Spirit Aerosystems Holdings, Inc.

Good morning, ladies and gentlemen, and welcome to Spirit Aerosystems Holdings Inc's second quarter 2023 earnings conference call. My name is Jordan and I'll be your coordinator today. If you'd like to register an audio question, you may do so by pressing star followed by one on your telephone keypad. We ask that all participants please limit themselves to one question. I'd now like to turn the presentation over to Ryan Avey, Senior Director of Investor Relations and FP&A. Please proceed.

Thank you, Jordan, and good morning, everyone. I'm Ryan Avey, and with me today are SPIRITS President and Chief Executive Officer Tom Gentile, Senior Vice President and Chief Financial Officer Mark Suchinski, and President of Commercial and Chief Operating Officer Sam Marnick. 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 and our SEC filings and in the forward-looking statement at the end of this web presentation. In addition, we refer you to our earnings release and presentation for disclosures and reconciliation and non-GAAP measures we use when discussing our results. With that, I'd like to turn the call over to our Chief Executive Officer, Tom Gentile.

Thank you, Ryan, and good morning, everyone. Welcome to SPIRIT's second quarter results call. I'll begin today by discussing the IAM contract and providing an update on the 737 vertical fin attached fitting progress. On the IAM contract, we are very pleased to have in place a four-year contract with our IAM represented employees. which reflects the gratitude we have for their contributions. While the first vote resulted in a work stoppage, we quickly went back to the table with our union partners and reached a resolution. Due to the work stoppage from the strike, we now expect to deliver between 370 and 390 737 fuselages this year. The front of our production line is starting to break to 42 airplanes per month in August, but we won't be able to fully recover the lost manufacturing days from the work stoppage and the subsequent resumption of full production at our Wichita site. Mark will walk you through some of the financial impacts related to the new contract and work stoppage in his comments. On the vertical fin attached fittings, first, all the rework on the available 737 fuselages in Wichita was completed during the second quarter, which was ahead of the timeline we provided on our last call and within the financial estimates that we provided. We were quickly able to develop a repair process and prioritize the rework. I want to recognize our operations team for the incredible effort they made to develop the repair, implement it, and maintain the schedule and budget. With regards to the units at Boeing, we have also recorded a provisional liability in the second quarter related to a potential claim for the repair work performed to date at Boeing. Additionally, we do not expect a material financial impact associated with previously delivered airplanes in the fleet. Now turning to our commercial business. Commercial air traffic demand continues to be strong and is approaching full recovery to pre-COVID levels. Based on May results, global air traffic is at 96% of 2019 levels, with domestic air traffic now exceeding 2019 levels by 5% and international approving to 91% of 2019 levels. This strong recovery in traffic combined with robust airline demand for new airplanes with improved fuel efficiency and seating capacity has fueled the recent large orders booked from airlines. As a result of these orders, our backlog at Spirit grew from $37 billion to $41 billion in the second quarter, which includes work packages on all commercial platforms in the Airbus and Boeing backlog. We are focused on executing the upcoming rate increases to meet the strong recovery in demand. While we are making progress, there continues to be challenges in the supply chain which have destabilized our production line. We still see examples of distressed suppliers, even smaller ones, which have significantly disrupted our operations because of shortages we've had to address. Over the last 18 months, we have incurred impacts approaching $200 million from individual distressed suppliers and other supply chain pressures, which have been reflected in our past earnings. These challenges in the supply chain also drove some of the forward losses recorded in the second quarter, primarily on the 787, the A350, and the A220 programs. Our priority for the second half of the year remains on execution within our factories and managing these supply chain challenges to meet production rate increases. While we continue to expect supply chain challenges, we have put plans in place to help mitigate the impacts. We have spirit employees in the field working with suppliers regularly, addressing rate readiness, helping them buy material, extending contracts, and offloading work to relieve some of the pressure. As we've mentioned previously, in our own factories, We are bringing in new employees earlier than we have in the past to help ensure a smoother transition on production rate breaks. Expectations for deliveries on our other programs through the year are as follows. 40 to 45 ship sets on 787, about 60 ship sets on the A350, 580 ship sets on the A320, and 75 to 80 ship sets on the A220. Now let's move to an update of our defense and aftermarket businesses. which both continue to perform well toward our 2025 targets. Our defense and space business once again produced strong revenue growth, up 30% this quarter compared to the second quarter of 2022. The new business pipeline also remains robust, and we continue to make good inroads with the defense primes displaying our design-build capabilities and commercial best practices. Year to date, we have won 20 different contracts worth more than $200 million in total. We continue to bid on large defense programs and are on track to reach our target of $1 billion in defense and space revenue by 2025. Our aftermarket business also had another quarter of solid revenue growth, up 15% compared to the same quarter last year, driven by increased MRO and spares volume with strong operating margins of 26%, helped by some one-time items. The aftermarket team also remains on plan to reach their 2025 revenue target of $500 million. I'll now turn the call over to Mark to take you through some more of the financials for our results. Over to you, Mark.