Q2 2024 Hexcel Corp Earnings Call

Thank you for standing by and welcome to the Hexcel Second Quarter 2024 Earnings Conference Call.

Operator: Thank you. I'd now like to turn the call over to Patrick Winterlich, Chief Financial Officer. You may begin. Good morning, everyone.

Unknown Executive: Order 2024 earnings conference call. All lines have been placed on me to prevent any background noise.

Unknown Executive: After the speakers are marked, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you.

Speaker Change: All lines have been placed on mute to prevent any background noise.

Speaker Change: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad.

Speaker Change: If you would like to withdraw your question, again, press the star 1. Thank you. I'd now like to turn the call over to Patrick Winterlich, Chief Financial Officer. You may begin.

Patrick Winterlich: I'd now like to turn the call over to Patrick Winterlich, Chief Financial Officer. You may again.

Unknown Executive: Thank you, Rob.

Patrick Winterlich: Good morning, everyone. Welcome to Hexcel Corporation, Second Quarter 2020's earnings conference call. Before beginning, let me cover the formalities. I want to remind everyone about the save hub of provisions related to any forward-looking statements we may make during the course of this call. Certain statements contained in this call may constitute forward looking statements within the meaning of the Private Securities, the Education Reform Act of 1995. They involve estimates, assumptions, judgment, and uncertainties caused by a variety of factors that could cause future actual results or outcomes to just a materially from our forward looking statements today.

Patrick Joseph Winterlich: Welcome to Hexcel Corporation's second quarter 2024 Earnings Conference call. Before beginning, let me cover the formalities. I want to remind everyone about the safe harbor provisions related to any forward-looking statements we may make during the course of this call. For example, certain statements contained in this call may constitute forward-looking statements within the meaning of the Private Securities Dislocation Reform Act of 1995. They involve estimates, assumptions, judgments, and uncertainties caused by a variety of factors that could cause future actual results or outcomes to differ materially from our forward-looking statements today. Such factors are detailed in the company's SEC filings and earnings release.

Patrick Joseph Winterlich: Thank you all.

Patrick Joseph Winterlich: Good morning everyone. Welcome to Hexcel Corporation's second quarter 2024 earnings conference call.

Patrick Joseph Winterlich: A replay of this call will be available on the Investor Relations page of our website. Lastly, this call is being recorded by Hexcel Corporation and is copyrighted material. It cannot be recorded or rebroadcast without our express permission.

Patrick Joseph Winterlich: Before beginning, let me cover the formalities. I want to remind everyone about the safe harbor provisions.

Patrick Joseph Winterlich: Related to any forward-looking statements we may make during the course of this call. Certain statements contained in this call may constitute forward-looking statements within the meaning of the Private Security Solicitation Reform Act of 1995. They involve estimates, assumptions, judgments, and uncertainties.

Patrick Joseph Winterlich: Caused by a variety of factors that could cause future actual results or outcomes to differ materially from our forward-looking statements today.

Patrick Winterlich: Such factors are detailed in the company SDC filings and earnings release.

Patrick Joseph Winterlich: Such factors are detailed in the company's SEC filings and earnings release.

Patrick Winterlich: A replay of this call will be available on the Investor Relations page of our website. Lastly, this call is being recorded by Hexcel Corporation in this copyrighted material. It cannot be recorded, or it broadcasts without our express permission. Your participation on this call constitutes your consent for that request.

Patrick Joseph Winterlich: A replay of this call will be available on the Investor Relations page of our website. Lastly, this call is being recorded by Hexcel Corporation and is copyrighted material. It cannot be recorded or rebroadcast without our express permission. Your participation on this call constitutes your consent to that request.

Patrick Joseph Winterlich: Your participation on this call constitutes your consent to that request. With me today are Tom Gentile, our CEO and President, and Kurt Goddard, our Vice President of Investor Relations. The purpose of the call is to review our second quarter 2024 results, details of which were in our news release issued earlier this morning. Now, let me turn the call over to Tom. Thanks, Patrick. Good morning, everyone.

Patrick Winterlich: With me today, I'm Tom Gentile, I'm CEO and President, and Kurt Godard, our Vice President of Investor Relations. The purpose of the call is to review our second quarter 2020's results. He tells an unusually issued earlier this morning.

Speaker Change: With me today are Tom Gentile, our CEO and President, and Kirk Goddard, our Vice President of Investor Relations. The purpose of the call is to review our second quarter 2024 results, detailed in our news release issued earlier this morning.

Tom Gentile: Now let me turn the call over to Tom.

Thomas C. Gentile: And thank you for joining us today as we share our 2024 second quarter results. I'm excited to be succeeding Nick Stanage as CEO and president of Hexcel and participating in my first Hexcel earnings call. Nick had a very strong tenure as CEO over the last 10 years and positioned the company for future leadership.

Tom Gentile: Thanks, Patrick.

Speaker Change: Now let me turn the call over to Tom.

Tom Gentile: Good morning, everyone, and thank you for joining us today as we share our 2024 second quarter results. I'm excited to be succeeding Nick Stange as CEO and President of Excell and participating in my first Excell earnings call. Nick had a very strong tenure as CEO over the last 10 years and positioned the company for future leadership. The strong financial results this quarter reflect the efforts. The Excell team has made over the last several years to recover from the pandemic. As you read in our news release, earlier this morning, Hexcel's second quarter sales of $500 million.

Tom Gentile: Thanks Patrick. Good morning everyone and thank you for joining us today as we share our 2024 second quarter results.

Tom Gentile: I'm excited to be succeeding Nick Stanage as CEO and President of Hexcel and participating in my first Hexcel earnings call.

Nick L. Stanage: Nick had a very strong tenure as CEO over the last 10 years and positioned the company for future leadership. The strong financial results this quarter reflect the efforts the Hexcel team has made over the last several years to recover from the pandemic.

Thomas C. Gentile: The strong financial results this quarter reflect the efforts the Hexcel team has made over the last several years to recover from the pandemic. As you read in our news release earlier this morning, Hexcel's second quarter sales of $500 million were up more than 10% year-over-year on strong performance, especially in commercial aerospace, where sales grew more than 21% year-over-year. At 60 cents, our EPS was 20% better than Q2 2023. As a side note, the last time Hexcel's quarterly sales exceeded $500 million was the first quarter of 2020.

Speaker Change: As you read in our news release earlier this morning, Hexcel's second quarter sales of $500 million were up more than 10% year-over-year on strong performance, especially so in commercial aerospace, where sales grew more than 21% year-over-year.

Tom Gentile: We're out more than 10% year over year on strong performance, especially so in commercial aerospace. We're sales through more than 21% year over year. At 60 cents, our EPS was 20% better than Q2 2023. As a side note, the last time Hexcel quarterly sales exceeded $500 million was the first quarter of 2020. As we look ahead to the second half of 2024, some of our commercial aerospace customers are facing continued challenges in the aerospace supply chain and slowing previously communicated production rate increases. Notably, on June 24th, Airbus signals a reduction in deliveries for 2024 from 800 to 770 aircraft, indicating would impact off-programs, including importantly for Hexcel, the 8350, which is our largest individual program.

Speaker Change: At $0.60, our EPS was 20% better than Q2 2023.

Speaker Change: As a side note, the last time Hexcel quarterly sales exceeded $500 million was the first quarter of 2020.

Thomas C. Gentile: As we look ahead to the second half of 2024, some of our commercial aerospace customers are flagging continued challenges in the aerospace supply chain and slowing previously communicated production rate increases. Notably, on June 24th, Airbus signaled a reduction in deliveries for 2024 from 800 to 770 aircraft, indicating it would impact all programs, including, importantly for Hexcel, the A350, which is our largest individual program. Boeing deliveries have also been below plan for the first half of the year. Our initial 2024 guidance was based on sales from Airbus, and Boeing continued to grow throughout the year. That now appears to be less likely.

Speaker Change: As we look ahead to the second half of 2024, some of our commercial aerospace customers are flagging continued challenges in the aerospace supply chain and slowing previously communicated production rate increases.

Speaker Change: Notably, on June 24th, Airbus signaled a reduction in deliveries for 2024 from 800 to 770 aircraft, indicating it would impact all programs, including, importantly for Hexcel, the A350.

Tom Gentile: Boeing deliveries have also been below plan for the first half of the year. Our initial 2024 guidance was based on sales from therapist and Boeing, continued to grow throughout the year. That now appears to be less likely, and we expect sales in earnings in the second half of 2024.

Speaker Change: which is our largest individual program. Boeing deliveries have also been below plan for the first half of the year.

Speaker Change: Our initial 2024 guidance, which was based on sales from Airbus and Boeing, continued to grow throughout the year. That now appears to be less likely, and we expect sales and earnings in the second half of 2024 to be generally similar to the first half of the year. We have therefore revised our guidance for 2024 accordingly.

Thomas C. Gentile: And we expect sales and earnings in the second half of 2024 to be generally similar to the first half of the year. We have therefore revised our guidance for 2024 accordingly, based on a more cautious near-term outlook. Our revised guidance is as follows: sales of $1.9 billion to $1.98 billion; previously, it was $1.925 billion to $2.025 billion. Adjusted diluting earnings per share of $2.02 to $2.18, previously $2.10 to $2.30, and free cash flow of around $200 million, previously greater than $200 million.

Tom Gentile: To be generally similar to the first half of the year, we have therefore revised our guidance for 2024 accordingly, based on a more cautious near-term output. Our revised guidance is as follows. Sales of 1.9 billion, 1.98 billion. Previously, it was 1.925 billion to 2.025 billion. Adjusting the delivery earnings for share of 2.2 cents to 2.018 cents, previously 2.10 to 2.30. And free cash flow of around 200 million, previously greater than 200 million.

Speaker Change: based on a more cautious near-term outlook. Our revised guidance is as follows.

Speaker Change: Sales of $1.9 billion to $1.98 billion. Previously, it was $1.925 billion to $2.025 billion. Adjusted diluting earnings per share of $2.02 to $2.18. Previously, $2.10 to $2.30.

Speaker Change: and free cash flow of around $200 million, previously greater than $200 million. We feel this revised guidance is a more prudent reflection of the softer market conditions for commercial aircraft production that we now expect in the second half of 2024.

Tom Gentile: We feel this revised guidance is a more prudent reflection of the software market conditions for commercial aircraft production that we now expect in the second half of 2024. With that said, we remain confident in the midterm outlook for commercial aircraft and expect both Airbus and Boeing to continue to increase their production rates over the coming years. For example, Airbus is announced that the A350 will be reaching 12 aircraft per month by 28. We are therefore not making any changes to the midterm guidance previously shared by the company at our February Investor Day and reconfirmed at the beginning of May.

Thomas C. Gentile: We feel this revised guidance is a more prudent reflection of the softer market conditions for commercial aircraft production that we now expect in the second half of 2024. With that said, we remain confident in the midterm outlook for commercial aircraft and expect both Airbus and Boeing to continue to increase their production rates over the coming years. For example, Airbus has announced that the A350 will be reaching 12 aircraft per month by 2028.

Speaker Change: With that said, we remain confident in the midterm outlook for commercial aircraft and expect both Airbus and Boeing to continue to increase their production rates over the coming years.

Speaker Change: For example, Airbus has announced that the A350 will be reaching 12 aircraft per month by 2028. We are therefore not making any changes to the midterm guidance previously shared by the company at our February Investor Day and reconfirmed at the beginning of May.

Thomas C. Gentile: We are therefore not making any changes to the midterm guidance previously shared by the company at our February Investor Day and reconfirmed at the beginning of May. Underpinning our confidence in the midterm outlook is the increased demand for new lightweight aircraft, with around 14,700 aircraft now in backlog for Airbus and Boeing combined. Total Revenue Passenger Kilometers, or RPK, continues to grow, with the IATA reporting record international passenger traffic. Domestically, the TSA reported a record level of security screenings earlier this month.

Tom Gentile: Underpinning our confidence in the midterm outlook is the increased demand for new lightweight aircraft, with around 14,700 aircraft now a backlog for Airbus and Boeing combined. Total revenue passenger kilometers are RPK, continues to grow, with the out of reporting record international passenger traffic. Domestically, the TSA reported a record level of security screenings earlier this month. This strong air traffic and healthy backlog is driving a recovery in aircraft production rates, which should get us back to 2019 production levels during 2026. The outlook for commercial aerospace production in the midterm and beyond is tremendous. And HECSL is well positioned to benefit as the aerospace supply chain continues to recover.

Speaker Change: Underpinning our confidence in the midterm outlook is the increased demand for new lightweight aircraft, with around 14,700 aircraft now in backlog for Airbus and Boeing combined.

Speaker Change: Total Revenue Passenger Kilometers, or RPK, continues to grow, with IATA reporting record international revenue.

Speaker Change: Passenger Traffic. Domestically, the TSA reported a record level of security screenings earlier this month. This strong air traffic and healthy backlog is driving a recovery in aircraft production rates, which should get us back to 2019 production levels during 2026.

Thomas C. Gentile: This strong air traffic and healthy backlog is driving a recovery in aircraft production rates, which should get us back to 2019 production levels by 2026. The outlook for commercial aerospace production in the midterm and beyond is tremendous, and Hexcel is well positioned to benefit as the aerospace supply chain continues to recover. Lightweight Hexcel advanced composite materials will enable enhanced sustainability and efficiency for decades to come as lighter aircraft and more aerodynamic architectures extend range, reduce fuel consumption, and drive lower emissions.

Speaker Change: The outlook for commercial aerospace production in the midterm and beyond is tremendous, and Hexcel is well positioned to benefit as the aerospace supply chain continues to recover.

Tom Gentile: Lightweight HECSL advanced composite materials will enable enhanced sustainability and efficiency for decades to come as lighter aircraft and more aerodynamic architectures extend range, reduce fuel consumption, and drive lower emissions. This compelling lightweight value proposition is one of the things that attracted me to HECSL, and it will become even more powerful over time as the aerospace industry focuses more on emissions reduction and sustainability. Every generation of aircraft over the last three years has used more advanced composite materials in the last. Advanced composite is now represent more than 50% of the weight of both the A350 and the 787.

Speaker Change: Lightweight Hexcel Advanced Composite Materials will enable enhanced sustainability and efficiency for decades to come as lighter aircraft and more aerodynamic architectures extend range, reduce fuel consumption, and drive lower emissions.

Thomas C. Gentile: This compelling lightweight value proposition is one of the things that attracted me to Hexcel, and it will become even more powerful over time as the aerospace industry focuses more on emissions reduction and sustainable aviation. Every generation of aircraft over the last 30 years has used more advanced composite materials than the last. Advanced deposits now represent more than 50% of the weight of both the A350 and the 787.

Speaker Change: This compelling lightweight value proposition is one of the things that attracted me to Hexcel and it will become even more powerful over time as the aerospace industry focuses more on emissions reduction and sustainable aviation.

Speaker Change: Every generation of aircraft over the last 30 years has used more advanced composite materials than the last. Advanced composites now represent more than 50% of the weight of both the A350 and the 787. We expect this trend to continue.

Thomas C. Gentile: We expect this trend to continue. I began my tenure as CEO at Hexcel about 11 weeks ago, and my initial priority was visiting our sites to meet and listen to our employees and learn more about the operations, our innovation agenda, and the lightweight material solutions we provide that are so critical to current and future aerospace and defense programs. At my previous companies, I was a significant user of advanced composites to make airframe and engine parts and structures, and now I have the opportunity to learn in-depth how these amazing materials are developed and produced.

Tom Gentile: We expect this trend to continue.

Tom Gentile: I began my tenure as CEO at HECSL about 11 weeks ago, and my initial priority has been visiting our sites to meet and listen to our employees and learn more about the operations. Our innovation agenda and the lightweight material solutions we provide that are so critical to current and future aerospace and defense programs. At my previous company, I was a significant user of advanced composite to make airframe and engine parts and structures. And now I have the opportunity to learn in depth how these amazing materials are developed and produced. Hexcel is a highly technical advanced composite materials company with very high barriers to entry, making Hexcel an important partner to commercial and defense customers.

Speaker Change: I began my tenure as CEO at Hexcel about 11 weeks ago. My initial priority has been visiting our sites to meet and listen to our employees and learn more about the operations.

Speaker Change: our innovation agenda, and the lightweight material solutions we provide that are so critical to current and future aerospace and defense programs.

Speaker Change: At my previous companies, I was a significant user of advanced composites to make airframe and engine parts and structures. And now, I have the opportunity to learn in-depth how these amazing materials are developed and produced.

Thomas C. Gentile: Hexcel is a highly technical advanced composite materials company with very high barriers to entry, making Hexcel an important partner to commercial and defense customers. Only a few companies make the premium carbon fibers and lightweight composite materials required by the aerospace and defense industry, and Hexcel has the largest and broadest portfolio of these products. Hexcel has 22 manufacturing sites, and so far, I have visited 12 of them in the U.S., Europe, and Morocco.

