Hexcel (HXL) 25 Jul 222023 Q2 Earnings call transcript

Good morning, ladies and gentlemen, and welcome to the Hexcel Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode, and please be advised that this call is being recorded. After the speaker's prepared remarks, there will be a question-and-answer session. [Operator Instructions]

And at this time, I would like to turn the call over to Mr. Officer. Financial Chief Mitelich, Patrick Please go sir. ahead,

Thank second quarter Dan. Good morning, Corporation's Hexcel to Welcome XXXX everyone. you, earnings call. conference

judgments the uncertainties caused by They to about let make available page be may beginning, of XXXX. assumptions, to related Act could the me of the and any the forward-looking are in variety cause everyone from to formalities. Investor filings the of provisions Reform night's safe outcomes our on website. statements SEC of statements estimates, factors of during statements last call. materially replay a the within forward-looking Before this statements this forward-looking Private harbor or detailed news that call call Certain and company's Litigation I A Relations of in constitute involve today. cover this Securities remind we Such will future want factors contained course meaning actual differ the our results release. may

this our is cannot rebroadcast copyrighted or Hexcel be recorded is material. without Corporation and being Lastly, permission. It recorded express by call

Your consent this constitutes that request. call participation to on your

Relations. call Goddard, quarter With Nick President; purpose Kurt Chairman, of detailed Stanage, in our results XXXX is issued the The Investor Vice release CEO me and of yesterday. to review President second and our are today our news our

call Nick. to the over me turn Now let

demand our advanced we solid carried sales quarter strong great morning, lightweight second Good quarter with increase forward delivered share as Patrick. everyone, results. reflecting Thanks, almost second we XX%, a the today and We for and as into you is robust of the in us for XXXX thank that execution. composites momentum year year-over-year started joining

pressures requires. mitigate supply to and customers' market labor manage inflationary continue to We protect our a constraints, chain tight and

through confidence As continue these improve supply chains global issues increases. to work and we our

this with at demand cancellations and airports an industry frustrating summer high it and many, been reflects growth. delays have While for

International to Air almost travel passengers key million highest Association, screened International the X.X daily screened XX, June month factor is higher According recovered travelers, first global now on markets number the is that passenger of domestic XXXX the and X.X% more returned has XX% Transport the XXXX May agency record. to the was XXXX TSA On load travel than than had marking globally levels. in average levels. on

customers Growing back to that who were now of for news and above aircraft air over There level great to our of at traffic both is Airbus Boeing and domestically backlog and peak XX,XXX recover depth us. pandemic. would mid-XXXX. for aircraft the doubted Looking passenger the a the combined for internationally passenger just order these Commercial levels levels. many demand, prior by are

next-generation for and strong maintenance penetration grow, in keep aircraft continue composites this winning space fuel-efficient to Hexcel and improved for opportunities Demand The advanced with our emissions is and of lightweight long-term demand broad well portfolio costs. solutions. lower is secular to with positioned

quarter million of Patrick to XX% compared XXXX. AXXX The programs. jet aerospace increased increased commercial wide-body more demand. XX% highlight me the constant growth came then the numbers. $XXX Aerospace sales detail quarter the Boeing more and second from XXX the for Airbus Other second business continued strongest than robust and quarter, of let Commercial on results more will and currency second some Now the provide of the of than in

and their and existing to aligned and re-fleeting customers to and the Airbus XXX orders in narrowbodies, our Boeing and remain AXXXneo new growing second fuel costs. efficiency regions growth with quarter, Airbus the in remained strong including family, and the markets including support ready in for AXXX Announced We improve options reduce MAX the demand. operating agile

first Casablanca, lightweight that to materials some In Morocco requirements ramp production the began our for XXXX in the expansion in we engineered the meet in size doubled as plant, facility up we which in celebrated of at composite now growing core has The demand, increased to in response May. region.

learned I our this at Casa to that Arizona the provider produced team for aerospace and we also Award plants. Performance we the mention by Achievement Hexcel superior our month, has U.K. supplier with at for largest fourth Arizona for want Supply Duxford Casa received consecutive year, or Grande, that Boeing been is Grande, earlier recognized the Chain honeycomb excellence. industry the world's

currency and million including increased Rafale, sales Turning our highest globally, broad-based & of Sales level & as and Space Defense. a space ever. the aircraft, well as civilian to Space F-XX This as constant across Defense rotorcraft. programs growth with XX% $XXX quarterly platforms for of in fighter number such of is

supported business produce Massachusetts & is Space Defense defense where our the by Amesbury, F-XX. team including U.S. materials programs, in for Our multiple we

and existing You with will we for our business acquisition customers enables regarding business deeper and excellent strategic is in our us. high-quality January been that an This line and recall composite that broadens acquired conversations this innovation XXXX. has a solutions. potential product Amesbury

