Q3 2024 The Boeing Co Earnings Call

Thank you for standing by good day, everyone and welcome to the Boeing company's third quarter 'twenty 'twenty four earnings conference call. Today's call is being recorded the management discussion and slide presentation, plus the analyst question and answer session are being broadcast live over the Internet to ask a question on today's conference. Please press the digit one followed by the.

<unk> zero on your Touchtone telephone again, it is one zero for questions. After pressing one zero you will hear a tone that you had been placed in Q pressing one zero again will take you out of queue and may prevent you from being able to ask a question at this time for opening remarks and introductions I am turning the call over to Mr. Matt Welsh.

Speaker Change: This president of Investor Relations for the Boeing Company. Mr. Welch. Please go ahead.

Matt Welsh: Thank you and good morning, welcome to Boeing's quarterly earnings call I am that Welch and with me today are Kelly or bird Boeing's, President and Chief Executive Officer, and Brian West Boeing's Executive Vice President and Chief Financial Officer.

Matt Welsh: And as a reminder, you can follow today's broadcast and slide presentation at Boeing Dot com.

Matt Welsh: Projections estimates and goals included in today's discussion involve risks.

Matt Welsh: Including those described in our SEC filings and in the forward looking statement disclaimer at the beginning of the presentation.

Matt Welsh: We also refer you to the disclosures relating to non-GAAP measures in our earnings release and presentation.

Speaker Change: Now I will turn the call over to Kelly outbreak.

Thanks, Matt and thanks to everyone for joining today's call.

Kelly outbreak: Let me start by saying that it's an honor to be leading the Boeing company.

Kelly outbreak: I've spent my entire career in the aerospace and defense business and one constant has always been the critical role that Boeing plays.

Kelly outbreak: Not just to the A&D industry, but to our national security and the overall global economy.

Kelly outbreak: But we're clearly at a crossroads the trust in our company has eroded.

Kelly outbreak: We're saddled with too much debt.

Kelly outbreak: We've had serious lapses in our performance across the company, which are disappointed many of our customers.

Kelly outbreak: But by the same token we have great opportunities ahead.

Kelly outbreak: Our company backlog is roughly a half a trillion dollars.

We have a customer base that wants us and needs us to succeed.

Kelly outbreak: We have employees, who are thirsty to get back to the iconic company. They know setting the standard for the products that we deliver.

Kelly outbreak: So my mission here is pretty straightforward turn this big shift in the right direction and restore Boeing to the leadership position that we all know in one.

Kelly outbreak: Now to do this is going to require changes in four particular areas and let me introduce them and I'll come back and discuss each one.

Kelly outbreak: First we need a fundamental culture change in the company.

Kelly outbreak: Second we must stabilize the business.

Kelly outbreak: Third we need to improve our execution discipline on new platform commitments across the company.

Kelly outbreak: And fourth while doing the first three we must build a new future for Boeing.

Kelly outbreak: So let me start with arguably the most important changing the culture at Boeing.

Speaker Change: I spent the last two decades working with Boeing in the supply chain.

Speaker Change: So I have an outside in view of Boeing which is very helpful.

Speaker Change: That experience combined now we're seeing things from the inside the company has helped provide an informed view of some of the actions we need to take.

Speaker Change: Much has been written about how we got to where we are but.

Speaker Change: Most also recognized that Boeing was once a benchmark for what good culture looks like and I believe we can return to that legacy.

Speaker Change: I know cultural change starts at the top our leaders from me on down needs to be closely integrated with our business and the people who are doing the design and production of our products, we need to be on the factory floors in the back shops and in our engineering labs.

We need to know what's going on not only with our products, but with our people.

Speaker Change: And most importantly, we need to prevent the festering of issues and work better together to identify fix and understand root cause.

Speaker Change: I've already introduced a much more detailed business cadence to drive this across the organization and this process of change is underway.

Speaker Change: Culture is driven by values and we'll redefine those for the company together.

Speaker Change: This has to be more than the poster on the wall. These values will be used to hold leaders accountable and how they lead our teams in delivering safe high quality products and services to our customers.

Speaker Change: I recently had a meeting with our top executives in the company and we talk specifically about this culture change.

Speaker Change: I see this more as a continuous process improvement rather than a milestone.

Speaker Change: We will be relentless in changing the Boeing culture drew action not just words on a page.

Speaker Change: Now, let me shift to the second item, which is stabilizing the business.

Speaker Change: This has been central to my focus since starting the job in August.

Speaker Change: We have some really big rocks that we need to get behind us to move the company forward.

Speaker Change: The first and foremost on everybody's mind today is ending the iam strike.

Speaker Change: We've been feverishly working to find a solution that works for the company and meets our employees needs.

I met with Union leadership, the first week on the job and let them know whether I was committed to resetting the relationship and I remain committed to getting the team back and improving our relationships. So we don't become so disconnected in the future.

Speaker Change: I'm very hopeful that the package, we put forward will allow our employees to come back to work. So we can immediately focus on restoring the company.

Speaker Change: Once we get back we have the task of restarting the factories and the supply chain and it's much harder to turn this on than it is to turn it off.

Speaker Change: So it's critical absolutely critical that we do this right our safety and quality management system will guide us through the restart and we have a detailed return to work plan in place and I'm really looking forward to getting everybody back and getting to work on that plan.

Speaker Change: One additional area of focus that is critical to our stability is the implementation of the safety and quality plan.

Speaker Change: As you know this is a plan that we have reviewed with the FAA and will be part of the criteria. We use to measure stability of our production system, which is necessary to gain authority to increase 737 rates I'm encouraged with the progress, we're making already and we need to continue that momentum.

Speaker Change: Another big rock to stabilize the company is managing our balance sheet to best support retaining our investment grade credit rating, we have a plan and we're executing that plan and I'm confident that we have a good path forward to manage the realities of our business and retain our investment grade rating.

So I've talked about culture and stability. The third area is improving the execution discipline on our new platforms, whether this be the commercial derivatives of the 737, Max and Triple seven or the series of programs in our Bds business, we have to be better at understanding and managing the risk on these projects.

Speaker Change: More proactively this.

Speaker Change: This includes disciplined program and risk management in all phases of the project, including the bid phase.

Speaker Change: Again, this is an area, where we need the management team much more focused on their programs and much more active working with their customers on ensuring success and anticipating risks before they happen.

Speaker Change: Supply chain management improvements will be critical to this effort.

Speaker Change: Clearly, we have some difficult contracts in our defense business, but we have to do better job of executing on the things that we can control.

Speaker Change: So lastly, the fourth area to discuss is building a new future for Boeing.

Speaker Change: While we're somewhat consumed with the challenges of today, we need to be setting the foundation of the future for Boeing.

Speaker Change: Boeing's, an airplane company and at the right time in the future we need to develop a new airplane.

Speaker Change: But we have a lot of work to do before Theyre. This includes stabilizing our business proving the execution on the development programs streamlining the portfolio to do what we do well and restoring the balance sheet. So that we do have a path to the next commercial aircrafts.

Speaker Change: We need to reset priorities and create a leaner more focused organization.

Speaker Change: We've recently announced a workforce reduction, which will focus on consolidation of areas, where we're not efficient and we need to continue to focus on reducing non essential activity.

Speaker Change: So before I hand, it over to Brian Let me summarize by saying that we have a lot of work to do we.

Speaker Change: We have a plan and changes already underway.

Speaker Change: This is a big shift that will take some time to turn but when it does it has the capacity to be great again.

Speaker Change: This is a company that ushered in the new era of air travel and help lay on the first man on the Moon getting back to the values that helped define this legacy is what will define our future.

Speaker Change: I'm excited about the opportunity and like look forward to working with all of you.

Speaker Change: So with that let me hand, it off to Brian to cover the financials and then we look forward to coming back and answering your questions Brian.

Brian West: Thanks, Kelly and good morning, everyone, let's start with the total company financial performance for the quarter.

Brian West: Revenue was $17 $8 billion down, 1%, primarily driven by lower commercial wide body deliveries, including impacts of the iam work stoppage.

Brian West: The core loss per share was $10.44.

Brian West: Primarily reflecting impacts from the I M work stoppage and previously announced charges across certain commercial and defense programs.

