Summary of GE Aerospace FY Conference Call Company Overview - **Company**: GE Aerospace (NYSE: GE) - **Industry**: Aerospace and Defense - **Key Segments**: Commercial engines and services, Defense propulsion technologies Core Points and Arguments 1. **Market Leadership**: GE Aerospace has the largest engine install base in the industry with 78,000 engines, powering three out of every four commercial aircraft and two out of three U.S. combat aircraft [4][5] 2. **Revenue Composition**: In 2025, approximately 70% of revenue is expected to come from services, supported by a $175 billion backlog, primarily driven by the install base [5][6] 3. **Growth Projections**: - Services orders growth has increased by over 30% year-to-date, leading to a 25% growth in commercial services revenue [5][6] - Full-year outlook for commercial services has been raised to low to mid-20s growth, translating to an additional $1 billion in services revenue [6] - Defense propulsion technologies (DPT) revenue expectations have been increased to high single digits from mid-single digits [6][12] 4. **Operational Improvements**: The implementation of the FlightDeck operating model has improved material flow by over 30% year-over-year, enhancing operational efficiency and supplier performance [6][7][29] 5. **Future Outlook for 2026**: - Anticipated growth in air traffic and engine shop visits, with a projected double-digit increase in shop visits over 2025 [10][11] - LEAP engine deliveries expected to grow by 15%-20%, reaching around 2,000 engines [12][13] - Services growth is expected to normalize to a double-digit growth rate between 2024 and 2028 [12][16] 6. **LEAP Engine Performance**: - LEAP engines are achieving performance levels comparable to CFM56 engines, with expectations for improved durability and profitability in the coming years [18][20] - External shop visits for LEAP engines are projected to increase significantly, unlocking spare parts revenue [20][39] Additional Important Insights 1. **Supply Chain Management**: GE Aerospace has focused on improving transparency and communication with suppliers, which has been crucial for meeting demand and resolving issues [36][38] 2. **Defense Propulsion Technologies Growth**: - DPT has seen an 80% increase in defense engine shipments year-over-year, with a $19 billion backlog driving future growth [42][43] - Growth opportunities are identified in international markets and classified projects, with expectations for mid-single digit growth in DPT [47][48] 3. **Cultural Shift**: The FlightDeck initiative has transformed the company culture towards greater transparency and accountability, enhancing overall operational performance [29][34] Conclusion - GE Aerospace is positioned for strong performance in 2025 and optimistic growth in 2026, with a solid backlog and operational improvements driving future revenue [48][49]

Financial Data and Key Metrics Changes - Revenue for the third quarter was $11.3 billion, up 26% year-over-year, with operating profit also increasing by 26% to $2.3 billion [15][20] - Earnings per share (EPS) grew 44% to $1.66, driven by increased operating profit, a lower tax rate, and a reduced share count [15][22] - Free cash flow reached $2.4 billion, up 30%, with over 130% conversion from earnings [15][22] Business Line Data and Key Metrics Changes - In Commercial Engines and Services (CES), orders were up 5%, with services orders increasing by 32% while equipment orders decreased by 42% due to timing [17][18] - CES revenue grew 27%, with services revenue up 28% and internal shop visit revenue up 33% [17][18] - In Defense and Propulsion Technologies (DPT), revenue grew 26%, with defense engine volume up 83% year-over-year [20][23] Market Data and Key Metrics Changes - Year-to-date, orders increased by 13%, with services orders up 31% [4] - The total DPT backlog is at $19 billion, up $1.5 billion year-over-year [20] - The company expects to grow LEAP deliveries more than 20% for the full year, up from a prior outlook of 15% to 20% [7][22] Company Strategy and Development Direction - The company is focused on enhancing its FlightDeck operating model to improve delivery and meet customer demand [3][5] - Investments in LEAP durability and next-generation technologies are prioritized to deliver value to customers [9][12] - The company is committed to maintaining competitive advantages through a strong backlog and continuous improvement in services and products [23][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand environment and the ability to meet customer expectations [4][9] - The company raised its full-year guidance for revenue growth to high teens, up from mid-teens, reflecting strong year-to-date performance [20][22] - Management