Q1 2026 The Boeing Co Earnings Call

April 22, 2026

Speaker #1: Thank you for standing by. Good day, everyone, and welcome to The Boeing Company's first quarter 2026 earnings conference call. At this time, all participants are in a listen-only mode.

Operator: Thank you for standing by. Good day, everyone, and welcome to the Boeing Company's Q1 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please be advised that 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 call, please press star then one on your telephone. At this time, I am turning the call over to Mr. Eric Hill, Vice President of Investor Relations, for opening remarks and introductions. Mr. Hill, please go ahead.

Speaker #1: Please be advised that 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.

Speaker #1: To ask a question on today's call, please press star, then 1 on your telephone. At this time, I am turning the call over to Mr. Eric Hill, Vice President of Investor Relations, for opening remarks and introductions.

Speaker #1: Mr. Hill, please go ahead.

Speaker #2: Thank you and good morning. Welcome to BOEING's Quarterly Earnings Call. With me today are Kelly Ortberg, BOEING's President and Chief Executive Officer, and Jay Malave, BOEING's Executive Vice President and Chief Financial Officer.

Eric Hill: Thank you and good morning. Welcome to Boeing's quarterly earnings call. With me today are Kelly Ortberg, Boeing's President and Chief Executive Officer, and Jesus Malave, Boeing's Executive Vice President and Chief Financial Officer. This quarter's webcast, earnings release, and presentation, which include relevant disclosures and non-GAAP reconciliations, are available on our website. Today's discussion includes forward-looking statements that are subject to risks and uncertainties, including the ones described in our SEC filings. As always, we will leave time at the end of the call for analyst questions. With that, I will turn the call over to Kelly Ortberg.

Speaker #2: This quarter's webcast earnings release and presentation, which include relevant disclosures and non-gap reconciliations, are available on our website. Today's discussion includes forward-looking statements that are subject to risk and uncertainties.

Speaker #2: Including the ones described in our SEC filings. As always, we will leave time at the end of the call for analyst questions. With that, I will turn the call over to Kelly Ortberg.

Speaker #3: Thank you, Eric, and good morning, everyone. Thanks for joining in today's call. As we reflect on our first quarter performance today, we're off to a really good start and headed in the right direction.

Kelly Ortberg: Thank you, Eric, and good morning, everyone. Thanks for joining in today's call. As we reflect on our Q1 performance today, we're off to a really good start and headed in the right direction. We remain on plan and are building momentum from solid performance across all three of our businesses. Our commercial airplanes team continues to integrate our safety and quality plan into its operations, which has enabled us to increase production rates and deliver high-quality airplanes to customers around the world. Our defense space team continues to stabilize operations, and after two years of hard work and development, we're starting to achieve inspiring milestones, like the recent Artemis II launch that carried NASA astronauts to space on the Boeing-built core stage rocket.

Speaker #3: We remain on plan and are building momentum from solid performance across all three of our businesses. Our commercial airplanes team continues to integrate our safety and quality plan into its operations, which has enabled us to increase production rates and deliver high-quality airplanes to customers around the world.

Speaker #3: Our Defense and Space team continues to stabilize operations and, after two years of hard work and development, we're starting to achieve inspiring milestones like the recent Artemis II launch that carried NASA astronauts to space on the Boeing-built core stage rocket.

Speaker #3: The launch and landing were truly profound moments as humans reached farther into space than ever before, and serve as a great reminder of what Boeing, our industry partners, and our country can do.

Kelly Ortberg: The launch and landing were truly profound moments as humans reached farther into space than ever before and serves as a great reminder of what Boeing, our industry partners, and our country can do. In Boeing Global Services, our team is off to a strong start, adding further orders to its record backlog, meeting customer demand, and continuing to deliver solid operating results. While we are seeing some regional instability as a function of the Iran war, we remain confident in the long-term future of our industry. We have seen moments like this before, whether it be recession, pandemic, or conflict. The resilience of our industry has always led to a recovery and return to growth trends. Our market remains robust and the Boeing portfolio of versatile, fuel-efficient airplanes, defense platforms and services is built for the dynamic environment of our time.

Speaker #3: In BOEING Global Services, our team is off to a strong start, adding further orders to its record backlog. Meeting customer demand and continuing to deliver solid operating results.

Speaker #3: While we are seeing some regional instability as a function of the Iran war, we remain confident in long-term future of our industry. Aviation is seeing moments like this before, whether it be recession, pandemic, or conflict.

Speaker #3: The resilience of our industry has always led to a recovery and a return to growth trends. Our market remains robust, and the Boeing portfolio of versatile, fuel-efficient airplanes, defense platforms, and services is built for the dynamic environment of our time.

Speaker #3: So far, we have not seen any impact on our airplane deliveries. As always, we stay close to our commercial customers if they make adjustments to their plans.

Kelly Ortberg: So far, we have not seen any impact on our airplane deliveries. As always, we stay close to our commercial customers if they make adjustments to their plans, in which case, I think the strength and diversity of our backlog gives us a lot of flexibility. I should note, we're already seeing higher demand in our defense business given the increased operational tempo, which over time will be a good offset to any potential commercial MRO weakness that results from these higher fuel prices. We are confident in our business, customers, and markets, and our team remains squarely focused on safety and quality, disciplined execution, and elevating operational performance so we can profitably deliver on our record backlog of nearly $700 billion. As I mentioned last quarter, one of the biggest focus areas for our team in 2026 is completing the certification work on our development programs.

Speaker #3: In which case, I think the strength and diversity of our backlog gives us a lot of flexibility. And I should note we're already seeing higher demand in our defense business given the increased operational tempo.

Speaker #3: Which, over time, will be a good offset to any potential commercial MRO weakness that results from these higher fuel prices. We are confident in our business, customers, and markets, and our team remains squarely focused on safety and quality disciplined execution and elevating operational performance so we can profitably deliver on our record backlog of nearly 700 billion dollars.

Speaker #3: As I mentioned last quarter, one of the biggest focus areas for our team in 2026 is completing the certification work on our development programs.

Speaker #3: This is where I'll spend a few moments before discussing our first quarter accomplishments. In BCA, we continue to move forward on certification work for the 737-7 and the 737-10.

Kelly Ortberg: This is where I'll spend a few moments before discussing our Q1 accomplishments. In BCA, we continue to move forward on certification work for the 737-7 and the 737-10. In the quarter, we began the final phases of the certification and flight tests for the 737-10, which includes autothrottle, autopilot, enhanced angle of attack, as well as engine anti-ice solution. We are pleased with the progress so far and remain on plan for the newest members of the 737 MAX family to be certified later this year, with deliveries expected to start in 2027. On the 777-9, we continue to advance our certification testing. Last month, we received approval from the FAA for the next phase of testing called TIA 4A. While it's a smaller package focused on natural ice testing, it's an important step in moving this development program forward.

Speaker #3: In the quarter, we began the final phases of the certification and flight tests for the 737-10, which includes autothrottle, autopilot, enhanced angle of attack, as well as engine anti-ice solution.

Speaker #3: We're pleased with the progress so far and remain on plan for the newest members of the 737 MAX family to be certified later this year, with deliveries expected to start in 2027.

Speaker #3: On the 777-9, we continue to advance our certification testing. Last month, we received approval from the FAA for the next phase of testing called TIA-4A.

Speaker #3: While it's a smaller package focused on natural ice testing, it's an important step in moving this development program forward. You'll recall, last quarter, we discussed a potential durability issue on the 777X engine that was discovered during an inspection.

Kelly Ortberg: You'll recall last quarter we discussed a potential durability issue on the 777X engine that was discovered during an inspection. Since then, we've worked closely with our supplier. As they've said yesterday, they believe they have identified root cause, and they're working on finalizing their modification. We are working together with the supplier and the FAA to fold this into our certification plan, and we remain on track for schedule of first delivery in 2027. In the quarter, we also achieved an important milestone on the 787 program. We obtained FAA certification for an increased maximum takeoff weight for the 787-9 and the 787-10, enabling those models to fly further or carry more cargo, creating additional value and revenue-generating opportunities for our 787 operators. In BDS, work to reduce risk across our development programs using active management is leading to win-win outcomes for our customers and Boeing.

Speaker #3: Since then, we work closely with our supplier. As they've said yesterday, they believe they have identified root cause and they're working on finalizing their modification.

Speaker #3: We are working together with Aspire and the FAA to pull this into our certification plan, and we remain on track for schedule of first delivery in 2027.

Speaker #3: In the quarter, we also achieved an important milestone on the 787 program. We obtained FAA certification for increased maximum takeoff weight for the 787-9 and the 787-10.