Brian West: Free cash flow was a usage of $2 billion in the quarter with results impacted by lower commercial wide body deliveries and unfavorable working capital timing, including impacts associated with the work stoppage.

Improvement versus prior expectations was driven by better than expected BCA advanced payments.

Brian West: Turning to next page I'll cover Boeing commercial airplanes.

Brian West: Yeah.

Brian West: BCA delivered 116 airplanes in the quarter.

Brian West: Revenue was $7 $4 billion and operating margin was minus 54%.

Brian West: Primarily reflecting previously announced pre tax charges of $3 billion on the Triple seven X and 767 programs. The I M work stoppage and higher period costs, including R&D.

Brian West: Backlog in the quarter ended at $428 billion and includes more than 5400 airplanes.

Brian West: Now I will give more color on the key programs.

Brian West: The 737 program delivered 92 airplanes in the quarter.

Brian West: As noted in mid September we have been making good progress on stabilizing production and preparing for 38 per month by year end are those objectives will now take longer due to the I am work stoppage.

Brian West: Given the strike.

Brian West: And our need to conserve cash we made near term adjustments to broadly stop supplier shipments.

Brian West: We continue to manage supplier by supplier based on inventory levels and for certain suppliers. This will allow them to catch up.

Brian West: We maintain our objective to position to supply chain to support our ramp post strike.

Brian West: The quarter ended with approximately 60 737 dash eights built prior to 2023, the vast majority for customers in China and India.

Around 30 from last quarter.

Additional progress on shutting down the Shadow factory has been impacted by the work stoppage, which will now extend into next year.

Brian West: And the Dash seven dash 10 inventory levels remained stable at approximately 35 airplanes and the certification timelines remain unchanged.

Brian West: On the 77 program, we delivered 14 airplanes in the quarter and as previously noted we continue to work through production recovery plans on heat exchangers and delivery delays associated with seat certifications.

Brian West: The program is currently producing at four per month and still plan to return to five per month by year end.

Brian West: We ended the quarter with 30 airplanes or inventory build prior to 2023 that required rework down.

Brian West: Down five from last quarter.

Brian West: Our ability to finish the rework and shut down the Shadow factory has also been impacted by the work stoppage and will now extend into next year.

Finally on the Triple Seven X program as previously announced the $2 $6 billion pre tax charge, primarily reflects our latest assessment of the certification timelines to address the delays and flight testing of the triple seven dash nine as well as anticipated delays associated with the iam work stoppage.

Brian West: We'll continue to follow the lead of the FAA as we progressed through the certification process and now expect first delivery in 2026.

Brian West: Year to date Triple seven X inventory spend has averaged a bit below $800 million per quarter.

Brian West: The cash profile will look similar to prior development programs with a year prior to first delivery typically the largest use of cash driven by inventory build associated with the production ramp which will unwind as deliveries commence.

Brian West: Moving onto the next page Boeing defense and space.

Brian West: Yes.

Bds booked $8 billion in orders during the quarter, including definitive Isaac a 2.6 billion dollar award from the U S. Air Force for two rapid prototype E. Seven a widescale aircrafts and the backlog ended at $62 billion.

Brian West: Revenue was $5 $5 billion stable year over year, and Bds delivered 34 aircraft in the quarter, including the first production MH 139, a gray well to the U S Air Force.

Brian West: As previously announced Bds recognized $2 billion of pre tax charges on the T. Seven a KC 46, a commercial crew and MQ25 programs in the third quarter and operating margin was minus 43, 1%.

Brian West: In September we indicated that margins would again be negative due to two things.

Brian West: First on the 25% of the portfolio, primarily comprised of fighter and satellite programs, our fighter programs recognize losses in third quarter due to disruption as the F 15 E X ramps up on its shared production line as well as additional cost pressures and winding down F 18 production.

Brian West: Second additional.

Brian West: Additional cost pressures on fixed price development programs. The magnitude of these losses expanded as we close the books, primarily reflecting higher estimated production costs and the T. Seven a program mainly on contracts in 2026 and beyond.

Brian West: And an updated assessment of impacts on the KC 46 day program associated with the I M work stoppage and the decision to conclude production on the 767 freighter.

Brian West: Given the fixed price nature of these contracts will continue to be transparent about impacts as we work to stabilize and mature these programs.

Brian West: While acknowledging these are disappointing results is a complicated development programs and we remain focused on retiring risk each quarter and ultimately delivering these mission critical capabilities to our customers.

Brian West: The plan to improve Bds margins in the medium to long term remains unchanged.

Brian West: Our core business remains solid representing about 60% of our revenue and generally performing in the mid to high single digit margin range with commercial derivatives experiencing margin compression in <unk> due to disruption in the Puget sound factories, including the work stoppage.

Brian West: Broadly the demand for our defense products remains very strong supported by the threat environment confronting our nation and our allies, we still expect the business to return to historical performance levels as we stabilized production execute on development programs and transition to new contracts with tighter underwriting standards.

Moving on to the next page Boeing Global services.

Brian West: Yes.

Brian West: Bgs continues to perform well in the quarter the business received $6 billion of orders in the backlog ended at $20 billion.

Brian West: Revenue was $4.9 billion up 2% primarily on higher commercial volume.

Brian West: Operating margin was 17% up 70 basis points compared to last year unfavorable volume and mix.

Brian West: In the quarter Bgs secured several key services agreements with an a as well as the KC 135 spares contract from the U S Air Force.

Brian West: It's a terrific long term franchise focused on profitable capital efficient service offerings, and executing well with mid single digit revenue growth mid teen margins and very high cash flow conversion.

Brian West: Turning to the next page I'll cover cash and debt.

Brian West: And cash and marketable securities we ended the quarter at $10 $5 billion, primarily reflecting the 2 billion dollar use of free cash flow in the quarter.

Brian West: The debt balance remained stable ending at $57 $7 billion.

Brian West: Last week, we entered into a new $10 billion short term credit facility and now have access to credit facilities totaling $20 billion, all of which remain undrawn.

Brian West: We expect <unk> free cash flow to be a usage driven by the timing of return to work the pace of our production ramp and the unwind of inventory in the balance sheet.

Brian West: While we expect 2025 to be another use of cash we anticipate a significant improvement over this year.

Brian West: Accordingly, we expect to exit next year with real momentum in the business as we return to normal production rates.

Brian West: We continue to take the tough, but necessary actions to preserve cash and safeguard our future.

Brian West: We've worked across the supply chain partners to significantly reduce expenditures, while balancing the associated trade offs.

Brian West: We shared plans to reduce our workforce to align with our financial reality and a more focused set of priorities.

Brian West: We're decisively implementing reductions to our discretionary spending across the company.

Brian West: As we move through this process, we will maintain our steadfast focus on safety quality and delivery for our customers.

Brian West: We remain committed to managing the balance sheet in a prudent manner with two main objectives first prioritize the investment grade credit rating and second allow the factory and supply chain to reset which will take longer as a result of the work stoppage.

Brian West: We're constantly evaluating our capital structure and liquidity levels to ensure that we can satisfy our debt maturities over the next 18 months, while keeping confidence and our credit rating as investment grade.

Brian West: The actions, we have recently taken including establishing the universal shelf registration, which is now effective directly support these priorities and we have a plan to comprehensively address the balance sheet in the near term that could include an offering of equity and equity linked securities.

Brian West: We're confident that over time, the business performance and capital structural will return to levels fully align with an investment grade profile.

Brian West: Near term, we're focused on reaching an agreement with a represented workforce to allow our factories in the Puget sound area to resume and then ramp production in a stable fashion for years to come.

Brian West: Stepping back the markets, we serve are significant and our product portfolio is well positioned demonstrated by our backlog of more than a half a trillion dollars.

Brian West: Long term these fundamentals underpinning our confidence as we manage the business with a long term view built on safety quality and delivering for our customers with that Matt let's open up for questions.

Speaker Change: In order that your question be clearly heard we ask that you not use the speakerphone cell phone or phone headset. Please use your handset to ask a question. If you are on a speaker phone. Please be sure. Your mute function is switched off so your signal can reach our equipment as a reminder, in the interest of time, we are asking that you limit yourself to one single.

Brian West: Part question.

Speaker Change: Your first question comes from the line of Myles Walton from Wolfe Research. Please go ahead.

