Tom Gentile President and Chief Executive Officer 3 ▪ Higher production on development programs and P-8 | --- | --- | --- | --- | |-------|-------|--------------------|-------| | | | | | | | | | | | | | SPIRIT | | | | | AEROSYSTEMS ® | | | | | | | | | | ►▶▶ spiritaero.com | | a Represents the deferred tax asset valuation allowance (included in Income tax provision) Cash and Debt Balances ▪ Lower deliveries of A220 15% Revenue Non-GAAP Measure Disclosure | --- | --- | --- | --- | --- | |--------------------- ...

Financial Data and Key Metrics Changes - The company reported revenue of $1.4 billion for the second quarter of 2023, an increase of 8% compared to the same period in 2022 [39] - Earnings per share (EPS) was negative $1.96, compared to negative $1.17 in the second quarter of 2022; adjusted EPS was negative $1.46 compared to negative $1.21 in the prior year [27][28] - Operating margin decreased to negative 7% from negative 4% year-over-year, driven by higher unfavorable changes in estimates and potential customer claims [34] Business Line Data and Key Metrics Changes - The Defense & Space segment saw revenue growth of 30%, reaching $190 million, attributed to higher development program activity and increased P-8 production [19][35] - The Aftermarket segment reported revenue of $92 million, up 15% year-over-year, driven by increased MRO and spares volume with strong operating margins of 26% [21][36] - Commercial revenue increased by 5% over the same period in 2022, primarily due to higher production volumes on the 737 and 787 programs, despite disruptions from the vertical fin issue and IAM work stoppage [47] Market Data and Key Metrics Changes - Global air traffic demand is recovering strongly, reaching 96% of 2019 levels, with domestic air traffic exceeding 2019 levels by 5% [8] - The company's backlog grew from $37 billion to $41 billion in the second quarter, reflecting strong airline demand for new airplanes [9] Company Strategy and Development Direction - The company is focused on executing production rate increases to meet strong recovery in demand, despite ongoing supply chain challenges [10][12] - The new IAM contract is expected to increase labor costs by approximately $80 million annually, which will pressure margins going forward [38] - The company aims to reach $1 billion in Defense and Space revenue by 2025, with a robust new business pipeline [20] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing supply chain challenges and the impact of the IAM work stoppage on deliveries, particularly for the 737 program [25][31] - The company expects continued challenges in stabilizing production and supply chains but remains optimistic about long-term demand recovery [37][77] - Future cash flow is projected to be negatively impacted by forward losses and increased costs, but management is focused on operational execution to improve cash flow [102][158] Other Important Information - The company recorded a contra-revenue charge of $23 million related to a potential claim from Boeing for repair work [24] - Cash and debt balances at the end of the quarter were $526 million and $3.9 billion, respectively [32] Q&A Session Summary Question: Impact of IAM contract on cash flow - Management indicated that the IAM contract would create additional financial pressure, impacting cash flow projections for 2023 [145] Question: Clarification on vertical fin issue - Management stated that they do not expect any material financial impact from the vertical fin issue based on the current understanding of the fleet disposition [93] Question: Free cash flow forecast - The updated free cash flow forecast indicates a significant burn in 2023, with expectations for improvement in 2024 and 2025 as production stabilizes [62][138]

We're aligned with AirbusÂ' schedule, and we're delivering to that. So we are on track to hit our deliveries for the year. We do have some behind schedule as normal based on supply shortages and things like that. But we are on track to hit their delivery schedule for the year. And the factory is in recovery mode, but is executing to the recovery plan and is on track for the full number of deliveries for this year. It's about 60. Our next question is from George Shapiro with Shapiro Research. Your line is no ...

▪ Begun implementation of repairs to available units located at Spirit ▪ Based on preliminary financial assessment, disruptions and rework within Spirit's factory is expected to have a negative impact of $31 million to full-year gross profit, of which $17 million is reflected in Q1 financial results ▪ Additional costs are expected but cannot be reasonably estimated at this time ▪ Implementing additional protocols to reinforce our quality systems to prevent similar occurrences in the future SPIRIT AEROSYSTEM ...