Speaker #3: Enabling those models to fly further or carry more cargo, creating additional value and revenue-generating opportunities for our 787 operators. In BDS, work to reduce risk across our development programs using active management is leading to win-win outcomes for our customers and BOEING.

Speaker #3: This means we're proactively working challenging programs by looking more closely at risk, requirements, schedules, and customer needs. Combined with stronger focus on program management rigor, we're seeing good progress here.

Kelly Ortberg: This means we're proactively working challenging programs by looking more closely at risk, requirements, schedules, and customer needs. Combined with stronger focus on program management rigor, we're seeing good progress here. For example, on KC-46 Tanker, we recently approached our best ever factory performance, going back to pre-pandemic levels of productivity, and we remain on track this year to deliver the most tanker aircraft since 2019. We also achieved an important milestone on MQ-25 with completion of high-speed taxi tests, and the first flight is imminent. The Stingray is our first unmanned aerial refueler for the US Navy. We are now one step closer to providing this first of its kind capability to further enable the US to project power worldwide. Overall, I'm pleased with the progress our BDS development programs are making, and there are no major EAC adjustments. Let's turn now to the Q1 accomplishments.

Speaker #3: For example, on KC-46 Tanker, we recently approached our best-ever factory performance, going back to pre-pandemic levels of productivity. And we remain on track this year to deliver the most tanker aircraft since 2019.

Speaker #3: We also achieved an important milestone on MQ-25, with completion of high-speed taxi tests. And the first flight is imminent. The stingray is our first unmanned aerial repeller for the US Navy.

Speaker #3: We are now one step closer to providing this first-of-its-kind capability to further enable the U.S. to project power worldwide. Overall, I'm pleased with the progress our BDS development programs are making, and there are no major EAC adjustments.

Speaker #3: Let's turn now to the first quarter accomplishments. As we start the year, we continue to drive stable operations across our factories, enabled by a focus on safety, quality, and performance.

Kelly Ortberg: As we start the year, we continue to drive stable operations across our factories, enabled by a focus on safety, quality, and performance. Our team is more engaged in embracing our values and behaviors, which we first shared with our team around this time last year. That increased commitment is helping drive process improvement ideas. As an example, I just reviewed one from Renton where the team developed a new drill jig, resulting in more than 30% reduction in defects per 737 wingtip. In BCA, Stephanie and her team are methodically increasing production rates across our key commercial programs. The 737 program has stabilized at a rate of 42 airplanes per month, and in the quarter, we also delivered the final 737 MAX from storage. As previously discussed, some Q1 737 deliveries slid into Q2 due to a recent nonconformance finding on aircraft wiring.

Speaker #3: Our team is more engaged in embracing our values and behaviors which we first shared with our team around this time last year. That increased commitment is helping drive process improvement ideas.

Speaker #3: As an example, I just reviewed one from Renton where the team developed a new drill jig resulting in more than 30% reduction in defects for 737 wingtip.

Speaker #3: In BCA, Stephanie and her team are methodically increasing production rates across our key commercial programs. The 737 program has stabilized at a rate of 42 airplanes per month, and in the quarter, we also delivered the final 737 MAX from storage.

Speaker #3: As previously discussed on first quarter 737 deliveries slid into the second quarter due to a recent non-conformance finding on aircraft wiring. As part of our root cause corrective action process, we fully understand the issue and we have reworked all of the 25 airplanes affected and most of these have already been delivered.

Kelly Ortberg: As part of our root cause corrective action process, we fully understand the issue, and we have reworked all of the 25 airplanes affected, and most of these have already been delivered. Importantly, this is evidence of our safety management system working to identify issues early and drive continuous improvement, and avoid these issues in the future. To be clear, the wiring issue will not affect our full year delivery goals or plans to increase production to 47 per month this summer. We believe our internal and external supply chains are well-positioned for this next rate increase. To support further planned rate ramps above 47 per month, we are readying the new Everett North Line. I recently walked the factory where I saw construction complete and tooling in place. Our team setting up the line are eager to get started, and we started hiring and training.

Speaker #3: Importantly, this is evidence of our safety management system working to identify issues early and drive continuous improvement and avoid these issues in the future.

Speaker #3: To be clear, the wiring issue will not affect our full-year delivery goals or plans to increase production to 47 per month this summer. We believe our internal and external supply chains are well positioned for this next rate increase.

Speaker #3: To support further planned rate ramps above 47 per month, we are readying the new Everett Northline. I recently walked the factory, where I saw construction complete and tooling in place.

Speaker #3: Our team's setting up the line are eager to get started and we started hiring and training. Employees for the Northline will complete structured on-the-job training which will pair new mechanics with experienced teammates from our existing Renton line.

Kelly Ortberg: Employees for the North Line will complete structured on-the-job training, which will pair new mechanics with experienced teammates from our existing Renton line. On the 787 program, we did see some impact to deliveries in the quarter due to delays of premium seating certification, but we still expect to meet our full-year delivery range of 90 to 100 airplanes. We're staying close to our customers, suppliers, and regulators to work through these seating issues, and Jay will talk a little bit more about the actions we're taking to better manage these impacts going forward. On production, the program continues to stabilize at 8 per month as we work through selected supply chain delays, including the interiors and engines. Overall, the factory is performing well, and the program continues preparations to increase production to 10 airplanes per month later this year.

Speaker #3: On the 787 program, we did see some impacted deliveries in the quarter due to delays of premium seat certification, but we still expect to meet our full-year delivery range of 90 to 100 airplanes.

Speaker #3: We're staying close to our customers, suppliers, and regulators to work through these seating issues and jail talk a little bit more about actions we're taking to better manage these impacts going forward.

Speaker #3: On production, the program continues to stabilize at eight per month as we work through selected supply chain delays including interiors and engines. Overall, the factory is performing well and the program continues preparations to increase production to 10 airplanes per month later this year.

Speaker #3: Like the 737 program, the 787 team will be guided by our safety and quality plan, with data from the six key performance indicators to assess readiness ahead of planned rate increases.

Kelly Ortberg: Like the 737 program, the 787 team will use the same disciplined process guided by our safety and quality plan with data from the 6 key performance indicators to assess readiness ahead of planned rate increases. Turning now to BDS, where our defense platforms continue to provide unique value and capability to our customers, particularly in the current threat environment. Over the past 2 months, we've seen much of our defense portfolio support key missions in theater. For example, the AH-64 Apache has proven its potent anti-drone capabilities, and the Patriot Advanced Capability-3 interceptor with its Boeing-built seeker has intercepted ballistic missiles and drones threatening civilians and military forces. Boeing systems remain central to air superiority, precision strikes, and electronic warfare, while long-range strike and airborne command and control extend reach and situational awareness.

Speaker #3: Turning now to BDS where our defense platforms are providing unique value and capability to our customers, particularly in the current threat environment. Over the past two months, we've seen much of our defense portfolio support key missions in theater.

Speaker #3: For example, the AH-64 Apache has proven its potent anti-drone capabilities and the Patriot advanced capability-3 interceptor with its Boeing-built seeker has intercepted ballistic missiles and drones threatening civilians and military forces.

Speaker #3: Boeing systems remain central to air superiority, precision strikes, and electronic warfare while long-range strike and airborne command and control extend reach and situational awareness.

Speaker #3: Our aerial refueling, reconnaissance, and strategic airlift sustain high tempo operations and we're proud that our combat survivor evader located system and the little bird helicopter played a key part in the heroic mission that safely returned down pilots.

Kelly Ortberg: Our aerial refueling, reconnaissance, and strategic airlift sustain high-tempo operations, and we're proud that our Combat Survivor Evader Locator system and the Little Bird helicopter played a key part in the heroic mission that safely returned downed pilots. We continue to make investments in our people and facilities to meet the evolving need of the United States and our allies. Those investments help secure wins like the recently announced agreement to expand PAC-3 seeker production in our Huntsville factory. The framework agreement with the Department of Defense enables a massive increase in the supply of seekers needed to expand the protection provided by the world's most advanced air defense system. The current demand environment for defense extends into services as well, and BGS has had several notable wins, including Boeing Defence UK's largest ever maintenance and support contract for the UK's Rotary Wing Enterprise, which was announced last week.

Speaker #3: We continue to make investments in our people and facilities to meet the evolving need of the United States and our allies. Those investments help secure wins like the recently announced agreement to expand PAC-3 seeker production in our Huntsville factory.

Speaker #3: The framework agreement with the Department of War enables a massive increase in the supply of seekers. Needed to expand the protection provided by the world's most advanced air defense system.

Speaker #3: The current demand environment for defense extends into services as well and BGS has had several notable wins including Boeing Defense UK's largest ever maintenance and support contract for the UK's rotary wing enterprise, which was announced last week.