Myles Walton: Thanks, Good morning, nice to speak with you again Kelly in your in your remarks, you talk about Boeing as an airplane company and so I just want to understand what is core and noncore outside of Boeing commercial airplanes as you see it and specifically how significant portfolio shaping and simplifying the business.

Speaker Change: Is in your turnaround Youre describing.

Speaker Change: Looking forward.

Speaker Change: Yeah. So first of all good talking to you again miles.

Speaker Change: Look as I look at the portfolio and I've made this comment I think that that we're better off being doing less and doing it better than doing more in not doing that well. So we're in the process of taking an evaluation.

Speaker Change: Of the of the portfolio is something a new CEO will always does when you come into our business and looking at those things and asking in the filter of what do we want this company to look like five years 10 years from now and didn't do these things add value to the company or distract us so I'm in the process of going through.

Speaker Change: Through that clearer.

Speaker Change: Clearly our core of commercial airplanes in and <unk>.

Speaker Change: Defense systems are going to stay with the <unk>.

Speaker Change: The Boeing company for the long run, but there's probably some things on the fringe there that we can be more efficient with or that just distract us from our main goal here so more more to come on that miles, but I don't have a specific list in my hand today and I'd ask everybody don't get ahead of me on this I don't have a specific list.

Speaker Change: Things that we're going to keep and we're not going to keep that's something for us.

Speaker Change: To evaluate and the process is underway to start that.

Myles Walton: Okay. Thank you.

Speaker Change: Your next question comes from the line of David Strauss from Barclays. Please go ahead.

Speaker Change: Hello again.

Speaker Change: Yes.

Speaker Change: Hey, David.

Speaker Change: Okay.

Speaker Change: So.

Speaker Change: Wanted to ask you about the balance sheet and the plan there.

Speaker Change: So how you are thinking around the parameters in terms of the size and timing of a potential capital raise I'm sure. This is a function of.

Speaker Change: Your discussions with the rating agencies as well as your ability to generate cash over and over the longer term. So maybe some color on what youre hearing from the credit from the rating agencies as well.

Speaker Change: Your thoughts maybe your initial thoughts around the ability of the company to generate free cash flow in the future relative to that.

Of that $10 billion target that's been out there. Thanks.

Speaker Change: Thanks, David I'll take a shot at that.

Speaker Change: We are in active engagement with the rating agencies and it's a constructive dialogue and they help inform the plan that we have and we do have a plan to address the balance sheet.

From a timing perspective, we've done everything necessary to be in a position to raise capital and we're monitoring events closely and we will access the markets whenever we determine it's the right time.

Speaker Change: In terms of the size question.

Speaker Change: Here's what's important to us on size.

Speaker Change: We're focused on maintaining $10 billion of cash in addition to our revolver capacity as we historically have.

Speaker Change: And we're anticipating our near term cash flows to be usage, driven mostly by timing both in the fourth quarter and next year as we ramp production and the third piece of this is that we have debt maturities in the next couple of years all of that is contextual for how we would think about our funding rates to address the capital needs and ensure some.

Patient liquidity as we execute our recovery game plan.

Speaker Change: So we have a plan we're focused and again, it's all on the priority to protect our investment grade.

Speaker Change: Okay, and Kelly, maybe you could take that.

Speaker Change: A question around the $10 billion target that's out there is that a realistic.

Speaker Change: Target will think about any time over the next several years for this company based on what you've seen so far.

Speaker Change: Yeah, It's too early for me to answer that I would just say with all the financial forecast. The long term outlook are under review and I need some time to to assess that and certainly we need to see some stability in the business to be able to put any kind of target out there. So.

Valuate that but today I'm not ready today to provide any update to that.

Speaker Change: Okay fair enough. Thank you.

Speaker Change: Your next question comes from the line of Shea Sheila <unk> from Jefferies. Please go ahead.

Shea Sheila: Thank you Harry Nice talking with you, Bob and Brian Thanks, as always so Brian you mentioned.

Ladies surge in Q4 and in 2025 as a total.

Shea Sheila: Obviously that assumes positive today can you talk about some of the drivers that were more positive in Q3, how do we think about the Q4 outflow.

Shea Sheila: And what are you assuming for both low delivery vans are in your free cash flow outflow Nextera and boardwalk locker does it become positive anytime in 'twenty five.

Speaker Change: Thanks Sheila.

Speaker Change: So earlier in the third quarter, we had expected working capital to be a drag in line with the first two quarters and as we closed the quarter with a timing benefit from BCA customer advances that cut the expected working capital about in half.

Working capital drag about half.

Speaker Change: So as we look into the fourth quarter lots.

So a lot's going to depend upon the timing of the return to work and the pace the production ramp.

Speaker Change: But you could see a fourth quarter working capital drag similar to the first two quarters is we've essentially had a shift of deliveries to the right as were building inventory. So net net free cash flow for the fourth quarter could look similar to the second quarter, depending on a lot of things coming together as we move through the course of the end of the year.

Speaker Change: As it pertains to 2025 2025 free cash flow will be significantly better than.

And then 2024 and we expect the first half to be a cash usage in the second half turn positive and then build real momentum as we exit the year and return to more stable production rates. So the calendar year is likely to be usage, but the profile is important as we set ourselves up for the recovery and then for 'twenty six.

Speaker Change: And beyond in terms of the divisions.

Speaker Change: There is no doubt the BCA will be driven by those.

Speaker Change: Production rate ramps, which are too early to call those as we stand today and then beef bds is going to be impacted by some of the cash implications of some of the charges that we've announced.

Speaker Change: But we've got a good handle on that and we will be more descript as we get in towards the end of the year.

Speaker Change: Thank you.

Unknown Attendee: Your next question comes from the line of Doug Harned from Bernstein. Please go ahead.

Speaker Change: Your next question comes from the line of Doug <unk> from Bernstein. Please go ahead.

Speaker Change: Good morning, and thank you.

Unknown Attendee: Good morning. Thank you.

Speaker Change: Yep.

Doug Harned: Kelly, you've referred to the idea that Boeing was once a benchmark for culture. And that was a long time ago. And if you look over the last five years, Boeing lost many experienced leaders from the senior management to the factory floor who were part of that culture.

Speaker Change: Kelly you've referred to the idea that Boeing was one set a benchmark for culture.

Speaker Change: And that was that was a long time ago and if you look over the last five years growing plus many experienced leaders from senior management to the factory floor, who were part of that culture.

Doug Harned: And you're also initiating a large head count reduction. So, how are you thinking about rebuilding leadership talent in this environment, to make your goals for cultural change, stabilization of the business, and execution that's evil. And should this involve internal and external approaches?

Speaker Change: And you're also initiating a large head count reductions. So how are you thinking about rebuilding leadership talent in this environment to make your goals for cultural chain stabilization of the business and execution achievable.

Speaker Change: And so this involve internal and external approaches.

Speaker Change: Yeah, Doug So so first of all I am still in the process of traveling around meeting our people, particularly two and three levels down My first impression is we've got great people in the Boeing company Fantastic people, we just got to get everybody in the right position running the right plays focused on the right.

Kelly: Yeah, Doug. So first of all, I'm still in the process of traveling around, meeting our people, particularly, you know, two and three levels down. My first impression is we've got great people in the Boeing Company, fantastic people. We just got to get everybody in the right position, running the right place, focused on the right things. And I think we've got some work to do there. Of course, I'll supplement the team as needed if we see that we need some additional resources from outside. I do think some outside view also helps us think a little bit when we're looking at culture change.

Speaker Change: Things and I think we've got.

Speaker Change: Some work to do there of course ALS supplement the team as needed if we see that we need some additional resources from outside I do think some outside view also helps us think a little bit when we're looking at it at culture change, but you are right the culture I'm referring to.

Kelly: But you're right, the culture I'm referring to at Boeing probably most of the folks who lived in that culture have retired or moved on. So our culture change here is really got to be for the entire company. We've got to come back and reevaluate the values that we have. The starts at the top. I know that it starts at the top. I've had a meeting with that top leaders in the company, and we've talked explicitly about what we're going to do to change the culture. But it's going to take time, as I said in my prepared remarks.