acquire with the the Since our recently the to end glad Hexcel - Technologies May. the meet so foresee step that in and did around we had property, and now fully into signal But we one the our site, the family. ability and expand former we team the is we This site of which to will owner. ahead. integrated opportunity of deal many is operations from the a closed Art years opportunities leased the has provides to the acquisition, control the the Hexcel clear when we Amesbury grow Ownership building to flexibility Hexcel simplify buy

momentum. up $XX growing and of in of XX% only currency in Hexcel marine end from June markets. total last were growth are of offset Total $X is to more year and other industrial to $XXX that at which of decreased Year-to-date, year-over-year up strong this partially sales due XXXX, than constant and $X.XX XX% Hexcel's million energy in time Industrial EPS the reflects lower all performance currency wind automotive, constant sales about X% sales million

over Patrick, like hand I'd to to [ph] excited we to say I parasocial return the to Before last month. were

that display, practically in has every knowing today. it the always, growing to As development and on and on Hexcel thrilling is flying aircraft content aircraft extensive all product see

have customer to next-generation about special We our is solutions talk which propel this the hosted about Hexcel's a to event. more best year anniversary. celebrate always lightweight meetings their of it part for made the many products, notable event as XXth how will we even face-to-face XXX customers And was

new that two launched we throughput cure enabling show, faster the higher rates. products each deliver cycles, aerospace production At

the forward by the also in technology We exhibited opportunities aircraft making longer, reduce to made one opening a improve thinner for represent the goal. Airbus ultimately our Wing Tomorrow project. emissions biggest and We continued new and wing center COX reduction lighter work efficiency, announced of parts carbon the fuel U.K. advanced and composite of to Airbus which look materials air on Chilton, toward development industry's collaboration of our on recently with congratulate transport wings,

and all to Hexcel when a of significant on years Finally, ringing our This Hexcel team year at of history. their of Stock team York in had Hexcel an experience opening to had New us in work ring represent in we opportunity the and this The recognition June Exchange for recognize the and has leadership effort the Hexcel’s led and celebrated XXXX the in anniversary was us the our way exchange. to XX last time privilege bell anniversary. moment bell the hard stock truly one for our that great a was XXth

I'll the Patrick on to it numbers. over Now turn to provide details more

Nick. you, Thank

dollars. denominated majority reminder, in our the a is of sales As

manufacturing base presence our However, of euros cost as is Europe. dollars, a in pounds and have a British significant mix we

As net XX-quarter margins. and lower, over currency is our a our benefit our results. operating income. our leading We to our exposure dollar protect result, Conversely, hedge the weak the costs when a dollar against the translate while headwind this to strengthens also a to lower, euro horizon a a sales to pound, financial translate

As a changes are result layered financial over into results currency time. of

a comparisons to foreign constant sales the which exchange removes in As provide the reminder, are thereby I currency, impact will sales. year-over-year

three XX% our XXXX represented to Commercial Turning sales. second markets. total of approximately Aerospace quarter

and increased compared of $XXX.X led sales to of second Aerospace AXXX Commercial the growth XXX quarter by million Airbus Boeing Second XXXX, in the XX.X% quarter programs.

jets by of the large composites business grew lightweight in jets. led Commercial business greater The of cabin in XX.X% Aerospace adoption other category generation latest strength on

represented in XXXX. for XX% period quarter the sales Aircraft Black particularly & Hawk Fighter also with space. of Defense solid second totaled Space and performance including same a from XX.X% the $XXX.X rotorcraft and strong, grew increasing Rafale along were and million, strongly, civilian and F-XX

in quarter markets to the second the comprised of XXXX other did X.X% energy decreasing XXXX growth in lower other from offset totaled compared automotive second wind XX% sales. sales. million, and $XX.X sales as Industrial quarter industrial not - Industrial

a we due consistent absorption call, this XXXX to unusually gross number second significant factors earnings quarter the The On gross increasing following for to on our our with a last an products overhead including inventory. sales expectations, margin from Hexcel demand XX.X% with mix basis, margin fiber-rich for was year. quarter first gross strong favorable last XX.X% called of margin consolidated and out was compared quarter strong

the percentage a compared in and As control XX.X% sales robust reflecting to second expenses the quarter grow. administrative XX.X% sales, of R&D second cost quarter XXXX, selling, expenses as of were general in and

of comparable by or income in prior million $XX.X XX.X% period. favorable was second compared or million year-over-year approximately points. in basis $XX.X the income impact operating the of to quarter exchange XX rates sales second adjusted in sales was XX.X% quarter Adjusted to The year the of operating

The and margin to operating turning XX%. operating XX% Materials Composite total of an Now the comparable generated period our two XX.X%. segment prior represented margin of The in year sales was segments.