Speaker Change: Hexcel is a highly technical advanced composite materials company with very high barriers to entry, making Hexcel an important partner to commercial and defense customers.

Tom Gentile: Only a few companies make the premium carbon fibers and lightweight composite materials required by the aerospace and defense industry, and Hexcel has the largest and broadest portfolio of these products. Hexcel has 22 manufacturing sites, and so far I have visited 12 of them in the US, Europe, and Morocco. I have met hundreds of employees and had the opportunity to learn more about Hexcel's manufacturing value chain in depth, starting with precursor, to producing carbon fiber, to weaving, to pre-prite, and then both honeycomb and engineered corp. Just as importantly, I've had the opportunity to see firsthand how the one Hexcel culture ensures that these products are manufactured in one of the safest workplace environments that I have ever experienced.

Speaker Change: Only a few companies make the premium carbon fibers and lightweight composite materials required by the aerospace and defense industry, and Hexcel has the largest and broadest portfolio of these products.

Speaker Change: Hexcel has 22 manufacturing sites and so far I have visited 12 of them in the US, Europe and Morocco.

Thomas C. Gentile: I've met hundreds of employees and have had the opportunity to learn more about Hexcel's manufacturing value chain in depth, starting with the precursor, to producing carbon fiber, to weaving, to pre-pray, and then both honeycomb and engineered coir. Just as importantly, I've had the opportunity to see firsthand how the one Hexcel culture ensures that these products are manufactured in one of the safest workplace environments that I have ever experienced The foundation of the Hexcel culture is worker safety. All meetings begin with a safety message.

Speaker Change: I've met hundreds of employees and have had the opportunity to learn more about Hexcel's manufacturing value chain in depth, starting with precursor, to producing carbon fiber, to weaving, to pre-price, and then both honeycomb and engineered core.

Speaker Change: Just as importantly, I've had the opportunity to see firsthand how the one Hexcel culture ensures that these products are manufactured in one of the safest workplace environments that I have ever experienced.

Tom Gentile: The foundation of the Hexcel culture is worker safety; all meetings begin with a safety message. Our teams constantly reinforce safety practices in a positive manner. Our Hexcel performance metrics, for operation management, and corporate safety metrics, and so many employees I have met have told me how committed they are, not only to their own safety, but also to the safety of those around them. In addition to safety, I saw firsthand the commitment this team has to operational excellence, with a very strong emphasis on quality. In our continuous process flow production system, we are literally conducting testing batches of products 24-7.

Speaker Change: The foundation of the Hexcel culture is worker safety.

Thomas C. Gentile: Our teams constantly reinforce safety practices in a positive way. Our Hexcel performance metrics for operations management incorporate safety metrics, and so many employees I have met have told me how committed they are, not only to their own safety but also to the safety of those around them. In addition to safety, I saw firsthand the commitment this team has to operational excellence with a very strong emphasis on quality. In our continuous process flow production system, we are literally conducting testing on batches of products 24-7.

Speaker Change: All meetings begin with a safety message. Our teams constantly reinforce safety practices in a positive manner. Our Hexcel performance metrics for operations management incorporate safety metrics, and so many employees I have met have told me how committed they are, not only to their own safety, but also to the safety of those around them.

Speaker Change: In addition to safety, I saw first-hand the commitment this team has to operational excellence with a very strong emphasis on quality. In our continuous process flow production system, we are literally conducting testing on batches of products 24-7.

Tom Gentile: This commitment to safety and operational excellence has resulted in a continual focus for on-time delivery to ensure that Hexcel is never the weak link in the supply chain. I have been very pleased to see that we have the capacity in place and the staffing in our factories to meet all of our customers' near-term requirements. Our new staff have received their training and are getting now valuable on the job experience as production rates and efficiency continue to recover. I have also spent time at a number of our research and technology centers of excellence, meeting with our scientists and better understanding the lightweight solutions being developed for next generation applications.

Thomas C. Gentile: This commitment to safety and operational excellence has resulted in a continual focus on on-time delivery to ensure that Hexcel is never the weak link in the supply chain. I've been very pleased to see that we have the capacity in place and the staffing in our factories to meet all of our customers' near-term requirements. Our new staff have received their training and are now getting valuable on-the-job experience as production rates and efficiency continue to recover. I've also spent time at a number of our research and technology centers of excellence, meeting with our scientists and better understanding the light-weighting solutions being developed for next-generation applications.

Speaker Change: This commitment to safety and operational excellence has resulted in a continual focus for on-time delivery to ensure that Hexcel is never the weak link in the supply chain.

Speaker Change: I've been very pleased to see that we have the capacity in place and the staffing in our factories to meet all of our customers' near-term requirements. Our new staff have received their training and are getting now valuable on-the-job experience as production rates and efficiency continue to recover.

Speaker Change: I've also spent time at a number of our research and technology centers of excellence, meeting with our scientists and better understanding the light-weighting solutions being developed for next generation applications.

Tom Gentile: This is truly leading edge material science technology, and we are continually working closely with many of our customers on the material systems for next generation programs. Even though the launch and entry into service of some of these products might be years into the future, the discussions on material systems are happening right now.

Thomas C. Gentile: This is truly leading-edge material science technology, and we are continually working closely with many of our customers on material systems for next-generation programs. Even though the launch and entry into service of some of these products might be years into the future, the discussions on material systems are happening right now. Besides site visits, I participated in Hexcel's annual management development review, enabling me to quickly get up to speed with understanding the strengths of the Hexcel team. This was followed by the annual Hexcel Strategic Plan Meeting, or STRAP, as we call it.

Speaker Change: This is truly leading-edge material science technology, and we are continually working closely with many of our customers on the material systems for next-generation programs.

Speaker Change: Even though the launch and entry into service of some of these products might be years into the future, the discussions on material systems are happening right now.

Tom Gentile: Besides site visits, I participated in Hexcel's annual management development review, enabling me to quickly get up to speed with understanding the strengths of the Hexcel team. This was followed by the annual Hexcel strategic plan meeting, or strap, as we call it. Strap is primarily focused on the next five years, but also encompasses a 10-year strategic view on the aerospace cycle ahead. It is about how we execute on our commitments, how we innovate to ensure we leave the world in advance composite technology, and how we identify the best opportunities to grow our business. In other words, it's all about how we win, how we build on what is working, and how we continue to strengthen our engagement with our customers.

Speaker Change: Besides site visits, I participated in Hexcel's annual management development review.

Speaker Change: enabling me to quickly get up to speed with understanding the strengths of the Hexcel team.

Thomas C. Gentile: STRAP is primarily focused on the next five years, but it also encompasses a ten-year strategic view of the aerospace cycle ahead. It is about how we execute on our commitments, how we innovate to ensure we lead the world in advanced composite technology, and how we identify the best opportunities to grow our business. In other words, it's all about how we win, how we build on what is working, and how we continue to strengthen our engagement with our customers.

Speaker Change: This was followed by the annual Hexcel Strategic Plan Meeting, or STRAP as we call it. STRAP is primarily focused on the next five years, but also encompasses a 10-year strategic view of the aerospace cycle ahead.

Speaker Change: It is about how we execute on our commitments, how we innovate to ensure we lead the world in advanced composite technology, and how we identify the best opportunities to grow our business.

Speaker Change: In other words, it's all about how we win, how we build on what is working, and how we continue to strengthen our engagement with our customers.

Thomas C. Gentile: Strap is based on a multi-year planning horizon using a very comprehensive bottoms-up forecasting process. Hearing from our global leaders makes me more convinced than ever that modern commercial and defense aircraft and the potential for zero-emissions aviation will utilize increasing quantities of the lightweight composite materials that Hexcel provides.

Tom Gentile: Strap is based on a multi-year planning horizon using a very comprehensive bottom-stop forecasting process. Hearing from our global leaders makes me more convinced than ever that modern commercial and defense aircraft and the potential for zero emissions aviation will utilize increasing quantities of the lightweight composite materials that Hexcel provides. And because of that, our market opportunities are compelling.

Speaker Change: STRAP is based on a multi-year planning horizon using a very comprehensive bottoms-up forecasting process.

Speaker Change: Hearing from our global leaders makes me more convinced than ever that modern commercial and defense aircraft and the potential for zero-emissions aviation will utilize increasing quantities of the lightweight composite materials that Hexcel provides. And because of that, our market opportunities are compelling.

Thomas C. Gentile: And because of that, our market opportunities are compelling. As CEO, I intend to reinforce and optimize Hexcel's existing strategy. We are a global technology leader in advanced material composites with an unrivaled, lightweighting product portfolio, especially for aerospace applications.

Tom Gentile: As CEO, I intend to reinforce and optimize Hexcel's existing strategy. We are a global technology leader in advanced material composites with an unrivaled, light-weighting product portfolio, especially for aerospace applications. We focus on innovation, and we benefit from a global scale along with deep customer relationships. We target markets undergoing secular growth where we can benefit from a sustainable competitive advantage. We are in sole-source positions by developing leading-edge solutions and delivering quality products on time, and we do this by focusing on our talented employees, a team that is highly experienced, engaged, and committed to what they do.

CEO: As CEO , I intend to reinforce and optimize Hexcel's existing strategy.

CEO: We are a global technology leader in advanced material composites with an unrivaled, lightweighting product portfolio, especially for aerospace applications. We focus on innovation and we benefit from a global scale along with deep customer relationships.

Thomas C. Gentile: We focus on innovation, and we benefit from a global scale along with deep customer relationships. We target markets undergoing secular growth where we can benefit from a sustainable competitive advantage. We are in sole source positions by developing leading-edge solutions and delivering quality products on time. And we do this by focusing on our talented employees, a team that is highly experienced, engaged, and committed to what they do. In addition to meeting with employees, I have also met with many of you in our investor community in recent weeks at analyst conferences and individual investor meetings.

Speaker Change: We target markets undergoing secular growth where we can benefit from a sustainable competitive advantage. We are in sole-source positions by developing leading-edge solutions and delivering quality products on time.

Speaker Change: And we do this by focusing on our talented employees, a team that is highly experienced, engaged, and committed to what they do.

Tom Gentile: In addition to meeting with employees, I have also met with many of you in our investor community in recent weeks at analyst conferences and individual investor meetings. We have had engaging conversations, and I look forward to continuing that dialogue. In addition, I have, of course, been active in reconnecting with many of Hexcel's customers in my new capacity. While I was in France last month, I had the opportunity to meet with staff friends in a 10.50th anniversary celebration for CFM, which is the partnership between staff friends and GE that produces the lead vengeance for the 737 Max in the 830.0.

Speaker Change: In addition to meeting with employees, I have also met with many of you in our investor community in recent weeks at analyst conferences and individual investor meetings.

Thomas C. Gentile: We have had engaging conversations, and I look forward to continuing that dialogue. In addition, I have, of course, been active in reconnecting with many of Hexcel's customers in my new capacity. While I was in France last month, I had the opportunity to meet with Safran and attend the 50th anniversary celebration for CFM, which is the partnership between Safran and GE that produces the LEAP engines for the 737 MAX and the A320 NEO. CFM is extremely successful as a case study on partnership.

Speaker Change: We have had engaging conversations and I look forward to continuing that dialogue.

Speaker Change: In addition, I have, of course, been active in reconnecting with many of Hexcel's customers in my new capacity.

Speaker Change: While I was in France last month, I had the opportunity to meet with Safran and attend the 50th anniversary celebration for CFM, which is the partnership between Safran and GE that produces the LEAF engines for the 737 MAX and the A320NEO.

Tom Gentile: CFM is extremely successful in a case study on partnerships. At that event, I also met with key leaders from many of our other customers.

Speaker Change: CFM is extremely successful in a case study on partnerships.

Thomas C. Gentile: At that event, I also met with key leaders from many of our other customers. And finally, I am flying to Farnborough tomorrow and have a full schedule of customer meetings in the coming days at the airstrip. Now let me take a moment to share a couple more highlights that are related directly to Hexcel, first in the area of sustainability. Hexcel established a relationship with a composite material recycler called Fermat almost three years ago to recycle carbon fiber prepreg from our European operations.

Speaker Change: At that event, I also met with key leaders from many of our other customers.

Tom Gentile: And finally, I am flying to Farmbird tomorrow and have a full schedule of customer meetings in the coming days at the air show.

Speaker Change: And finally, I am flying to Farnborough tomorrow and have a full schedule of customer meetings in the coming days at the air show.

Tom Gentile: Now let me take a moment to share a couple more highlights that are related directly to Hexcel, first in the area of sustainability. Hexcel established a relationship with a composite material recycler called FairMAC almost three years ago to recycle carbon fiber free grain from our European operations. In May, we announced yet another agreement with FairMAC; this time in the U.S. It's a 10-year agreement to recycle carbon fiber composite materials from Hexcel Salt Lake City for reuse and composite materials sold into various commercial markets. Our continued partnership with FairMAC further demonstrates our dedication to reduce landfill waste, which is part of our 2030 sustainability targets.

Thomas C. Gentile: In May, we announced yet another agreement with FairMath, this time in the U.S. It's a 10-year agreement to recycle carbon fiber composite materials from Hexcel Salt Lake City for reuse in composite materials sold into various commercial markets. Our continued partnership with Fairmat further demonstrates our dedication to reduce landfill waste, which is part of our 2030 Sustainability Target. Second, we were pleased to host Utah State Governor Spencer Cox and others at our Salt Lake City site as Project ALTA was announced.

Speaker Change: Now, let me take a moment to share a couple more highlights that are related directly to Hexcel.

Speaker Change: First, in the area of sustainability.

Speaker Change: Hexcel established a relationship with a composite material recycler called Fermat almost three years ago to recycle carbon fiber prepreg from our European operations.

Speaker Change: In May, we announced yet another agreement with BearMap, this time in the U.S. It's a 10-year agreement to recycle carbon fiber composite materials from Hexcel Salt Lake City for reuse in composite materials sold into various commercial markets.

Speaker Change: Our continued partnership with Thermat further demonstrates our dedication to reduce landfill waste, which is part of our 2030 Sustainability Targets.

Tom Gentile: Second, we were pleased to host Utah State Governor Spencer Cox and others at our Salt Lake City site as Project Alta was announced. This project is a coalition of industry leaders, policymakers, and community members working together to build a safe and collaborative future through advanced air mobility. Hexcel remains at the forefront of material science to support the development of electric vertical pick-up and landing aircraft for use in advanced urban air mobility networks. This is thanks to our advanced likely composite materials that will help make energy efficient, reliable, and cost-competitive air vehicles a reality.

Speaker Change: Second, we were pleased to host Utah State Governor Spencer Cox and others at our Salt Lake City site as Project ALTA was announced. This project is a coalition of industry leaders, policy makers, and community members working together to build a safe and collaborative future through advanced air mobility.

Thomas C. Gentile: This project is a coalition of industry leaders, policy makers, and community members working together to build a safe and collaborative future through advanced air mobility. Hexcel remains at the forefront of materials science to support the development of electric vertical takeoff and landing aircraft for use in advanced urban air mobility networks.

Speaker Change: Hexcel remains at the forefront of materials science to support the development of electric vertical takeoff and landing aircraft for use in advanced urban air mobility networks. This is thanks to our advanced lightweight composite materials that will help make energy efficient, reliable, and cost competitive air vehicles a reality.

Thomas C. Gentile: This is thanks to our advanced lightweight composite materials that will help make energy efficient, reliable, and cost competitive air vehicles a reality. Finally, let me take a moment to reiterate a point from our earnings release earlier this morning, and that is capital allocation and specifically our share repurchase. In the second quarter of 2024, we repurchased around $100 million of Hexcel stock, and in the first quarter, we did the same, bringing the total repurchases to just over $200 million this year, as we see value in Hexcel stock and return excess cash to our shareholders.

Tom Gentile: Finally, let me take a moment to reiterate a point from our earnings release earlier this morning. And that is capital allocation and specifically our share repurchases. In the second quarter of 2024, we repurchased around $100 million of Hexcel stock, and in the first quarter, we had done the same. Bringing the total repurchases to just over $200 million this year, as we see value in Hexcel stock and returning Hexcel cash to our share. As we continue to recover back to 2019 levels of production, we will generate more cash. Our capital allocation strategy will be first to fund execution on our current customer commitments, drive productivity in our factories, and continue innovating to position Hexcel to provide the material systems and solutions on next generation platforms. We have a lot of organic growth potential.

Speaker Change: Finally, let me take a moment to reiterate a point from our earnings release earlier this morning, and that is capital allocation and specifically our share repurchases.

Speaker Change: In the second quarter of 2024, we repurchased around $100 million of Hexcel stock, and in the first quarter, we had done the same, bringing the total repurchases to just over $200 million this year as we see value in Hexcel stock and returning excess cash to our shareholders.