Speaker Change: Boeing probably most of the folks who lived in that culture have retired or moved on so our culture change here is really got to be for the entire company. We've got a comeback and reevaluate the values that we have this starts at the top I know that it starts at the top I had a meeting with.

Speaker Change: The top leaders in the company and we've talked explicitly about what we're going to do to change the culture, but it's going to take time as I said in my prepared remarks. This isn't something that there's just a light switch that that flips.

Kelly: This isn't something that there's just a light switch that flips. Will continue to work this. It's a never-ending process. We've got to get to a point where the organization itself holds itself accountable to the cultural aspects and the values of the company. You know, I know what that looks like. I've been in the company where the values and the culture are very, very strong, and it becomes self-policing and self-developing as you bring new people in. So I think this is something that we can do. I think we may have to supplement in certain areas with some additional outside resources, but in the main, we need to turn the culture around with every employee here.

Speaker Change: We will continue to work this is a never ending process.

Speaker Change: We got to get to a point, where the organization itself holds itself accountable to the cultural aspects in the values of the company and you know I know what that looks like I've been in the company, where we're the values and the culture is very very strong and it becomes self policing and self developing as you bring new.

Speaker Change: People in so I think I think this is something that we can do.

Speaker Change: I think we may have to supplement in certain areas with some additional outside resources, but in the main we need to turn the culture around with every every employee here. We've got a large employee base now let me come to the 100.

Kelly: We've got a large employee base.

Kelly: Now let me come to the 100 or the announcement on the workforce reduction. Look, as I've come here, we're inefficient and one of the things I've heard from a lot of employees is there's just too much overhead. It's closed them down and being able to get their work done. So we're going to really focus this workforce reduction in streamlining those overhead activities, consolidating things that can be consolidated. And I wouldn't think of it like we're going to take people off the production or out of the engineering labs. It's not what our intent here. It's about around getting ourselves more efficient and have a more lean and mean machine going forward.

Speaker Change: The announcement on the workforce reduction.

Speaker Change: As ive come yet.

Speaker Change: Were inefficient and one of the things I've heard from a lot of employees is is there's just too much overhead it slows them down and being able to get their work done so we're going to really focus.

Speaker Change: This workforce reduction reduction and streamlining those overhead activities consolidating things that can be consolidated and I wouldn't think of it like we're going to take people off the production.

Speaker Change: Our out of the engineering labs, that's not what our intent here it's about around.

Speaker Change: Getting ourselves more efficient.

Speaker Change: And have a more lean and mean machine going forward and I think that's going to be really important as we ramp up the production as Brian talked about over the next year.

Kelly: And I think that's going to be really important as we ramp up the production, as Brian talked about over the next year.

Speaker Change: Very good thank you.

Speaker Change: Your next question comes from the line of Ron Epstein from Bank of America. Please go ahead.

Unknown Attendee: Good morning, Kelly. Nice to talk to you again. Hi Ron.

Speaker Change: Hey, Good morning, Kelly Nice to talk to you again, hi, Ron.

Unknown Attendee: When you, when you sit back and you think about where you want the Boeing company to be inside years, how do you think about that? I mean, this is kind of a dress, as some of the questions we've already hit. I mean, where do you think it's other in a new airplane and where, really, where could this company be? And, you know, as outsiders looking in, you know, what should be expected that it will be?

Ron Epstein: When you when you sit back and just think about where you want the growing company, but inside mirrors.

Speaker Change: How do you think about that kind of addresses some of the questions regarding it.

Speaker Change: Where do you think he keeps other than a new airplane and really where could this company.

Speaker Change: And you know as outsiders looking in.

Speaker Change: What should we expect that it will be.

Kelly: Well, look, I'm still, you know, as I just said before, I'm still going through that process of, in detail, understanding what, what do we want to look like? But it's clear, I want to, I want to be the leader in the aerospace and defense market. I want to be setting the standard for the products that we deliver. I want our customers doing our marketing for us, not us doing our marketing, and we've got to get to a point where our engineering capability and our production capability is actually, is doing the talk. So execution is going to be extremely critical.

Speaker Change: Well look I'm still as I've said before I'm still going through that process.

Speaker Change: In detail understanding what do we want to look like but it's clear I want to I want to be the leader in the aerospace and defense market I want to be setting the standard for the products that we deliver I want our customers do and our marketing for us not us doing our marketing and we've got to get to a point, where our engineering capability.

Speaker Change: In our production.

Speaker Change: Capability is actually is doing the talk so execution is going to be extremely critical I do think we need to focus on the things that we can be good at.

Kelly: I do think we need to focus on the things that we can be good at. This is not a situation where we have to figure out what market opportunities are we going to pursue. They're right in front of us. Our backlog is so strong. Our demand for our products is so strong. This is about getting ourselves focused on the things that we can do well and executing on those things. And what comes out of that, you can, you can run the numbers. I mean, the demand is fantastic for our product lines and for efficient as we deliver those into the market.

Speaker Change: This is not a situation where we have to figure out what market opportunities are we going to go pursue that right in front of US. Our backlog is is so strong our demand for our products is so strong. This is about getting ourselves focused on the things that we can do well and executing on those things.

Speaker Change: And what comes out of that.

Speaker Change: You can you can run the numbers I mean, the demand is fantastic for our product lines and if we're efficient as we deliver those into the market the sky's the limit for us.

Kelly: The sky's a limit for us.

Speaker Change: Yeah, Okay, alright, thank you.

Unknown Attendee: Yeah, all right.

Unknown Attendee: Thank you.

Seth Seifman: Your next question comes from the line of Seth Sipheman from JPMorgan. Please go ahead.

Speaker Change: Your next question comes from the line of Seth <unk> from Jpmorgan. Please go ahead.

Unknown Attendee: Okay.

Seth: Okay. Thanks, very much good morning, and good to speak with you Kelly.

Seth Seifman: Thanks, Frank Mosh. Good morning and good to speak with you, Kelly.

Seth Seifman: I said, if I could do a question and a clarification. You know, Kelly, I wonder if you could talk a little bit about the defense business. You know, I think a lot of us have been surprised by the magnitude of the charges there in recent years. There's obviously some tough contract terms, but you know, the fact that the charges are so persistent suggests that there's an estimating problem there as well.

Speaker Change: Maybe if I can do.

Speaker Change: Jana and a clarification.

Seth: Kelly I Wonder if you could talk a little bit about the defense business.

Speaker Change: I think a lot of us have been surprised by the magnitude of the charges. There in recent years, there's obviously some tough contract terms, but.

Speaker Change: The fact that the charges are so persistent suggests that theres, an estimating problem there as well and so what are you seeing as kind of the core of the problem at DDS and what does it take to get to an acceptable level. There and then maybe Brian you talked about.

Seth Seifman: And so, you know, what do you see is kind of the core of the problem at BDS and, you know, what does it take to get to an acceptable level there? And then maybe Brian, you talked about getting to an acceptable production rate by the normal production rates by the end of it next year. What are those normal production rates?

Getting to an acceptable production rate.

Speaker Change: <unk> production rates by the end of the next year what are those normal production rates.

Speaker Change: Okay. Let me, let me start with the Bds portfolio. So everything you said is true we've got some some tough contracts and there is no magic bullet to that we're going to have to work our way through some of those tough contracts, having said that the discipline about what we can control on those contracts needs to get better or.

Kelly: Okay. Let me, let me start with the BDS portfolio. So everything you said is true. We've got some tough contracts, and there's no magic bullet to that. We're going to have to work our way through some of those tough contracts.

Kelly: Having said that, the discipline about what we can control on those contracts needs to get better. Our EAC process needs to get better; our risk management. This is the thing that I think is so important: is that we're not admiring these risks, but we're acting on them. So we've been carrying risks in these programs, and I don't think we've been doing enough work with our customers to figure out how to be risk these things before it turns into an EAC overrun. So that's what I've got the team focused on doing.

Speaker Change: Process needs to get better.

Speaker Change: Our risk management. This is the thing that I think.

Speaker Change: Is so important is that we're not admiring these risks, but we're acting on them. So we've been carrying risks in these programs and I don't think we've been doing enough work with our customers to figure out how to de risk. These things before the before it turns into an EAC overrun. So that's what I've got the team focused on doing a lot more.