represented related on compared is year The mix comparable engineered tooling Product XX% in an The and [indiscernible] of operating businesses, operating period. was sales programs. various structures development our and margin space softer total higher X.X% of margin to and generated and which prior sales the XX% the than as in quarter this Engineered costs and normal comprised segment, to core

operating The year-to-date effective compared to $XX.X $XX.X support for was provided of of was XXXX million in higher cash is XXXX. first Working of tax capital use $XXX.X year-to-date of cash sales. rate Net by activities half second quarter XX.X%. to a the million million the

comparable prior year the $XX.X For increased capital million. period, working

in $XX.X like Capital asset million wind million. of we was $XX.X that includes an This Amesbury, compares an also the for $XX.X in early that be first This sold year the XXXX. Nick. were will expenditures third and period. XXXX, sale accounted for by to Colorado in discussed which in of for basis I in the to held energy half purposes $XX property prior Massachusetts former quarter our July, was would mention facility for on million million the accrual

negative was Free of comparable Massachusetts flow million, prior for which includes $XX.X for XXXX period, $XX.X cash flow negative million. the was the acquisition X months free year the first property cash

cash XXXX an of quarter was For million sales the to in $XX.X or $XX.X or of second XX% of second of EBITDA alternative compared metric in generation, quarter the XXXX. XX% million sales adjusted of

earnings a we $XXX the gross on debt As basis. result, in calculation basis, for net we a disclosed renewed to call, is previously lower million liquidity on as range and trend last of syndicated our leverage a range revolver. debt now leverage The have bank our maturity desired times, our as covenant we extended a defined X.X that may X little on date

the The million. a of payment The June common not of remaining the did of to stock date payable purchase during $XXX August was under second a with We Board Directors XXXX. any $X.XXX as XXXX, declared XX. quarterly XX, authorization record yesterday, of program August at repurchase quarter dividend X, share of stockholders

read you last our are night, guidance. we in XXXX release As updating our

narrowed billion. range to EPS We $X.XX similarly, $X.XXX to $X.XXX have our guidance our have to raised sales and And raised we to guidance $X.XX. and range billion narrowed

updated Our free flow property. purchase Amesbury, to cash the guidance the of for is Massachusetts reflect

expenditures Free year particularly more we experienced applications, to Europe. million. quarter sales to due reminder, than revised as And typically capital million some of a is $XXX flow with on guidance sales approximately in now to the $XXX softer cash XXXX accrued seasonality, generate in forecasting third in the

turn back that, to me Nick. With let the call

Thanks, Patrick.

continues to for Hexcel generation We coming stronger years. significant that with expectations the the in are get confident for outlook cash

that for deployment capital plan generation, cash we As priorities remain unchanged. our

the First, into grow growth expenditure and organic optimize we we opportunities for expect subdued our penetration back few capacity capital and footprint. as next Both will to years, invest be support to requirements secular and our expanded in we existing adoption. composite

science The range. technology. a in target disciplined innovative we to opportunities pay depending manner, material while on our and with M&A high-quality next these will priority is continue explore activities, repurchase dividend. leverage And staying value-adding to involving aligned We'll stock our a

and X were team that want is Hexcel new on and our Stanford our collaborating strategic ahead in note business for I next our review, opportunities years. the week, three questions, lie XX last of take to we the Before that to markets, for global days expanded and our which over sharing customers annual

into While were we at packed crystal a clear. least that things lot two meeting,

continuing enable solutions First, advanced key customers the to their technologies forward targets. sustainability composite continues and our that lightweight and efficiency to on helping look the lower value a and material reduction in our achieve enabler proposition help reduce our pursuit relentless optimize their new come. emissions to emissions, expand materials consumption, are to goals of generations as sustain We noise And meet to customers focus fuel increases. that planet for global our

all the and pandemic forecasted that quarters Second, have over growth become we the ourselves years. coming for done that and during to we since All we lean paying growing are robust the absolutely efficient is off. did to prepare and ready to demand meet

with our customers. aligned are We

We time that we know through or to and flexing with how and challenges have again requirements, uncertainties work and pivoting at changing are adept that we arise. demonstrated

on-time Our I Hexcel questions. cash to our productivity, Hexcel's our remain and continue take in on extremely value stay quality especially you. Thank future and team ready delivery. we're to ability one delivering will Paul, overall and now management stockholders. efficiency and performance, to in confident focused

We'll RBC this morning Ken Thank Instructions] Herbert you, Stanage. at first go Capital Mr. [Operator to Markets.

Good Patrick. hi. morning, and Yeah, Nick

Ken. morning, Good

Morning.