Thomas C. Gentile: As we continue to recover back to 2019 levels of production, we will generate more cash. Our capital allocation strategy will be first to fund execution on our current customer commitments, drive productivity in our factories, and continue innovating to position Hexcel to provide material systems and solutions on next-generation platforms. We have a lot of organic growth potential.

Speaker Change: As we continue to recover back to 2019 levels of production, we will generate more cash.

Speaker Change: Our capital allocation strategy will be first to fund execution on our current customer commitments.

Speaker Change: Drive productivity in our factories and continue innovating to position Hexcel to provide the material systems and solutions on next generation platforms. We have a lot of organic growth potential. We will also look in a disciplined way at inorganic material science growth opportunities that meet our strategic and return thresholds and strengthen our competitive technology portfolio. But if the right opportunities do not materialize, we will continue to pay a dividend and review opportunities for future share repurchases.

Patrick Joseph Winterlich: We will also look in a disciplined way at inorganic material science growth opportunities that meet our strategic and return thresholds and strengthen our competitive technology portfolio. But if the right opportunities do not materialize, we will continue to pay a dividend and review opportunities for future share repurchases. We currently have a remaining authorization of $285 million. Now, I will turn it over to Patrick to provide more details on the numbers.

Tom Gentile: We will also look in a disciplined way at inorganic material science growth opportunities that meet our strategic and return thresholds, and strengthen our competitive technology portfolio.

Tom Gentile: But if the right opportunity does not materialize, we will continue to pay a dividend and review opportunities for future share repurchases. We currently have remaining authorization of $285 million.

Speaker Change: We currently have remaining authorization of $285 million.

Patrick Winterlich: Now let me turn it over to Patrick to provide more details on the numbers.

Patrick Winterlich: Patrick? Thank you, Tom. As a reminder regarding foreign exchange exposure, and I have explained in detail during previous earnings calls, Hexcel benefits from a strong dollar. We continue to hedge foreign exchange exposure over a ten-quarter time horizon. The year-over-year sales comparison by will provide rank constant currency, which thereby removes the foreign exchange impact into sales. Our second quarter results demonstrated both year-over-year and sequential sales growth and margin expansion led by commercial aerospace. The commercial aerospace market represented approximately 64% of total second quarter to 2024 sales of $320.7 million. Second quarter commercial aerospace sales increased 21.6% compared to the second quarter of 2023, with double-digit growth for both white bodies and narrow bodies.

Speaker Change: Now let me turn it over to Patrick to provide more details on the numbers. Patrick?

Patrick Joseph Winterlich: Thank you, Tom. As a reminder, regarding foreign exchange exposure, and I've explained in detail during previous earnings calls, Hexcel benefits from a strong dollar. We continue to hedge foreign exchange exposure over a ten-quarter time horizon. The year-over-year sales comparisons I will provide are in constant currency, which thereby removes the foreign exchange impact on sales. Our second quarter results demonstrated both year-over-year and sequential sales growth and margin expansion led by commercial aerospace.

Patrick Joseph Winterlich: Thank you, Tom. As a reminder, regarding foreign exchange exposure, and I have explained in detail during previous earnings calls,

Patrick Joseph Winterlich: Hexcel benefits from a strong dollar. We continue to hedge foreign exchange exposure over a ten-quarter time horizon. The year-over-year sales comparisons I will provide bring constant currency, which thereby removes the foreign exchange impact.

Patrick Joseph Winterlich: Our second quarter results demonstrated both year-over-year and sequential sales growth and margin expansion led by Commercial Aerospace.

Patrick Joseph Winterlich: The commercial aerospace market represented approximately 64% of total second quarter 2024 sales of $320.7 million. Second quarter commercial aerospace sales increased 21.6% compared to the second quarter of 2023, with double-digit growth for both wide-bodies and narrow-bodies. All of the major commercial aerospace platforms grew both year-over-year and sequentially. The other commercial aerospace category increased 15.4% on strong regional and business jet demand. Space and Defense represented approximately 28% of second quarter sales and totaled $138.9 million, increasing 1.4% from the same period in 2023. Military helicopter programs were strong, both domestically and overseas, including the CH-53K and the Apache.

Patrick Joseph Winterlich: The commercial aerospace market represented approximately 64% of total second quarter 2024 sales of $320.7 million.

Patrick Joseph Winterlich: Second quarter commercial aerospace sales increased 21.6% compared to the second quarter of 2023, with double-digit growth for both widebodies and narrowbodies.

Patrick Winterlich: All of the major commercial aerospace platforms grew both year over year and sequentially. The other commercial aerospace category increased 50.4% on strong regional and business jet demand. Space and defense represented approximately 28% of second quarter sales and totaled $138.9 million, increasing 1.4% from the same period as 2023. Military helicopter programs were strong both domestically and overseas, including the CH-23K and the Apache. The 22 sales were significantly lower as that program winds down. While new V-22 build a sun setting, we will continue to benefit from replacement road scrap blades from the existing V-22 fleet. S-35 was also down in the second quarter of 2024 compared to the prior year period.

Patrick Joseph Winterlich: All of the major commercial aerospace platforms grew both year-over-year and sequentially. The other commercial aerospace category increased 15.4% on strong regional and business jet demand.

Patrick Joseph Winterlich: Space in Defence represented approximately 28% of second quarter sales and totalled $138.9 million, increasing 1.4% from the same period in 2023.

Patrick Joseph Winterlich: Military helicopter programs were strong, both domestically and overseas, including the CH-53K and the Apache.

Patrick Joseph Winterlich: V-22 sales were significantly lower as that program winds down. While new V-22s are built at sunsetting, we will continue to benefit from replacement rotorcraft blades from the existing V-22 fleet. F-35 sales were also down in the second quarter of 2024 compared to the prior year period. However, our F-35 sales have a tendency to fluctuate from one quarter to the next, as F-35 sales were particularly strong in the first quarter of 2024. So on a year-to-date basis, F-35 sales are higher than the comparable 2023 period. Industrial accounted for 8% of second quarter 2024 sales and totaled $40.8 million, increasing 21.8% compared to the second quarter of 2023. The automotive submarkets, largely aimed at high-end performance vehicles, witnessed growth, while the remaining industrial submarkets were down.

Patrick Joseph Winterlich: V-22 sales were significantly lower as that program winds down. While new V-22s build at sun setting, we will continue to benefit from replacement rotorcraft blades from the existing V-22 fleet.

Patrick Joseph Winterlich: F35 was also down in the second quarter of 2024 compared to the prior year period. Our F35 sales have a tendency to fluctuate from one quarter to the next, as F35 sales were particularly strong in the first quarter of 2024.

Patrick Winterlich: Our S-35 sales have a tendency to fluctuate from one quarter to the next. The S-35 sales were particularly strong in the first quarter of 2024. So, on a year-to-date basis, S-35 sales are higher than the comparable 2023 period. Industrial complying 8% to second quarter of 2024 sales and totaled $40.8 million, increasing 21.8% compared to the second quarter of 2023. Automotive largely aimed at high-end performance vehicles, with less growth, while the remaining industrial submarkets were down. Gross margin of 25.3% in the second quarter of 2024 increased year-over-year and sequentially on improved operating leverage combined with price realisation as we work to offset inflationary pressures.

Patrick Joseph Winterlich: So on a year-to-date basis, F35 sales are higher than the comparable 2023 period.

Patrick Joseph Winterlich: Industrial complied 8% of second quarter 2024 sales and totalled $40.8 million.

Patrick Joseph Winterlich: Increasing 21.8% compared to the second quarter of 2023. Automotive largely aimed at high-end performance vehicles witnessed growth, while the remaining industrial sub-markets were down.

Patrick Joseph Winterlich: Gross margin of 25.3% in the second quarter of 2024 increased year-over-year and sequentially on improved operating leverage combined with price realisation as we worked to offset inflationary pressures. As a percentage of sales, selling, general, and administrative expenses and R&T expenses were 10.9% in the second quarter compared to 10.8% in the second quarter of 2023. Please note, we will incur a modest amount of expense in 2024 related to the CEO transition, which will hit our general and administrative costs. Adjusted operating income in the second quarter was $72 million, or 14.4% of sales, compared to $61.8 million, or 13.6% of sales, in the comparable prior year period.

Patrick Joseph Winterlich: Gross margin of 25.3% in the second quarter of 2024 increased year-over-year and sequentially on improved operating leverage combined with price realisation as we work to offset inflationary pressures.

Patrick Winterlich: The percentage of sales, selling general and administrative expenses, and R&T expenses were 10.9% in the second quarter compared to 10.8% in the second quarter of 2020. Please note we will incur a modest amount of expense in 2024 related to the CEO transition, which will hit our general and administrative costs. Adjusted operating income in the second quarter was 72 million dollars, or 14.4% of sales, compared to 61.8 million dollars, or 13.6% of sales, in the comparable prior period. The year-over-year impact of exchange rates in the second quarter to operating income was favourable by approximately 40 basis points.

Patrick Joseph Winterlich: The percentage of sales, selling, general and administrative expenses and R&T expenses were 10.9% in the second quarter, compared to 10.8% in the second quarter of 2023.

Patrick Joseph Winterlich: Please note, we will incur a modest amount of expense in 2024 related to the CEO transition, which will hit our general and administrative costs.

Patrick Joseph Winterlich: Adjusted operating income in the second quarter was $72 million or 14.4% of sales compared to $61.8 million or 13.6% of sales in the comparable prior year period.

Patrick Joseph Winterlich: The year-over-year impact of exchange rates in the second quarter on operating income was favourable by approximately 40 basis points. Sequentially, the adjusted operating margin improved 290 basis points on higher operating leverage and the absence of the first quarter stock-based compensation charge that has historically been incurred at the beginning of the fiscal year. Now turning to our two segments, the Cost and Materials segment represented 82% of total second quarter sales and generated an operating margin of 17.2%, while the operating margin in the comparable prior year period was 16.2%.

Patrick Joseph Winterlich: The year-over-year impact of exchange rates in the second quarters to operating income was favourable by approximately 40 basis points.

Patrick Winterlich: Sequentially, the adjusted operating margin improved 290 basis points on higher operating leverage and the absence of the first quarter to stop-based compensation charge but has historically been incurred for the beginning of the fiscal year. Now, turning to our two segments, the constant material segment represented 82% of total second quarter sales and generated an operating margin of 17.2%. The operating margin in the comparable prior period was 16.2%. The engineering product segment, which is comprised of our structures and engineering core businesses, represented 18% of total sales and generated a 14.1%. 1.1% operating margin has compared to 8.9% in the comparable prior period.

Patrick Joseph Winterlich: Sequentially, the adjusted operating margin improved 290 basis points on higher operating leverage.

Patrick Joseph Winterlich: and the absence of the first quarter stock-based compensation charge that has historically been incurred at the beginning of the fiscal year.

Patrick Joseph Winterlich: Now turning to our two segments, the constant material segment represented 82% of total second quarter sales.

Patrick Joseph Winterlich: and generated an operating margin of 17.2%. The operating margin in the comparable prior year period was 16.2%. The engineer product segment, which is comprised of our structures and engineer core businesses,

Patrick Joseph Winterlich: The Engineer Product segment, which is comprised of our Structures and Engineer Core businesses, represented 18% of total sales and generated a 14.1% operating margin as compared to 8.9% in the comparable prior year period. Net cash provided by operating activities was $37.2 million for the first six months of 2024, which compared to $30.1 million in the first six months of 2023. Working capital was a cash use of $118.3 million for the first six months of 2024. For the comparable prior year period, working capital was a cash use of $113.9 million.

Patrick Joseph Winterlich: represented 18% of total sales and generated a 14.1% operating margin as compared to 8.9% in the comparable prior year period.

Patrick Winterlich: Next cash provided by operating activities was 37.2 million dollars for the first six months of 2024, which compares to 30.1 million dollars in the first six months of 2023. Working capital was a cash use of $118.3 million for the first six months of 2024. For the comparable prior period, working capital was a cash use of $113.9 million dollars. Capital expenditures on an accrual basis were 41.4, 41.1 million dollars for the first six months of 2024 compared to $70.5 million dollars in the comparable prior period. Recall that in 2023, we purchased the land and building for our aims-free Massachusetts operation for approximately $30.38 million in the first half of the year.

Patrick Joseph Winterlich: Net cash provided by operating activities was $37.2 million for the first six months of 2024, which compares to $30.1 million in the first six months of 2023.

Patrick Joseph Winterlich: Working capital was a cash use of $118.3 million for the first six months of 2024. For the comparable prior year period, working capital was a cash use of $113.9 million. Capital expenditures on an accrual basis were $41.1 million for the first six months of 2024.

Patrick Joseph Winterlich: Capital expenditures on an accrual basis were $41.1 million for the first six months of 2024, compared to $70.5 million in the comparable prior year period. Recall that in 2023, we purchased the land and building for our Ames Free Massachusetts operation for approximately $38 million in the first half of the year. Free cash flow for the first six months of 2024 was negative $14.4 million, which compared to negative $44.7 million in the second quarter of 2023.

Patrick Joseph Winterlich: compared to $70.5 million in the comparable prior year period.

Patrick Joseph Winterlich: Recall that in 2023 we purchased the land and building for our Amesbury, Massachusetts operation for approximately $38 million in the first half of the year.

Patrick Winterlich: Free cash flow for the first six months of 2024 was negative $14.4 million dollars, which compared to negative $44.7 million dollars in the second quarter of 2023. Our accounts for receivable collections were a little weaker than expected at the end of this most recent quarter, principally because the quarter ended on a Sunday. Collections in the first week of July were very strong. The board of directors declared a 15 cents quarterly dividend this morning. The dividend is payable to stockholders of record as of August 2nd, with a payment date of August 9th. We continue to repurchase Excel stock, buying $101.1 million of common stock during the second quarter.

Patrick Joseph Winterlich: Free cash flow for the first six months of 2024 was negative $14.4 million.

Patrick Joseph Winterlich: which compared to negative $44.7 million.

Patrick Joseph Winterlich: Our accounts receivable collections were a little weaker than expected at the end of this most recent quarter, principally because the quarter ended on a Sunday. Collections in the first week of July were very strong.

Patrick Joseph Winterlich: Our accounts receivable collections were a little weaker than expected at the end of this most recent quarter, principally because the quarter ended on a Sunday. However, collections in the first week of July were very strong. The Board of Directors declared a $0.15 quarterly dividend this morning.

Patrick Joseph Winterlich: The dividend is payable to stockholders of record as of August 2nd, with a payment date of August 9th. We continue to repurchase Hexcel stock, buying $101.1 million of common stock during the second quarter. Year-to-date, through June 30th, repurchases total $201.8 million. The remaining authorization under the share repurchase program, as of June 30th, 2024, will be $285.3 million. As Tom discussed, we decreased our 2024 sales guidance in relation to continued uncertainty in the aerospace supply chain, and we decreased our EPS guidance principally on operating leverage, combined with cost headwinds arising from this inefficient supply chain environment, but also some additional costs associated with the CEO transition.

Patrick Joseph Winterlich: The Board of Directors declared a 15 cent quarterly dividend this morning. The dividend is payable to stockholders of record as of August 2nd, with a payment date of August 9th.

Patrick Joseph Winterlich: We continue to repurchase Hexcel stock.

Patrick Joseph Winterlich: buying $101.1 million of common stock during the second quarter.

Patrick Winterlich: Yesterday, through June 30th, we purchased his total $201.8 million dollars. The remaining authorization under the Share Recurches Programme, as of June 30th, 2024, was $285.3 million dollars. As Tom discussed, we decreased our 2024 sales guidance in relation to continued uncertainty in the aerospace supply chain, and we decreased our EPS guidance, principally lower on operating leverage. Combined with cost headwind, arriving from this inefficient supply chain environment, but also some additional costs associated with CEO transition. We thrive on predictable demand so that we can optimize our operations, including our staffing and asset utilization. Much of our operations are continual flow, operating 24 hours a day, 7 days a week, including holidays, and we are typically sold sourced, so we must hire ahead of our customer ramps.

Patrick Joseph Winterlich: Year-to-date through June 30th, repurchases totaled $201.8 million. The remaining authorization under the share repurchase program as of June 30th, 2024, was $285.3 million.

Patrick Joseph Winterlich: As Tom discussed, we decreased our 2024 sales guidance in relation to continued uncertainty in the aerospace supply chain, and we decreased our EPS guidance, principally lower on operating leverage.

Patrick Joseph Winterlich: Combined with cost headwinds arising from this inefficient supply chain environment, but also some additional costs associated with CEO transition.