Kelly: A lot more deep dive, a lot deeper look at the programs. A lot more looking around the corner, not just dealing with what today's problem is going to be because, as you pointed out, we've gone from today's problem to today's problem to today's problem, and that's because we're not looking around the corner enough on these programs. And some of that means that you've got to be better at working with your customer to define success on these programs going forward. So look, it's going to take a lot of work. We're not going to be able to just wave a wand and clean up these troubled contracts.

Speaker Change: <unk> a lot more deep dives a lot deeper look at the programs a lot more looking around the corner not just dealing with what today's problem is going to be because as you pointed out we've gone from today's problem to today's problems of disease problem and Thats because were not looking around the quarter enough on these programs and some of that.

Speaker Change: And is that you've got to be better at working with your customer to define success on these programs going forward. So look it's going to take a lot of work.

Speaker Change: We're not going to be able to just wave a wand and clean up. These of these troubled contracts, we signed up to some things that are problematic.

Kelly: We signed up to some things that are problematic. But we're also, I will tell you, really focusing on our bid and proposal activity, putting discipline around that to make sure that we absolutely understand the risk that we're taking on as we enter into new contracts as well.

Speaker Change: But we're also I will tell you are really focusing on our bid and proposal activity putting discipline around that to make sure that we absolutely understand the risk that we're taking on.

Speaker Change: As we enter into new contracts as well so burned down the tough ones get better execution on on the future and I think the opportunities are there we know how to run these.

Kelly: So, burn down the tough ones, get better execution on the future, and I think the opportunities are there. We know how to run these programs. We just have lost a little bit of discipline. And I'll tell you, I don't think our people are close enough to the people in the labs, on the factory floor, identifying what's keeping us from being successful. And so, you know, we've started, we've made some changes in that regard, and there's more to come to focus on these EACs. We just got to get better.

We know how to run these programs. We just have lost a little bit of discipline and I will tell you I don't think our people are close enough to the people in the labs and on the factory floor identifying what's keeping us from being successful and so we've started we've made some changes in that regard and there's more to come to.

Speaker Change: To focus on on these Eac's, we just got to get better.

Brian West: I set the your BCA question prior to the work stoppage. We had a plan in place to get to 38 per month on the 737. We were making very nice progress. We were starting to bring up that third line in Renton, and then the work stop it happened. So our expectation is, once we get back to work, we ramp production and move through next year. We'll get back on track, and then we'll be having discussions with the regulator about increasing beyond 38 per month. All of that is not specific and timing, but those are kind of the milestones that we look forward to getting through as we go through next year.

Speaker Change: It's at the BCA question prior to the work stoppage.

Speaker Change: We had a plan in place to get $2 38 per month on the 737.

Speaker Change: We're making very nice progress we are starting to bring up that third line in Renton and then at work stoppage happened. So our expectation is once we get back to work, we ramp production and move through next year, we will get back on track and then we'll be having discussions with the regulator about increasing beyond 38 per month.

Speaker Change: All of that is not specific timing, but those are kind of the milestones that we look forward to getting through as we go through next year.

Okay. Thank you.

Peter Arment: Thank you. Your next question comes from the line of Peter Arment from Baird. Please go ahead.

Speaker Change: Your next question comes from the line of Peter Arment from Baird. Please go ahead.

Unknown Attendee: Yeah, thanks.

Peter Arment: Yes. Thanks, good morning, nice to talk to you again Kelly.

Peter Arment: Good morning. Nice to talk to you again, Kelly.

Peter Arment: Hey, Kelly, you spent a few decades as a supplier and are very familiar with Boeing from the outside. Now you're inside. If you talk a little bit about you've got a Boeing has a deal to acquire Spirit and hold in house. How you're thinking about kind of that and being vertically integrated and what kind of capabilities. I know you've got a lot on your plate, still evaluating lots of things in the portfolio and things, but could you maybe address that point? Thanks.

Speaker Change: Ali.

Speaker Change: You spend a few decades.

Speaker Change: As a supplier and are very familiar with.

Speaker Change: <unk> from the outside and now Youre inside could you talk a little bit about <unk>.

Speaker Change: <unk> got a Boeing has a deal to acquire spirit and pulled in house, how youre thinking about kind of that and being vertically integrated and what kind of capabilities. I know you got a lot on your plate still evaluating lots of things in the portfolio and things, but could you maybe address that point. Thanks, Yes first of all just to be clear, there's no change in our commitment to spirit.

Kelly: Yeah, first of all, just to be clear, there's no change in our commitment to the spirit acquisition and the integration, and that's clearly one of our major activities here in terms of stabilizing the business. This is their big part of the supply chain. Now, you know, the deal won't close to sometime next year. So it's very important that we work closely with spirit and we are in improving their performance so that they support our ramp up. And you know, I like what I see there. Peter, we're making good progress in pushing the defects back into the system to where they're originating and then getting that root cause to fix those.

Speaker Change: <unk> and the integration.

Speaker Change: And that's clearly one of our.

Speaker Change: Major activities here in terms of stabilizing the business as they are a big part of the supply chain now the deal won't close till sometime next year. So it's very important that we work closely with spirit and we are.

Speaker Change: In improving their performance so that there so that they support our ramp up and I like what I see there Peter we're making good progress in pushing.

Speaker Change: The <unk> back into the system to where they're where they're originating and then getting that root cause to fix those and prior to the strike we were starting to see some pretty good improvement in the overall quality of the fuselage is coming back and so.

Kelly: And part of the strike, we were starting to see some pretty good improvement in the overall quality of the fuselage is coming back in. So no change in our strategy with Spirit. I think once we get that under our belt, it'll be easier for us to integrate and tightly couple the improvements there. And I think that'll be even a step change improvement from where we are today. But we've got a lot of work to do with spirit. We've got several hundred people on their site to, you know, every day, helping them work through some of their challenges.

Speaker Change: No change in our strategy with spirit I think once we get that.

Under our belt, it'll be easier for us to integrate and tightly coupled with the improvements there and I think that'll be even a step change.

Speaker Change: Improvement from from where we are today, but we've got a lot of work to do with spirit, We've got several hundred people.

Speaker Change: On their site.

Speaker Change: Every day, helping them.

Worked through some of their challenges and it's going to be critical to our ramp up.

Kelly: And it's going to be critical to our ramp up.

Peter Arment: Appreciate the color. Thanks, Kelly.

Speaker Change: I appreciate the color thanks, guys.

Noah Poponak: Your next question comes from the line of Noah Palpeneck from Goldman Sachs. Please go ahead.

Your next question comes from the line of Noah <unk> from Goldman Sachs. Please go ahead.

Unknown Attendee: Hey, good morning, everyone. I know.

Speaker Change: Hey, good morning, everyone.

Speaker Change: No.

Noah Poponak: Just to be 100 percent clear, you guys are saying you expect a negative free cash flow for four year 2025? Yes.

Speaker Change: Just to be 100% clear you guys are saying you're expecting negative free cash flow for full year 2025.

Speaker Change: Yes.

Brian West: So Brian, can you talk maybe a little bit more about the pieces of that? Because I guess I would have thought, you know, if you could have a little bit of max production recovery momentum. Exiting 24 into 25, you could certainly get that to a cash flow positive place. Eight, seven, it sounds like is on pretty decent footing, exiting the year. You still have a ton of inventory to unwind. I guess I don't know where you stand with the advances relative to being behind schedule. And I guess I don't know what you're assuming for defense.

Speaker Change: So Brian can you talk maybe a little bit more about the pieces of that because I guess I would've thought.

Speaker Change: If you get out a little bit of Max production rate recovery momentum exiting 'twenty four 'twenty five.

Speaker Change: Certainly get that to a cash flow positive place 87, it sounds like us.

Speaker Change: I'm pretty decent footing exiting the year, you still have a ton of inventory unwind.

Speaker Change: I guess I don't know, where you stand with the advances relative to being behind schedule and I guess I don't know what youre, assuming for defense and maybe maybe the Max.

Brian West: And maybe the max ramp back up post labor dispute takes is a lot tougher than I'm appreciating, but maybe you could just talk more about those moving pieces that roll up to that.

Speaker Change: Ramp back up post labor dispute takes or is a lot tougher that I'm appreciating but.