Yeah.

just Just flow the first, cash outlook. free I wanted to on clarify

other cash moving change the may can we flow acquisition in majority have expected cash I any the otherwise comment or the in you would that think, on facility of obviously, pieces flow to see But guide? outlook. justified the the

Yes.

of it So buy really to and we we to us XXX. now outlook bit see But that the to mean, the a fundamentally slightly for and in confident the inventory of that posted essentially that through I was really and earnings by expenditure July, more control the the year that rest from driven moves exceptional onetime property felt little XXX. with coming down getting capital XXX we

So it a to more there's lot not that. than

property and strength. the purchase some So really Amesbury underlying recognizing

Thanks, Great. the at commercial you I full slower quarter. some Patrick. obviously the And second growth aerospace year saw slightly as look in growth,

second growth teens sort high where for guidance I point Or year. for rate it of half in a imply we the year? a the little does are the think Aerospace full about would of today? the maybe quarter, fair the you starting the second as from Is think soften bit

the seasonality with Well, and vacations. QX I down the mean European we've particularly called

And a so that will slow things down little.

the question underlying in read going the Everyone obviously think quarter I fourth this really challenges is But how [ph] strong fantastic. the raise fundamentally, always confident There were demand there. Pratt Whitney out is to issue we're the morning. about has & be. engine is

Boeing these on to strong Our as strong. we're platforms all willing And forward content as move obviously Airbus and possible. is

quarter. especially but not smooth the still we're half the a but path, it's a should So fourth pretty we of to positive, year, second be solid recognize always be it going

Okay. Thanks, Patrick.

go Khanna Cowen. Gautam We next you. Thank at to to now

Good guys. morning, Hey.

Morning.

Gautam. Morning,

guys year-over-year, didn't did a XXX on quarter rate of on just cited any wanted in of programs? know itself, saw programs I across the I much couple see You but [ph] the change you MAX, to increase AXXX sequentially, and XXX a XXX you ask,

Yes.

second QX. quarter, So first of There's supply look maybe we're the with XXs happened bit on movement clearly if Boeing little chain in and you half, range. restocking the a at the between low aligned some in first

saw a we So Gautam. minimal sequentially, decrease

I anyone across noticeably? and the of underlying assembly that's just Or chain, is rate And of rates out whack customers the Okay. aligned at your with you Boeing feel most do Airbus? there most like back, stepping are of mean, board? on supply

we're to attention excess be outliers that pretty chain may on Well, we the a providing. and pulling Xs for or right supply the looking product the that especially the and chain enough. of And Tier supply to be lines beyond throughout pulling and our material much not Xs, now, pay see OEs lot we aligned

guys. Thanks a lot,

you. Thank

to now next go Barclays. We'll Strauss at David

morning. Good you. Thank

Morning.

want question quarter. margins the to Just in first - on

have revenue I just QX? amount. could versus a mix, the maybe margin touch similar. things Composite down margin, in the the QX obviously, mean, decent different in you The Materials So impacted that was all fairly on was the might

could So that address you if first?

that as mix, out in Yes. I strongest tried was product aligned, just and call always we profile Hexcel had it was you I've I previous of really in touched on the mean things I comments. strong margins. We drives exceptional. fiber QX product QX, to our think think rich very that and - mix, if somewhat carbon a like,

so And a that we good in had of QX. weighting

in quite control, build a good inventory cost overhead We led combined of very good also to had with QX. that, And lot absorption.

QX. strong with inventory that the build. leveraging range. factors is We revenue of this sales, would over with good base strong combined really the is in QX fiber so with products, Hexcel would or and that a level would way that strong And say be I is the controlled – really very mix drove frame key overhead That back of more I that expect it. normal is performing to solid some

I And where here. go we on guess Okay. question a from

guidance think going Patrick, year. get of to you range at on to talked bottom way of previously, be that billion that about mid-teens you're company on all you're total that look this to It $X.X like $X.X the of for end mid-teens margins. I the based margins, you're kind doesn't the to billion revenue, implying your margins EPS going

go progression as higher? do to the how So volumes Thanks. here margin from we think continue about

Yes.

to be something XX% after low be that with and would And range model. probably QX now back it struggle probably inflationary we year $X.X that think think to the bit the billion get X.X%. us pushed earnings. I at talked to end would quarter this like of in pressures of a Essentially, last and I we to a the the mid-teens fourth then sort billion $X.X acknowledge we on

inflationary think of are pressures lot a transitory. I the

certainly look the XXXX, So that knees we some commodity of as energy costs into chemicals forward anticipate buy are going to raw off. are going materials we and to

is And put delayed have of been out there. so there we shape what but in correct, we the general fundamentally getting

So we are above significantly, and at operating to go we again range income. looking as that back ultimately, billion our and higher be And saw for and mid-teens ourselves of should back we to XXXX in we going XXXX, pushing will slightly historically step the push sales that where we'll to drive be income to continue XX%, be we approach now as part definitely and up maybe were XX% then $X to looking we that. our up to

Thanks very much.