Patrick Joseph Winterlich: This also led us to modestly soften our position around our free cash flow generation. We thrive on predictable demand so that we can optimize our operations, including our staffing and asset utilisation. Much of our operations are a continual flow, operating 24 hours a day, seven days a week, including holidays. And we are typically the sole source, so we must hire ahead of our customer rounds.

Patrick Joseph Winterlich: This also led us to modestly soften our position around our free cash flow generation. We thrive on predictable demand so that we can optimise our operations, including our staffing and asset utilisation.

Patrick Joseph Winterlich: Much of our operations are continual flow, operating 24 hours a day, 7 days a week, including holidays. And we are typically sole source, so we must hire ahead of our customer rounds.

Patrick Winterlich: Last year we had a strong first half of the year, but reductions in narrow body demand ultimately led to a lower second half. Unfortunately, we are now experiencing a similar dynamic in 2024 with some softening or temporary pausing in the pace of forecasted rate ramps in the second half of 2024 for both narrow bodies and wide bodies. Our focus on training, efficiency, and factory throughput, however, will continue to ensure Hexcel's position is as strong as possible for when the ramp increases do take place. As a result, sales and earnings in the second half of 2024 are expected to be similar to the first half of 2024, so a flat second half rather than the growth we were previously forecasting.

Patrick Joseph Winterlich: Last year, we had a strong first half of the year, but reductions in narrow body demand ultimately led to a lower second half. Unfortunately, we are now experiencing a similar dynamic in 2024, with some softening or temporary pausing in the pace of forecasted rate ramps in the second half of 2024 for both narrow bodies and wide bodies. However, our focus on training, efficiency, and factory throughput will continue to ensure Hexcel is positioned as strongly as possible for when the ramp increases do take place.

Patrick Joseph Winterlich: Last year we had a strong first half of the year, but reductions in narrow body demand ultimately led to a lower second half.

Patrick Joseph Winterlich: Unfortunately, we are now experiencing a similar dynamic in 2024 with some softening or temporary pausing in the pace of forecasted rate ramps in the second half of 2024 for both narrow bodies and wide bodies.

Patrick Joseph Winterlich: Our focus on training, efficiency and factory throughput, however, will continue to ensure Hexcel is positioned as strongly as possible for when the ramp increases do take place.

Patrick Joseph Winterlich: As a result, sales and earnings in the second half of 2024 are expected to be similar to the first half of 2024, so a flat second half rather than the growth we were previously forecasting. As Tom said, these near-term market disruptions are not significant enough to warrant a change in the mid-term guidance that we issued in February this year. With that, I will turn the call back to Tom. Thanks, Patrick.

Patrick Joseph Winterlich: As a result, sales and earnings in the second half of 2024 are expected to be similar to the first half of 2024, so a flat second half rather than the growth we were previously forecasting.

Patrick Winterlich: As Tom said, these near-term market disruptions are not significant enough to warrant a change in the mid-term guidance that we issued in February this year.

Patrick Joseph Winterlich: As Tom said, these near-term market disruptions are not significant enough to warrant a change in the mid-term guidance that we issued in February this year.

Tom Gentile: With that, let me turn the call back to Tom.

Tom Gentile: Thanks, Patrick. These past few months of visiting Hexcel sites, meeting our people, and learning more about our technology in our markets have reinforced for me everything that I do about Hexcel significantly more. I'm more convinced today that the opportunities for next generation innovations in lightweighting are compelling and that Hexcel is well positioned to meet the growing demand. With their traffic recovered from the pandemic and backlogs now higher than they were in 2019, the demand outlook over the next several years is very positive.

Thomas C. Gentile: These past few months of visiting Hexcel sites, meeting our people, and learning more about our technology and our markets have reinforced for me everything that I knew about Hexcel and significantly more. I'm more convinced today that the opportunities for next-generation innovations and light-weighting are compelling, and that Hexcel is well-positioned to meet this growing demand. With air traffic recovering from the pandemic and backlogs now higher than they were in 2019, the demand outlook over the next several years is very positive.

Patrick Joseph Winterlich: With that, let me turn the call back to Tom.

Tom Gentile: Thanks Patrick. These past few months of visiting Hexcel sites, meeting our people, and learning more about our technology and our markets have reinforced for me everything that I knew about Hexcel and significantly more.

Tom Gentile: I'm more convinced today that the opportunities for next-generation innovations and light-weighting are compelling and that Hexcel is well-positioned to meet this growing demand.

Tom Gentile: With air traffic recovered from the pandemic and backlogs now higher than they were in 2019, the demand outlook over the next several years is very positive.

Tom Gentile: However, based on recent announcements and deliveries from our commercial customers, our view is that the back half of 2024 will be softer than our original expectations, and so we have trimmed our guidance accordingly in light of this more cautious outlook.

Thomas C. Gentile: However, based on recent announcements and deliveries from our commercial customers, our view is that the back half of 2024 will be softer than our original expectations, and so we have trimmed our guidance accordingly in light of this more cautious outlook. Going forward, our goals at Hexcel will be the following.

Tom Gentile: However, based on recent announcements and the leverage from our commercial customers, our view is that the back half of 2024 will be softer than our original expectations and so we have trimmed our guidance accordingly in light of this more cautious outlook.

Tom Gentile: Going forward, our goals at Hexcel will be to follow. First, continue our relentless focus on safety and quality. Next, meet our customer production rates, increases across all programs. We have a strong capital base and the staffing in place to do so. Invest in productivity to make our factories more efficient as production rates ramp up. Continue investments in research and technology to advance Hexcel's lightweighting solutions and position ourselves to be part of the material systems for the next generation of aircraft, including narrow bodies, engines, UAVs, and space and defense. Explore additional growth opportunities in adjacent aerospace markets and select industrial submarkets.

Thomas C. Gentile: First, continue our relentless focus on safety and quality. Next, meet our customer production rates across all programs. We have a strong capital base and the staffing in place to do so.

Speaker Change: Going forward, our goals at Hexcel will be the following. First, continue our relentless focus on safety and quality. Next, meet our customer production rates increases across all programs. We have a strong capital base and the staffing in place to do so.

Thomas C. Gentile: Invest in productivity to make our factories more efficient as production rates ramp up. Continue investments in research and technology to advance Hexcel's lightweighting solutions and position ourselves to be part of the material systems for the next generation of aircraft, including narrowbodies, engines, UAVs, and space and defense. Explore additional growth opportunities in adjacent aerospace markets and select industrial sub-markets. We will selectively look at inorganic growth opportunities, but only when they bring high-quality margins and broaden or deepen our innovative materials science portfolio to support our efforts to gain more than our fair share of future opportunities.

Speaker Change: Invest in productivity to make our factories more efficient as production rates ramp up.

Speaker Change: Continue investments in research and technology to advance Hexcel's lightweighting solutions and position ourselves to be part of the material systems for the next generation of aircraft, including narrowbodies, engines, UAVs, and space and defense.

Speaker Change: Explore additional growth opportunities in adjacent aerospace markets and select industrial submarkets. We will selectively look at inorganic growth opportunities, but only when it brings high-quality margins and broadens or deepens our innovative materials science portfolio to support our efforts to gain more than our fair share of future opportunities.

Tom Gentile: We will selectively look at interconnect growth opportunities, but only when it brings high quality margins and broadens or deepens or innovative material science portfolio to support our efforts to gain more than our fair share of future opportunities.

Tom Gentile: and lastly, continue returning capital to shareholders through dividends and stock buybacks.

Thomas C. Gentile: And lastly, continue returning capital to shareholders through dividends and stock buybacks. In conclusion, this has been an incredible two and a half months. I am more optimistic than ever about the future impact Hexcel's lightweighting materials can have on sustainable aviation. This Hexcel team is truly amazing, and I am fortunate and excited to have the opportunity to lead this team.

Speaker Change: And lastly, continue returning capital to shareholders through dividend and stock buybacks. In conclusion, this has been an incredible two and a half months. I am more optimistic than ever about the future impact Hexcel's lightweighting materials can have on sustainable aviation future.

Tom Gentile: In conclusion, this has been an incredible two and a half months. I am more optimistic than ever about the future impact Hexcel's lightweight materials and have a sustainable aviation future. This one Hexcel team is truly amazing, and I am fortunate and excited to have the opportunity to leave this team.

OneXL team: This one Hexcel team is truly amazing, and I am fortunate and excited to have the opportunity to lead this team.

Operator: Rob, we're now ready to take some questions. Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.

Unknown Executive: We're now ready to take some questions. Thank you.

OneXL team: Rob, we're now ready to take some questions.

Unknown Executive: We will now begin the question and answer your question. If you would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star one again.

Speaker Change: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again. We ask that you please limit yourself to one question and one follow-up.

Unknown Executive: We ask you please limit yourself to one question and one follow-up.

Operator: We ask that you please limit yourself to one question and one follow-up. Your first question comes from the line of Sheila Kahyaoglu from Jeffreys. Your line is open. Thank you. Good morning, Tom and Patrick.

Sheila Kahyaoglu: Your first question comes from a line of Sheila Kahyaoglu from Jeffries.

Sheila Kahyaoglu: Your line is open. Thank you.

Speaker Change: Your first question comes from the line of Sheila Kahyaoglu from Jeffreys. Your line is open.

Sheila Karin Kahyaoglu: Tom, congratulations. And, given this is your first quarter, I wanted to ask about profitability. You reiterated the midterm guidance, but how do we think about profit, given 13% in the second half, as you just said, and consensus is betting about 250 basis points of expansion in 2025, or about 25% EBIT growth. So how do we think about that margin expansion if volumes don't materialize, especially given that Hexcel is carrying 20% more headcount per plane versus pre-pandemic levels? So just kind of how you balance the midterm guidance for profitability.

Tom Gentile: Good morning, Tom and Patrick. Tom, congratulations. And just given this is your first quarter, I wanted to ask about profitability. You reiterated the midterm guidance, but how do we think about profit given 13% in the second half, as you just said, and consensus is embedding about 250 basis points expansion in 25 or about 25% EVICK growth. So how do we think about that margin expansion if volumes don't materialize, especially given that Hexcel is carrying 20% more headcount per plane versus pre-pandemic level.

Sheila Karin Kahyaoglu: Thank you. Good morning, Tom and Patrick. Tom, congratulations.

Sheila Karin Kahyaoglu: And just given this is your first quarter, I wanted to ask about profitability, you reiterated the midterm guidance, but how do we think about profit?

Sheila Karin Kahyaoglu: given 13% in the second half, as you just said. And consensus has been betting about 250 basis points expansion in 25 or about 25% EBIT growth. So how do we think about that margin expansion if...

Speaker Change: Volumes don't materialize, especially given that Hexcel is carrying 20% more headcount per plane versus pre-pandemic levels. So, just kind of how you balance the midterm guidance for profitability.

Tom Gentile: So just kind of how you balance the midterm guidance or profitability. Well, Sheila, I think you highlighted the operating leverage that we have as we continue to recover and revenues go up back toward the 2019 level. That drives an incredible amount of operating leverage to absorb fixed costs and improve margins. Now, since we expect that the second half of '24 is going to be similar to the first half, the margins, therefore, will be similar as well. But as the production rate continue to increase and revenues increase next year and beyond, that's when we'll start to see the operating leverage kick in and margins really increase.

Thomas C. Gentile: Well, Sheila, I think you highlighted the operating leverage that we have. As we continue to recover and revenues go up back toward the 2019 level, that drives an incredible amount of operating leverage to absorb fixed costs and improve margins. Now, since we expect that the second half of 24 is going to be similar to the first half, the margins, therefore, will be similar as well.

Speaker Change: Right.

Speaker Change: Well, Sheila, I think you highlighted the operating leverage that we have. As we continue to recover and revenues go up back toward the 2019 level, that drives an incredible amount of operating leverage to absorb fixed costs and improve margins. Now, since we expect that the second half of 2024 is going to be similar to the first half, the margins, therefore, will be similar as well. But as the production rates continue to increase and revenues increase next year and beyond, that's when we'll start to see the operating leverage kick in and margins really increase. So we're not changing our outlook for the midterm that we outlined at the February Investor Day. We simply just trimmed the guidance for the second half of this year based on some communications, particularly the one from Airbus on June 24.

Thomas C. Gentile: But as production rates continue to increase and revenues increase next year and beyond, that's when we'll start to see the operating leverage kick in, and margins really increase. So we're not changing our outlook for the midterm that we outlined at February Investor Day. We simply just trimmed the guidance for the second half of this year based on some communications, particularly the one from Airbus on June 24. Okay, great. I'll stick to just one.

Tom Gentile: So we're not changing our outlook for the midterm that we outlined at the February and yesterday. We simply just trimmed the guidance for the second half of this year based on some communications, particularly the one from Airbus on June 24.

Sheila Kahyaoglu: Okay, great. I'll pick the one. Thank you. All right.

Sheila Karin Kahyaoglu: Thank you. All right. Thanks, Sheila.

Speaker Change: Okay, great. I'll stick to one. Thank you. All right. Thanks, Sheila.

Miles Walton: Your next question comes from a line of Miles Walton from Wolf Research. Your line is open. Thanks, good morning. Thomas, how many follow-up on that last comment you made about the Airbus June 24th announcement being the primary contributor. It seemed to be that their contribution commentary is more focused on the 320 and even the 330 or 220 than the 350 at the time. And I wonder, did the Leonardo pause on the 787 for the composite fuselage? Did that have a material contributor to the change in the outlook? Is it really Airbus's June 24th indication?

Operator: Your next question comes from the line of Miles Walton from Wolf Research. Your line is open. Thanks, good morning. Thomas, I'm going to follow up on that last comment you made about the Airbus June 24th announcement being the primary contributor. It seemed to be that their contribution commentary was more focused on the 320 and even the 330 and or 220 than the 350 at the time, and I wonder whether the Leonardo pause on the 787 was for the Composite Fuselage, did that have a material contributor to the change in the outlook, or, to your point, was it really Airbus's June 24th communication? It was, Miles, really all of the above.

Speaker Change: Your next question comes from the line of Myles Walton from Wolf Research. Your line is open.

Myles Alexander Walton: Thanks, good morning.

Speaker Change: Tom, if somebody could follow up on that last comment you made about the Airbus June 24th announcement being the primary contributor. It seemed to be that their contribution commentary is more focused on the 320 and even the 330 or 220 than the 350 at the time.

Speaker Change: And I wonder, did the Leonardo pause on the 787 for the composite fuselage? Did that have a material contributor to the change in the outlook? Or to your point, was it really Airbus's June 24th communication?

Myles Alexander Walton: We took a look at a lot of the demand signals that we're seeing in the market, both from Airbus and Boeing, as well as some of the other customers. And on the June 24th Airbus announcement, they really weren't specific in the actual release about which programs had been affected. They said it was all programs, and that was reiterated in some of their commentary afterwards.

Tom Gentile: It was, Miles, it was really all of the above. We took a look at a lot of the demand signals that we're seeing in the market, both from Airbus and Boeing, as well as some of the other customers. And on the June 24th Airbus announcement, they really weren't specific in the actual release about which programs had impacted. They said it was all programs, and that was reiterated in some of their commentary afterwards. And so, we do understand that the A350 would be impacted, and it's more along the lines of the rate increases that we expected later this year may be pushed out or delayed.

Speaker Change: It was really all of the above. We took a look at a lot of the demand signals that we're seeing in the market, both from Airbus and Boeing, as well as some of the other customers.

Speaker Change: And on the June 24th Airbus announcement, they really weren't specific in the actual release about which programs it impacted. They said it was all programs, and that was reiterated in some of their commentary afterwards. And so we do understand that the A350 would be impacted, and it's more along the lines of the rate increases that we expected later this year may be pushed out or delayed.

Thomas C. Gentile: And so we do understand that the A350 would be impacted, and it's more along the lines of the rate increases that we expected later this year may be pushed out or delayed. And that's what we took into account as we made some of our decisions about trimming the guidance. But we also looked at the deliveries that both Airbus and Boeing reported for Q2.

Tom Gentile: And that's what we took into account as we made some of our decisions about trimming the guidance. But we also looked at the deliveries that both Airbus and Boeing reported for Q2, and we took into account some of the other announcements, like the one that Leonardo made that you just referenced. So it was all of that that we took into account where we felt it was just more prudent to be more conservative and have a more cautious outlook for the second half of this year.

Speaker Change: And that's what we took into account as we made some of our decisions about trimming the guidance.

Speaker Change: But we also looked at the deliveries that both Airbus and Boeing reported for Q2 and we took into account some of the other announcements like the one that Leonardo made that you just referenced. So, it was all of that that we took into account where we felt it was just more prudent

Speaker Change: to be more conservative and have a more cautious outlook for the second half of this year. I think one of the questions I get is, is the company being more conservative than what you're being told?

