Spirit AeroSystems(US:SPR)2022-08-03 19:44Financial Data and Key Metrics Changes - Revenue for Q2 2022 was $1.3 billion, up 26% from the same quarter last year, primarily due to higher production on the 737 and increased Aftermarket revenue [21][38] - Earnings per share (EPS) was negative $1.17, an improvement from negative $1.30 in Q2 2021; adjusted EPS was negative $1.21 compared to negative $0.31 in the same period last year [24][25] - Operating margin was negative 8%, down from 10% in Q2 2021, impacted by supply chain challenges and losses related to Russian sanctions [27][28] Business Line Data and Key Metrics Changes - Commercial revenue increased 28% compared to 2021, driven by higher production volumes on the 737, 777, and A220 programs, partially offset by lower production on the 787 and 747 programs [38] - Defense & Space revenue improved 3% compared to Q2 2021, due to increased production and development program activity [42] - Aftermarket revenues were up 42% compared to the same period in 2021, primarily due to higher spare part sales and maintenance activities [44] Market Data and Key Metrics Changes - Domestic air traffic has recovered to close to 2019 levels, with air traffic exceeding 2019 levels during the July 4th holiday weekend [7][8] - Spirit's backlog stands at $34 billion, with 85% attributed to narrowbody aircraft [8] Company Strategy and Development Direction - The company is focused on managing supply chain challenges and inflationary pressures while aiming to stabilize 737 MAX production rates [48] - Diversification efforts in the Defense & Space segment are progressing well, with additional work secured [49] - The Aftermarket segment is expected to continue revenue growth as aircraft utilization recovers [49] Management's Comments on Operating Environment and Future Outlook - Management acknowledges near-term pressures from supply chain issues, staffing shortages, and inflation but remains optimistic about the long-term recovery of the aerospace industry [19][20] - The company expects to deliver about 300 737 MAX units in 2022, down from previous expectations due to supply chain disruptions [11][93] Other Important Information - The company recorded a net charge of $28 million related to adjustments of certain assets and liabilities due to U.S. sanctions on Russia [14] - Free cash flow usage for Q2 2022 was $62 million, with expectations of $250 million to $300 million for the full year [33][35] Q&A Session Summary Question: Update on 787 program and FAA work - Management confirmed that all requested engineering analysis for the 787 has been submitted and they are working closely with Boeing to resolve outstanding issues [56][58] Question: Cash flow outlook for 2023 - Management indicated that cash flow generation in 2023 will depend on production rates, particularly for the 737 MAX, and they expect to be cash flow positive if production rates exceed breakeven levels [72][74] Question: Labor challenges and hiring process - Management noted that they have exhausted their recall list and are now hiring externally, with a solid staffing situation across various locations [81][83] Question: Clarification on MAX buffer and production rates - Management explained that the buffer has been reduced to 66 units and that they plan to maintain a permanent buffer of about 20 units while aligning production rates with Boeing [90][132] Question: Cash flow and working capital management - Management outlined five key levers for improving cash flow in the second half of the year, including stable 737 production rates and increased 787 deliveries [100][102]