Spirit Aerosystems Holdings, Inc.

Good morning, ladies and gentlemen, and welcome to Spirit AeroSystem Holdings Incorporated Third Quarter 2022 Earnings Conference Call. My name is Harry and I'll be your coordinator today. To ask a question during the Q&A, please dial star one on your telephone keypad. And in the interest of time, please limit yourself to one question. I'd now like to turn the presentation over to Aaron Hunt, Director of Investor Relations. Please proceed.

Thank you, Harry. And good morning, everyone. Welcome to Spirit's Third Quarter 2022 Earnings Call. I'm Aaron Hunt, Director of Investor Relations, and with me today are SPIRIT's President and Chief Executive Officer, Tom Gentile, SPIRIT's Senior Vice President and Chief Financial Officer, Mark Szczesinski, and SPIRIT's Executive Vice President, Chief Operating Officer, and President of Commercial Division, Sam Marnick. After opening comments by Tom and Mark regarding our performance and outlook, we will take your questions. Before we begin, I need to remind you that any projections or goals we may include in our discussion today are likely to involve risks. including those detailed in our earnings release, in our SEC filings, in the forward-looking statement at the end of this web presentation, and referenced in our call today. In addition, we refer you to our earnings release and presentation for disclosures and reconciliation of non-GAAP measures we use when discussing our results. And as a reminder, you can follow today's broadcast and slide presentation on our website at spiritarrow.com. With that, I'd like to turn the call over to our Chief Executive Officer, Tom Gentile.

Thank you, Aaron, and good morning, everyone. Welcome to Spirit's third quarter earnings call. Global air traffic demand continues to make good momentum toward pre-pandemic levels, but the lingering impacts of the pandemic are complicating the recovery and creating a challenging economic environment. The supply side of the aerospace recovery remains in a fragile state. While we saw positive earnings from all three of Spirit's segments for the first time this year, our day-to-day operations continue to face challenges from multiple factors, including volatility and near-term production rates, schedules, supply chain challenges, availability of skilled labor, and persistent inflation. For example, while the headline production rates do not change, we have seen delivery schedule changes since last quarter for some programs, including the 767, the A220, and the A320, pushing units out of 2022 and putting pressure on free cash flow. Frequent schedule changes create challenges for us and our supply chain. While many of our suppliers are performing to expectations, We continue to see disruption in the supply chain, which is causing part shortages in our factories. Several issues are driving this supply chain disruption, including skilled labor shortages, attrition, part shortages, and inflation. Labor has also been a challenge. Earlier in the year, we addressed our labor needs by recalling workers. Many of these workers were less experienced and have had a longer learning curve to meet the same levels of productivity as the workers that retired during the pandemic. As we have gone to the open market to fill new openings, we have seen a higher level of attrition than in the past. To mitigate this attrition and attract the skilled labor needed, we have brought on additional contractors, have been holding job fairs, we have lengthened our training program, and have increased hourly starting wages. In addition, we have even been offering a signing bonus for hourly workers of $3,000 in Wichita. These issues, schedule changes, part shortages, labor shortages and attrition, and inflation have disrupted our production system in Q3, resulting in lower than expected deliveries, which in turn had a negative impact on our cash flow. We have put in place plans to address these challenges, and we continue to target 300 deliveries for the 737 during the full year 2022 with our team. There is obviously risk to achieving this target, but our team is making a tremendous effort to achieve this delivery schedule so that we start 2023 in a stronger position. Right now, we are producing the 737 at a rate of 31 aircraft per month. We expect to be at this rate for much, if not most, of 2023. Given the ongoing schedule, supply chain, and labor challenges that we have been encountering, we have launched a cost optimization effort that should enable Spirit to be profitable and cash flow positive when the 737 is at 31 aircraft per month. which is where we are now and may remain for some time. This cost optimization effort will focus on reducing structural cost at Spirit in three major areas, operations, supply chain, and infrastructure overhead. While our commercial operations are taking more time to recover from the max grounding and the pandemic, our efforts to diversify into defense and space and aftermarket are gaining more traction. Our defense and space segment grew this quarter its revenue by 17% with 11.4% margins. We have been able to win more classified defense projects that are important to the new national defense strategy by repurposing some of our excess wide-body capacity to defense applications. So far, we have transitioned approximately 1.2 million square feet in Wichita to defense business. These classified programs are early in their development but will contribute to revenue and profit when they get into full-rate production. In September, we were awarded a contract to provide the new horizontal stabilizers for the KC-135 tanker. We continue to target $1 billion in defense and space revenue by 2025. The aftermarket business also saw solid growth in Q3. The segment grew 38% over Q3 2021 with 24% margins. We recently signed an MOU with Malaysia Airlines Burrhead to establish repair services for nacelles and flight control surfaces. we continue to target $500 million of revenue for our aftermarket business with margins in excess of 20% by 2025. I'll now turn the call over to Mark to take you through a few more details on our third quarter results. Mark.