We'll go next to now Melius Research. Spingarn Robert at

good morning. Hey,

Good morning, Rob.

one or during I Patrick Nick, quarter. aligned I the that to XXs would just but month? maybe to said start future expect When the pretty building Boeing the you're another programs. in on you quick think low said it, on And XX you map with have then per second

Yes. on that we on XXs about Boeing, on I the with only the X at MAX. XXX basically very confirm low and but not are back, running aligned the

capacity. the have We

we're to going of up them. We target But XX, they XX going Boeing. soon pulling start XX getting their XX rate, as be material and aligned or even are to with we're to ready get ahead as ramp XX, or up, a to and not at higher

that, Boeing talk So I'll prediction to put tomorrow. to that a let on

to XLR range. affect weight Okay. are your to what that the hitting you a lightweight challenges increasing some material may on talk about of them maybe be And couple XXX that? some To There's things that then been talking mitigate content might Airbus. extent

in Wing and programs, Hexcel opportunity U.K., talked on speak you Tomorrow? that mind. could facility wondered be brought the Wing must the of future you your Tomorrow bit And fresh the on if mentioned I a also to little your so you of having then in team And about in

Yes, Rob.

don't can’t you, with involved liner, the take related challenges seeing to that's call So [ph] it's with seeing and XLR, of waning into intimately get is want going to the the details. fuel we're this I their to related what reading back fuel out to and place. aircraft weight I tell on we're I because lighting central on in development can efforts. and some the everybody Airbus start else additional to the a specifically on some tank

to But portfolio. weight and that They impact. out. that do know anything can help they that know our they capability, They can certainly weight continue we areas know the them drive our to to decrease

to ongoing. point that let call. that's tomorrow earnings So Again, their during I'll Airbus talk

it's of lot Wing forms - It's final the exciting, is different there's there excited wing. Tomorrow, allows of so our On Hexcel obviously. product position a of material types of optimize selected. depends help I'm yet, ultimate really of material lot no Tomorrow the a on There's And Wing type as portfolio demonstrations. multiple it with to what us and about that is technology that's to of

to in to future We have path a we're forward narrowbody derivatives we the the So weight, they any for with. and new optimize move increase that believe a believe wings continue great strength next position. or decrease Airbus forward fantastic other

of And to Nick, and the do are where specifically you got keep with necessary speaking where the think it I'm could types that narrowbody? be, to that needs it composite in technology up rates they've wing,

they and absolutely. I launch could a today, they think win the technology have

technology is the I are can that various them all with laydown evaluated of I'm And excited but evaluating downstream still just the the design. optimize only forms. that them, cure the rate being I to rate with material that we're in think and material rate throughput, not and material the they that side-by-side helping processing, say

Thanks, Great. Nick.

Rob. You're welcome,

We'll Thank now next Wells to Matt you. go Akers Fargo. at

it in put a point. decision Could plan wasn't finer Thanks guys. the about to owner year. to the talk What morning, original that that? question. was sell the the buy it Maybe the just facility? looking for Was you Amesbury prior and Good owner? want for the seems It the drove be to you like Hey. to

so Amesbury, on find right. for were composites. the to that that's how value updated one and major technologies our So fit and cohesively and guidance our It not to and the of why our original existing was add reason or major excited reasons plan to in portfolio that our we year, technologies, When into acquired you're the technology we we cash CapEx.

it's know, offering a how do you As and opportunities our to that composite we tremendous. site. just excitement they military enhance And what around continues but U.S. grow product primarily with that's overall site, the our can

owner direction. and to out found the change was When wanted took to pursue Dan it opportunity us he He We prior so approached we Healy, to that going that coming we and We and expansions facility could we control efficiency the periods. there. the the consolidations continue really drive and growth modifications see the could market that to the property. in the control that

Got sense. it. the half. And growing compares if I in sequentially we wind I QX? how you the of step sequentially a Thanks. up easier then saw makes know get talk after sort on That But lot just about industrial. think back that you could business kind ask about in of can

for see before, the has by second stabilized think half be we've we stabilizing driven supporting said and Well, that it foreseeable the a continuing much there. us Obviously, in do we're solid future. that's wind of pretty I ’XX. And products for legacy the business to by Europe,

automotive, of Clearly, marine, growth see go-forward on other the grow that or some driving nicely, continues to see we industrial and period the we significant side. in basically the offsetting industrial

we opportunity pressures. and GDP impacted as tends see continue that forward. a there little have product Recreation to some introducing to that of has by there, offerings again, softer little inflationary some going and on goods. But winter the and bit an wet we the technology being the been a again, And we're sports be

you. Thank Great.