Revenue and Sales Performance - For the year ended December 31, 2022, approximately 45% of the company's net revenues were generated from sales of components to Boeing for the B737 aircraft, compared to 35% in 2021 and 19% in 2020[243]. - Net revenues for the twelve months ended December 31, 2022, were $5,029.6 million, an increase of 27.2% from $3,953.0 million in 2021[268]. - Boeing accounted for $3,008.9 million in net revenues in 2022, representing a 36.3% increase from $2,206.0 million in 2021[273]. - Airbus net revenues increased to $1,098.2 million in 2022, up 16.1% from $945.6 million in 2021[273]. - Commercial segment net revenues for the twelve months ended December 31, 2022 were $4,068.4 million, an increase of $940.3 million, or 30.1% compared to the prior year[291]. - Defense & Space segment net revenues for the twelve months ended December 31, 2022 were $649.8 million, an increase of $64.8 million, or 11.1% compared to the prior year[292]. - Aftermarket segment net revenues for the twelve months ended December 31, 2022 were $311.4 million, an increase of $71.5 million, or 29.8% compared to the prior year[293]. - The Commercial segment represented approximately 81% of net revenues for the twelve months ended December 31, 2022, compared to 79% in the prior year[290]. - For the twelve months ended December 31, 2022, net revenues from direct sales to non-U.S. customers were $1,215.1 million, representing 24% of total net revenues, down from 29% in 2021[372]. Financial Losses and Challenges - The company recorded a pre-tax loss of $29.1 million related to adjustments of certain assets and liabilities associated with sanctioned Russian business activities for the twelve months ended December 31, 2022[240]. - The total net loss attributable to common shareholders for 2022 was $545.7 million, slightly higher than the loss of $540.8 million in 2021[268]. - The company recognized unfavorable change in estimates of $278 million for the twelve months ended December 31, 2022, primarily driven by forward loss charges of $250.3 million[274]. - The net loss for the twelve months ended December 31, 2022, was $546.2 million, compared to a net loss of $540.8 million in 2021 and $870.3 million in 2020[416]. - The company reported a net loss of $463.1 million for the same period, indicating a significant financial challenge[377]. - The company reported a net loss of $545.7 million for the year ended December 31, 2022, compared to a net loss of $545.7 million in 2021[414]. Operating Performance - Gross profit for 2022 was $48.6 million, compared to a gross loss of $117.8 million in 2021[268]. - The operating loss for 2022 was $281.2 million, an improvement from a loss of $459.2 million in 2021[268]. - Commercial segment operating margins improved to (2%) for the twelve months ended December 31, 2022, compared to (7%) for the same period in the prior year[291]. - Defense & Space segment operating margins increased to 11% for the twelve months ended December 31, 2022, compared to 8% for the same period in the prior year[292]. - Aftermarket segment operating margins were 19% for the twelve months ended December 31, 2022, compared to 21% for the same period in the prior year[294]. Production and Deliveries - Total shipset deliveries for 2022 reached 1,297, a 27% increase from 1,022 in 2021[270]. - The company delivered 281 B737 models in 2022, a significant increase from 162 in 2021[270]. - Deliveries to Boeing increased by 97 shipsets to 359 shipsets during the twelve months ended December 31, 2022, compared to 262 shipsets in the prior year[278]. - Deliveries to Airbus increased to 726 shipsets during the twelve months ended December 31, 2022, compared to 579 shipsets in the prior year, driven by 124 more deliveries on the A320 program[278]. Debt and Liquidity - As of December 31, 2022, the company's debt balance was $3,868.6 million, with $658.6 million in cash and cash equivalents, reflecting a decrease of $820.0 million from the previous year[308]. - The company expects adverse impacts on operating cash flows to continue for 2023 and beyond due to various factors including supply chain disruptions and labor shortages[308]. - The company entered into a $400.0 million senior secured term loan credit facility on October 5, 2020, and subsequently refinanced it with lower interest rates[312][313]. - On November 23, 2022, the company issued $900 million aggregate principal amount of its 9.375% Senior Secured First Lien Notes due 2029[317][320]. - The First Lien 2029 Notes bear interest at a rate of 9.375% per year, with the first interest payment due on May 30, 2023[318]. - The company recorded a loss on extinguishment of $7.2 million for the twelve months ended December 31, 2022, related to the modification of its prior credit agreement[316]. - The company anticipates sufficient liquidity to meet operating and financing needs for at least the next 12 months[422]. Cash Flow and Investments - The net cash used in operating activities for the twelve months ended December 31, 2022, was $394.6 million, an increase of $331.4 million compared to the prior year[355]. - The net cash outflow from investing activities for the twelve months ended December 31, 2022, was $155.5 million, a decrease from $163.8 million in the prior year[356]. - The net cash outflow from financing activities for the twelve months ended December 31, 2022, was $261.0 million, an increase of $97.5 million compared to the same period in the prior year[357]. - The company reported a cash balance of $658.6 million at the end of 2022, down from $1,478.6 million at the end of 2021[417]. - The company experienced a net decrease in cash, cash equivalents, and restricted cash of $820.0 million for the period[416]. Asset and Liability Management - Total assets decreased from $7,737.3 million in 2021 to $6,666.2 million in 2022, a decline of approximately 13.8%[412]. - Total liabilities increased to $6,211.5 million as of December 31, 2022, compared to $6,272.4 million in 2021[378]. - Spirit's total non-current liabilities were $4,717.2 million as of December 31, 2022, a slight decrease from $4,859.5 million in 2021[378]. - The outstanding balance of the Second Lien 2025 Notes was $1,200.0 million, with a carrying value of $1,191.0 million as of December 31, 2022[334]. Research and Development - Research and development expense for the twelve months ended December 31, 2022, was $2.9 million lower compared to the same period in the prior year[280]. - Research and development expenses decreased to $50.4 million in 2022 from $53.3 million in 2021, reflecting a focus on cost management[408]. Warranty and Provisions - Warranties are typically provided on all products and services, and costs related to warranties are accrued at the time of sale[433]. - Provisions for warranty expenses are estimated using historical information and industry peer experience[433]. - The Company considers warranty experience of other entities and management judgment for new products or customers[435].