Speaker Change: Maybe you could just talk more about those moving pieces that roll up to that.

Brian West: Sure. So, first of all, it will be significantly better as our expectation versus 2024. And the moving pieces are exactly that you laid out in terms of the commercial side of our business in addition to the triple seven X, which is going to be at that cash flow, you know, most investment as it gets ready for an EIS in 2026, which is going to put further pressure on the cash flow broadly speaking.

Sure. So first of all it will be significantly better as our expectation versus 2024 and the moving pieces are exactly what you laid out in terms of the commercial side of our business. In addition to the Triple S. Avonex.

Speaker Change: Which is going to be at that cash flow.

Speaker Change: Most investment as it gets ready for in <unk> in 2026, I was just going to put further pressure on the cash flow, but broadly speaking we have to have.

Brian West: We have to have a return to work. We didn't have a ramp. We didn't have a ramp beyond 38. All things that we don't have clarity on as we sit here today, but one we're making some general forecast of what that might look like. And we know the first thing we need to do is get back to work in the factory. So we'll get more specific as we move through the end of the year in the next year and appreciate that, you know, all of that is going to be that profile that I describe, which is we typically have a first half cash usage clearly first quarter, but then it's going to turn in the second half.

Speaker Change: Return to work we didn't have a ramp we then have a ramp beyond 38, all things that we don't have clarity on as we sit here today, but one we're making some general forecast of what that might look like.

Speaker Change: <unk>.

Speaker Change: We know that the first thing we need to do is get back to work in the factory. So we will get more specific as we move through.

The end of the year and into next year and appreciate that all of that is going to be that profile that I described which is we typically have a first half cash usage clearly first quarter, but then it's going to turn in the second half and then we're going to exit with more momentum as the production in the factories heal and recover and terms.

Brian West: And then we're going to exit with more momentum as the production in the factories heals and recovers in terms of BDS. You know, we've got charged a bit announced.

Speaker Change: Bds.

Speaker Change: We've got charges had been announced some of those charges are going to be more near term in focus that we have to acknowledge and we look forward to that team operating a game plan to execute with a much different level of <unk>.

Brian West: Some of those charges are going to be more near term and focused, and we have to acknowledge, and we look forward to that team operating a game plan to execute with a much different level of performance as we exit next year. So it's all in the mix. It's hard to call it this moment, and we'll keep you posted on how all these levers are going to move as we get towards the early part of the year.

Speaker Change: Performance as we exit next year. So it's all in the mix, it's hard to call at this moment and we'll keep you posted on how all of these levers are going to move as we get towards the early part of the year.

Brian West: Peter, I guess what's your best guess of number of months it takes to get the max back to what that first half of September was looking like once you have a labor resolution? Yeah, so hey, know this Kelly. Let me, I'm not going to give you an exact month because I don't know what the exact month is going to be. Let me tell you kind of some of the steps that we have to take that we've got in our plan.

Speaker Change: I guess, what's your best guess of number of months it takes to get the Max back to what that first half of September was looking like.

Speaker Change: Once you have once you have labor resolution, yes, So hey, no. This Kelly, let me, let me I'm not going to give you an exact month because I don't know what the exact month is going to be let me tell you kind of some of the steps that we have to take that we've got in our plan. So first of all it will probably be a couple of weeks to bring the members back.

Brian West: So, first of all, there'll probably be a couple of weeks to bring the members back. We have a recertification effort and a retraining effort that we're going to do. For those who haven't been, who are trained on their job and didn't get enough time on an airplane before they went out on strike, we're going to go through a retraining activity. It is so much more important that we do this right than fast coming out of the shoot. As you know, we've got the supply chain right now that we've turned off in many cases. So I'm anticipating we're probably going to have a little bumpy return from the supply chain.

Speaker Change: We have a recertification effort and a retraining effort that we're going to do for those who havent been who were trained on their job and didn't get enough time on an airplane before they went out on strike, we're going to go through a retraining activity. It is so much more important that we do this right than fast coming out of the chute.

Speaker Change: As you know we've got.

Speaker Change: The supply chain right now that we've turned off in many cases, so I'm anticipating we're probably going to have a little bumpy a return from the supply chain. We've tried to manage that as best we could.

Brian West: We've tried to manage that as best we could and keep folks like Spirit, for example, on fuselage, keep them funded and moving forward. But there are some folks who've had to stop and are going to start back up. And so we've got to be realistic about some schedule issues associated with bringing the supply chain back on.

Speaker Change: Folks like Spirit for example on fuselage keep them funded and moving forward, but there are some folks who've had to stop and are going to start back up and so we've got a.

Speaker Change: Be realistic about some some.

Speaker Change: Schedule issues associated with bringing the supply chain back on the other thing that I think is really important as you know we have this 38 a month.

Brian West: The other thing that I think is really important is, you know, we have this 38-month cap with the FAA. We've got a safety and quality management plan in place. We've laid that flat with the FAA and that monitors a lot of key metrics within our production system. And those metrics have to be trending in the right direction, and they have to be meeting certain thresholds for us to achieve a rate increase. And we actually won't take it to the FAA if we're not achieving those rate increases. We're going to make sure that we take care of that.

Speaker Change: Cap with the FAA, we've got our safety and quality management plan in place, we've laid that flat with the FAA and that monitors a lot of key metrics within our production system and those metrics have to be trending.

Speaker Change: Trending in the right direction and they have to be meeting certain thresholds for us to achieve.

Our rate increase and we actually won't take it to the FAA. If we're not achieving those rate increases we're going to make sure that we take care of that but I'm anticipating the first rate increase this is going to be the first time that we've done it in the FAA has done it and so I think the first one is probably going to be the hardest goal and beyond right.

Brian West: But I'm anticipating the first rate increase. This is going to be the first time that we've done it, and the FAA has done it. And so I think the first one's probably going to be the hardest, going beyond rate 38. And so, you know, we just can't be overly aggressive in how we're forecasting that because anything in aerospace, the first time you do it, it's hard. And this will be the first time, you know, there's a lot of dynamics around both the technical parts of rate increases and the political dynamics around our rate increases. So we absolutely have to make sure that we're not increasing rate when we're not ready.

Speaker Change: 38, and so we just can't be overly aggressive in how we are <unk>.

Speaker Change: Forecasting that because anything in aerospace the first time you do it is hard.

Speaker Change: And this will be the first time and you know theres a lot of dynamics around.

Speaker Change: Both the technical parts of rate increases in the political dynamics around our rate increases. So we absolutely have to make sure.

Speaker Change: That we're not increasing rate when we're not ready.

Brian West: And I'm in direct lockstep with the FAA on that. So, you know, those are things. I think the first rate increases something for us all to watch. I think they'll get easier for the sequential rate increases after that throughout the year.

And.

Speaker Change: <unk> and <unk>.

Speaker Change: Direct lock step with the FAA on that so you know those are things I think the first rate increase is something for us all to watch I think they'll get easier for the sequential rate increases after that throughout the year and as Brian said we.

Brian West: And as Brian said, you know, we should exit next year in a much more, I'll call it, normal or recovered fashion.

Speaker Change: Should we should exit.

Speaker Change: Next year in a much more I'll call it normal or recovered fashion.

Unknown Attendee: Okay, thank you.

Speaker Change: Okay. Thank you.

Scott Deuschle: Your next question comes from the line of Scott Doishol from Deutsche Bank.

Speaker Change: Your next question comes from the line of Scott <unk> from Deutsche Bank. Please go ahead, hey, good.

Unknown Attendee: Please go ahead. Hey, good morning. Good morning.

Good morning.

Speaker Change: Good morning.

Scott Deuschle: Kelly, just following up on supply chain, can you provide more detail on how you're managing supply chain through this work stoppage and also what specific steps you're taking to ensure that, you know, supply chain remains in a position to ramp up once the strike is over. And I asked because, you know, last time there was a broad-based work stoppage, getting things back on track was clearly a challenge. And frankly, we're still seeing the ghosts of that four years later. And so just looking for some more clarity here on how we kind of avoid, well, they answer that takes the past.

Kelly just following up on supply chain can you can you provide more detail on how youre managing supply chain through this work stoppage and also what specific steps you're taking to ensure that our supply chain remains in a position to ramp up once the strike is over.

