Boeing Company (The)

Thank you for standing by. Good day, everyone, and welcome to the Boeing Company's third quarter 2022 earnings conference call. Today's call is being recorded. The management discussion and slide presentation, plus the analyst question and answer session, are being broadcast live over the internet. To ask a question on today's conference, please press the digit 1, followed by the digit 0 on your touchtone telephone. Again, it is 1-0 for questions. After pressing 1-0, you will hear that you've been placed in queue. Pressing 1-0 again will take you out of queue and may prevent you from being able to ask a question. At this time, for opening remarks and introductions, I'm turning the call over to Mr. Matt Welch, Vice President of Investor Relations for the Boeing Company. Mr. Welch, please go ahead.

Thank you, John, and good morning, everyone. Welcome to Boeing's third quarter 2022 earnings call. I am Matt Welch, and with me today are Dave Calhoun, Boeing's President and Chief Executive Officer, and Brian West, Boeing's Executive Vice President and Chief Financial Officer. As a reminder, you can follow today's broadcast and slide presentation through our website at Boeing.com. As always, we have provided detailed financial information in our press release issued earlier today. Projections, estimates, and goals we include in our discussions this morning involve risk. including those described in our SEC filings and in the forward-looking statement disclaimer at the end of this web presentation. In addition, we refer you to our earnings release and presentation for disclosures and reconciliation of certain non-GAAP measures. Now I will turn the call over to Dave Calhoun.

Dave Calhoun. Dave Calhoun. Matt, thanks. Welcome to everybody. Thanks for joining us. I will acknowledge up front that our plans for the investor conference middle of next week, we're looking forward to them. We hope we can give some guideposts for the forward look and the Boeing company. So many of our comments today will be a little shorter than usual and focused strictly on the quarter. This quarter was a big one for us. We hit a marker. a marker we've set since the beginning of our turnaround effort in the beginning of 2020, and that was to generate positive free cash flow. So we generated $2.9 billion in the quarter. That puts us on the path that we projected for 2022, which was positive. So again, a very important accomplishment for us, and I think begins the real turning point for the company. At the same time, we took a charge on our fixed price development contracts. These are contracts that we have talked about now repeatedly on these calls. We believe, as we always do, that the charge that we took is meant to complete these contracts, ultimately to deliver them to satisfied customers in the Air Force, the armed forces. And anyway, we're not embarrassed by them. They are what they are. And we intend to deliver against these contracts and satisfy our customers. Without a doubt, and you've heard it from all of the earnings calls over the course of the week, the supply chain, inflation, labor shortages, macroeconomic challenges are challenging for everybody. That is reflected in these third quarter calls. Again, the charges in our fixed price development world, et cetera. All of that's embedded. We're not anticipating or suggesting that the supply chain world is going to get much better in the near term. We expect it will continue to be challenged over the course of 2023. One of our problems is not demand. Demand is very strong. It's strong across the portfolio of products and it's strong across the world with all of our customers. Why? Because their demand is strong. Bookings in pretty much every geography is strong, with the exception of China. But also their concerns about the very supply constraints that we're all referring to sort of force them to want to get in line and get their orders in so that they have the lift they need as the world returns to some normal state. What's our job in this supply-constrained world? Well, in the factories, we don't push the system too fast. We slow down when we have to, and we try not to compound problems that may arise from the supply chain or from our own shops. We've added more than 10,000 people this year, and we're investing in training and development to accelerate their experience curve and improve our productivity over time. And we're driving stability in the supply chain. We've introduced all kinds of on-site technology, digital tools to watch what they're doing, but also we've added people to those organizations that are more challenged than others, and we've increased inventory safety stock wherever we can. Truth is, it'll still take time to normalize, and our objective in the investor conference that lies ahead is to give you that projection as to how and when we think that is likely to happen. Despite the challenges, I'm very pleased with the progress broadly. Our 8.7 deliveries have returned. It's a reflection on us focusing on the right things. Strict conformance with respect to our manufacturing processes is very important. We've gotten it right, and the delivery process has started, and so far, so good. On the 7.37 MAX return to service, again, philosophy is one at a time. A million revenue flights, exceptional schedule reliability. That's what we've experienced, and that is why the folks who have leaned into the MAX continue to lean into the MAX and continue to place orders with us. In total over the quarter, 227 orders for airplanes, WestJet, UPS, Cargolux, China Airlines, just a few. Again, very strong. You probably have seen today Alaska. has upped their commitment to the max, and we greatly appreciate it from all of them. In a strong demand and yet supply constrained world, our inventory, the finished goods inventory that we have is an asset, not a liability, and we use it to de-risk that delivery outlook. And as for China, we continue to de-risk. That's been our objective. We still would like to deliver airplanes to China. We continue to support our customers. We continue to support the regulator. As we all know, the COVID restrictions and policies in China have reduced demand for airplanes in general, and we hope that is what is restricting the acceptance of the airplanes that they have on our tarmacs. But we also are clear-eyed about the geopolitical risks that are out there, and we are not gonna impart new risks on our investors, and we believe we can de-risk what we have. We're progressing on our development programs, the Dash 7, the Dash 10, the Triple 7, Dash 9, and the Dash 8 freighter. All of these are progressing well. As everybody knows, we are up against a deadline here at the end of the year. We remain confident that we can get an extension of that deadline because this is the safe answer, and we've heard from we've heard from pilots, we've heard from our workers, associates, and we know that the FAA has been putting in the work to certify these airplanes. So we remain not just hopeful but confident that we can get this across the finish line. And then those airplanes, as many of you know, complete that narrow-body portfolio in a way that allows us to compete head-to-head with our important competitor, Airbus. BDS, Boeing Defense, yes, we have these fixed price development challenges, but we have a rich portfolio. We delivered four MH139 Gray Wolf test aircraft to the U.S. Air Force. We received contracts for additional KC-46A tankers for both the U.S. Air Force and the Israeli Air Force. And despite the challenges on our real development programs, the tanker T-7 and MQ-25, we still remain confident in their long TERM SUCCESS AND CONTRIBUTION TO OUR CASH FLOW. AND THEN BOWING SERVICES, BGS, JUST ANOTHER VERY STRONG QUARTER. THEY'RE TRYING TO KEEP UP WITH DEMAND THE BEST THEY CAN. THEY DELIVERED THEIR 100TH CONTRACTED 737-800 BOWING FRADER CONVERSION TO AIRCAP. WE'VE GOT TEE AWARDS IN BOTH COMMERCIAL AND DEFENSE CUSTOMERS AND THINGS ARE GOING WELL AND THE MARGINS CONTINUE TO EXPAND. And then finally, we have not stopped investing in our foundational capabilities. We had some pretty good examples of that over the course of the quarter. We opened three advanced facilities across the country, composite fabrication, additive manufacturing, and an important autonomy investment alongside MIT just in Cambridge. Also very excited about WISC's unveiling. of the world's first autonomous self-flying four-seat all-electric vertical takeoff and landing air taxi. There's a very bright future ahead for that. And with respect to autonomy and its advancement in the world of certification, it's a very, very important part of our strategy. So we're making great progress. I feel good about our turnaround. I do think the cash flow numbers in the quarter are, in fact, a marker for us. We've been focused on it. We will continue to manage the company on the basis of the cash economics that we support our investors with, and that'll be that. So I'm happy to turn it over to Brian now for some color on the quarter.