Spirit AeroSystems Holdings, Inc. (NYSE:SPR) Q4 2022 Earnings Conference Call February 7, 2023 11:00 AM ET Company Participants Aaron Hunt - Director, IR Tom Gentile - President and CEO Duane Hawkins - EVP and President, Defense & Space Division Mark Suchinski - SVP and CFO Conference Call Participants David Strauss - Barclays Cai von Rumohr - Cowen Sheila Kahyaoglu - Jefferies Ken Herbert - RBC Seth Seifman - JPMorgan George Shapiro - Shapiro Research Kristine Liwag - Morgan Stanley Michael Ciarmoli - Trui ...

Tom Gentile President and Chief Executive Officer 2021 ▪ Received $300 of tax refund in 2021 ▪ Repaid the 2019 Boeing 737 Advance of $123 in 2022 2022 significant cash items: ▪ Paid $123 for 737 advance repayment ▪ Received $27 of pension-related cash benefits, net of excise tax 6 | --- | --- | --- | --- | --- | --- | --- | |-------------------|-------|---------------|-------|-------|-------|----------------------------------------------------------------------------------| | | | Revenue \n11% | | | | | | | ...

Third Quarter 2022 Earnings Review Tom Gentile President and Chief Executive Officer Mark Suchinski Senior Vice President and Chief Financial Officer November 3, 2022 spiritaero.com Revenue $ millions | --- | --- | --- | --- | --- | |-------|-------|-------|-------|-------------------------------------------------------------------------| | | | | | | | | 30% | | ▪ | Increased aftermarket activity | | | | | ▪ | Overall deliveries increased to 316 | | | | | | shipsets compared to 248 in Q3 2021 ▪ 69 737 ships ...