Speaker #3: Our global services team also signed the largest landing gear exchange contract in Boeing's history with Singapore Airlines. That agreement will provide landing gear exchanges for more than 75 airplanes across Singapore's 737 MAX and 787 fleets.

Kelly Ortberg: Our global services team also signed the largest landing gear exchange contract in Boeing's history with Singapore Airlines. That agreement will provide landing gear exchanges for more than 75 airplanes across Singapore 737 MAX and 787 fleets. With these recent program wins and operational improvements in all of our segments, we're well on our way to fully putting the recovery behind us. Before I wrap up my prepared remarks, I want to thank all of our employees for delivering another quarter of improved performance as we continue to turn the corner. Their dedication to safety and quality, embracing our values and behaviors, and continuous improvement have enabled a solid start to the year. While there's more to do in 2026, we're making measurable progress. We're restoring trust with our customers. We're increasing production rates, and we're on track to generate full year of positive cash flow.

Speaker #3: With these recent program wins in operational improvements in all of our segments, we're well on our way to fully putting the recovery behind us.

Speaker #3: So before I wrap up my prepared remarks, I want to thank all of our employees for delivering another quarter of improved performance as we continue to turn the corner.

Speaker #3: Their dedication to safety and quality, embracing our values and behaviors, and continuous improvement have enabled a solid start to the year. While there's more to do in 2026, we're making measurable progress.

Speaker #3: We're restoring trust with our customers, we're increasing production rates, and we're on track to generate a full year of positive cash flow. And our commercial, defense, and service portfolios are well positioned to meet market demands and restore Boeing to the iconic company we all know.

Kelly Ortberg: Our commercial defense and service portfolios are well-positioned to meet the market demands and restore Boeing to the iconic company we all know. Now I'll turn it over to Jay to discuss our operating results before we move on to questions.

Speaker #3: So now I'll turn it over to Jay to discuss our operating results before we move on to questions.

Speaker #2: Thanks, Kelly. And good morning, everyone. As Kelly mentioned, a good start to the year and a clean quarter. Consolidated revenue was up 14% to $22.2 billion.

Jesus Malave: Thanks, Kelly, and good morning, everyone. As Kelly mentioned, a good start to the year and a clean quarter. Consolidated revenue was up 14% to $22.2 billion, driven by solid growth across all three segments. Of note, the revenue impacts from last year's Spirit acquisition and Digital Aviation Solutions divestiture largely offset each other in the quarter. Operating margin was 2%, down primarily from lower FAS/CAS pension adjustment as compared to last year, partially offset by higher segment earnings. The core loss per share of $0.20 improved from last year on segment growth and other non-operating earnings improvements. Free cash flow was a usage of $1.5 billion in the quarter, driven by seasonal corporate expenditures in addition to planned CapEx increases as we continue to make progress on our growth investments in St. Louis and Charleston.

Jay Malave: Thanks, Kelly, and good morning, everyone. As Kelly mentioned, a good start to the year and a clean quarter. Consolidated revenue was up 14% to $22.2 billion, driven by solid growth across all three segments. Of note, the revenue impacts from last year's Spirit acquisition and Digital Aviation Solutions divestiture largely offset each other in the quarter. Operating margin was 2%, down primarily from lower FAS/CAS pension adjustment as compared to last year, partially offset by higher segment earnings. The core loss per share of $0.20 improved from last year on segment growth and other non-operating earnings improvements. Free cash flow was a usage of $1.5 billion in the quarter, driven by seasonal corporate expenditures in addition to planned CapEx increases as we continue to make progress on our growth investments in St. Louis and Charleston.

Speaker #2: Driven by solid growth across all three segments. Of note, the revenue impacts from last year's Spirit acquisition and digital aviation solutions divestiture largely offset each other in the quarter.

Speaker #2: Operating margin was 2%, down primarily from lower fast-cast pension adjustment as compared to last year. Partially offset by higher segment earnings. The core loss per share of 20 cents improved from last year on segment growth and other non-operating earnings improvements.

Speaker #2: Free cash flow was usage of 1.5 billion dollars in the quarter driven by seasonal corporate expenditures in addition to planned CapEx increases as we continue to make progress on our growth investments in St.

Speaker #2: Louis and Charleston. Cash flow was notably better than expectations I shared last month. Largely driven by the solid recovery from the 737 wiring issue and favorable collection timing late in the quarter.

Jesus Malave: The cash flow was notably better than expectations I shared last month, largely driven by the solid recovery from a 737 wiring issue and favorable collection timing late in the quarter. Turning to BCA on the next page. BCA delivered 143 airplanes in the quarter. Revenue of $9.2 billion was up 13%. As Stephanie and her team continuously derive quality improvements while increasing delivery volume. Operating margin of -6.1% improved compared to last year, primarily driven by higher delivery volume and a favorable accounting adjustment, partially offset by the dilutive impact of the Spirit AeroSystems acquisition that we highlighted last quarter. Regarding our customers in the Middle East, as Kelly noted, at this time we have not seen any requests for delivery deferrals, nor have we encountered material supply chain disruptions that would impact our delivery or production rate plans.

Jay Malave: The cash flow was notably better than expectations I shared last month, largely driven by the solid recovery from a 737 wiring issue and favorable collection timing late in the quarter. Turning to BCA on the next page. BCA delivered 143 airplanes in the quarter. Revenue of $9.2 billion was up 13%. As Stephanie and her team continuously derive quality improvements while increasing delivery volume. Operating margin of -6.1% improved compared to last year, primarily driven by higher delivery volume and a favorable accounting adjustment, partially offset by the dilutive impact of the Spirit AeroSystems acquisition that we highlighted last quarter. Regarding our customers in the Middle East, as Kelly noted, at this time we have not seen any requests for delivery deferrals, nor have we encountered material supply chain disruptions that would impact our delivery or production rate plans.

Speaker #2: Turning to BCA in the next 143 airplanes in the quarter. Revenue of 9.2 billion dollars was and her team continuously derived quality improvements while increasing delivery volume.

Speaker #2: Operating margin of negative 6.1% improved compared to last year, primarily driven by higher delivery volume and a favorable accounting adjustment, partially offset by the dilutive impact of the Spirit AeroSystems acquisition that we highlighted last quarter.

Speaker #2: Regarding our customers in the Middle East, as Kelly noted, at this time we have not seen any requests for delivery deferrals nor have we encountered material supply chain disruptions that would impact our delivery or production rate plans.

Speaker #2: In fact, we delivered four airplanes as planned to customers in that region since the conflict began. That said, we will continue to monitor the situation.

Jesus Malave: In fact, we delivered 4 airplanes as planned to customers in that region since the conflict began. That said, we will continue to monitor the situation. Importantly, backlogs continue to grow and remain at an all-time high of $576 billion, including over 6,100 airplanes. Now clicking down to the commercial programs. Starting with the 737 program, where we delivered 114 airplanes in the quarter, which included the final shadow factory airplane built prior to 2023. As Kelly mentioned, we completed the rework on all 25 airplanes impacted by the wiring NOE, and we remain on track to deliver 500 airplanes this year. In the quarter, production stabilized at a rate of 42 per month, and the team drove a nearly 20% reduction in final assembly rework hours as compared to Q1 2025.

Jay Malave: In fact, we delivered 4 airplanes as planned to customers in that region since the conflict began. That said, we will continue to monitor the situation. Importantly, backlogs continue to grow and remain at an all-time high of $576 billion, including over 6,100 airplanes. Now clicking down to the commercial programs. Starting with the 737 program, where we delivered 114 airplanes in the quarter, which included the final shadow factory airplane built prior to 2023. As Kelly mentioned, we completed the rework on all 25 airplanes impacted by the wiring NOE, and we remain on track to deliver 500 airplanes this year. In the quarter, production stabilized at a rate of 42 per month, and the team drove a nearly 20% reduction in final assembly rework hours as compared to Q1 2025.

Speaker #2: Importantly, backlog continued to grow and remains at an all-time high of 576 billion dollars including over 6,100 airplanes. Now clicking down to the commercial programs.

Speaker #2: Starting with the 737 program where we delivered 114 airplanes in the quarter, which included the final shadow factory airplane built prior to 2023. As Kelly mentioned, we completed the rework on all 25 airplanes impacted by the wiring NOE and we remain on track to deliver 500 airplanes this

Speaker #1: Share in the quarter . Duction stabilized at a rate of 42 per month , and the team drove a nearly 20% reduction in final assembly rework hours as compared to the first quarter of 2025 .

Speaker #1: We continue to expect a production increase to 47 per month in Renton in the summer, and will benefit from buffer inventory during this transition.