Thank you.

at Sheila Jefferies. now Kahyaoglu next go We'll to

you. Thank

are the to as [ph] in ‘XX And quarter. sort of Defense, growth Just that any that? decline XXXX, defense? ask on wanted Base & good there about in you B think upon drove What platforms

Rafale strong we've We was good helicopter for was nicely. was which up So Hawk really, is F-XX in it up Black up saw civil us the driven, positions step strong. got nicely. drove applications, India, in U.S. saw QX. which space what we very and although The stepped very strong,

in it all, broad-based, those primary all but the was drivers. were So very

optimism some continued really I'd And long in the the hit softness build a just for growth will continues been the as rates. of delivery Lockheed lot about In have down but new. [ph] their CH-XXK, strong. it XXXX, going in there's a to F-XX say talking hold targeted that, ultimately that B-XX people there's around and time, perhaps and nothing

before we So and to 'XX roll up going guide on I'll side. and the Space wait takes I be the plan our in what's really until the Defense puts more

And then, deal you. Patrick, one Nick. with you, new if to could don't I I want ask for No, you understand Thank a landlord. Sure.

you ARC. think So share purchased sort other your do behind metric How and that shares? back of from allocation and about your we capital What's resuming you repurchases? buying you analysis facility your start when do

Yes.

So we continue organic - laid I M&A, mean dividends. disciplined will capital the which Nick haven't growth, changed out our deployment priorities, pay

and stock, of share cash. we piles the last so default And amounts [ph] buyback We're will to of sort becomes kind which do. not going sit of mountain on

year will and this in is beyond. some the we generate start and the profile typical as the second 'XX we going half, through rest certainly to go into cash and which of Hexcel So now for

out share agenda engage in when on buyback, to We coming will call in much expect our but periods. at point, this specifically to not very what and it's the going

much. you Thank so

We'll Skibitski to next you. Pete Alembic at Thank go now Global.

third XQ quarter versus the Patrick, maybe revenue-wise. in comments picks just we quarter in could carbon XQ sequentially? sense Or fiber your margins you extending already a that Margin-wise, maybe it? should expect have the do to offset down third be about

we'll a a I more the normal Yes. was mix year, unusually strong, the for forward QX I profile see going that in line lower not if the driving you terms that of say give would will of issue. seasonality strong rest perhaps steps line should is sort what less we any a with quarter, second tougher. revenue again. as fiber specifics, into a back of get issue of not bottom And terms up like, going saw in makes quarter. volume we the which I'm because fourth but the sort that quarter-by-quarter to of lower to - mean, predictions back be of then in quality margins a I the or margin, It's and we forward. don't we in mean come going margin top overhead revenue up bit are it's leverage, if But us expecting or

Okay. you. Thank

Richard We’ll to next at go Partners. now Seaport Safran Research

Nick, are morning. How good you? Patrick,

Richard. morning, Good

you like I'd Paris to were build or bought about that and since the Nick, highlighted it, in the ask rates. you highlighting higher you enabled materials

you just for that's generally, being for payoff you payout. Or a I I'm a have could know defense, you've platforms new the targeted if discuss here? they if long-term been near-term more they be to of commercial, want talking case these And have And aerospace wondering what materials, might about? be both. So might materials when there

Yes.

pre-preg, there's talking we're laydown again, whether others. and of autoplay, or it's we're working they're autoplays cured out and on some [ph] about So than whether a the the pressure mature those product table, more it's all technologies, in form, an abused [ph] whether it's type, multiple under versions,

respect Boeing With look work and the diligently cost most machining existing one at that customers on and the but something the is say processing element, the on. the materials, our the to and as the assets. our and the for I we being Airbus run material you would with in laydown also again, curing new after part,

transition. and flexibility our the It's question very qualification a respect just application. it of plans, with So easy for makes a for our to

And then, Patrick, one. quick just Thanks. Okay. a

I back the in working half half but I about if and You've inventory. back capital specifically, to talking of know apologize, guess, year, missed been I And you've this the I margins. it, want about and answered

Given this XQ shows that correct is your most the assume the that year? capital fourth in Is working up of the quarter. should slowing, trend way it expected benefit it to seasonal

of benefit by in inventory. the year, We should half the expect, a definitely see capital working would I second driven

corner But second quarter the saw the of we've the up. 'XX. we flat. a of turned inventory kind the growth half sort was It XXXX the quarter was few essentially, think of in dollars first million seen we of in the that essentially second and I