Financial Data and Key Metrics Changes - Revenue for Q3 2022 was $1.3 billion, up 30% year-over-year, primarily due to higher production on the 737 program and increased Aftermarket revenue [25][24] - Gross margins were the highest reported since the pandemic began, with operating margins slightly positive compared to negative 16% in Q3 2021 [28][24] - Adjusted EPS was negative $0.15, an improvement from negative $1.13 in the same period last year [27] Business Line Data and Key Metrics Changes - Commercial segment revenues increased 32% compared to 2021, with operating margin rising to positive 4% from negative 9% [40][41] - Defense & Space segment revenue grew by 17% with operating margins at just under 12%, driven by increased production and classified program activity [42][43] - Aftermarket segment revenues were up 38% compared to Q3 2021, with operating margins increasing to 24% [45][46] Market Data and Key Metrics Changes - Deliveries of narrowbody programs in Q3 2022 were 40% higher compared to 2021, totaling 226 units, while overall deliveries increased to 316 units from 248 in the same period last year [26] - The company continues to face challenges in the supply chain, labor shortages, and inflation, impacting production schedules and cash flow [22][24] Company Strategy and Development Direction - The company is focusing on cost optimization efforts to ensure profitability and cash flow positivity at a production rate of 31 aircraft per month [16][54] - Plans to diversify into Defense & Space and Aftermarket segments are gaining traction, with targets of $1 billion in Defense & Space revenue and $500 million in Aftermarket revenue by 2025 [19][20] - The company is exploring refinancing options to provide additional financial cushion amid an uncertain economic environment [55] Management's Comments on Operating Environment and Future Outlook - Management noted that global air traffic demand is recovering but remains complicated by pandemic impacts and supply chain fragility [8][9] - The expectation is that challenges such as schedule changes, part shortages, and inflation will continue into 2023 [53][22] - The company aims to achieve a target of 300 deliveries for the 737 in 2022, with a focus on starting 2023 in a stronger position [15][16] Other Important Information - The company ended Q3 2022 with $671 million in cash and $3.8 billion in debt, indicating a need for careful financial management moving forward [37] - The termination of the U.S. Pension Plan Value A is expected to result in a cash reversion of $120 million to $150 million in 2023 [32][38] Q&A Session Summary Question: What are the expectations for Q4 free cash flow? - Management indicated that Q4 cash flow will depend heavily on deliveries, particularly of the 737 MAX, with a target of 100 deliveries [61][62] Question: Will free cash flow be positive next year without the pension cash reversion? - Management confirmed that they expect to be free cash flow positive even without the pension cash reversion [65][66] Question: What caused the recent changes in production rate assumptions? - Management explained that changes were due to greater clarity from Boeing regarding their outlook and adjustments made by Airbus [75][78] Question: What challenges exist in achieving the target of 100 737 deliveries in Q4? - Management acknowledged that while the target is aggressive, improvements in staffing and stabilization of part shortages provide confidence in meeting the goal [88][90] Question: How will cost reduction efforts be balanced with potential future production increases? - Management emphasized the need to align costs with production levels and ensure that cost-cutting measures do not hinder the ability to meet customer demands [98][100]

Financial Performance - Revenue increased due to higher production deliveries on 737, increased aftermarket activity, and overall deliveries increased to 318 shipsets compared to 235 in Q2 2021[4] - Commercial segment revenue increased by 28%[14] - Aftermarket segment revenue increased significantly by 42%[21] - Defense & Space segment revenue increased by 3%[17] - The company reported a GAAP diluted loss per share of ($1.17) for the three months ended June 30, 2022[29] - Adjusted diluted loss per share was ($1.21) for the three months ended June 30, 2022[29] - Free cash flow was ($79) million for the three months ended June 30, 2022[31] Operational Highlights - Overall deliveries increased to 318 shipsets in Q2 2022 compared to 235 in Q2 2021[4] - 71 737 shipsets were delivered in Q2 2022 compared to 35 in Q2 2021[4] - 147 A320 shipsets were delivered in Q2 2022 compared to 96 in Q2 2021[4] Strategic Initiatives - Settled repayable investment agreement with the U.K Department of Business, Energy and Industrial Strategy[2] - Selected by Boeing to support the B-52 Commercial Engine Replacement Program[2] - Awarded Shooting Star Cargo Module by Sierra Space[2] - Joined Airbus as a strategic partner to support the British-produced H175M for the U.K's New Medium Helicopter requirement[2]