GE Aerospace

Good day, ladies and gentlemen, and welcome to the General Electric third quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. My name is Liz, and I will be your conference coordinator today. If you experience issues with the webcast slides refreshing or there appears to be delays in the slide advancement, please hit F5 on your keyboard to refresh. As a reminder, this conference is being recorded. I would now like to turn the program over to your host for today's conference, Steve Winokur, Vice President of Investor Relations. Please proceed.

Thanks, Liz. Welcome to GE's third quarter 2023 earnings call. I'm joined by Chairman and CEO Larry Culp and CFO Rahul Ghai. Some of the statements we're making are forward-looking and based on our best view of the world and our businesses as we see them today. As described in our SEC filings and on our website, those elements may change as the world changes. Over to Larry.

Steve, thank you and good morning, everyone. Before we start, I want to reiterate that the GE team stands firmly with our employees, customers, and all those impacted by the brutal Hamas attacks on Israel in the subsequent war. Our priority has been the safety of GE employees in the region. We're doing everything possible to support them and their families. Last week, GE announced a half a million dollar contribution to help with the humanitarian efforts for the many people in Israel, Gaza, and the surrounding areas impacted by these horrific events. Terrorism has no place in our society. And like so many, I'm devastated by the loss of lives, violence, and suffering of innocent people. Turning to the quarter, GE delivered a very strong performance and we're raising full year guidance again. GE Aerospace continues to experience rapid growth, driven by robust demand and solid execution, largely in commercial engines and services, another significant quarter for the team. Our fleet of 41,000 commercial engines and 26,000 rotorcraft and combat engines continues to expand as we work to define the future of flight. Today, we're navigating a still challenging supply chain environment to deliver for and support our customers. Year-to-date, commercial engine deliveries are up 30%. Across GE and Safran's MRO shops this quarter, we've improved LEAP quick-turn shop visits over 30% year-over-year and sequentially. For tomorrow, we're building our backlog and sales pipeline during unprecedented industry growth. Recently Air Canada ordered 36 GENX-1B engines plus four spares. Building on GENX's rich history, it's the fastest selling high thrust engine with over 50 million flight hours. For the future, we're investing in R&D and developing next generation technologies. For example, we're advancing full system testing for our hybrid electric systems at our electric power center in Ohio. We're also collaborating with industry partners in NASA on an eco-demonstrator program to measure sustainable aviation fuel impact on the environment, particularly high altitude emissions. And our growth opportunities extend beyond commercial. In defense, we're pleased the U.S. Army has accepted the first two T-901 flight test engines for the future attack reconnaissance aircraft prototypes. The T-901 will also upgrade the U.S. Army's Apache and Blackhawk helicopters providing 50% more power, reduced lifecycle costs, and lower fuel consumption. And we've been selected for development work on the cockpit voice and flight data recorder systems for the future long-range assault aircraft program. Next-generation programs like these demonstrate how GE's rotorcraft programs enable the military and our allies to take on more challenging missions today and in the future. And we're pleased to see Congress recognizing this important work by including funding for advanced engine development, like the XA-100, in both the House and Senate Fiscal Year 24 defense appropriation bills. However, even with these strong results, we're far from satisfied. Through our lean transformation, we're making real progress, improving flow and eliminating waste. For example, our team in Pune, India, has increased output of high-pressure turbine manifolds by three times. But we need to do more, as do our suppliers, given the pace of demand for both aftermarket services and new engine deliveries. There are pockets of improvement now. Material input increased double digits sequentially, supporting spare parts delivery, which was up significantly year over year. We're working within our own plants and in partnership with our suppliers to deliver sequential improvements in output and turnaround times day by day, week by week. Over to GE Vernova, where performance is strengthening pre-spin at both renewable energy and power. Customers continue to invest in the energy transition, driving meaningful demand for our products and services. BRID and now Onshore Wind were both profitable this quarter, and we expect improved performance from here. BRID customers are increasing their infrastructure investments globally to connect renewables and improve reliability. Here to date, orders remain strong at more than three times revenue and with higher margins, which will support profitable growth through the decade. We've also increased selectivity, streamlined cost, and rationalized our industrial footprint, tracking toward full-year profitability at GRID. I really like the way the GRID team is using Lean to drive this turnaround and to deliver profitable growth. For example, across power transmission's 14 sites globally, we've reduced lead time by roughly 15% year-to-date, and we're targeting a 20% reduction by year-end. Now at Onshore, our strategy to focus on fewer markets, pivoting more toward North America, where GE Vernova is the market leader, is working. And we're relying more on our workhorse products, now representing 70% of equipment volume this quarter. These shifts are translating to 700 basis points of higher margins in backlog this year. We're still driving cost out, fewer layers, reducing headcount, and empowering leaders closest to the operators. Finally, we're improving fleet reliability. We're now halfway through our enhancement program in the field and expect to be roughly 60% complete by year end. As expected, offshore wind remains difficult this year. with losses of roughly a billion dollars in 2023. Next year, we expect offshore will have similar losses, but substantially improved cash performance. So it's a tough $6 billion backlog that we're working our way through, which we expect to largely complete over the next two or three years. Meanwhile, we're making operational progress with rising availability on the 800 installed megawatts of our six megawatt platform. Electricity is now being produced at Dogger Bank, and we recently had the installation of our first Hollyodex turbines at Vineyard Wind. Looking forward, we've expanded Vicka Bates' role to CEO of the entire wind business to leverage our progress in onshore and offshore. We're taking a similarly disciplined approach to writing new business, like we've done over at GAS onshore and grid, with increased rigor on pricing, terms, geographic exposure, and other risks. All in all, given power's continued strength and with our two largest businesses in renewables, grid and now onshore delivering, plus our plan for offshore, we're highly confident in successfully spinning off GE Vernova early in the second quarter. Across GE, I'm pleased with how we're operating as a simpler, more focused business at both GE Aerospace and GE Vernova. Another strong quarter, but plenty more to do. My thanks go out to the team for their dedication and commitment to serving our customers. It's been nearly two years since we announced our intention to create three independent, investment-grade industry leaders, and now we're closing in on the final step. Today, we announced plans to spin off GE Vernova and launch GE Aerospace in the beginning of the second quarter of 2024. Both will be listed on the New York Stock Exchange with GE Vernova as GEV and GE Aerospace carrying forward under GE. We've made some important hires and promotions to ensure we have the best teams leading these businesses forward. At GE Aerospace, we've completed the functional leadership team, naming our heads of corporate affairs, human resources, legal, and treasury with experienced leaders from inside and outside GE. At GE Vernova, we added seasoned public company CFO Ken Parks. As I mentioned a moment ago, Vicka Bate is now CEO of the wind business. We've also further simplified and strengthened our balance sheet by redeeming the remainder of our preferred equity and selling a portion of our air cap shares for $2.7 billion of proceeds. Our balance sheet is well positioned to support the launch of two investment-grade companies. And we're approaching some key spin milestones. GE Vernova will file a confidential Form 10 shortly, with the initial public filing expected in the first quarter. Soon, we'll announce each company's board of directors. And in early March, GE Vernova and GE Aerospace plan to hold investor days. Building on our success at GE Healthcare, we're exactly where we want to be at the end of October for both GE Aerospace and GE Vernova. Now over to Rahul for more detail on our results.