I to in our So trend expect and that fact, would reduce. inventory, continue

should positive flow. capital that some and therefore, so drive cash working cash reduction And

level the of reflect sales. will Receivables

flow impact receivable from of year. would And fourth so we will quarter. positive they're capital a again to seasonality back down, by second half inventory, the I in probably and likely lower working cash the then step in the expect overall, But sales come but driven QX

very you thank much. Well,

at We’ll now Liwag to [ph] go next Morgan Stanley. Kristine

the opportunity AXXX-XXX? And upper fiber get Great. for CapEx win? end an you the about in that Airbus could set there content? ship AXXX-XXX. should do any content provide Hexcel of on Or aircraft? Is think potential Patrick, expected should say you I program? your How IM potentially of shipset the the Airbus color to the meet terms for maximum requirements we you Can

Okay.

there. a So in of there lot was questions

is platform. aiming we call in So that reengineer be XXX-XXX $XXX,XXX essentially, sort and the of probably they range. of in wing other were for range the on opportunities the today terms lower $XXX,XXX a of to we'll if XXX mean, I shipset at is we as out significant end the if that well to win position,

likely a sort. bring. very But try in fiber we mean, but If it number, a integrity the IM a clearly, attract going and attract the to that far the need there's variable, wing IM a fiber, to give IM some we but step-up see fiber significant what shipset. Would not you multiple of structural it's have and opportunity. clearly, involved times I today, too it's great

So be again, great. would Hexcel opportunity fiber-rich

too wouldn't capital I much. terms In put it of expenditure,

it. have you the we as imagine we're we the line hold into Alabama, on as the pan the on, pandemic. bringing went capacity, are certainly we case cover in We completing fiber few which I a put in that next years, and new works line And a would of in we'll know,

platform combined opportunities, the strong, margins. we good if in with and other capital returns for significantly, invest gladly Now long-term grew will

Thank the you color. Great. for

We’ll Research. Walton Wolfe Myles at to next now go

today or with to supplied Maybe vertical... or that, or furnished of is your the own think materials follow much with fiber up sales Thanks. of Patrick, how on

a little I'll of turn but around Well, I that, XX% that to our we're bit. that we XX% use fiber. don't know own on explicit

So produce, the consume majority the fiber vast we we internally.

produce. full yet, use of fiber. the But The XX% we XX% parties, what outlets we to to goes using a at up, not we're we majority stepping to capacity vast third is in were it military XXXX remainder and industrial. the amount goes Now we smaller of but our are and own

And you're you fiber what in sources, from producing there external - procure less internal?

and some qualified that in third-party for really will programs to where are very the buying fibers, we're older be of is legacy long those true term is and programs because continue That unlikely requalified.

a than third-party And of fiber, quantity it use we but own so smaller do we buy is our yes, fiber. in

Fair is Okay. XXX% free net to cash 'XX? Or income to in conversion flow, to looking enough. path then growth... And a there cash flow is the

direction We're get in in know, I there yeah. in don't think the the or next X driving we'll but year I definitely miles, moving is we're that definitely that simple yes. whether 'XX, towards answer

you. only That’s Thank two. my Perfect. Okay.

We'll Epstein go next Ron America. at now of Bank to

maybe question morning. or there And want M&A first. and Is any technologies words just whatever? interesting The could a environment? quick good quick more you of mean technical to what you that. financial mean do guys just question. question. a then then if finance seeing in one couple out Hey, the there I I are share technology have add-on that a you Maybe on things I a

Yes, Ron.

our get is to something set always, that's comes whether review, materials of always to the on to technologies of portion to condition out offer or to diagnostics. around say a is customers, are that And that as technologies value would companies, to So capability our there attractive, a tough broader our actionable. To what's the on our are add I as maintenance material or review into would strat science us allow down obviously, do specifics more it solution do. big part and there portfolio, obviously, process. importantly, enhance M&A And

a active. have very We regular on it that's pipeline we review So a basis.

to on based consider mindful, our and have always on, priorities disciplined but stay our going those continue what work we that and is forward. we We would pipeline

the then wins, today Would doing technology the that's be think Got a in does a Or thinking composites or it us when guess, times it. Got expect you of up to side, with give a about here something application are a XXX how, context on how the the win. the you for or lay of of would when future can different? kind think on that. an come I advanced about we broad we completely tape just I couple future you up? it [ph] they're wing? how about And expect and it. context mean AXXXXX future I it that mean like it something you technology within an how injection molded of

Yes.

forms, a we're that it's great one question. So Hexcel's material strategy, one the will designed And type. lightweight to that is work and assumption allows our multiple great The ability composite just that's rapidly, making of knowledge customers' wing optimize them a not a technology with the material focuses with be design and so to has wing. advanced all and on the opportunity

not for and wing strike skin talking set, wind a versus again, I infuse diverse position versus a So and brackets, our of about believe it's to could combination type. what the It material thermal one be really And what versus when of molding. beauty [indiscernible] is compound you're plastic, Hexcel's that's be thermal liquid prepreg portfolio. going a

Thank it. you. Got

welcome. You're

And at go next Truist now to Michael Securities. Ciarmoli

Hey. guys. taking question. the for Thanks Good morning,

new CapEx should you there. past your to the anything mean in about kind spend CapEx purchase. back XXX% on in facility Or of your we Just Does of - I back to to change support is CapEx there? on think still – how are you? profile said the facility? the Just conversion terms how

remains outlook CapEx Our unchanged, really.