Jesus Malave: We continue to expect a production increase to 47 per month in Renton this summer, and will benefit from buffer inventory during the transition. As we discussed previously, production rate increases above 47 per month will be enabled by activating the 737 North Line in Everett. This North Line is expected to begin operations later this year at a low rate of initial production to demonstrate conformity to the FAA that will allow operations under our current production certificate. Following completion of these initial units, we will be led by our safety and quality plan to increase rate to 52 per month when the entire production system is ready. On the 787, we delivered 15 airplanes in the quarter, in line with expectations shared last month, and remain on track to deliver 90 to 100 airplanes in the year.

Jay Malave: We continue to expect a production increase to 47 per month in Renton this summer, and will benefit from buffer inventory during the transition. As we discussed previously, production rate increases above 47 per month will be enabled by activating the 737 North Line in Everett. This North Line is expected to begin operations later this year at a low rate of initial production to demonstrate conformity to the FAA that will allow operations under our current production certificate. Following completion of these initial units, we will be led by our safety and quality plan to increase rate to 52 per month when the entire production system is ready. On the 787, we delivered 15 airplanes in the quarter, in line with expectations shared last month, and remain on track to deliver 90 to 100 airplanes in the year.

Speaker #1: As we discussed previously, production rate increases above 47 per month will be enabled by activating the 737 North Line in Everett, with the North Line expected to begin operations later this year at a low rate of initial production to demonstrate conformity to the FAA.

Speaker #1: That will allow operations under our current production certificate . Following completion of these initial units . We will be led by our Safety and Quality Plan to increase rate to 52 per month when the entire production system is ready On the seven , eight , seven , we delivered 15 airplanes in the quarter .

Speaker #1: In line with expectations shared last month, we remain on track to deliver 90 to 100 airplanes in the year, although seat certifications impacted deliveries in the quarter.

Jesus Malave: Although seat certifications impacted deliveries in the quarter, we are working with the FAA and our customers to address these risks by partnering earlier in the development process and creating contractual off-ramps to avoid delivery delays in the future. In Charleston, the factory's performing well and continuing to make progress at stabilizing the production rate at 8 per month. In the quarter, our rework hours improved by more than 25% as compared to Q1 2025. These gains in the factory come even as our stability is being paced by the supply chain, where we don't enjoy the same buffer we have on 737. We are closely working with our suppliers, including forward deploying resources to support their recovery plans. We continue to expect an increase to 10 per month later this year.

Jay Malave: Although seat certifications impacted deliveries in the quarter, we are working with the FAA and our customers to address these risks by partnering earlier in the development process and creating contractual off-ramps to avoid delivery delays in the future. In Charleston, the factory's performing well and continuing to make progress at stabilizing the production rate at 8 per month. In the quarter, our rework hours improved by more than 25% as compared to Q1 2025. These gains in the factory come even as our stability is being paced by the supply chain, where we don't enjoy the same buffer we have on 737. We are closely working with our suppliers, including forward deploying resources to support their recovery plans. We continue to expect an increase to 10 per month later this year.

Speaker #1: We are working with the FAA and our customers to address these risks by partnering earlier in the development process and creating contractual off ramps to avoid delivery delays in the future In Charleston , the factors performing well in continuing to make progress at stabilizing the production rate at a per month in the quarter .

Speaker #1: Our rework hours improved by more than 25% as compared to the first quarter of 2025 . These gains in the factory come even as our stability is being paced by the supply chain , where we don't enjoy the same buffer we have on 737 .

Speaker #1: We are closely working with our suppliers , including forward deploying resources to support their recovery plans We continue to expect an increase to ten per month later this year Finally , on 777X .

Jesus Malave: Finally, on 777X, Kelly highlighted TIA 4A approval, as well as progress made with GE on a solution for the engine durability issue we highlighted last quarter. During the quarter, we successfully completed flight testing associated with handling qualities, lighting, and stability and control. We remain on track for first delivery in 2027, and continue to focus on managing the production system for increased rates. We also have a dedicated team performing the change incorporation statement of work for built airplanes, which will be completed over a number of years. All right. Let's shift over to BDS on the next page. BDS delivered 29 aircraft and 1 satellite in the quarter. Revenue grew 21% to $7.6 billion, primarily driven by higher volume on KC-46 tanker, missiles and weapons, and classified programs. Spirit contributed approximately $150 million of sales in the quarter.

Jay Malave: Finally, on 777X, Kelly highlighted TIA 4A approval, as well as progress made with GE on a solution for the engine durability issue we highlighted last quarter. During the quarter, we successfully completed flight testing associated with handling qualities, lighting, and stability and control. We remain on track for first delivery in 2027, and continue to focus on managing the production system for increased rates. We also have a dedicated team performing the change incorporation statement of work for built airplanes, which will be completed over a number of years. All right. Let's shift over to BDS on the next page. BDS delivered 29 aircraft and 1 satellite in the quarter. Revenue grew 21% to $7.6 billion, primarily driven by higher volume on KC-46 tanker, missiles and weapons, and classified programs. Spirit contributed approximately $150 million of sales in the quarter.

Speaker #1: Kelly highlighted Tia for approval, as well as progress made with GE on the solution for the engine durability issue we highlighted last quarter. During the quarter, we successfully completed flight testing associated with handling qualities, lighting, and stability and control.

Speaker #1: We remain on track for first delivery in 2027, and continue to focus on managing the production system for increased rates. We also have a dedicated team performing the Changing Corporation Statement of Work for built airplanes, which will be completed over a number of years.

Speaker #1: All right , let's shift over to BDS on the next page . BDS delivered 29 aircraft and one satellite in the quarter Revenue grew 21% to $7.6 billion , primarily driven by higher volume on KC 46 tanker missiles and weapons , and classified programs .

Speaker #1: Spirit contributed approximately $150 million of sales in the quarter Operating margin increased 60 basis points in the 2:45 point 1% . On improving operational performance BDS booked $9 billion in orders during the quarter , including notable awards that continue .

Jesus Malave: Operating margin increased 60 basis points in the quarter to 3.1% on improving operational performance. BDS booked $9 billion in orders during the quarter, including notable awards to continue E-7 Wedgetail development and additional international demand for KC-46 aircraft. Backlog grew to a record $86 billion. As I mentioned last month, I've continued my reviews of BDS and have come away impressed with the teams leading these programs. I've also generally found reasonable assumptions in our EACs. They're not without risk, and many assume improvements in front of us, but the estimates have a solid basis. On many of these legacy challenge programs, the teams have made excellent progress in retiring risk and moving these programs forward. Steve Parker and team are building on this progress utilizing active management and increased program management rigor to drive continued gains and improved financial stability.

Jay Malave: Operating margin increased 60 basis points in the quarter to 3.1% on improving operational performance. BDS booked $9 billion in orders during the quarter, including notable awards to continue E-7 Wedgetail development and additional international demand for KC-46 aircraft. Backlog grew to a record $86 billion. As I mentioned last month, I've continued my reviews of BDS and have come away impressed with the teams leading these programs. I've also generally found reasonable assumptions in our EACs. They're not without risk, and many assume improvements in front of us, but the estimates have a solid basis. On many of these legacy challenge programs, the teams have made excellent progress in retiring risk and moving these programs forward. Steve Parker and team are building on this progress utilizing active management and increased program management rigor to drive continued gains and improved financial stability.

Speaker #1: E-7 Wedgetail development and additional international demand for KC 46 aircraft . Backlog grew to a record $86 billion . As I mentioned last month , I continued my reviews of BDS and have come away impressed with the team's leading these programs .

Speaker #1: I have also generally found reasonable assumptions in our Eac's . They're not without risk , and many assume improvements in front of us , but the estimates have a solid basis on many of these legacy challenge programs .

Speaker #1: The teams have made excellent progress in retiring risk and moving these programs forward Steve Parker and his team are building on the progress utilizing active management and increased program management rigor to drive continued gains and improved financial stability .

Speaker #1: As Kelly has previously said, you were never done until you were done. But the team has made great progress here. As I also mentioned, a key part of our ongoing reviews of the BDS portfolio is focused on strategy and growth.

Jesus Malave: As Kelly's previously said, you are never done until you are done, but the team has made great progress here. As I also mentioned, a key part of our ongoing reviews of the BDS portfolio is focused on strategy and growth. It's clear to me that our defense portfolio is well positioned to capture upside from increased operational tempo and rising defense budgets among the US and our allies. We see incremental growth opportunities from our missiles and weapons systems, including PAC-3, Small Diameter Bomb, and JDAMs, as well as exquisite capability offered by platforms such as P-8, F-15EX, and other proven solutions where we are investing to ramp up production. While we pursue additional growth, new opportunities are now subject to tighter underwriting to account for risk and our ability to deliver on our commitments.