highlighted the importance of ongoing investments in technology and supply chain improvements to support future growth [9][24] Other Important Information - The company is investing nearly $1 billion in its supply chain to expand capacity [9] - The LEAP 1A HPT blade is now in production, expected to enhance output significantly [7][12] - The company has secured significant commitments from major airlines, including Korean Air and Cathay Pacific, for its engines [13][14] Q&A Session Summary Question: Can you elaborate on the services performance and factors influencing it? - Management noted that strong services performance was driven by improved material availability and increased work scopes, with expectations for continued growth [29][30] Question: What gives confidence in the LEAP services margin outlook? - Management highlighted ongoing improvements in supply chain and operational performance, projecting continued growth in internal shop visits and external channel performance [35][41] Question: How is capital deployment being balanced with share repurchase and potential M&A? - Management confirmed a balanced approach to capital allocation, prioritizing reinvestment in the business while also returning capital to shareholders and considering strategic M&A opportunities [44][48] Question: What is driving the strong aftermarket revenue growth despite deceleration in ASK growth? - Management attributed the growth to pent-up demand for shop visits and increased work scopes, alongside a growing external LEAP channel [90][91]

Financial Data and Key Metrics Changes - Revenue for the third quarter was $11.3 billion, up 26% year-over-year, with operating profit also increasing by 26% to $2.3 billion [15][19] - Earnings per share (EPS) grew 44% to $1.66, driven by increased operating profit, a lower tax rate, and a reduced share count [15][19] - Free cash flow reached $2.4 billion, up 30%, with over 130% conversion from earnings [15][19] Business Line Data and Key Metrics Changes - In Commercial Engines and Services (CES), orders were up 5%, with services orders increasing by 32% and equipment orders down 42% due to timing [17][19] - CES revenue grew 27%, with services revenue up 28% and internal shop visit revenue up 33% [17][19] - In Defense and Propulsion Technologies (DPT), revenue grew 26%, with engine volume up 83% year-over-year [19][19] Market Data and Key Metrics Changes - Year-to-date, orders increased by 13%, with services orders up 31% [4] - The total DPT backlog is at $19 billion, up $1.5 billion year-over-year [19] - The company expects to grow LEAP deliveries more than 20% for the full year, up from a prior outlook of 15% to 20% [7][19] Company Strategy and Development Direction - The company is focused on enhancing its FlightDeck operating model to improve delivery and meet customer demand [3][5] - Investments in LEAP durability and next-generation technologies are prioritized to deliver value to customers [10][12] - The company is committed to expanding its supply chain capacity, investing nearly $1 billion to support growth [9][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand for services and products, raising full-year guidance across the board [5][19] - The company anticipates continued growth in commercial services and engine deliveries, with a positive outlook for 2026 [20][56] - Management highlighted the importance of addressing supply chain challenges and improving material availability [78] Other Important Information - The company has secured significant commitments from major airlines, including Korean Air and Cathay Pacific, for its engines [12][13] - The company is actively working on next-generation engine technologies, including the GE9X and RISE program [11][12] Q&A Session Summary Question: Can you elaborate on the services performance and factors driving it? - Management noted that improved material availability and increased work scopes contributed to strong services growth, with expectations for continued demand [28][30] Question: What gives confidence in the LEAP services margin outlook? - Management highlighted ongoing improvements in supply chain performance and operational efficiencies as key factors supporting the margin outlook [34][36] Question: How does the company balance capital deployment and share repurchase? - Management stated that the capital allocation approach remains balanced, focusing on reinvestment in the business while returning capital to shareholders [41][42] Question: What is the outlook for 2026, particularly regarding CES revenue growth? - Management indicated a positive outlook for 2026, expecting solid revenue growth driven by an increasing installed base and higher shop visit demand [55][56]