As acquisition this bit ee under the think sort similar property and is be to few an next to We years. in And would this would a to our for described our underlying see trend years. the $XXX a there, I year. I around next I little subs few XX shape of trend guided is million exception I underlying of

opportunity it Nick and to sort it, years. the that of grow unchanged and for XXX for our described do we in the of underlying now arose CapEx growth speak, This to building, so an opportunities, strategically few outlier, But control next and trend remains as the be in can expand under that. want and with the we site at to

quarter Okay. to the as the there should I question. a think a kind in might & segment some future, Defense. of here is you this back bunch How out we you back in about more to And Products. pressure bigger do talk some I a products? some in shovel-ready projects wing margin about the Perfect. margin of peak? think And then be Defense, - - it tooling Space mean, sounds just on you pipeline headwind development & we forward think Or there can but like called been prior going if that get of there's think in should there Space if maybe Engineered engineered for are that

strong a anyone do I nature sell can strong bring product, mix and buy composite because lumpy a we this engineered and when it of the time, top we softer good much have quarter is some did when Yes. than Peptel very tooling product mean, quarter, very we sort for of who have in seen but more of we just kind of is positive in And of we [ph] lumps we a have follows the Products and a mix and a that. get on tooling very we'll first lumpy. then materials engineered the We Engineered QX. costs incur court a down get business.

was I our [ph] opportunities I in around the tooling XXK some nd core believe mean to engineered strongly And CH we'll think win we forward this fantastically quarter to across about that. also was space and more but military products businesses, programs. going very positioned programs there particularly for driving development engineered do business, our be we're some

Thank, Perfect. Patrick.

Thank you.

further and morning. have Thank gentlemen, ladies that one Noah now take for you. Sachs. And from We'll do at we question Goldman time this Poponak

Hey. guys. Good morning,

Morning, Noah.

Noah. Good morning,

revenue wanted Patrick, I half. the to in back profile about ask the

think normal down down digits. a usually historically of with aerospace alluded think low the maybe you're looks single on it that's And airplanes. seasonality, only I I sequentially but number you ramping to like being

you can give more little down? how us So around a that's much context

from new put of pull side, that should defense dollars? with in before thinking then level this in with back growing that revenues again? Or that the you've then we does be on sequentially - growing absolute defense And now as XQ

Yes.

the they're certainly third end I in there. we've align of much will which and there's a So to is we underlying and will quarter, mean, how see in see right, doing. materialized you're that Boeing the really we going - lot with - towards of we year, what program the some growth, Airbus ourselves are got or

I you net-net, think effect, the if larger will the seasonal be expense like.

but And of a of will bit a will I overstate bit QX. see we it, in wouldn't we down a a so see dip. step

And Space & it well, be restate, Defense. Europe it the commercial & quite not programs might of as Defense that affect could in just affect Space some honestly, could

our be It quarter, Space can time, million, QX it's mean, not $XXX about but our and $XXX record straight continue there was & is would of State we're see be good markets, perfect It a in but won't positive terms we bit ever as one sales expect one of forward. straight line very to million. we going sort a a opportunities growth see, year line. In and sectors, encouraged another time a & from of of I do to Defense, are opportunities highest ahead, XXXX. very Defense bumpy I quarter-to-quarter,

kind slower to as in inputs margins. it into that. that Should than normalized I that utilization we Appreciate enough if ask again capacity getting back of cost one of that been long growth that And be sort think on higher settling helpful. more XX% you in next just That's incremental could year has maybe back normal year? should and for early next are a Or the business? of

specific been and we a know, Obviously, high out sort number incremental to target. call XX out has can driven pandemic, to margins. you we're no, look do. year, to or the the always last We're months, coming maximize as somewhat we've going Well, very not going leverage of what exceptional of incremental

we we get mixes but margins XXs, ourselves, as that lower know. do to. or growth to driving XXs be it's than that, will whether always best we pushing incremental and XXs different shapes, costs, profiles Quarter-to-quarter, and be the or XXs you and can can occasional But different to be always will perform we even

Oka. so Thanks much.

Thanks.

the you conference day. will gentlemen wish us a Good Hexcel the so of quarter great bye. conclusion second and to that and like thank all us bring you. And for Thank to ladies joining you all call. I'd earnings much