BOEING CO Q3 FY2024 earnings call

Culture Change

• Need fundamental culture change starting at the top, with leaders integrating with business and people, redefining values to hold leaders accountable for safe, high-quality products.

Stabilizing the Business

• Focus on ending the IAM strike, restarting factories and supply chain with a detailed return to work plan, implementing safety and quality plan, and managing balance sheet for investment-grade credit rating.

Execution Discipline on New Platforms

• Better risk management, disciplined program and risk management across project phases, including bid phase, and supply chain improvements for new platform commitments.

Building a New Future

• Streamline portfolio, reset priorities, reduce nonessential activity, and implement workforce reduction to focus on efficient operations and future growth.

Total Company

• Revenue was $17.8 billion, down 1%, primarily due to lower commercial wide body deliveries and IAM work stoppage. Core loss per share was $10.44. Free cash flow was a use of $2 billion, impacted by lower commercial wide body deliveries and unfavorable working capital timing, but improved by better-than-expected BCA advanced payments.

Boeing Commercial Airplanes (BCA)

• Delivered 116 airplanes in the quarter. Revenue was $7.4 billion, operating margin was minus 54%. Backlog ended at $428 billion with over 5,400 airplanes. The 737 program delivered 92 airplanes, 787 delivered 14, and the 777X had a $2.6 billion pretax charge.

Boeing Defense & Space (BDS)

• Booked $8 billion in orders, revenue $5.5 billion (stable year-over-year), operating margin minus 43.1%. Recognized $2 billion of pretax charges on T-7A, KC-46A, commercial crew, and MQ-25 programs.

Boeing Global Services (BGS)

• Received $6 billion in orders, revenue $4.9 billion (up 2%), operating margin 17%. Performed well with higher commercial volume and key service agreements.

Guidance

• 4Q free cash flow expected to be usage driven by return to work, production ramp, and inventory unwind. 2025 expected to be a cash use but with significant improvement over 2024. Anticipate exiting 2025 with real momentum as normal production rates return.

Risks

• Potential issues with IAM strike impact on restarting factories and supply chain. Challenges in managing balance sheet and maintaining investment-grade credit rating. Execution risks on new platform commitments and defense program charges.

Q: What is core and noncore outside of Boeing Commercial Airplanes as you see it and specifically, significant portfolio shaping and simplifying the business is in your turnaround you're describing looking forward?

A: Yes. As I look at the portfolio, we're better off doing less and doing it better than doing more and not doing it well. Evaluating the portfolio to see what adds value or distracts. Core of commercial airplanes and defense systems will stay, but fringe areas may be streamlined.

Q: How you're thinking around the parameters in terms of the size and timing of a potential capital raise?

A: We are in active engagement with the rating agencies, and it's a constructive dialogue. We have a plan to address the balance sheet. Timing and size dependent on market conditions, focusing on maintaining $10 billion of cash and managing debt maturities.

Q: How are you thinking about rebuilding leadership talent in this environment to make your goals for cultural change, stabilization of the business and execution achievable?

A: I'm traveling to meet people, focusing on streamlining overhead. Evaluate internally first, but may supplement with external resources if needed. Workforce reduction is to streamline overhead for efficient operations.

Q: When you sit back and you think about where you want the Boeing Company to be in 5 years, how do you think about that?

A: Want to be the leader in the aerospace and defense market, setting the standard for products, with customers doing our marketing. Focus on execution and being efficient in delivering products.

Q: What do you see as kind of the core of the problem at BDS? And what does it take to get to an acceptable level there?

A: Tough contracts and lack of discipline in risk management, EAC process, and working with customers to derisk. Need deeper dives, better risk management, and working with customers to define success on programs.

Q: Can you provide more detail on how you're managing supply chain through this work stoppage?

A: Work with every supplier on each commodity, keeping close communication. Managing supplier by supplier, with some suppliers kept hot and furloughs temporary, expecting no major issues in ramping up post-strike.

Q: Would you consider hiring from the outside to fill the BDS head slot because obviously, the folks there have really not been getting the job done?

A: Evaluate internally first. If we need to supplement from the outside and bring in outside skills, we will. We'll see where specific positions head.

Q: Would you consider divesting any of those because that would significantly reduce the amount you'd have to raise via equity?

A: Looking at the portfolio review, evaluating what fits in long-term strategy. Some properties may be divested if they don't fit, but no specific list yet.

Q: Would you talk about your near and long-term outlook for the Global Services segment, how you see sales and margins trending?

A: Global Services is doing well, team executing. Cultural aspects permeate the company, and while it's not my current focus, the team is delivering results and needs support to continue.