Speaker Change: And I ask because last time, there was a broad based work stoppage and getting things back on track was clearly a challenge and frankly, we're still saying that goes to that four years later.

Speaker Change: I was just looking for some more clarity here on how we kind of avoid.

Speaker Change: Well the answer that it takes for the past. Thanks, Yes. The answer to that is we have to work with every supplier.

Kelly: Thanks. Yeah, they answer that as we have to work with every supplier on each commodity relative to what their current situation is. Now, I think in some cases we've kept people hot, as I've said, either because we felt that they were behind or there was a need for, for there was too much risk associated with turning them down. Some of the larger companies, you know, they're going to use this time. So I think that will be okay. It'll be the ones or two of these things that we have to deal with. You need all the parts to build the airplanes.

Speaker Change: On each commodity relative to what their current situation is now I think in some cases.

Speaker Change: We've kept people hard as I've said, either because we felt that they were behind or there was need for four there was too much risk associated with with with turning them down some of the larger companies. They are going to use this time to to actually get in a healthier position themselves.

Speaker Change: I think that'll be okay. It will be the ones or twos. These things that we have to deal with you.

You need all the parts to build the airplanes. So as we bring that on I'm not expecting a major issue. It's not like we've been out on strike for a long period, such that someone's decommissioned to factory or changed a foundry or.

Kelly: So, as we bring that on, I'm not expecting a major issue. It's not like we, you know, we've been out on strike for a long period such that someone's decommissioned a factory or changed a foundry or shifted a balance of their workforce. We have seen some furloughs, but furloughs are temporary. That's why they furlough them because they want to be able to call those folks back, and we've done some furloughs ourselves. So, you know, we're managing that supplier by supplier day in, day out, trying to keep close communication with all of our supply chain as we bring this back on.

Speaker Change: <unk> shifted our balance of their workforce, we have seen some furloughs.

Speaker Change: But furloughs or temporary that's why they furlough and because they won.

Speaker Change: To be able to call those folks back and we've done some furloughs ourselves.

Speaker Change: We're managing that supplier by supplier day in day out trying to keep close communication.

With all of our supply chain as we as we bring this back on.

Jason Gursky: Thank you. Your next question comes from the line of Jason Gersky from City. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Your next question comes from the line of Jason Gursky from Citi. Please go ahead.

Jason Gursky: Yeah, good morning, and Kelly, welcome back to the fun of quarterly earnings calls. Thanks, Jason. Yeah, let's see.

Jason Gursky: Yeah, Good morning, and Kelly welcome back to the.

Kelly: Quarterly earnings calls thanks, Jason.

Jason Gursky: Yes.

Speaker Change: Let's see here I wanted to just talk a little bit about the bigger picture turnaround here and particularly isn't really.

Jason Gursky: I'm going to just talk a little bit about, you know, the bigger picture turnaround here and particularly as it relates to the balance sheet. It's to me like you're getting ready here to deploy, you know, a pretty well thought out plan. You got some cost cutting that you're doing here. You've talked about, you know, you're going to go look at the portfolio. There might be some of the vestitures potentially there. Brian's talked about the capital raise, and you've talked about, you know, better execution.

Rates to the balance sheet.

Jason Gursky: And stimulate here getting ready here to deploy.

Jason Gursky: <unk>.

Speaker Change: A pretty well thought out plan, you've got some cost cutting that you're doing here.

Speaker Change: You've talked about you're going to look at the portfolio and there might be some divestitures.

Speaker Change: Potentially there Brian talked about the capital raise and you've talked about.

Speaker Change: Better execution I think the one thing that.

Jason Gursky: I think the one thing that maybe missing from that list, I just wanted to try to get a sense from you on, is the potential of just exiting some programs or some contracts that. You've got absolutely no path to profitability or free cash flow on over the longer term and whether there's an opportunity for you all to get out of some of these contracts or get out of some of these programs and how you go about doing that and just want to get a really good sense of whether that is kind of on the menu of options that you have.

Speaker Change: Maybe missing from that list I just wanted to go to try to get a sense from you on.

Speaker Change: <unk>.

Speaker Change: The potential of just exiting some programs are some contracts that you have got absolutely no path to profitability or free cash flow on over the longer term and whether there is an opportunity for you all to get out of some of these contracts or get out of some of these programs and how you go about doing.

Speaker Change: That in and just wanted to get a really good sense of whether that is kind of a menu of options that you have because I think we're all looking for ways on.

Jason Gursky: Because I think we're all looking for ways on how you can kind of. Tony, you know, increase the pace of this turnaround.

Speaker Change: How you can kind of.

Speaker Change: Increase the pace of this turnaround I know you say, it's going to take a long time, but just kind of wondering what are some of the tools at your disposal here, yes. So look I think if you're talking to the big the.

Kelly: I know you say it's going to take a long time, but just kind of what are some of the tools that you're disposal here? Yeah, so look, I think if you're talking the big, you know, the big defense programs where we've got EAC problems, I don't think that's a viable option to us. I don't think we can just, even if we wanted to. I don't think we can walk away from these contracts. We these are core customers that need this capability. We've got long-term commitments. So, you know, walking away isn't an answer to this. I'm in my prepared remarks, and a comment to an earlier; we do have to work with the customers and see if there's areas where we can trade things off with them and help us and help them to.

Speaker Change: The Big Defense programs, where we've got EAC problems I don't think that's a viable option to us I don't think we can just even if we wanted to I don't think we can walk away from these contracts. These are core customers that need this capability.

Speaker Change: We've got long term commitments to them so walking away isn't an answer to this in my prepared remarks and comment to an earlier, we do have to work with the customers and see if there is areas, where we can trade things off with them.

Speaker Change: And help us and help them too and.

Kelly: And I don't think we've been doing enough of that in the trade space with the customers, so we can come up with some wind winds and we don't sit here with these, these risks that are unmitigated. Going forward. So, I think that's more the where I would focus on these things.

Speaker Change: And I don't think we've been doing in enough of that in the trade space.

Speaker Change: With the customers. So we can come up with some win wins and that we don't sit here with these these risks that are unmitigated going forward. So I think that's more the where I would focus.

Speaker Change: On these things now there are some things that we can just stop doing that.

Kelly: Now, there are some things that we can just stop doing that we're currently doing. And those are on the table in this streamlined effort that I'm talking about. There are some areas where, you know, we may be at one contract phase, and do we want to go to the next contract phase that will sit and evaluate. And, you know, we've got to get it; we do have to get it in a position where we've got a portfolio much more balanced with less risky programs and more profitable programs. And, you know, we're going to be working that.

Speaker Change: That we're currently doing.

Speaker Change: Those are on the table in this streamlined effort that I'm talking about there are some areas, where we may be at one contract phase and do we want to go to the next contract phase.

Speaker Change: That will sit and evaluate.

Speaker Change: And you know we've got to get into we do have to get in a position, where we've got a portfolio much more balanced with less risky programs and more profitable programs and what we're going to be working that but again I don't think our wholesale walkaway is just in the cards.

Kelly: But again, I don't think a wholesale walk away is just in the cards.

Unknown Attendee: Okay, that's helpful.

Speaker Change: Okay. That's helpful. Thank you.

Unknown Attendee: Thank you.

Cai Rumohr: Your next question comes from the line of Kyvan Rumor from TD Securities. Please go ahead. Yes, thanks so much, and welcome back, Kelly.

Speaker Change: Your next question comes from the line of Cai von rumor from TD Securities. Please go ahead.

Speaker Change: Yes, thanks, so much and welcome welcome back Kelly So two questions for you first.

Cai Rumohr: So, two questions for you.

Cai Rumohr: First, you know, would you consider hiring from the outside to fill the BDS head slot because obviously the folks there have really not been getting the job done? And secondly, if we look at your portfolio, you have several properties in global services on the commercial side that look like they could be very highly valued. Specifically, Jefferson, that you could argue are not directly required to build planes successfully. So, would you consider, you know, divesting any of those because that would significantly reduce the amount you'd have to raise by equity?

Speaker Change: Would you consider hiring from the outside to fill the Bds had slop because obviously the folks there have really not been getting the job done and secondly, if we look at your portfolio you have several properties.

Speaker Change: Sure.