Thomas C. Gentile: And we took into account some of the other announcements, like the one that Leonardo made that you just referenced. So it was all of that that we took into account, where we felt it was just more prudent to be more conservative and have a more cautious outlook for the second half of this year. Okay. I think one of the questions I get is, "Is the company being more conservative than what you're being told?" Or are you just basically mapping to what you're being told?

Miles Walton: I think one of the questions I get is the company being more conservative than what you're being told, or are you just basically mapping to what you're being told. And Tom, this is your first opportunity to sort of reset guidance and expectations. And so I think it's important to understand: are you embedding more conservative assumptions than what you're being told to absorb, further deterioration? I think we're just being realistic based on what we're seeing and reading. And so we're not trying to be conservative or aggressive. It's just being realistic with the outlook. And what I would say is that the guidance change that we made was really more trimming it to align to what we're seeing.

Speaker Change: or are you just...

Speaker Change: Basically mapping to what you're being told and Tom this is your first opportunity to just sort of reset guidance and expectations And so I think it's important to understand. Are you are you embedding? More conservative assumptions than what you're being told to absorb You know further deterioration if any

Thomas C. Gentile: And, Tom, this is your first opportunity to sort of reset guidance and expectations. And so I think it's important to understand whether you are embedding more conservative assumptions than what you're being told to absorb, you know, further deterioration. I think we're just being realistic based on what we're seeing and reading, and so we're not trying to be conservative or aggressive; it's just being realistic with the outlook. And what I would say is that the guidance change that we made was really more trimming it to align with what we're seeing.

Tom Gentile: I think we're just being realistic based on what we're seeing and reading. And so we're not trying to be conservative or aggressive, it's just being realistic with the outlook. And what I would say is that the guidance change that we made was really more trimming it to align to what we're seeing. And as I said, we've obviously got all the capital in place for higher levels of production, and we have the staffing in place to what we were originally forecasting. So if the supply chain does stabilize, better in the second half.

Tom Gentile: And, as I said, we've obviously got all the capital in place for higher levels of production. And we have the staff in place to what we were originally forecasting. So if the supply chain does stabilize better in the second half and things are better, then we'll look for upside. But we're being realistic in terms of what the outlook is. But we are prepared in terms of our capital and our staffing for whatever the customer requirements are.

Thomas C. Gentile: And as I said, we've obviously got all the capital in place for higher levels of production, and we have the staffing in place to what we were originally forecasting. So if the supply chain does stabilize better in the second half, and things are better, then we'll look for upside, but we're being realistic in terms of what the outlook is. But we are prepared in terms of our capital and our staffing for whatever the customer requirements are. Thanks Miles. Your next question comes from the line of Gautam Khanna from TD Cowan. Your line is open. Hey, uh, good morning.

Tom Gentile: And things are better, then we'll look for upside. But we're being realistic in terms of what the outlook is. But we are prepared in terms of our capital and our staffing for whatever the customer requirements are. All right. Thank you.

Miles Walton: All right. Thank you. Thanks, Mausler.

Gautam Khanna: Your next question comes from a line of Gotown Conor from TD Cowan.

Speaker Change: Thanks Miles. Your next question comes from the line of Gautam Khanna from TD Cowan. Your line is open.

Gautam Khanna: Your line is open. Hey, good morning. Good morning.

Gautam J. Khanna: Hey, good morning.

Gautam J. Khanna: Morning, Tom. I was wondering if you could maybe elaborate. Last quarter, Nick mentioned what rate you guys thought you were on the 787 and, likewise, on the 737. Would you mind?

Tom Gentile: Tom, I was wondering if you could maybe elaborate. Last quarter, Nick mentioned what rate you guys thought you were on on the 787. And likewise on the 737, would you mind refreshing us on where you are right now? Are you still at five a month and low 30s? And the max, yes, we're still pulling really right now in the low 30s on the 787. It's been in the 5 or 6 range. We're obviously continuing to monitor the outlook and the demand signals that we get from our customer. And we're staying closely aligned to that. We're literally in conversations every day with our customers on all the programs. And we're staying very closely aligned to what their demand and their outlook is.

Gautam J. Khanna: Morning. Tom, I was wondering if you could maybe elaborate. Last quarter, Nick mentioned what rate you guys thought you were on, on the 787.

Gautam J. Khanna: and likewise on the 737. Would you mind refreshing us on where you are right now? Are you still at five months?

Thomas C. Gentile: Refreshing us on where you are right now. Are you still at five a month? Low 30s.

Thomas C. Gentile: And the max, yes, we're still pulling really right now in the low 30s. The 787, it's been in the 5 or 6 range. We're obviously continuing to monitor the outlook and the demand signals that we get from our customers, and we're staying closely aligned to that. We're literally in conversations every day with our customers on all the programs, and we're staying very closely aligned to what their demand and their outlook

Speaker Change: Low 30s.

Tom Gentile: And the Macs, yes, we're still...

Tom Gentile: pulling really right now in the low 30s. The 787, it's been in the 5 or 6 range.

Speaker Change: We're obviously continuing to monitor the outlook and the demand signals that we get from our customer, and we're staying closely aligned to that.

Gautam J. Khanna: We're literally in conversations every day with our customers on all the programs, and we're staying very closely aligned to what their demand and their outlook is. But yes, that continues to be the same case this quarter as it was last quarter for the Max VH7.

Thomas C. Gentile: But yes, that continues to be the same case this quarter as it was last quarter for the Max 787. Okay, just then to be clear, on the guidance revision that you provided today, is this more just anticipation of that which will be conveyed to you at some point, or is it, as he mentioned, just maybe just reflective of AirPods? I'm just curious.

Tom Gentile: But yes, that continues to be the same case this quarter as it was last quarter for the max.

Tom Gentile: Okay, just then to be clear on the guidance revision that you provided today, this more just anticipation of that which will be conveyed to you at some point or, as you mentioned, just maybe just reflective of air box. I'm just curious. It's reflective of everything that we're seeing in the market and also the demand signals that we're getting from both our customers. So after the Airbus announcement, they have given us some indication of what the back half of the year will look like. And we are staying very aligned to them in terms of what will happen.

Speaker Change: Okay, and just then to be clear, on the guidance revision that you provided today, is this more just anticipation of that which will be conveyed to you at some point, or is it...

Speaker Change: As he mentioned, just maybe just reflective of AirPods. I'm just curious.

Thomas C. Gentile: It's reflective of everything that we're seeing in the market and also the demand signals that we're getting from both of our customers. So, after the Airbus announcement, they have given us some indication of what the back half of the year will look like, and we are staying very aligned to them in terms of what will happen. Now, it's important to, I think, also reiterate that our delivery system is quite complex. So, for example, on the MAX, we delivered to 30-plus locations, on the A320, over 80 locations, and on the A350, more than 75 locations.

Speaker Change: It's reflective of everything that we're seeing in the market, and also the demand signals that we're getting from both of our customers. So after the Airbus announcement...

Speaker Change: They have given us some indication of what the back half of the year will look like, and we are staying very aligned to them in terms of what will happen. Now, it's important to, I think, also reiterate that our delivery system is quite complex. So, for example, on the MAX, we deliver to 30-plus locations. On the A320, over 80 locations, and on the A350, more than 75 locations. So, all of those might have a slightly different demand signal in the second half. We're looking at the totality of it, though.

Tom Gentile: Now, it's important to, I think, also reiterate that our delivery system is quite complex. So, for example, on the Max, we delivered a 30-plus location on the A320, over 80 locations, and on the A350, more than 75 locations. So all of those might have a slightly different demand signal in the second half. We're looking at the totality of it, though, as we make our determination for our guidance. But we feel that, again, based on what we're seeing in here, that a more cautious outlook for the second half is prudent and realistic. I appreciate that.

Thomas C. Gentile: So all of those might have a slightly different demand signal in the second half. We're looking at the totality of it, though, as we make our determination for our guidance. But we feel that, again, based on what we're seeing and hearing... that a more cautious outlook for the second half is prudent and realistic. I appreciate that. I guess, I'm sorry, just to follow up one more time. On the Boeing side, are you anticipating being below the rates you were at in the first half on those two programs? in the updated guide.

Speaker Change: As we make our determination for our guidance, but we feel that, again, based on what we're seeing and hearing, that a more cautious outlook for the second half is prudent and realistic.

Tom Gentile: I guess I'm sorry, just to follow up one more time. On the Boeing side, are you anticipating being at below the rates you're at in the first half on those two programs? in the updated guidance. Now, well, we are going to continue to just monitor what our customers are telling us to stay closely aligned with their production schedules in the second half. I mean, you've got some. I mean, as we communicated, second half sales are going to be very similar to first half sales. So I don't know that we necessarily see reductions, as Tom said.

Speaker Change: I appreciate that. I guess, I'm sorry, just to follow up one more time. On the Boeing side, are you anticipating being at below the rates you were at in the first half on those two programs?

Thomas C. Gentile: Well, we are going to continue to just monitor what our customers are telling us and stay closely aligned with their production schedules in the second half. I mean, Gautam, just to add, I mean, as we communicated, second-half sales are going to be very similar to first-half sales, so I don't know that we necessarily see reductions, as Tom said, and as Tom said, it's really about delaying ramp increases rather than reductions. Thank you, guys. Your next question comes from the line of Bert Subin from Stiefel. Your line is open. Hey, good morning, and welcome, Tom. Thank you, Bert.

Speaker Change: in the updated guidance.

Speaker Change: Well, we are going to continue to just monitor what our customers are telling us and stay closely aligned with their production schedules in the second half.

Gotham: I mean, Gautam, just to add, I mean, as we communicated, second half sales are going to be very similar to first half sales, so I don't know that we necessarily see reductions, as Tom said, and as Tom said, it's really, this is about delays in ramp increases rather than reductions.

Gautam Khanna: And as Tom said, it's really, this is about delaying around increases rather than reduction. Thank you, guys. I appreciate it. Thank you.

Speaker Change: Thank you guys, I appreciate it.

Bert Subin: Your next question comes from a line up, Bert Subin from Steval.

Speaker Change: Your next question comes from the line of Bert Subin from Stiefel. Your line is open.

Bert Subin: Your line is open. Hi, hey, good morning, and welcome, Tom. Thank you, Bert.

Speaker Change: Hi, good morning, and welcome Tom. Thank you Bert.

Bert William Subin: Just to follow up on Gautam's question there, if we look at the guide you gave, if we look at the midpoint of it for 1.94, it sort of assumes $485 million in sales per quarter for the rest of the year, which would be a step down from the second quarter. So is that just looking at sort of mix across the programs and sort of assuming the growth you were starting to get ready for in the second quarter moderates? Well, what I would say is that we expect the second half to look very similar to the first half, and that's at about the midpoint if you double it.

Tom Gentile: Just to follow up on Gotham's question there, if we look at the guide you gave, if we look at the midpoint of it for 1.94, it sort of assumes, you know, 4.85 million in sales per quarter for the rest of the year, which would be a step down from the second quarter. So is that just looking at sort of mix across the programs and sort of assuming the growth? You were starting to get ready for the second quarter moderates. It sounds like not necessarily pulling down programs specific production.

Bert William Subin: Just to follow up on Gautam's question there, if we look at the guide you gave, if we look at the midpoint of it for 1.94, it sort of assumes $485 million in sales per quarter for the rest of the year, which would be a step down from the second quarter.

Speaker Change: Looking at sort of mix across the programs and sort of assuming the growth you were starting to get ready for in the second quarter moderates, it sounds like you're not necessarily pulling down program specific production. So just looking for a little more clarity on like the actual dynamics of what happens from 2Q to 3Q.

Tom Gentile: So I'm just looking for a little more clarity on like the actual dynamics of what happens from 2.2 to 3.2. Well, what I would say is we expect the second half to look very similar to the first half, and that's about the midpoint if you double it. So, as Patrick just said, we're not expecting any decreases necessarily. We're just expecting things to remain flat, and for potential increases not to materialize until later. But please also, but remember the seasonality. So we have a seasonality effect. So I wouldn't just assume 3 and 4, Q3, Q4 is exactly the same.

Speaker Change: Well, what I would say is, we expect the second half to look very similar to the first half and that's at about the midpoint if you double it. So, as Patrick just said, we're not expecting any decreases necessarily, we're just expecting things to remain flat and for potential increases not to materialize until later.

Thomas C. Gentile: So, as Patrick just said, we're not necessarily expecting any decreases, we're just expecting things to remain flat and for potential increases not to materialize until later. But please also remember the seasonality, so we have a seasonality effect, so I wouldn't just assume 3 and 4, Q3, Q4 are exactly the same. Q3 is going to have that seasonal effect, especially in Europe; Q4 is going to be strongest, and you can kind of put EPS on that and assume Q4 is going to be stronger than Q3 because of the normal seasonality. So, I hear your 485 number, but don't just straight line it.

Speaker Change: Please also remember the seasonality. We have a seasonality effect, so I wouldn't just assume 3 and 4, Q3, Q4 are exactly the same. Q3 is going to have that seasonal effect, especially in Europe . Q4 is going to be stronger, so you can kind of put EPS, align that, assume Q4 is going to be stronger than Q3 because of the normal seasonality. I hear your 485 number, but don't just straight line it.

Tom Gentile: Q3 is going to have that seasonal effect, especially in Europe. Q4 is going to be stronger, and you can kind of put EPS aligned that. Assume Q4 is going to be stronger than Q3 because of the normal seasonality. So I know I hear your 485 number, but don't just straight-line it. Yeah, I understand.

Bert William Subin: Yeah, understood. And then just to follow up on the defense side, could you give us a little more color? I mean, I think it was helpful, the walk that you did there in terms of talking about the F-35 and the V-22, but you had seen six consecutive quarters of double-digit growth, and that's stepped down to 1%. Is that, you know, expected to sort of step back up? There's just some lumpiness in the second quarter. Obviously, you stuck by your mid-single-digit guy, but I'm just curious how you're thinking about defense for the rest of this year.

Tom Gentile: And then just to follow up on the defense side, could you give us a little more color? I mean, I think it was helpful to the walks that you did there in terms of talking about the F-35 and the V-22. But you had seen six consecutive quarters of double-digit growth, and that's stepped down to 1%. Is that expected to sort of step back up? There's just some lumpiness in the second quarter.

Speaker Change: Yeah, understood. And then just to follow up on the defense side...

Speaker Change: Could you give us a little more color? I mean, I think it was helpful, the walk that you did there, in terms of talking about the F-35 and the V-22, but you had seen six consecutive quarters of double-digit growth, and that stepped down to 1%.

Tom Gentile: Obviously, you stuck by your mid single digit guy, but just curious how you're thinking about defense for the rest of this year, and in the midterm outlook, is the view still sort of the same? Yeah, the midterm outlook is still the same. We're still very bullish on defense. I think Q2 was just a bit lumpy. If you look at the first half of the year, it's still up by 6%, which is very good, solid growth. And by the way, that solid growth over 17% last year. So defense is going to just find there were a couple of programs that had some ups and downs in the quarter.

Speaker Change: Is that, you know, expected to sort of step back up, there's just some lumpiness in the second quarter, obviously you stuck by your mid-single-digit guide, but just curious how you're thinking about defense for the rest of this year, and, you know, in the midterm outlook, is the view still sort of the same?

Thomas C. Gentile: And, you know, in the midterm outlook, is the view still sort of the same? Yes, the midterm outlook is still the same. We're still very bullish on defense. I think Q2 was just a bit lumpy. If you look at the first half of the year, it's still up by 6%, which is very good solid growth. And, by the way, that's solid growth over 17% last year. So defense is going just fine.

Speaker Change: Yeah, the mid-term outlook is still the same. We're still very bullish on defense. I think Q2 was...

Speaker Change: Just a bit lumpy. If you look at the first half of the year, it's still up 5-6%, which is very good solid growth. And by the way, that's solid growth over 17% last year.

Speaker Change: So, defense is going just fine. There were a couple of programs that had some ups and downs in the quarter. But overall, defense and space are going to be a very strong segment for Hexcel going forward. Thank you.

Tom Gentile: But overall, defense and space are going to be a very strong segment for HxL going forward.

Matthew Akers: Thank you.

Thomas C. Gentile: There were a couple of programs that had some ups and downs in the quarter, but overall, defense and space are going to be a very strong segment for Hexcel going forward. Your next question comes from Matt Akers from Wells Fargo. Your line is open. Hey guys, good morning.

Speaker Change: Your next question comes from a line of Matt Akers from Wells Fargo. Your line is open.

Matthew Akers: Matt Acres from Wells Fargo. Your line is open.

Tom Gentile: Hey guys, good morning. Thanks for the question. Tom, I guess I wanted to ask you; you've been around the industry for a long time. So, as you go through some of these facility tours, where do you see kind of the biggest opportunity? Is there some opportunity to kind of streamline operations there, and how does that translate to kind of cost takeout, or working capital, or better truth, or however you kind of want to quantify it? Well, first of all, what I would say is that Hexcel has world-class facilities. These are premier factories that have the latest state-of-the-art equipment for making these advanced composite materials in all phases of production.

