the XX delivering second down because month, in see quarter we And a we to that big nice drop to first deliver weren't as tick costs rate. at quarter

very I would reason some it There say quarter simple. went get first the to the were $X during But for million rate is up ready Yeah. costs the increase.

And it. that adjustment on mentioned. also was I So contributed a MCXX there that to small the

what $XX to drove that from And it million so basically million two QX in the factors those were in QX. was $XX

getting at Got to XX-XX, I like seems pressure. narrow the MAX rate, it. I still, I to up even it. goes if look bodies to your are under be it the mean, still widebodies mean, Got if going But

get AXXX that's So it correct? XXX and you're some it to be drag, to wide-body going have and the like where to we residual seems is, five going that at regardless, back six still even XX if cost costs excess

But separate for how around costs, twin specific production Well, not treat are those instances, out site pressure cost production twin excess a on across that on in some the aisles. but negative our margins. in the today. costs can on twin are like a impact our rules embedded have profit have rates we And Wichita, wide-body lower there programs the puts Those the excess large rates is board. today, Michael, there accounting calculation lower obviously we

as it there's So a relates to definitely lower production rates. headwind those

it. guys. a Thanks Got lot,

you. Okay. Thank

joining Thank this are like your for call there time, question. would has conference our call. I thank questions. to you, Michael now concluded. At for today's everybody further And no

disconnect now may You lines. your