Jay Malave: As Kelly's previously said, you are never done until you are done, but the team has made great progress here. As I also mentioned, a key part of our ongoing reviews of the BDS portfolio is focused on strategy and growth. It's clear to me that our defense portfolio is well positioned to capture upside from increased operational tempo and rising defense budgets among the US and our allies. We see incremental growth opportunities from our missiles and weapons systems, including PAC-3, Small Diameter Bomb, and JDAMs, as well as exquisite capability offered by platforms such as P-8, F-15EX, and other proven solutions where we are investing to ramp up production. While we pursue additional growth, new opportunities are now subject to tighter underwriting to account for risk and our ability to deliver on our commitments.

Speaker #1: It's clear to me that our defense portfolio is well positioned to capture upside from increased operational tempo and rising defense budgets among the US and our allies .

Speaker #1: We see incremental growth opportunities from our missiles and weapons systems , including Pac three , small diameter bomb and Jdams , as well as exquisite capability offered by platforms such as P-8 F-15ex and other proven solutions .

Speaker #1: Where we are investing to ramp up production while we pursue additional growth . New opportunities are now subject to tighter underwriting to account for risk and our ability to deliver on our commitments This approach , combined with continued operational improvements , support steady progress towards high single digit operating margins .

Jesus Malave: This approach, combined with continued operational improvements, support steady progress towards high single-digit operating margins as we execute against a record $86 billion backlog. Moving into global services on the next page. BGS continued to perform well and again delivered strong financial results in the quarter. Revenue was up 6% to $5.4 billion, primarily reflecting increased government volume. Excluding the impact of the Digital Aviation Solutions divestiture, revenue was up 13%. Operating margin of 18.1% was down from prior year, primarily related to the impact of the Digital Aviation Solutions divestiture and less favorable mix. Both commercial and government businesses delivered double-digit margins in the quarter. Also in the quarter, BGS received FAA and EASA qualification for 777-9 training devices, an important step forward in support of the airplane's entry into service next year. Chris Raymond and the BGS team remain focused on continuous improvement.

Jay Malave: This approach, combined with continued operational improvements, support steady progress towards high single-digit operating margins as we execute against a record $86 billion backlog. Moving into global services on the next page. BGS continued to perform well and again delivered strong financial results in the quarter. Revenue was up 6% to $5.4 billion, primarily reflecting increased government volume. Excluding the impact of the Digital Aviation Solutions divestiture, revenue was up 13%. Operating margin of 18.1% was down from prior year, primarily related to the impact of the Digital Aviation Solutions divestiture and less favorable mix. Both commercial and government businesses delivered double-digit margins in the quarter. Also in the quarter, BGS received FAA and EASA qualification for 777-9 training devices, an important step forward in support of the airplane's entry into service next year. Chris Raymond and the BGS team remain focused on continuous improvement.

Speaker #1: As we execute against the record $86 billion backlog . Moving to global services in the next page , BG's continued to perform well and again delivered strong financial results in the quarter .

Speaker #1: Revenue was up 6% to $5.4 billion, primarily reflecting increased government volume. Excluding the impact of the Digital Aviation Solutions divestiture, revenue was up 13%.

Speaker #1: Operating margin of 18.1% was down from prior year , primarily related to impact of the digital aviation Solutions divestiture and less favorable mix , both commercial and government businesses delivered double digit margins in the quarter Also , in the quarter , BGS received FAA and IATA qualification for 7779 training device's An important step forward in support of the airplanes .

Speaker #1: Entry into service next year. Chris Raymond and the BGS team remain focused on continuous improvement. For example, the business has implemented automation and AI to.

Jesus Malave: For example, the business has implemented automation and AI to reduce proposal cycle time by approximately 25% year to date, enabling faster response times to our customers. BGS received $8 billion of orders for a book to bill of 1.6 in the quarter, led by strong intake from its government business. BGS ended the quarter with record backlog now at $33 billion and remains a high-performing business focused on profitable, capital-efficient service offerings, and continues to execute very well. Okay, let's shift over to cash and debt. Cash and marketable securities ended at $20.9 billion, primarily reflecting debt repayments and free cash flow usage in the quarter. Debt balance ended at $47.2 billion, down $6.9 billion in the quarter on the paydown of maturing debt, consistent with our debt reduction plans. There are $1.4 billion of maturities left in the year.

Jay Malave: For example, the business has implemented automation and AI to reduce proposal cycle time by approximately 25% year to date, enabling faster response times to our customers. BGS received $8 billion of orders for a book to bill of 1.6 in the quarter, led by strong intake from its government business. BGS ended the quarter with record backlog now at $33 billion and remains a high-performing business focused on profitable, capital-efficient service offerings, and continues to execute very well. Okay, let's shift over to cash and debt. Cash and marketable securities ended at $20.9 billion, primarily reflecting debt repayments and free cash flow usage in the quarter. Debt balance ended at $47.2 billion, down $6.9 billion in the quarter on the paydown of maturing debt, consistent with our debt reduction plans. There are $1.4 billion of maturities left in the year.

Speaker #1: Reduce cycle time by approximately 25% year to date , enabling faster response times to our customers . BGS received $8 billion of orders for a book to bill of 1.6 in the quarter , led by strong intake from its government business , BGS ended the quarter with record backlog now at $33 billion and remains a high performing business focused on profitable capital , efficient service offerings and continues to execute very well Okay , let's shift over to cash and debt , cash and marketable securities ended at $20.9 billion , primarily reflecting debt repayments and free cash flow usage in the quarter .

Speaker #1: Debt balance ended at $47.2 billion , down $6.9 billion in the quarter on the paydown of maturing debt . Consistent with our debt reduction plans , there are $1.4 billion of maturities left a year .

Speaker #1: We also maintain access to credit facilities of $10 billion , all of which remain undrawn , and we remain committed to strengthening the balance sheet and supporting our investment grade rating Regarding our cash flow outlook , we continue to expect positive free cash flow of 1 to $3 billion this year , aligned with the expectations I shared last quarter .

Jesus Malave: We also maintain access to credit facilities of $10 billion, all of which remain undrawn, and we remain committed to strengthening the balance sheet and supporting our investment-grade rating. Regarding our cash flow outlook, we continue to expect positive free cash flow of +$1 to $3 billion this year, aligned with the expectations I shared last quarter. As I said previously, we benefited from order timing in Q1. We expect Q2 free cash flow to improve, with H2 turning positive. Of note, we assume the expected DOJ payment to occur in H2. Beyond 2026, and consistent with what we've discussed previously, cash flow is expected to grow, primarily driven by higher commercial deliveries, steady performance improvements at BDS, and continued growth at BGS.

Jay Malave: We also maintain access to credit facilities of $10 billion, all of which remain undrawn, and we remain committed to strengthening the balance sheet and supporting our investment-grade rating. Regarding our cash flow outlook, we continue to expect positive free cash flow of +$1 to $3 billion this year, aligned with the expectations I shared last quarter. As I said previously, we benefited from order timing in Q1. We expect Q2 free cash flow to improve, with H2 turning positive. Of note, we assume the expected DOJ payment to occur in H2. Beyond 2026, and consistent with what we've discussed previously, cash flow is expected to grow, primarily driven by higher commercial deliveries, steady performance improvements at BDS, and continued growth at BGS.

Speaker #1: As I said previously , we benefited from order timing in the first quarter , we expect second quarter free cash flow to improve with the second half of the year turning positive .

Speaker #1: Of note , we assume the DOJ payment to occur in the second half of the year beyond 2026 , and consistent with what we've discussed previously , cash flow is expected to grow primarily driven by higher commercial deliveries , steady performance improvements at BDS , and continued growth at BGS .

Speaker #1: We continue to view the $10 billion free cash flow figure as very attainable , significant growth . Beyond that into the next decade as we execute on our record backlog and benefit from continued strong market demand .

Jesus Malave: We continue to view the $10 billion free cash flow figure as very attainable, with significant growth beyond that into the next decade as we execute on our record backlog and benefit from continued strong market demand. Okay, let's sum it all up. A good start to the year as we've continued to build on the momentum from 2025, and we're focused on steadily elevating our performance in 2026 to deliver on the long-term potential of this business. With that, let's open up the call for questions.

Jay Malave: We continue to view the $10 billion free cash flow figure as very attainable, with significant growth beyond that into the next decade as we execute on our record backlog and benefit from continued strong market demand. Okay, let's sum it all up. A good start to the year as we've continued to build on the momentum from 2025, and we're focused on steadily elevating our performance in 2026 to deliver on the long-term potential of this business. With that, let's open up the call for questions.

Speaker #1: Okay , let's sum it all up . A good start to the year as we've continued to build on the momentum from 2025 .

Speaker #1: And we're focused on steadily elevating our performance in 2026 to deliver on the long-term potential of this business. With that, let's open up the call for questions.