Matthew Carl Akers: Thanks for the question. Yeah, Tom, I guess I wanted to ask you because you've been around the industry for a long time. So as you go through some of these facility tours, you know, where do you see kind of the biggest opportunity? Is there, you know, some opportunity to kind of streamline operations there? And how does that translate to kind of, you know, cost takeout or working capital or better throughput or whatever you kind of want to quantify it? Well, first of all, Matt, what I would say is that Hexcel has world-class facilities. These are premier factories that have the latest, state-of-the-art equipment for making these advanced composite materials in all phases of production.

Matthew Carl Akers: Yeah, hey guys, good morning. Thanks for the question. Good morning, Matt. Yeah, Tom, I guess I wanted to ask you, you've been around the industry for a long time, so as you go through some of these facility tours,

Matthew Carl Akers: Where do you see the biggest opportunity? Is there some opportunity to streamline operations there and how does that translate to cost take-out or working capital or better throughput or however you want to quantify it?

Tom Gentile: Right, well, first of all, Matt, what I would say is that Hexcel has world-class facilities.

Speaker Change: These are premier factories that have the latest state-of-the-art equipment for making these advanced composite materials in all phases of production. It's a continuous process flow.

Thomas C. Gentile: It's a continuous process flow, and there's a lot of activity that's underway. There's a lot of continuous improvement activity leveraging the best of lean, as well as Six Sigma, as well as APQP in terms of quality and efficiency. And there are opportunities for continued digitization and automation. So one of the things that we're doing, in fact, right now is upgrading the ERP and the MES systems, which are two critical systems for factory operations. And that's rolling out now across all the factories over the next 12 to 14 months.

Tom Gentile: It's a continuous process flow, and there's a lot of activity that's underway. There's a lot of continuous improvement activity leveraging the best of lean, as well as Six Sigma, as well as APQP in terms of quality and efficiency. And there's opportunities for continued digitization and automation. So one of the things that we're doing, in fact, right now, is upgrading the ERP and the MES systems, which are two critical systems to factory operations. And that's rolling out now across all the factories over the next 12 to 14 months. So that will be one aspect of improving in the factories.

Speaker Change: and there's a lot of activity that's underway. There's a lot of continuous improvement activity, leveraging the best of Lean as well as Six Sigma, as well as APQP in terms of quality and efficiency. And there's opportunities for continued digitization and automation. So one of the things that we're doing in fact

Speaker Change: Right now is upgrading the ERP and the MES systems, which are two critical systems to factory operations. And that's rolling out now across all the factories over the next 12 to 14 months. So that will be one aspect of improving in the factories. The other thing is we've got an initiative, which we call our Hexcel Manufacturing Initiative or Future Factory, which is really looking at what is the next level of technology to really improve the efficiency of our equipment and improve the output of these lightweight composite materials for the future. And the team has a lot of ideas, and we will be basically synthesizing those and putting them into an action plan that we'll be implementing over the next few years.

Thomas C. Gentile: So that will be one aspect of improving the factories. The other thing is we've got an initiative, which we call our Hexcel Manufacturing Initiative or Future Factory, which is really looking at what the next level of technology is to really improve the efficiency of our equipment and improve the output of these lightweight composite materials for the future. The team has a lot of ideas, and we will be basically synthesizing those and putting them into an action plan that we'll be implementing over the next few years. So between continuous improvement, digitization, automation, and future investments in technology, all of those things represent an opportunity to continue to drive productivity in our factories as we go forward. Very exciting. Great, thanks. Thanks.

Tom Gentile: The other thing is we've got an initiative which we call Hexcel Manufacturing Initiative or Future Factory, which is really looking at what is the next level of technology to really improve the efficiency of our equipment and improve the output of these lightweight composite materials for the future. And the team has a lot of ideas, and we will be basically synthesizing those and putting them into an action plan that will be implementing over the next few years. So, between continuous improvement, digitization, automation, and future investments in technology, all of those things represent an opportunity and continue to drive productivity in our factories as we go forward.

Speaker Change: Continuous improvement, digitization, automation, and future investments in technology, all of those things represent an opportunity to continue to drive productivity in our factories as we go forward. Very exciting.

Tom Gentile: Very exciting.

Tom Gentile: Great. Thanks.

Matthew Carl Akers: And I guess just one more on the industrials, the guidance change there. Could you talk about specifically what and market drove most of that change? Well, as we look at industrials, it's a smaller part of Hexcel's overall business today. Wind has declined a lot.

Tom Gentile: And I guess this one more on the industrial, the guidance change there. Could you talk about specifically what and markets drove most of the time? Well, if you look at industrial, let's say it's a smaller part of Hexcel's overall business today. Wind has declined a lot. The market has just changed, and it really is no longer leveraging the Hexcel Premium Bibers or Material Systems. So that has to mention a lot. Automotive was actually quite strong and is now the biggest component. And as we go forward on industrial, we'll continue to look for opportunities to focus on premium lightweight materials, and where Hexcel can add a lot of value.

Speaker Change: Great. Thanks. Thanks. And I guess just one more on the industrial, the guidance change there. Could you talk about specifically what and market drove most of that change?

Thomas C. Gentile: The market has just changed, and it really is no longer leveraging Hexcel premium fibers or material systems, so that has diminished a lot.

Speaker Change: Well, as we look at industrial, it's a smaller part of Hexcel's overall business today. Wind has declined a lot. The market has just changed. And it really is no longer leveraging the Hexcel premium fibers or material systems. So that has diminished a lot. Automotive was actually quite strong and is now the biggest component. And as we go forward on industrial, we'll continue to look for opportunities to focus on premium, lightweight materials and where Hexcel can add a lot of value. And we do see some opportunities in some of the submarkets, but it's clearly changed and that's why we got into a double-digit decline this year.

Thomas C. Gentile: Automotive was actually quite strong and is now the biggest component. And as we go forward on industrial, we'll continue to look for opportunities to focus on premium, lightweight materials where Hexcel can add a lot of value. And we do see some opportunities in some of the submarkets, but the environment has clearly changed, and that's why we got into a double-digit decline this year. I would just sort of say exactly as Tom said.

Patrick Winterlich: And we do see some opportunities in some of the soft markets, but it's clearly changed, and that's why we got it to a double-digit decline this year. I would just sort of, so exactly as Tom said, so wind continues to decline, perhaps even slightly more than we expected. But really, it's automotive, and we had a soft Q1 in automotive. If you'll remember, the growth in automotive just won't be quite as strong as we initially expected when we gave the guidance to January. So that's really the driver. Got it.

Patrick Joseph Winterlich: So wind continues to decline, perhaps even slightly more than we expected. But really, it's the automotive business, and we had a soft Q1 in the automotive business. You'll remember the growth in the automotive business just won't be quite as strong as we initially expected when we gave the guidance in January. That's really the driver.

Speaker Change: I would just sort of, so exactly as Tom said, so wind continues to decline, perhaps even slightly more than we expected, but really it's automotive, and we had a soft Q1 in automotive, if you'll remember.

Speaker Change: The growth in automotive just won't be quite as strong as we initially expected when we gave the guidance in January . That's really the driver.

Matthew Carl Akers: Got it. Thank you. Your next question comes from the line of John McNulty from BMO Capital Markets. Your line is open. Yeah, good morning.

Patrick Winterlich: Thank you.

John Mcnulty: Our next question comes from the line up on McNulty from BMO Capital Markets. Your line is open. Yeah, good morning. Thanks for taking my question. So I guess the first one is around the cash flow and uses, so your buybacks was more aggressive than we've seen in a while in the first half of the year. It's almost on pace to kind of match your full year free cash flow.

Speaker Change: Got it. Thank you.

Speaker Change: Your next question comes from the line of John McNulty from BMO Capital Markets. Your line is open.

John Patrick McNulty: Thanks for taking my question. I guess the first one is around cash flow and uses. So your buyback was more aggressive than we've seen in a while in the first half of the year; it's almost on pace to kind of match your full year free cash flow. So I guess how should we be thinking about your comfort in continuing to kind of push on that buyback program, just given where the stock is right now, as we look through the rest of the year? Well, I think you're exactly right.

John Patrick McNulty: Yeah, good morning. Thanks for taking my question. So I guess the first one is...

John Patrick McNulty: around the cash flow and uses, so your buyback.

John Patrick McNulty: was more aggressive than we've seen in a while in the first half of the year. It's almost on pace to kind of match your full year free cash flow. So I guess, how should we be thinking about your comfort in continuing to kind of push on that, on that buyback program, just given where the stock is right now, as we look through the rest of the year?

Patrick Winterlich: So I guess how should we be thinking about your comfort and continuing to kind of push on that buyback program, given where the stock is right now as we look through the rest of the year. Well, I think you're exactly right. The eye back in the first half of the year is basically our outlook for free cash flow from the full year, so we're very bullish on the future for Hexcel stock, and we saw a great opportunity in the first quarter and a second quarter to buy, and so we'll continue to monitor the situation. We will look for opportunities to continue to share with purchases, and I think what you said is completely accurate.

Thomas C. Gentile: The buyback in the first half of the year is basically our outlook for free cash flow for the full year. So we're very bullish on the future of Hexcel stock, and we saw a great opportunity in the first quarter and the second quarter to buy. And so we'll continue to monitor the situation. We will look for opportunities to continue to share repurchases. And I think what you said is completely accurate. It was a great opportunity to buy, and we took it in the first half. I got it.

Speaker Change: Well, I think you're exactly right, is the buyback in the first half of the year is basically our outlook for free cash flow for the full year. So we're very bullish on the future for Hexcel stock, and we saw a great opportunity in the first quarter and the second quarter to buy. And so we'll continue to monitor the situation.

Speaker Change: We will look for opportunities to continue to share repurchases. And I think what you said is completely accurate. It was a great opportunity to buy, and we took it in the first half.

Patrick Winterlich: It was a great opportunity to buy, and we took it in the first half.

Tom Gentile: Got it, fair enough, and then maybe just a little bit more on the commercial aerosis kind of flow down in terms of your numbers or at least a leveling off maybe with the first half. When you think about the second half and how things progress, and also the timing of when you're delivering for where you're six months in advance of when your customers need the product, is there a risk just given the supply chain issues that this slowdown or this more muted rate drags on into the first half of 2025? I know it's a little bit of a pull out of crystal ball, but I guess what you're hearing from your customers, I guess how are you thinking about if this could drag into the first half?

John Patrick McNulty: Fair enough. And then maybe just a little bit more on the commercial aerospace kind of slowdown in terms of your numbers, or at least leveling off, maybe with the first half. Is this, when you think about the second half and how things progress, and also the timing of when you're delivering for, where you're six months in advance of when your customers need the product, is there a risk, just given the supply chain issues, that this slowdown or this more muted rate drags on into the first half of 2025?

Speaker Change: Got it. Fair enough. And then maybe just a little bit more on the commercial aerospace kind of slow down in terms of your numbers or at least leveling off maybe with the first half.

Speaker Change: Is this, when you think about the second half and how things progressed...

Speaker Change: and also the timing of when you're delivering for, where you're six months in advance of when your customers need the product. Is there a risk, just given the supply chain issues, that this slowdown or this more muted rate drags on into the first half of 2025? I know it's a little bit of a pull out of crystal ball, but I guess what you're hearing from your customers, I guess, how are you thinking about if this could drag into the first half?

John Patrick McNulty: I know it's a little bit of a pull out of the crystal ball, but I guess what you're hearing from your customers. How are you thinking about if this could drag into the first half? We're not anticipating that.

Tom Gentile: We're not anticipating that. The messages that we're hearing was the second half of 24 is going to be a little softer than expected, and so what I said is we're not seeing rates going down, but rather some of the increases being delayed and pushed out. Next year and beyond looks just as strong, if not stronger than before. And by the way, if the back half of 24, if the supply chain stabilizes and there's upside, we'll be prepared to deliver on it. So we trimmed our values because of what we're hearing, but that's only really related to the second half of 24, 25, 26 and beyond, still a very strong given the strong recovery in air traffic and the backlog and the increase in production rates that we see coming.

Thomas C. Gentile: The messages that we're hearing are that the second half of 24 is going to be a little softer than expected. And so, what I said, we're not seeing rates going down, but rather some of the increases being delayed and pushed out. Next year and beyond looks just as strong, if not stronger than before. And by the way, if the back half of 24 stabilizes and there's upside, we'll be prepared to deliver on it.

Speaker Change: We're not anticipating that. The messages that we're hearing was the second half of 24 is going to be a little softer than expected. And so what I said is we're not seeing rates going down, but rather some of the increase is being delayed and pushed out. Next year and beyond looks just as strong, if not stronger, than before. And by the way, if the back half of 24, if the supply chain stabilizes and there's upside, we'll be prepared to deliver on it.

Thomas C. Gentile: So we trimmed our guidance because of what we're hearing, but that's only really related to the second half of 24. 25, 26 and beyond still look very strong, given the strong recovery in air traffic and the backlog and the increase in production rates that we see coming. Scott, thanks very much for the call. Your next question comes from the line of Gavin Parsons from UBS. Your line is open. Hey, thanks. Good morning.

Speaker Change: So, we trimmed our guidance because of what we're hearing, but that's only really related to the second half of 24, 25, 26 and beyond still look very strong, given the strong recovery in air traffic and the backlog and the increase in production rates that we see coming.

Matthew Akers: Thanks very much for the call.

Speaker Change: Scott, thanks very much for the call.

Gavin Parsons: Your next question comes from a line of Gavin Parsons from UBS.

Speaker Change: Your next question comes from the line of Gavin Parsons from UBS. Your line is open.

Tom Gentile: Your line is open. Hey, thanks. Good morning.

Gavin Eric Parsons: Morning, Tom. It sounds like you have some guidance from the OEMs, but maybe you're still having to guess as to what production rates might be. I know you talked about the complexity of the ship to locations, but is there any way you can improve visibility or line of sight on that?

Gavin Eric Parsons: Hey, thanks. Good morning.

Tom Gentile: Tom, it sounds like you have some guidance from the OEMs, but that maybe you're still having to gas as to what production rates might be, and I know you talked about the complexity of the shift to locations. But is there any way you can improve visibility or line of sight on that front? Well, it's been a challenge for the whole industry over the last couple of years. Despite the fact that there is strong air traffic recovery, there's huge demand for aircraft that's reflected in the orders and the backlog, it's just been a little bit harder to predict production and deliveries because of a lot of supply chain disruption.

Gavin Eric Parsons: Morning. Tom, it sounds like you have some guidance from the OEMs, but that maybe you're still having to guess as to what production rates might be. I know you talked about the complexity of the ship to locations, but is there any way you can improve visibility or line of sight on that front?

Thomas C. Gentile: Well, it's been a challenge for the whole industry over the last couple of years, you know, despite the fact that there is strong air traffic recovery; there is huge demand for aircraft that's reflected in the orders in the backlog. It's just been a little bit harder to predict production and deliveries because of a lot of supply chain disruption. And so, you know, I wish we all had a crystal ball to see a little bit better. But that's, that's just the reality of the situation.

Speaker Change: Well, it's been a challenge for the whole industry over the last couple of years. Despite the fact that there is strong air traffic recovery, there's huge demand for aircraft that's reflected in the orders and the backlog. It's just been a little bit harder to predict production and deliveries because of a lot of supply chain disruption. And so I wish we all had a crystal ball to see a little bit better, but that's just the reality of the situation. And so we've tried to be pragmatic.

Tom Gentile: And so I wish we all had a crystal bar to see a little bit better, but that's just the reality of the situation. And so we've tried to be pragmatic and realistic about what the second half of 24 looks like in terms of trimming our guidance, but the medium and longer-term outlook hasn't changed. Air traffic has recovered to well above 2019 levels. The backlog is bigger than it was pre-pandemic and production rates are going up across all the programs over the next few years. So Hexel has the capital in place to meet that demand. We have the staffing in place for short-term requirements.

Thomas C. Gentile: And so we've tried to be pragmatic and realistic about what the second half of 24 looks like in terms of trimming our guidance. But the medium and longer-term outlook hasn't changed. Air traffic has recovered to well above 2019 levels, but the backlog is bigger than it was before the pandemic. And production rates are going up across all the programs over the next few years, so Hexcel has the capital in place to meet that demand. We have the staffing in place for short-term requirements, and the outlook is very good. It's just that the back half of 24 is a bit softer than we originally expected.

Speaker Change: and realistic about what the second half of 24 looks like in terms of trimming our guidance. But the medium and longer term outlook hasn't changed.

Speaker Change: Air traffic has recovered to well above 2019 levels. The backlog is bigger than it was pre-pandemic.

