The Boeing Company Q3 FY2025 earnings call

• Sustained focus on safety and quality driving better performance across the enterprise, re - earning trust of stakeholders. Focus on culture change energizing teams. By August, delivered more commercial airplanes than all of last year. Operations generated positive free cash flow in the quarter for the first time since 2023. Jointly agreed with FAA to increase 737 production to 42 per month.
• In Commercial Airplanes, made progress in safety and quality plan, ramped up 737 production, FAA allowed delegation to Boeing for some 737 MAX and 787 airworthiness certificates, 787 program working towards stability at rate 7, investing in expansion of South Carolina site for 787.
• In Development programs, 777X delayed certification and first delivery with a $4.9 billion charge, 737 - 7 and - 10 programs made progress on engine anti - ice issue with anticipation of certification in 2026.
• In Defense, active management approach to derisk development programs, had notable milestones, executed contingency plan due to IAM work stoppage.
• In Global Services, strong quarter with exceptional performance, on track to close sale of Jeppesen and secure deals for retained digital capabilities

Commercial Airplanes

• Delivered 160 airplanes in the quarter, the highest quarterly delivery total since 2018. Revenue was up nearly 50% to $11.1 billion. Booked 161 net orders, including 50 787 airplanes for Turkish Airlines and 30 737 - 8 airplanes for the Norwegian group. Backlog ended at $535 billion with over 5,900 airplanes.
• 737 program delivered 121 airplanes, stabilized at 38 per month, then increased to 42 per month in agreement with FAA. Worked on 737 - 7 and - 10 programs with progress on engine anti - ice issue.
• 787 delivered 24 airplanes, ended with approx. 10 787 airplanes in inventory built prior to 2023, expected to deliver through 2026.
• 777X delayed certification and first delivery, incurred a $4.9 billion noncash charge, now expects first delivery in 2027.

Defense

• Delivered 30 aircraft and 2 satellites in the quarter. Revenue grew 25% to $6.9 billion. Operating margin 1.7%. Booked $9 billion in orders, backlog grew to a record $76 billion. Had notable milestones like delivery of 100th KC - 46 tanker, awarded $2.8 billion contract for Evolved Strategic Satcom program, signed multiyear contracts for PAC - 3 seekers. Executed contingency plan due to IAM work stoppage.

Global Services

• Revenue was up 10% to $5.4 billion. Operating margin 17.5%. Received $8 billion in orders with a year - to - date book - to - bill of 1.2. The U.S. Navy awarded contracts for repair of F - 18 landing gear and outer wing panels. On track to close sale of Jeppesen and other portions of digital business, and securing deals for retained digital capabilities

• 777X now expects first delivery in 2027, with a $4.9 billion noncash charge. Expect headwinds of about $2 billion in 2026 due to delivery timing, and cash roll off of the charge spread into the next decade.
• Expect positive free cash flow in Q4 2025 pre DOJ payment, with better performance year - to - date leading to an update to free cash flow usage of about $2.5 billion for 2025.
• For 737, plan to exit the year at 42 per month rate, and move to higher rates in increments of 5, not earlier than 6 months apart, when ready.
• For 787, plan to move to 10 per month next year after stabilizing at rate 8, with focus on supply chain, especially seating

• Certification delay for 777X, which led to a $4.9 billion noncash charge. The issue is around getting TIA approval for certification work, which was underestimated in terms of the work required.
• IAM representative workforce strike in St. Louis, affecting production of certain items like JDAMs, but team is working to support customers.
• Supply chain constraints, especially with seating on 787 program, which could potentially impact production rates

Q: Jay, what is the negative cash flow in 2026 on the 777X in totality or versus this year? And as you look out, how soon after first delivery can that program get to a neutral position from a cash perspective?

A: Sure. Thanks for the question, Myles. So as I mentioned before, it's a headwind relative to our prior expectations of $2 billion. So I'd expect the overall absolute cash flow to be usage. It's a little bit higher than that. As far as how we get to call it, I'd say, breakeven neutrality type of free cash flow, we've talked about this a little bit in the past. So next year will be a heavy use year. The year after that will be better in 2027. And then we would expect ourselves to get closer to neutral in 2028. And that's all on the back of improving payments from aircraft deliveries and advances. So again, next year, we'll build up inventory. There'll be limited advances and delivery payments. But in 2027, we'll start to see those benefits and those will continue to ramp up in '28 and beyond. So I would expect, starting in 2029, neutrality will go to a benefit of positive free cash flow for the program. And so look, all told, next year is going to be a little bit heavy, but it will continue to improve from year - over - year from that point.

Q: So maybe back on the 777, certainly you're going to get bombarded with these, so apologies for that. But what's driving this now? Like what changed from like just 2, 3 months ago to reevaluate what's going on with the program. Yes. So I guess that's the question. Like what changed to really make the focus on this now?

A: Yes. So Ron, first of all, let me reiterate what I said in the prepared remarks. There's no new issues with the airplane itself or the engines, the test program. Ironically, we have more hours and the maturity of this airplane is probably higher than any other airplane we've been through the test program. The issue is solely around getting the certification work complete. We had anticipated getting TIA approval. That's what's needed to actually get cert credit when we fly those particular tests. We have not been able to achieve the certification credit and that's because we haven't gotten the TIA approval. So look, we've taken a step back. We very much underestimated how much work it was going to take for us to get the TIA approvals and for the FAA to have the opportunity to review all the data submissions that are required. So we stepped back and we've rebaselined this program to incorporate those learnings as Jay said. And the philosophy I want here is I don't want this to be a continuous quarterly issue for us to make sure we have a solid financial estimate here that we have a high level of confidence that we can get this certification work done. Now recognize that some of this is still not in our control. We're working very closely with the FAA. I'm hopeful that there's opportunities for us to improve upon some of this. I think I've talked to the administrator Bedford. And I think he also agrees that we need to look for ways to streamline the process. But in effect, this is a result of us realizing that the plan we had in place to get the certification approvals just was not realistic going forward.