Speaker #2: We will now begin the question and answer session in the interest of time, and to allow for broader participation. We ask that you limit yourself to one single-part question.

Operator: We will now begin the question-and-answer session. In the interest of time and to allow for broader participation, we ask that you limit yourself to one single-part question. Our first question comes from the line of Sheila Kahyaoglu from Jefferies. Your line is open.

Speaker #2: Our first question comes from the line of Sheila Kahyaoglu from Jefferies . Your line is open .

Speaker #3: Thank you. Good morning, Kelly and Jay, and congratulations on getting rates stable and looking up. I wanted to ask your thoughts on the conflict in the Middle East and potential impacts to deliveries.

Sheila Kahyaoglu: Thank you. Good morning, Kelly and Jay, and congratulations on getting rates stable and looking up. Wanted to ask your thoughts on the conflict in the Middle East and potential impacts to deliveries, your commercial services and weapons businesses, and free cash flow, and just how we think about scenario planning if the conflict drags another 3 months, 6 months or 9 months?

Speaker #3: Your commercial services and weapons businesses , and free cash flow , and just how we think about scenario planning . If the conflict drags another three months , six months or nine months

Speaker #1: Yeah , she as we said in the prepared remarks , we have seen no impact so far , no customers are requesting changes in their deliveries .

Kelly Ortberg: Yeah, Sheila, as we said in the prepared remarks, we have seen no impact so far. No customers are requesting changes in their deliveries. As Jay said, we made deliveries in Q1 into important customers there in the Middle East. I think the broader thing for us to watch is the overall impact of fuel prices and jet fuel price impact and whether that hits the aftermarket. As you know, we're less susceptible to aftermarket. It's a smaller part of our overall portfolio going forward. Let me come back and give you a feel for how we're exposed on OE. 14% of our unit backlog is in the Middle East for customers, but two-thirds of that backlog delivers out in 2030 and beyond. We have pretty good ability to resequence airplanes in the 12- to 18-month time frame. I think we'll be okay.

Speaker #1: And as Jay said , we made deliveries in the first quarter into important customers . They're in the Middle East . I think the broader thing for us to watch is the overall impact of of fuel prices and jet fuel price impact , and whether that hits the aftermarket , as you know , we're less susceptible to aftermarket .

Speaker #1: It's a less and less smaller part of our overall portfolio going forward. But let me come back and give you a feel for how we're exposed on OE.

Speaker #1: So 14% of our unit backlog in the is in the Middle East for customers . But two thirds of that backlog delivers out in 2030 .

Speaker #1: And beyond . And we have pretty good ability to resequence airplanes into 12 to 18 month time frame . So , you know , I think we'll be okay .

Speaker #1: We'll manage through that . If someone has some issues , we'll be able to resequence their airplanes . I have received calls from airline customers letting letting me know that they're willing to pull forward if there's any opportunity .

Kelly Ortberg: We'll manage through that. If someone has some issues, we'll be able to resequence their airplanes. I have received calls from airline customers letting me know that they're willing to pull forward if there's any opportunity. I think the overall market dynamic will be okay for us in terms of OE deliveries. It's going to be very dynamic. I think we just need to watch particularly the flight hour and the services business that's flight hour dependent. That'll be the first indicator of any impact in our aftermarket. I'm encouraged with the near-term performance in our Defense aftermarket. Hopefully, as I said in my remarks, we'll see some upside there, probably offset some of the downside if we see it in Commercial, and we'll see the relative timing of those ups and downs. I'm not too worried about it right now.

Speaker #1: So I think the overall market dynamic will be okay for us in terms of , of deliveries , it's going to be very dynamic .

Speaker #1: I think we just need to watch , particularly the flight hour and the services business . That's flight hour dependent . That'll be the first indicator of of any impact in our in our aftermarket .

Speaker #1: I'm encouraged with the , the near-term performance in our defense aftermarket . So hopefully , as I said in my remarks , we'll see , you know , some upside there .

Speaker #1: Probably offset some of the downside if we see it in commercial and we'll see the relative timing of those ups and downs , I'm not too worried about it right now .

Speaker #1: Obviously , the big question is how long is the war last ? And I , I can't . Answer that . We'll just have to watch it and manage as things happen .

Kelly Ortberg: Obviously, the big question is how long does the war last? I can't answer that. We'll just have to watch it and manage as things happen.

Speaker #3: Great . Thank you

Sheila Kahyaoglu: Great. Thank you.

Speaker #2: Your next question comes from the line of Ron Epstein from Bank of America. Your line is open.

Operator: Your next question comes from the line of Ron Epstein from Bank of America. Your line is open.

Speaker #4: Hey , good morning guys . You both spent a fair amount of time on the call talking about the defense business . And I was wondering if we could maybe dig down deeper on the defense portfolio , both in terms of new product sales and in the services business .

Ronald Epstein: Yeah. Hey. Good morning, guys. You both spent a fair amount of time on the call talking about the defense business. I was wondering if we could maybe dig down deeper on the defense portfolio, both in terms of new product sales and in the services business, what you're seeing there, and where are other potential areas of growth that you didn't highlight in your prepared remarks?

Ron Epstein: Yeah. Hey. Good morning, guys. You both spent a fair amount of time on the call talking about the defense business. I was wondering if we could maybe dig down deeper on the defense portfolio, both in terms of new product sales and in the services business, what you're seeing there, and where are other potential areas of growth that you didn't highlight in your prepared remarks?

Speaker #4: What you're seeing there and where are other potential areas of growth that you didn't highlight in your prepared remarks ?

Speaker #1: Yeah , Ron . So , you know , I put it in two categories . One is , is our , our , our product lines and portfolio are very much utilized in the current war environment .

Kelly Ortberg: Yeah, Ron. I'd put it in two categories. One is our product lines and portfolio are very much being utilized in the current war environment. Anytime you see that kind of op tempo, we're going to see service uptick associated with servicing those platforms. By the way, we're very proud of our platforms. We've got teams of people in the Middle East supporting our customers in very dynamic situations. We're really proud of those folks as well. Then you look at the overall, just I'll say, the defense budget increase, and I look at our portfolio, and we're really well-positioned for that. Let me give you a couple examples of areas where I think this new defense budget is going to benefit as well. F-47, we see $5 billion in the budget for F-47. KC-46, increase in KC-46 production, $4 billion. F-15EX, $3 billion.

Speaker #1: So anytime you see that kind of op tempo , we're going to see service uptick associated with servicing those platforms . And by the way , we're very proud of , of , of our platforms .

Speaker #1: We've got teams of people in the Middle East supporting our customers and very dynamic situations . So we're really proud of those folks as well .

Speaker #1: And then you look at the overall just , I'll say the defense budget increase , and I look at our portfolio and we're really well positioned for that .

Speaker #1: Let me give you a couple examples of areas where I think this new defense budget is going to benefit as well . At 47 , we see $5 billion in the budget for F 47 , KC 46 increase in KC 46 production , 4 billion F-15ex 3 billion .

Speaker #1: Enhanced the enhanced Satcom strategic satcom of 2 billion . So you know , massive increases in weapon systems as well . And if you look at the backdrop of this , while while it is funding new capability , it's really funding additional production of existing systems , which should be low risk for us .

Kelly Ortberg: The enhanced SATCOM, strategic SATCOM of $2 billion. Massive increases in weapon systems as well. If you look at the backdrop of this, while it is funding new capability, it's really funding additional production of existing systems, which should be low risk for us. Our focus is really making sure we underwrite this growth properly with the right contract structures. We have our supply chain costs under control so that we get an opportunity here as we see increased production to actually make money on these opportunities. That's our focus. I feel like the portfolio's well-positioned, and there's no doubt that as we look at our five-year outlook for defense, we're going to see upside from what we had planned last year.

Speaker #1: So our focus is really making sure we underwrite this growth properly with the right contract structures , we have our supply chain costs under control .

Speaker #1: So that we get an opportunity here . As we see increased production to actually make money on these , these these opportunities . So that's our focus .

Speaker #1: I feel like the portfolios are well positioned and there's no doubt that as we look at our five year outlook for defense , we're going to see upside from what we had planned last year .

Speaker #1: Yeah . Ron , maybe just a couple others . You look at the first quarter results , you know , the tanker program , the classified programs as well as missiles and weapons .

Jesus Malave: Yeah, Ron, maybe just a couple of, if you look at the Q1 results, the tanker program, the classified programs, as well as missiles and weapons. We expect that to continue to drive growth this year. As a reminder, we're expecting to increase our deliveries on the tanker from around 14 last year to about 19 this year. Then, as you know, on the classified programs, we've got some pretty significant content there. Going back to Kelly's comments, the beauty of our portfolio is that we participate and have exposure on shorter cycle defense platforms, as well as longer term. The missiles and weapons would be where I would categorize more shorter cycle, and we certainly see some upside over the next few years in that area.