Speaker Change: and production rates are going up across all the programs over the next few years. So Hexcel has the capital in place to meet that demand, we have the staffing in place for short-term requirements, and the outlook is very good. It's just the back half of 24 is a bit softer than we originally expected, and we trimmed the guidance accordingly.

Tom Gentile: And the outlook is very good. It's just the back half of 24 is a bit softer than we originally expected, and we trim the guidance accordingly. That makes sense.

Thomas C. Gentile: And we trim the guidance quarter. Got it. That makes sense. Any way that you can quantify how labor efficiency or utilization has improved over the last few quarters after the hiring in the second half of 23? Well, you see it reflected in the improvement in the margin, and that's really a reflection of the operating leverage that we get. So don't forget that back in 2019, Hexcel's revenue was about 2.35 billion dollars, and we had the same capital in place, and the headcount was a little bit higher, but the margins were at the 18% level.

Tom Gentile: Any way that you can quantify how labor efficiency or utilization has improved over the last few quarters after the hiring in the second half of the 23rd? Well, you see it reflected in the improvement in the margin, and that's really a reflection of the operating leverage that we get. So don't forget, back in 2019, Hexcel's revenue was about $2.35 billion. And we had this same capital in place, and the head count was a little bit higher. But the margins were in the 18% level. So, as the revenues recover, you'll see the operating leverage drive margin improvement, and some of that will be due to labor productivity efficiency as well.

Speaker Change: Got it. That makes sense. Any way that you can quantify how labor efficiency or utilization has improved over the last few quarters after the hiring in the second half of 23?

Speaker Change: Well, you see it reflected in the improvement in the margin, and that's really a reflection of the operating leverage that we get. So don't forget, back in 2019, Hexcel's revenue was about $2.35 billion, and we had the same capital in place, and the headcount was a little bit higher, but the margins were in the 18% level. So as the revenues recover, you'll see the operating leverage drive margin improvement. And some of that will be due to labor productivity and efficiency as well.

Tom Gentile: Thank you.

Thomas C. Gentile: So as revenues recover, you'll see operating leverage drive margin improvement, and some of that will be due to labor productivity and efficiency as well. Your next question comes from Scott Micas from Melius Research. Your line is open. Good morning.

Scott Mikus: You are next question comes from a line of Scott Mikus from Meleus Research.

Speaker Change: Your next question comes from a line of Scott Micas from Melius Research. Your line is open.

Scott Mikus: Your line is open.

Patrick Winterlich: Good morning. Patrick, Patrick, are you seeking any conservatism into the guide for a potential strike at Boeing and how that could impact their demand? Yeah, I mean, as a simple answer, it is no; I think that would be a step too far. We're obviously very conscious of that negotiation about to happen. We will stay very close and, as we always do, align ourselves with our key customers, Boeing and others in this case. But no, we have not built in a strike, but we will obviously stay very vigilant, and we will respond accordingly. I think that would be a little bit too much to put that into our guidance.

Unknown Executive: Patrick, Patrick, are you taking any conservatism into the guide for a potential strike at Boeing and how that could impact their demand pull? Yeah, I mean, the simple answer is no. I think that that would be a step too far.

Unknown Executive: Good morning. I'm Patrick. Patrick, are you baking any conservatism into the guide for a potential strike at Boeing and how that could impact their demand pool?

Speaker Change: Yeah, I mean, the simple answer is no. I think that would be a step too far. We're obviously very conscious of that negotiation about to happen. We will stay very close, and as we always do, align ourselves with our key customers, Boeing and others, in this case.

Patrick Joseph Winterlich: We're obviously very conscious of that negotiation about to happen. We will stay very close, and as we always do, align ourselves with our key customers, Boeing and others, in this case. But no, we have not built in a strike, but we will obviously stay very vigilant, and we will respond and react accordingly.

Speaker Change: But no, we have not built in a strike, but we will obviously stay very vigilant and we will respond, react accordingly. I think that would be a little bit too much to put that into our guidance.

Tom Gentile: Okay, and then for Tom, when you were at Spirit, you worked at a first five sales mix to get more aftermarket and defense work.

Thomas C. Gentile: I think that would be a little bit too much to put that into our guidance. Okay, and then for Tom, when you were at Spirit, you worked at a first five sales mix to get more aftermarket business in defense work. At Hexcel, do you think there needs to be some aftermarket exposure that you could get through inorganic means? And then, if so, has the board given you the mandate to pursue that goal through M&A? Well, the discussions I've had with the board are very much focused on continuing to drive growth at Hexcel, and we're going to do that in a variety of ways. You mentioned defense in space.

Speaker Change: Okay, and then for Tom, when you were at Spirit, you worked at a Burst-Fi.

Tom Gentile: At Hexel, do you think there needs to be some aftermarket exposure that you can get through inorganic meetings? And then, if so, has the board given you the mandate to pursue that goal through M&A? Well, the discussions that I've had with the board are very much focused on continuing to drive growth at Hexel. And we're going to do that in a variety of ways. You mentioned defense and space. That's a key opportunity for Hexel. We've got a very good platform and base. And in last year, three, 17%, we're going to expect a new growth as we go forward.

Speaker Change: Sales Mix to get more aftermarket and defense work. At Hexcel, do you think there needs to be some aftermarket exposure that you can get through inorganic means? And then if so, has the board given you the mandate to pursue that goal through M&A?

Speaker Change: Well, the discussions I've had with the board are very much focused on continuing to drive growth at Hexcel, and we're going to do that in a variety of ways. You mentioned defense in space, that's a key opportunity for Hexcel. We've got a very good platform and base, and last year it grew 17 percent. We're going to expect continued growth as we go forward, so that's one big opportunity. We'll continue to look for other adjacencies. Lightweight is probably a little tougher for Hexcel, given the lightweight materials that we provide. There aren't as much, there's not as much obvious opportunity in that. We'll look for it, but the opportunity for us is to continue expanding our lightweight materials and next generation programs, and expanding our capabilities.

Thomas C. Gentile: That's a key opportunity for Hexcel. We've got a very good platform and base, and last year it grew 17%. We're going to expect continued growth as we go forward. So that's one big opportunity. We'll continue to look for other adjacencies. The aftermarket is probably a little tougher for Hexcel, given the lightweight materials that we provide.

Tom Gentile: So that's one big opportunity. We'll continue to look for other adjacencies. Aftermarket is probably a little tougher for Hexel given the lightweight materials that we provide. There's not as much obvious opportunity in that. We'll look for it, but the opportunity for us is to continue expanding our lightweight materials and next generation programs and expanding into some adjacencies, including defense and space, and some industrial submarkets. That's where our focus is. And that's clearly what the board wants to see: more growth as we go forward. We continue profitability and margin improvement as we get the operating leverage with revenue recovery and continue to drive efficiency in our factories.

Thomas C. Gentile: There aren't as many; there's not as much obvious opportunity in that. We'll look for it, but the opportunity for us is to continue expanding our lightweight materials and next generation programs and expanding into some adjacencies, including defense in space and some industrial submarkets. That's where our focus is, and that's clearly what the board wants to see, more growth as we go forward. We will continue profitability and margin improvement as we get operating leverage with revenue recovery and continue to drive efficiency in our factory. Thanks for taking the questions.

Speaker Change: Nick Winterlich, Nick Stanage

Tom Gentile: Thanks for taking the questions.

Speaker Change: Thanks for taking the questions.

Unknown Executive: Thank you. Your next question comes from Ken Herbert from RBC Capital Markets. Your line is open. Hi, good morning. This is actually Steve Strackhouse on behalf of Ken Herbert.

Kenneth Herbert: Your next question comes from a line of Ken Herbert from RBC Capital Markets. Your line is open. Hi, good morning, Tom. This is Steve Strackhouse on for Ken Herbert.

Speaker Change: Thank you. Your next question comes from a line of Ken Herbert from RBC Capital Markets. Your line is open.

Kenneth George Herbert: I was wondering if you could give us a little bit more broader detail of what you're seeing at Hexcel from an OE Bill Great perspective now, as compared to when you kind of first joined. And then if you can kind of further bridge that between what you were seeing at Spirit when you head left there as well. I think that might be really helpful from an industry perspective. What do you mean in terms of what we're getting on build rates from the... Either build rates or just the supply chain generally as well.

Kenneth Herbert: I was wondering if you could give us a little bit more broader detail about what you're seeing at Hexel from an OEBO great perspective. Now, that's compared to when you first joined. And then, if you can further bridge that between what you were seeing at Spirit, when you head left there as well, I think that might be really helpful from an industry perspective. You mean in terms of what we're getting on build rates from either the build rates or just the supply chain generally as well? I think all of that kind of commentary would be helpful as we kind of dissect the build rates here.

Speaker Change: Hi, good morning, Tom. This is actually Steve Strackhouse on for Ken Herbert. I was wondering if you could give us a little bit more broader detail.

Speaker Change: of what you're seeing at Hexcel from an OE build rate perspective now as compared to when you kind of first joined. And then if you can kind of further bridge that between what you were seeing at Spirit when you head left there as well, I think that might be really helpful from an industry perspective.

Speaker Change: You mean in terms of what we're getting on build rates?

Speaker Change: Either build rates or just the supply chain generally as well, I think all of that kind of commentary would be helpful as we kind of dissect the build rates here.

Thomas C. Gentile: I think all of that kind of commentary would be helpful as we kind of dissect the build rates here. But, what I would say is that communication and the relationship and the partnerships with all of our customers, including the major commercial OEMs, Boeing and Airbus, are very strong at Hexcel. We have a very active dialogue. We stay connected to them in terms of what their build rates are and what their future outlooks and plans are.

Tom Gentile: Well, what I would say is that the communication and the relationship and the partnerships with all of our customers, including the major commercial Williams pulling Airbus, is very strong at Hexcel. We have a very active dialogue. We stay connected to them. In terms of what their build rates are and what their future outlooks and plans are. And so I would say the dialogue and the information and the transparency is the same as I've seen elsewhere. And that's very important. And we're going to continue to do that because this is a very dynamic environment. It's extremely volatile.

Speaker Change: Well, what I would say is that the communication and the relationship and the partnerships

Speaker Change: with all of our customers, including the major commercial OEMs, Boeing and Airbus, is very strong at Hexcel. We have a very active dialogue. We stay connected to them in terms of what their build rates are and what their future outlooks and plans are. And so I would say the dialogue and the information and the transparency is the same as I've seen elsewhere. And that's very important, and we're going to continue to do that because this is a very dynamic environment. It's extremely volatile. There's still some instability in the supply chain. And we want to stay very close to our customers and make sure that we are aligned to what their current outlook is and continue to evolve with that.

Thomas C. Gentile: And so I would say the dialogue and the information and the transparency is the same as I've seen elsewhere on that. And that's very important, and we're going to continue to do that because this is a very dynamic environment. It's extremely volatile.

Patrick Joseph Winterlich: There's still some volatility in the supply chain, and we want to stay very close to our customers and make sure that we are aligned with what their current outlook is and continue to evolve with that. I mean, the one thing I would just add, just to state the obvious, is that Hexcel's supplying materials is different to many other suppliers, sort of including Spirit. So we tend to be earlier in the supply chain, where, as we've said many times, sort of four to six months ahead, sometimes more, sometimes less, but largely. So you have to sort of think about that offset for Hexcel.

Tom Gentile: There's still some instability in the supply chain. And we want to stay very close to our customers and make sure that we are aligned to what their current outlook is and continue to evolve with that. I mean the one thing I would just say is that Hexcel's supplying materials is different to many other supplies, including spirits. So we tend to be earlier in the supply chain, whereas we've said many times, sort of four to six months ahead, sometimes more, sometimes less, but largely. So you have to sort of think about that offset for Hexcel. So that is a difference.

Speaker Change: I mean, the one thing I would just add, just to state the obvious, is that Hexcel's supplying materials...

Speaker Change: is different to many other supplies, sort of including spirits, so we tend to be earlier.

Speaker Change: in the supply chain where, as we've said many times, we're four to six months ahead, sometimes more, sometimes less, but largely. So you have to sort of think about that offset for Hexcel, so that is a difference that is the reality of where Hexcel is in the supply chain.

Kenneth George Herbert: So that is the difference; that is the reality of where Hexcel is in the supply chain. Okay, and then maybe just one follow-up as well. I realize you guys have done about $200 million in share repurchases with about $285 million left in the authorization. Do you anticipate any change in the capital allocation priorities, maybe looking to expand that $285 million? Well, the 285 gives us plenty of headroom to do a lot more share repurchases, and our goal is to keep our leverage in the 1.5 to 2 range and to look at what our free cash flow generation is and determine how we want to allocate the capital.

Tom Gentile: There's a reality of what that is in this supply chain. Okay.

Patrick Winterlich: And there may be just one follow-up as well. I realize you guys have done about 200 billion in shared repurchases, with 285 left in the authorization. Do you anticipate any change in the capital allocation priorities? Maybe you're looking to expand that 285? Well, the 285 is plenty of headroom to do a lot more shared repurchases. And our goal is to keep our leverage in the one and a half to two range and to look at what our free capital generation is and determine how we want to allocate the capital. Right now, shared repurchases are a very good use of cash.

Speaker Change: Okay, and then maybe just one follow-up as well. I realize you guys have done about $200 million in share repurchases, with about $285 million left in the authorization. Do you anticipate any change in the capital allocation priorities, maybe looking to expand that $285 million?

Speaker Change: Well, the 285 gives us plenty of headroom to do a lot more share repurchases, and our goal is to keep our leverage in the 1.5 to 2 range and to look at what our free capsule generation is and determine how we want to allocate the capital. Right now, share repurchases are a very good use of cash, and we obviously did a lot of it in Q1 and Q2, and we'll continue to look at the opportunity in Q3 and Q4 as we go forward. Awesome. Thank you so much.

Kenneth George Herbert: Right now, share repurchases are a very good use of cash, and we obviously did a lot of them in Q1 and Q2, and we'll continue to look at the opportunity in Q3 and Q4 as we go forward. Awesome. Thank you so much.

Patrick Winterlich: And we obviously did a lot of it in Q1 and Q2. And we'll continue to look at the opportunity in Q3 and Q4s as we go forward.

Patrick Winterlich: Awesome.

Patrick Winterlich: Thank you so much.

Kenneth George Herbert: Your next question comes from Pete Skibitski from Olympic Global. Your line is open. Hey, good morning, everyone. Hey, Tom, just in the way of thinking about other kinds of landmines that are out there or risk factors, and maybe this first one, I think I know the answer, but the storms that rolled through Houston, it's a big commodity town, a big oil and gas town.

Pete Skavitsky: Your next question comes from a line of Pete Skavitsky from Olympic Global.

Peter John Skibitski: Your next question comes from a line of Pete Skibitski from Olympic Global. Your line is open.

Pete Skavitsky: Your line is open.

Tom Gentile: Hey, good morning, everyone. Hey, Tom, just in the way of thinking about other kinds of landmines that are out there or risk factors. And maybe it's first one, I think I know the answer, but the storms that rolled through Houston, if the big commodity town, big oil and gas town, are you guys anticipating any material availability issues as a result of the storm that rolled through there? Not right now. No, I mean, we obviously monitor the situation where we're in close touch with our suppliers on our resins and in our cool and natural, those kinds of commodities.

Peter John Skibitski: Hey, good morning, everyone.

Peter John Skibitski: Hey, Tom, just in the way of thinking about other kind of landmines that are out there or risk factors, and maybe this first one, I think I know the answer, but the storms that rolled through Houston, it's a big commodity town, big oil and gas town, are you guys anticipating any material availability issues as a result of the storm that rolled through there?

Peter John Skibitski: Are you guys anticipating any material availability issues as a result of the storm that rolled through there? Not, not right now. No, I mean, we obviously monitor the situation. We're in close touch with our suppliers for our resins and acrylonitrile, those kinds of commodities. And we're not hearing anything right now that gives us any concern from those storms at all.

Speaker Change: Not right now, no. I mean, we obviously monitor the situation. We're in close touch with our

Speaker Change: Suppliers on our resins and in our acrylonitrile those those kinds of commodities And we're not hearing anything right now that gives us any concern from from those storms at all Okay, okay, and then kind of with your unique vantage point as spirit. You know

Tom Gentile: And we're not hearing anything right now that gives us any concern from those storms at all.

Thomas C. Gentile: Okay, okay. And then, kind of, with your unique vantage point as spirit, you know, we all anticipate spirit to be absorbed by Boeing and, and partially by Airbus. Can you foresee any kind of issues with production rates as a result of that dynamic? No, we don't.

Tom Gentile: Okay. And then kind of with your unique vantage point, as spirit, you know, we all have to be spirit to be absorbed by Boeing and partially by Airbus. Can you foresee any kind of issues with production rates as a result of that dynamic? No, we don't. We expect that to be a smooth transition, and the contracts will just carry on as they were before, so we don't need to spend any issues whatsoever.