Speaker Change: Global services on the commercial side that looked like they could be very highly valued specifically Jefferson you could argue are not directly required to build planes successfully so would you consider divesting any of those because that would significantly reduce.

Speaker Change: The amount you'd have to raise equity.

Kelly: Yes, so Kyvan, I would say I'm not going to specifically address the BDS position, but I'll just say generically as I look at any of these positions and any changes, we'll take a look at internally. And secondly, do we have the right candidate? And if so, that's the way we'll head. If we need to supplement from the outside and bring some outside skills, then we'll head that direction. So, as I said before, I'm certainly not averse to bringing in some additional resources to help the team. And I don't think the team's averse to that as well.

Speaker Change: Yes, so cai.

Speaker Change: I would say I'm not going to specifically address the bds position, but I'll just say generically.

Speaker Change: As I look at any of these positions and any changes we'll make.

Speaker Change: Take a look at internally do we have the right candidate and if so that's the way, we'll we'll head if we need to supplement from the outside and bring some outside skills and then we will it will head that direction. So as I said before I'm, certainly not averse to bringing in some additional resources to help the help the team and I don't think that.

Speaker Change: Averse.

Speaker Change: To that as well so we'll see we'll see where that heads on specific positions.

Kelly: So, you know, we'll see; we'll see where that heads on specific positions. The second part of his question.

The second part of his question.

Kelly: Oh, Jefferson. Yes, on the properties and global services that, you know, you've got things like Jefferson that arguably could command a very high price and don't look like they're totally required to build planes successfully. Would you consider, you know, divesting any of those to supplement an equity raise?

Speaker Change: Yes.

Speaker Change: Yes on the.

Speaker Change: The properties in global services.

<unk> got things like Jefferson that arguably could command a very high price.

Speaker Change: It looked like they were totally required to build claims successfully would you consider divesting any of those to supplement an equity raise.

Kelly: Yeah, I think I think that's what I'm talking about when I'm talking about looking at the portfolio and deciding what we need for our future? I'm not going to specifically comment on Jefferson, but looking at all of our activities like that, whether it's in our services business or in either the core businesses, looking at what we're doing there and asking the question.

Speaker Change: I think that's what I'm talking about when I'm talking about looking at the portfolio and deciding what what do we need for our future I'm not going to specifically comment on Jefferson, but but looking at at all of our activities like that whether it's in our services business or in either the core businesses looking at at.

Speaker Change: At what we're doing there and asking the question does that really fit in our long term strategy or would that property be better off somewhere else and we could get more value up we're destroying value by holding it in the Boeing company. So those are the things that we'll look at as we do this portfolio review and my guess is there'll be some things that.

Kelly: Does that really fit in our long-term strategy, or would that property be better off, you know, somewhere else? And we could get more value up. We're destroying value by holding it in the Boeing Company. So those are the things that we'll look at as we do this portfolio review. And my guess is there'll be some things that we want to take on action on.

Speaker Change: That we want to take an action on I just don't have that list to tell you right now what am I going to do.

Kelly: I just don't have that list to tell you right now. What am I going to do?

Kelly: Do you have any time frame to make that decision? Like, are we talking three months? Are we talking nine months?

Do you have any timeframe.

Speaker Change: Make that decision, Mike or we talking three months are we talking nine months, yeah. I wanted to have a good feeling internally by the end of the year as to what I want that we've got a process underway, where we do our long range planning, which will facilitate that now you know.

Kelly: Yeah, I want to have a good feeling internally by the end of the year as to what I want. We've got a process underway where we do our long range planning, which will facilitate that. Now you know, you know, that some of these things can be actioned quickly. Some of these things are not actionable. Some of these things, you know, take a long time. So it sort of depends on what the opportunities are, you know. Can things be separated? Can we just stop doing work?

Speaker Change: You know that some of these things can be action quickly. Some of these things are not actionable some of these things.

Take a long time, so it sort of depends.

Speaker Change: On what the opportunities are you know.

Speaker Change: Can things be separated can we just stopped doing work.

Kelly: You know, an example, just the 767 freighter, we looked at that and said, "Hey, look, there's an end coming on the 767 freighter is coming soon." Let's make the decision now and get that distraction out of the way. We'll finish the deliveries. Been a fantastic airplane, and we'll continue to support our customers and support the middle variants of that. But let's declutter our minds with some of this stuff and get our resources really focused on what's going to make a difference for us going forward. And that's the type of stuff I want to really focus on.

Speaker Change: An example, just the 767 freighter, we looked at that and said Hey look Theres an end coming on the 767 freighter. It's coming soon let's can make the decision now and get that distraction out of the way we will finish the deliveries been a fantastic airplane and will continue to support our our customers and support.

Speaker Change: Mill variance of that but let's let's declutter our mines with some of this stuff and get to get our resources really focus on what's going to make a difference for us going forward and that's the type of stuff I want to really focus on.

Cai Rumohr: Terrific. Thank you very much.

Speaker Change: Terrific. Thank you very much.

Richard Safran: In Greg, we have time for one final question. Okay, that question comes from the line of Richard Saffron from Seaport Research Partners.

Speaker Change: Greg we have time for one final question.

Speaker Change: That question comes from the line of Richard Safran from Seaport Research Partners. Please go ahead.

Richard Safran: Let's go ahead. Thanks, Kelly Bryant. Good morning.

Richard Safran: Thanks, Kelly, Brian Matt Good morning, Kelly, great to be speaking with you again.

Richard Safran: Kelly, great to be speaking with you again. So I thought I'd ask also about global services, but I think you may have some better visibility. You know, we've seen some modest growth this year. We had about 70 basis points of margin improvement this quarter. I thought you might talk about your near and long term outlook for the segment.

Richard Safran: So I thought I'd ask also about global services, but I think he may have some better visibility.

Richard Safran: We've seen some modest growth. This year, we had about 70 basis points of margin improvement. This quarter I thought you might talk about your near and long term outlook for this segment are you see sales and margins trending and Kelly is there any read through to global services from your Port four part strategy or you're pretty happy with the way things are going there.

Kelly: How do you see sales and margins trending, and Kelly, is there any read-through to global services from your port strategy, or you're pretty happy with the way things are going there?

Kelly: Well, let me just say that that's not my focus right now. They're doing really well. Chris Raymond and his team are executing, and the one thing I want to do right now is just help them make sure they get all the support from the corporation they need to continue to execute.

Speaker Change: Well, let me just say that that.

Speaker Change: My focus right now, they're doing really well, Chris Raymond and his team are executing and the one thing I want to do right. Now is just help them make sure. They get all the support from the corporation they need to continue.

Speaker Change: To execute having said that absolutely theres parts in this four part strategy that flow through our global service, particularly the cultural aspects of this so that's a company wide activity.

Kelly: Haven't said that. Absolutely. There's parts in this four part strategy that flow through our global service, particularly the cultural aspects of this. So that's a complex wide activity, and it has to permeate through our global services. Business as well, and there's areas in global services. They're doing well, but there are areas we could do better. There's areas we could closer to our people and have have better, you know, better outcomes for our customers. So they're in this together, but I would just say Chris's team is doing really well.

Speaker Change: And it has to permeate through our global services.

Speaker Change: Business as well and there is areas in global services, and Theyre doing well, but theres areas, we could do better.

Speaker Change: Theres areas closer to our people.

Speaker Change: We have better.

Speaker Change: Better outcomes for our customers. So there are in this together, but I would just say chris's team is doing really well and it's not my priority right now.

Kelly: And it's not my priority right now. We want them to continue with their head down and delivering the results that they're delivering.

Speaker Change: We want them to continue with their head down and delivering the results that they're delivering.

Speaker Change: Yeah.

Unknown Attendee: And that concludes our party. Thank you, everybody, for joining.

Speaker Change: And that concludes our thanks very much.

Speaker Change: Thank you everybody for joining.

Unknown Attendee: Ladies and gentlemen, that completes the Boeing Company's third quarter, 2024 earnings conference call. Thank you for joining. You may now disconnect.

Ladies and gentlemen that completes the Boeing company's third quarter 2024 earnings conference call. Thank you for joining you may now disconnect.

Unknown Attendee: We're sorry. Your conference is ending now. Please hang up.

Speaker Change: We're sorry your conferences ending now please hang up.