Jay Malave: Yeah, Ron, maybe just a couple of, if you look at the Q1 results, the tanker program, the classified programs, as well as missiles and weapons. We expect that to continue to drive growth this year. As a reminder, we're expecting to increase our deliveries on the tanker from around 14 last year to about 19 this year. Then, as you know, on the classified programs, we've got some pretty significant content there. Going back to Kelly's comments, the beauty of our portfolio is that we participate and have exposure on shorter cycle defense platforms, as well as longer term. The missiles and weapons would be where I would categorize more shorter cycle, and we certainly see some upside over the next few years in that area.

Speaker #1: We expect that to continue to drive growth this year . As a reminder , we're expecting to increase our deliveries on the tanker from around 14 last year to about 19 this year .

Speaker #1: And then , as you know , on the classified programs , we've got some pretty significant content there . And , you know , going back to Kelly's comments , the beauty of of our portfolio is that we participate and have exposure on short , shorter cycle defense platforms as well as longer term .

Speaker #1: And , you know , the missiles and weapons would be where I would categorize more shorter cycle . And we certainly see some upside over the next few years in that area .

Speaker #4: Great . Thank you

Ronald Epstein: Great. Thank you.

Ron Epstein: Great. Thank you.

Speaker #2: Your next question comes from the line of Myles Walton from Wolfe Research . Your line is open .

Operator: Your next question comes from the line of Myles Walton from Wolfe Research. Your line is open.

Speaker #5: Great . Thanks . Morning , Jay . Could you speak to the free cash flow profile for the rest of the year , particularly if the second quarter can get close to break even and then is there any free cash flow , downside risk on requests for progress , payment deferrals , either from Middle East or other carriers ?

Myles Walton: Great. Thanks. Morning. Jay, could you speak to the free cash flow profile for the rest of the year, particularly if Q2 can get close to breakeven? Is there any free cash flow downside risk on requests for progress payment deferrals, either from Middle East or other carriers? Is there upside free cash flow risk from the Chinese orders if those were to come to pass? Thanks.

Speaker #5: And is there upside free cash flow risk from the Chinese orders ? If those were to come to pass ? Thanks

Speaker #1: Sure . Let me let me just take it to the profile first part of your question there , Myles . You know , just to reiterate , the guide in terms of 1 to $3 billion for the year , as I mentioned during the prepared remarks , we benefited from from some timing as well as the good recovery at BCA .

Jesus Malave: Sure. Let me just take you through the profile, first part of your question there, Miles. Just to reiterate the guide in terms of $1 to $3 billion for the year. As I mentioned during the prepared remarks, we benefited from some timing as well as the good recovery at BCA. It's just timing in the year. We are a little bit back-end loaded, as you would expect. In the H2, we'll expect to see some advances on the KC-46 program like we have seen in previous years. We'll see a little bit higher weighting towards aircraft BCA deliveries, which will come in with higher delivery payments in the H2. In the Q2, specifically, somewhat similar to last year, an outflow, but in the range of, say, $ low hundreds of millions.

Jay Malave: Sure. Let me just take you through the profile, first part of your question there, Miles. Just to reiterate the guide in terms of $1 to $3 billion for the year. As I mentioned during the prepared remarks, we benefited from some timing as well as the good recovery at BCA. It's just timing in the year. We are a little bit back-end loaded, as you would expect. In the H2, we'll expect to see some advances on the KC-46 program like we have seen in previous years. We'll see a little bit higher weighting towards aircraft BCA deliveries, which will come in with higher delivery payments in the H2. In the Q2, specifically, somewhat similar to last year, an outflow, but in the range of, say, $ low hundreds of millions.

Speaker #1: So it's just timing in the year . We are a little bit back end loaded , as you would expect in the back half of the year .

Speaker #1: We'll expect to see , some advances on the KC 46 program like we have seen in previous years . We'll see a little bit higher weighting towards aircraft , BCA deliveries , which will come in with higher delivery payments in the back half of the year .

Speaker #1: In the second quarter , specifically , somewhat similar to last year , a outflow but in the range of , say , low hundreds of millions of dollars .

Speaker #1: So , as I mentioned in my prepared remarks , an improvement from where we landed here in the first quarter and continued ramp throughout the year .

Jesus Malave: As I mentioned in my prepared remarks, an improvement from where we landed here in Q1 continued ramp throughout the year, and we still feel very confident in that guide. As far as variability on the upside, we had a really good start at BDS and BGS. You look at the revenue growth there to the extent that we could continue to have strong growth, have that convert into net income, and we can keep a lid on working capital, there could be some upside in those businesses. As you know, we're highly dependent on the BCA delivery profile, so those are things that we're keeping an eye on. Those, as Kelly mentioned in his prepared remarks, that we're pretty much right on track on those. As far as experiencing any specific requests, nothing meaningful.

Jay Malave: As I mentioned in my prepared remarks, an improvement from where we landed here in Q1 continued ramp throughout the year, and we still feel very confident in that guide. As far as variability on the upside, we had a really good start at BDS and BGS. You look at the revenue growth there to the extent that we could continue to have strong growth, have that convert into net income, and we can keep a lid on working capital, there could be some upside in those businesses. As you know, we're highly dependent on the BCA delivery profile, so those are things that we're keeping an eye on. Those, as Kelly mentioned in his prepared remarks, that we're pretty much right on track on those. As far as experiencing any specific requests, nothing meaningful.

Speaker #1: And we still feel very confident in that guide . As far as variability , you know , on the on the upside , we had a really good start at BDS and BGS .

Speaker #1: You look at the revenue growth there—to the extent that we can continue to have strong growth, have that convert into net income, and we can keep a lid on working capital.

Speaker #1: And there could be some upside in those businesses . As you know , we've we've we're highly dependent on the BCA delivery profile .

Speaker #1: So those are things that we're keeping an eye on . And those , as Kelly mentioned in his prepared remarks , that we're pretty much right on track on those as far as experiencing any specific requests .

Speaker #1: Nothing meaningful . I have to get back to Kelly's comments . As far as Middle East customers , nothing meaningful in terms of requests that would cause right now , any variability to our cash flow outlook .

Jesus Malave: To get back to Kelly's comments, as far as Middle East customers, nothing meaningful in terms of requests that would cause right now any variability to our cash flow outlook. Pretty much on track, and we'll monitor obviously throughout the rest of the year, but a very good start to the year.

Jay Malave: To get back to Kelly's comments, as far as Middle East customers, nothing meaningful in terms of requests that would cause right now any variability to our cash flow outlook. Pretty much on track, and we'll monitor obviously throughout the rest of the year, but a very good start to the year.

Speaker #1: So pretty much on track , and we'll monitor , obviously throughout the rest of the year , but a very good start to the year .

Speaker #5: Thank you

Myles Walton: Thank you.

Speaker #2: Your next question comes from the line of Doug Harnett from Bernstein . Your line is open .

Operator: Your next question comes from the line of Douglas Harned from Bernstein. Your line is open.

Speaker #6: Good morning . Thank you Kelly , I wanted I wanted to go to the seven , the 737 . And you stabilize production at 42 a month .

Douglas Harned: Good morning. Thank you. Kelly, I wanted to go to the 737, and you stabilized production at 42 a month. I'd like to see what you can say about the process and timeline to get to 47 and 52, and I'm highlighting 52 because that had been a challenge in 2018 for Spirit. Now that you're integrating Spirit, what are your thoughts on the timing of these next two rate breaks, and where beyond Spirit do you see some potential supply chain challenges?

Speaker #6: But I'd like to see what you can say about the process and timeline to get to 47 . And 52 . And I'm highlighting 52 because that had been a challenge in 2018 for spirit .

Speaker #6: And now that you're integrating spirit , what are your thoughts on timing of these next two rate breaks ? And where beyond spirit do you see some potential supply chain challenges ?

Speaker #1: Yeah . Thanks , Doug . So first of all , let me reiterate , we've done a really nice job of stabilizing at 42 .

Kelly Ortberg: Yeah. Thanks, Doug. First of all, let me reiterate, we've done a really nice job of stabilizing at 42. That was our plan, and we've done a nice job of that. The rate increase from 42 will be done by this summer. That's our current plan. I feel pretty good about that. We still benefit, as you know, from high levels of inventory. I look at the rate 38 to 42, and then 42 to 47, kind of as similar rate increases. We'll go through the same process that we've gone through in the prior rate increases. Where we go from 47 to 52, there's a couple important dynamics that are a little bit different. That's where we bring in the North Line, our fourth line of 737 production. We call it the North Line because it's in Everett as opposed to in Renton.