Speaker Change: We all anticipate Spirit to be absorbed by Boeing and partially by Airbus.

Speaker Change: Can you foresee any kind of issues with production rates as a result of that dynamic?

Thomas C. Gentile: We expect that to be a smooth transition, and the contracts will just carry on as they were before. So we don't anticipate any issues whatsoever. Okay, thanks for the call. Your next question comes from the line of Michael Ciarmoli from Truist Securities. Your line is open. Hey, good morning, guys.

Tom Gentile: Okay, thanks for the call.

Michael Ciarmoli: Your next question comes from a line of Michael Ciarmoli from Truist Securities.

Speaker Change: Your next question comes from the line of Michael Ciarmoli from Truist Securities. Your line is open.

Michael Ciarmoli: Your line is open. Hey, good morning. Thanks for taking the questions.

Michael Frank Ciarmoli: Thanks for taking the question. Tom, maybe just go back to the 26 targets that you inherited. I mean, you know, we've seen a lot of struggles in the supply chain. Looks like 26, or to get there, it looks like it's going to be more back-end loaded. I mean, should we just be thinking more on the low end of this? It would seem like it would be a challenge to get to the upper end now, especially with, you know, the NEO kind of rates getting pushed out. And I mean, you know, we don't really have that much time here for these widebody rates to double.

Michael Ciarmoli: Tom, maybe just back to the 26th target that you inherited. I mean, you know, we've seen a lot of struggles in the supply chain. Looks like 26th, or to get there, it looks like it's going to be more back and loaded. I mean, should we just be thinking more on the low end of this? I mean, it would seem like it would be a challenge to get to the upper end now, especially with, you know, the finillo kind of rates getting pushed out. And I mean, you know, we don't really have that much time here for these wide body rates to double.

Michael Frank Ciarmoli: Hey, good morning, guys. Thanks for taking the question. Tom, maybe just back to the 26 targets that you inherited. I mean, you know, we've seen a lot of struggles in the supply chain. Looks like 26, or to get there, it looks like it's going to be more back-end loaded. I mean, should we just be thinking more on the low end of this? I mean, it would seem like it would be a challenge to get to the upper end now, especially with...

Speaker Change: You know, the NEO kind of rates getting pushed out and I mean, you know, we don't really have that much time here for these wide body rates to double. And I mean, I think the confidence level in the supply chain, you know, we probably got to be more conservative.

Thomas C. Gentile: And I mean, I think the confidence level in the supply chain, you know, we probably have to be more conservative. So, you know, should we think about more of the low end? And then I guess on the same side is cash flow generation still thinking greater than 800 million? Yeah, well, look, I wouldn't change the midterm outlook at all. We're very confident in the outlook. I wouldn't be saying low-end; I would be saying the same, if not even better.

Michael Ciarmoli: And I mean, I think the confidence level and the supply chain, you know, we've probably got to be more conservative. So, you know, should we think about board the low end?

Tom Gentile: And then I guess at the same side is cashflow generation still thinking greater than 800? No, I wouldn't change the midterm outlook at all. We're very confident in the outlook. I wouldn't be saying low end. I would be saying the same, if not even better. The demand is there, and the plans are in place to increase the building. So we said 800 million over the three years. And we're going to keep to that and look to exceed it. You know, we're very bullish on the midterm outlook. And we feel confident in it. Some softness, obviously in the back half of 2024, but the outlook for 2526 and 27 still remains very strong, yet not stronger based on the recent orders and the recent indications on present rates.

Speaker Change: So, you know, should we think about more of the low end and then I guess at the same side is cash flow generation still thinking greater than $800 million?

Speaker Change: Yeah, well look, I wouldn't change the midterm outlook at all. We're very confident in in the outlook. I wouldn't be saying low-end, I would be saying the same, if not even better.

Thomas C. Gentile: The demand is there, and the plans are in place to increase the build rate. So we said $800 million over three years, and we're going to keep to that and look to exceed it. We're very bullish on the midterm outlook, and we feel confident in it.

Speaker Change: The demand is there, and the plans are in place to increase the build rate. So we said $800 million over the three years, and we're going to keep to that and look to exceed it.

Speaker Change: We're very bullish on the midterm outlook, and we feel confident in it. Some softness, obviously, in the back half of 2024, but the outlook for 2025, 2026, and 2027 still remains very strong, if not stronger, based on the recent orders and the recent indications on production rates. It'll be interesting to see what happens in Farnborough and what kind of orders come out, particularly for wide bodies.

Michael Frank Ciarmoli: Some softness, obviously, in the back half of 2024, but the outlook for 2025, 2026, and 2027 still remains very strong, if not stronger, based on the recent orders and the recent indications on production rates. It'll be interesting to see what happens at Farnborough and what kind of orders come up, particularly for wide bodies, and that's probably, if anything, just going to improve the outlook. Got it, got it

Tom Gentile: It'll be interesting to see what happens in Farmer. And what kind of orders come out, particularly for wide bodies. And that's probably, if anything, just going to improve the outlook. Got it.

Speaker Change: And that's probably, if anything, just going to improve the outlook.

Thomas C. Gentile: Just the last one on the cash. Given your product has a shelf life, given this kind of softness in the back half, is there any kind of destocking risk or any kind of thing moving around with inventories that we should be aware of? No, I don't, I don't think so. You know, in terms of the shelf life for the product, it's, it's, it's, it's, you know, a fairly long time. It's kept in freezers; it can, and it can last for over a year.

Tom Gentile: Just the last one on the cash. Given your product has a shelf life, given the kind of softness in the back half, any kind of destocking risk or any kind of thing moving around with inventory that we should be aware of? No, I don't think so. You know, in terms of the shelf life for the product, it's a fairly long time. It's kept in freezers. It can last for over a year. And there's plenty of freezer capacity out there because everybody would produce a much higher rate before the pandemic. So that's not an issue.

Speaker Change #100: Got it, got it. Just the last one on the cash. Given your product has a shelf life, given this kind of softness in the back half, any kind of destocking risk or any kind of thing moving around with inventories that we should be aware of?

Speaker Change #101: No, I don't. I don't think so. You know, in terms of the shelf life for the product, it's, it's, it's, it's, you know, a fairly long time. It's kept in freezers. It can it can last for over a year. And there's plenty of freezer capacity out there because everybody was producing at much higher rates before the pandemic. So, so that's not an issue whatsoever. Okay, got it. Thank you.

Tom Gentile: Okay. Got it. Thank you.

Thomas C. Gentile: And there's plenty of freezer capacity out there because everybody was producing at much higher rates before the pandemic. So, that's not an issue whatsoever. Okay. Thank you. Your next question comes from Richard Safran from Seaport Research Partners. Your line is open. Tom, Patrick, and Kurt, good morning.

Richard Safran: Your next question comes from Alina, Richard Safran from Seaport Research Partners.

Speaker Change #102: Thank you.

Speaker Change #102: Your next question comes from a line of Richard Safran from Seaport Research Partners. Your line is open.

Richard Safran: Your line is open.

Richard Safran: Tom Patrick Kurt, Good morning. So for cash conversion, you way back when you did see a pass to 100% made it clear you weren't sure that was going to happen in 24. But I'm wondering, since you're maintaining your bullish midterm outlook, is that something we could see in 2025, or might 100% cash conversion be more by 26? Boeing seemed to have the posture of the deliveries. The output was going to be very low until Spirit was pretty cleaned up, then the traveled work in particular was no longer taking place and the fuselages were clean and to spec.

Richard Tobie Safran: Tom, Patrick, Kurt, good morning.

Richard Tobie Safran: So for cash conversion, way back when you did see a path to 100%, you made it clear you weren't sure that was going to happen in 24. But I'm wondering, since you're maintaining your bullish midterm outlook, is that something we could see in 2025? Or might 100% cash conversion be more like 26? No, I mean, I think the softness we're seeing, and it's not massive softness.

Richard Tobie Safran: So, for cash conversion, way back when you did see a pass to 100%, made it clear you weren't sure that was going to happen in 24, but I'm wondering since you're maintaining your bullish midterm outlook, is that something we could see in 2025 or might 100% cash conversion be more like 26?

Patrick Joseph Winterlich: I mean, it's a 2% adjustment in top-line revenues, just to sort of put things in perspective. We still see that line to 100% net income cash conversion, 25 and beyond. We're clearly moving in that direction. And we still have that confidence, Rich.

Speaker Change #104: No, I mean, I think the softness we're seeing, and it's not massive softness. I mean, it's a 2% adjustment in top-line revenues, just to sort of put things in perspective. We still see that line to 100% net income, cash conversion, 25 and beyond. We're clearly moving in that direction.

Richard Tobie Safran: Okay. And just lastly, here, one more question on M&A. You know, I know you're asked this every once in a while, but you've been pretty consistent about what you're considering for technology bolt-ons. I thought maybe, though, you could comment a bit on the environment and the opportunity set, if you're seeing attractive deals, or, since it's been such a while, is this a case where prices may just be too high, and you can't justify the investment? And on that topic, also, do you think the portfolio as it stands supports your growth strategy? Well, I'll take that one first.

Speaker Change #104: We still have that confidence, Rich.

Rich: Okay, and it just...

Speaker Change #106: Lastly here, one more question on M&A. You know, I know you're asked this every once in a while. You've been pretty consistent about what you're considering in technology bolt-ons.

Rich: I thought maybe though you could comment a bit on the environment and the opportunity set. If you're seeing attractive deals or since it's been such a while, is this a case where prices may just be too high and you can't justify the investment? And on that topic also, do you think the portfolio as it stands supports your growth strategy?

Thomas C. Gentile: In terms of the portfolio, absolutely, it supports the growth strategy that we have. We've got the recovery first over the next several years as production rates increase, and we get back to 2019 levels of production and revenue. And then we have some new opportunities in space and defense, which will continue to help us grow. On the M&A front, we're going to continue to scan the market and look for opportunities, but we're going to be very disciplined.

Speaker Change #107: Well, I'll take that one first. In terms of the portfolio, absolutely, it supports the growth strategy that we have. We've got the recovery first over the next several years as production rates increase, and we get back to 2019 levels of production and revenue. And then we have some new opportunities in space and defense, which will continue to help us grow. On the M&A front, we're going to continue to scan the market and look for opportunities, but we're going to be very disciplined. We've got a lot of work to do in terms of execution on the rate increases and continue to drive productivity in our factories and continue to innovate so that we can be on the next generation of programs, including the narrowbody.

Thomas C. Gentile: We've got a lot of work to do in terms of execution on the rate increases and continuing to drive productivity in our factories and continue to innovate so that we can be on the next generation of programs, including the narrow bottom, as well as defense in space. So that creates a huge amount of organic growth over the next several years. And for M&A, we'll look for things that extend our advanced composite materials and provide some technological innovations.

Speaker Change #107: So that creates a huge amount of organic growth over the next several years. And for M&A, we'll look for things that extend our advanced composite materials and provide some technology innovations.

Speaker Change #107: But it has to meet our strategic criteria and also we'll have some very high return thresholds that we'll have to meet. And absent that, as we said, we'll continue to issue our dividend and consider future stock repurchases.

Thomas C. Gentile: But it has to meet our strategic criteria, and also, we'll have some very high return thresholds that we'll have to meet. And absent that, as we said, we'll continue to issue our dividend and consider future stock repurchases. Thanks a lot. And our last question today comes from the line of Noah Poponak from Goldman Sachs. Your line is open. Hey, good morning, everyone. Good morning, Noah.

Speaker Change #108: Thanks a lot. Thank you. And our last question today comes from the line of Noah Poponak from Goldman Sachs. Your line is open.

Noah Poponak: Skibits at the large commercial aerospace OEM appear to be pulling from the supply chain at higher rates than their delivery to keep the supply chain humming along for when they eventually are ramping more consistently. How should we be thinking about the risk of how much inventory is in the system, especially given your longer lead time and I guess how much of the back half change is? Expecting an inventory destock, and do we have to think about that happening, you know, beyond 2024?

Speaker Change #108: Hey, good morning, everyone. Morning, Noah. I think that the large commercial aerospace OEMs

Speaker Change #109: Appear to be pulling from the supply chain at higher rates than their deliveries.

Speaker Change #110: to keep the supply chain humming along for when they eventually are ramping more consistently.

Noah Poponak: How should we be thinking about the risk of how much inventory is in the system, especially given your longer lead time and I guess how much of the back half change is

Speaker Change #112: Expecting an inventory destock, and do we have to think about that happening, you know, beyond 2024?

Noah Poponak: Well, I think that is part of what's happening right now as the OEMs are ensuring that the supply chain can continue to get stable and improve their efficiency so as the production rates go up, they're ready to do it. So I think it's just a question of smoothing the production over a time period and not trying to front load it too much. So I think what the OEMs are doing is prudent, and it's going to help improve the stability, the financial, and the operational strength of the supply chain.

Speaker Change #113: Well, I think that is part of what's happening right now, as the OEMs are ensuring that the supply chain can continue to get stable and to improve their efficiency so that as the production rates go up, they're ready to do it.

Speaker Change #113: So, I think it's just a question of smoothing the production over a time period and not trying to front load it too much. So, I think what the OEMs are doing is prudent.

Speaker Change #113: and it's going to help improve the stability and the financial and the operational strength of the supply chain.

Noah Poponak: So I think it's a good and a prudent approach to the production rate increases, and it's all about smoothing the demand between this year and next year so that the supply chain can get back to stability. And just to follow up on what Tom said there Noah, I mean the only meaningful program where that's really happening, I think is the MAX. I mean, I'm not saying it's not happening on the others a little bit, but the only meaningful one is the MAX, and I would remind you of the shift set for Hexcel on the MAX, sort of at the lower end of the red 200 to 500,000 range.

Speaker Change #113: So I think it's a good and a prudent approach to the production rate increases.

Tom Gentile: And just to follow up on what Tom said there, Noah, I mean, the only meaningful program where that's really happening, I think, is the MAX. I mean, I'm not saying it's not happening on the others a little bit, but the only meaningful one is the MAX. And I would remind you of the shift set for Hexcel on the MAX, sort of at the lower end of the 200,000 to 500,000 range. So really, a de-stocking impact because of an adjustment in the supply chain. So really, a de-stocking impact because of an adjustment is not massive for Hexcel on that particular program where that sort of pull is slightly ahead of production. But as Tom said, we're very vigilant on this, but we're not expecting a huge impact.

Noah Poponak: So really, a de-stocking impact because of an adjustment is not massive for Hexcel on that particular program where that sort of pull is slightly ahead of production, but as Tom said, we're very vigilant on this, but we're not expecting a huge impact. Okay, that makes sense. And then, Tom, you know, respecting that you're here now and you're not at Spirit now but just giving your ties to the company, and then I guess, you know, you sell to Spirit now.

Speaker Change #114: Okay, that makes sense. And then, Tom, you know, respecting that you're here now and you're not at Spirit now, but just giving your ties to the company and then I guess, you know, you sell to Spirit now.

Noah Poponak: Boeing seemed to have the posture of, The output was going to be very low until Spirit was... pretty cleaned up, and the traveled work in particular was no longer taking place, and the fuselages were clean and to spec. I guess the June underlying production rate on the MACs looked pretty healthy, but I don't know, do you have any insight into where that stands? I really don't.

Speaker Change #115: Boeing Boeing seemed to have the posture of the deliveries the output was going to be very low until Spirit was

Speaker Change #115: pretty cleaned up and the traveled work in particular was no longer taking place and the fuselages were clean and to spec.

Tom Gentile: You know, the June, I guess the June underlying production rate on the max looked pretty healthy, but I don't know. Do you have any insight into where that stands?

Speaker Change #116: I guess the June underlying production rate on the MAX looked pretty healthy, but I don't know. Do you have any insight into where that stands?

Tom Gentile: I really don't. My whole focus has been on Hexcel, and I'm excited to be here and looking forward to the future. We've got a great opportunity as we go forward, so I'm excited to buy it. Okay, thank you.

Thomas C. Gentile: My whole focus has been on Hexcel, and I'm excited to be here and looking forward to the future. We've got a great opportunity as we go forward, so I'm excited about it. Okay, thank you. Thank you. This does conclude today's conference call. Thank you for your participation. Everyone, you may now disconnect.

Speaker Change #117: I really don't. My whole focus has been on Hexcel, and I'm excited to be here and looking forward to the future. We've got a great opportunity as we go forward, so I'm excited about it. Okay. Thank you.

Unknown Executive: Thank you.

Unknown Executive: This does conclude today's conference call. Thank you for your participation.

Speaker Change #118: Thank you.

Speaker Change #119: This does conclude today's conference call. Thank you for your participation. Everyone, you may now disconnect.

Unknown Executive: Everyone, you may now disconnect.