Speaker #1: That was our plan and we've done a nice job of that . So the rate increase from 42 , you know , will be will be done by the summer as that's our current plan .

Speaker #1: And I feel pretty , pretty good about that . We still benefit as you know , from high levels of inventory . So I kind of look at the rate 38 to 42 .

Speaker #1: And then 42 to 47 . Kind of as similar rate increases , we'll go through the same process that we've gone through in the prior rate increases .

Speaker #1: When we go from 47 to 52 , there's a couple important dynamics that are a little bit different . That's where we bring in the North line .

Speaker #1: Our fourth line of of seven , three , seven production . We call it the North line because it's in , it's in Everett as opposed to in Renton .

Speaker #1: We're in the process now , as we talked about in the prepared remarks of , of bringing that online , the capitals all in place .

Kelly Ortberg: We're in the process now, as we talked about in the prepared remarks, of bringing that online. The capital's all in place. The facility's ready to go. We're hiring people. We're going to bring those people through the Renton production system so that they get experience in a stable environment. We're going to be moving some experienced folks from Renton up to Everett. We've got to get that all stabilized, and also get the FAA authorization on that line. That'll be happening while we're producing here at 47 a month. As I've also said, once we burn down inventory, and we'll be burning that down at 52 and further rate increases beyond 52, that's where the supply chain needs to be more in line with our production rate. We won't have the levels of inventory that we had.

Speaker #1: The facilities ready to go . We're hiring people . We're going to bring those people through the Renton production system so that they get experience in a stable environment .

Speaker #1: And then we're going to be moving some folks from experienced folks from Renton up up to Everett . So we've got to get that and all stabilized .

Speaker #1: And also get the FAA authorization on , on , on that line . So that'll be happening while we're producing here at 47 a month .

Speaker #1: And as I've also said , once we burn down inventory and , and we'll be down at 52 and further rate increases beyond 52 , that's where the supply chain needs to be more in line with our production rate .

Speaker #1: We won't have the levels of , of inventory that we had . And so , you know , continuing to watch the supply chain there .

Kelly Ortberg: Continuing to watch the supply chain there, and we have areas that we continue to work will be a focus when we move to that next rate. Hey, let's get from 42 to 47 here in front of us, and as we've done on this previous rate increase, just continue to work the constraints where we see them to allow us to move to the next rate.

Speaker #1: And we have areas that we continue to work will be a focus when we move to that next rate . So , hey , let's get to from 42 to 47 here in front of us .

Speaker #1: And as we've done on this previous rate increase is just continue to work . The constraints where we see them to , to allow us to move to the next rate .

Douglas Harned: Well, can you say anything about Spirit on this as you integrate?

Speaker #6: Can you say anything about Spirit on this as you integrate?

Speaker #1: So Spirit's done fine . We're very pleased with the performance and the rate increases . We do still need to see some improvements in spirit , but but everything's tracking to our plan .

Kelly Ortberg: Spirit's done fine. We're very pleased with the performance and the rate increases. We do still need to see some improvements in Spirit, but everything's tracking to our plan, and I would say the integration's gone well so far. Things are looking up with our Spirit integration.

Speaker #1: And I would say the integration has gone gone well so far . So , you know , things are things are looking up with our spirit integration .

Speaker #1: Yeah . Doug , just some of the quality improvements that I mentioned on my prepared remarks have been enabled by the better quality performance that we've seen coming out of spirit from an integration standpoint .

Jesus Malave: Yeah, Doug, just some of the quality improvements that I mentioned on my prepared remarks have been enabled by the better quality performance that we've seen coming out of Spirit. From an integration standpoint, we have biweekly meetings with the functional teams and go through the status of those teams, and everything's progressing well.

Jay Malave: Yeah, Doug, just some of the quality improvements that I mentioned on my prepared remarks have been enabled by the better quality performance that we've seen coming out of Spirit. From an integration standpoint, we have biweekly meetings with the functional teams and go through the status of those teams, and everything's progressing well.

Speaker #1: We have bi weekly meetings with the functional teams and go through the status of of those teams , and everything's progressing well .

Speaker #6: Very good . Thank you

Kelly Ortberg: Very good. Thank you.

Douglas Harned: Very good. Thank you.

Speaker #2: Your next question comes from the line of Seth Seifman from JP Morgan . Your line is open .

Operator: Your next question comes from the line of Seth Seifman from JP Morgan. Your line is open.

Speaker #6: Hey .

Seth Seifman: Hey. Thanks very much. Morning, everyone. I heard the comments earlier on 787, and I'm wondering if we could dig in a little bit deeper there. First on what gives you the confidence in overcoming the supply chain challenges there. Seems like the line in Charleston is doing quite well, but waiting on some suppliers, particularly with seats. Then on the financial profile of the program and bringing in Spirit, and we can see some increase in the defer during the quarter. How that moves from here and gets to the healthy financial profile that we're looking for. Lastly, maybe the long-term opportunity there with the new capacity at Renton.

Speaker #7: Thanks very much . And morning , everyone Heard the comments earlier on on seven , eight , seven . And I'm wondering if we could dig in a little bit deeper there .

Speaker #7: You know , first on what gives you the confidence and kind of overcoming the supply chain challenges there seems like the , you know , the line in , in Charleston is doing quite well , but you know , waiting on some , some suppliers , particularly with seats and then on the on the financial profile of the program .

Speaker #7: And , you know , bringing in spirit and , you know , we can see some , some increase in the deferred during , during the quarter , but you know , how that moves from here and gets to the kind of healthy financial profile that we're looking for .

Speaker #7: And then, lastly, maybe the long-term opportunity there with the new capacity that you're adding.

Speaker #1: Okay , so let me talk about production . Then I'll have Jay talk about the financial performance . So as you , as you commented , we've done a good job of , of stabilizing as we've moved from five to 7 to 8 per month .

Kelly Ortberg: Okay, Seth, let me talk about production, then I'll have Jay talk about the financial performance. As you commented, we've done a good job of stabilizing as we've moved from 5 to 7 to 8 per month. A good example is, in this case, rework has improved significantly in the final assembly line, 25% improvement year on year. We have, as we've talked about throughout the past year, we've been struggling with getting the seat certifications complete for the new cabin configuration. If it's a new seating configuration, typically with doors, this has been an area that we've struggled. It has less impact on our factory production because we can essentially build the airplanes. It's that we can't deliver them. We've got a fair number of 787s that are actually built, that are held up now to get seat certification.

Speaker #1: You know , a good example is in this case , rework has improved significantly in the final assembly line , 25% improvement year on year .

Speaker #1: We have as we've talked about throughout the , the past year , we've been struggling with getting the seat certifications complete for the new , the new cabin configuration .

Speaker #1: So if it's a new , a new seating configuration , typically with doors , this has been an area that that we've struggled .

Speaker #1: It has less impact on our factory production because we can . Essentially build the airplanes . It . It's that we can't deliver them .

Speaker #1: And so we've got a number of seven , eight , sevens that are held up that are actually built , that are held up now to get seat certification .

Speaker #1: So this is something we've kind of getting the pig through the Python . We've got to work to get this done . I don't see any showstoppers in , in these certifications , but it's just taking longer than than we anticipated .

Kelly Ortberg: This is something we're just getting the pig through the python, but we've got to work to get this done. I don't see any showstoppers in these certifications, but it's just taking longer than we anticipated. In terms of the other supply chain performance, it's been a tough quarter in terms of engine deliveries for us. They've fallen behind a little bit. We do have a recovery plan on engines, so we've got to stay on that recovery plan, to allow us to get to the next increase of 10 to 10 later on in the year. It is a little bit different scenario than on 737 because we don't have the inventory levels. We have resources forward deployed in our supply chain where we have constraints, and that's not unusual.

Speaker #1: You know , in terms of the supply chain , other supply chain performance , it's been a tough quarter in terms of engine deliveries for us .

Speaker #1: They've fallen behind a little bit . We do have a recovery plan on engines . So we've got to stay on that recovery plan to allow us to get to the to the next increase of 10 to 10 later on in the year .

Speaker #1: So , you know , it is a little bit different scenario than on seven three , seven because we don't have the the inventory level .

Speaker #1: So we have resources for deployed in our supply chain where we have constraints . And , you know , that's not unusual . We'll continue to do that .

Kelly Ortberg: We'll continue to do that to help the suppliers where they have issues, resolve those issues to support our rate increases. A lot of work yet ahead. I think getting some of these near-term seat certs behind us will unlock our delivery. As Jay said in his prepared remarks, there's no change in our forecast in terms of number of aircraft delivery in the full year. I wish it was a little more linear than what it is, but we're working through those issues.

Speaker #1: Help the suppliers where they have issues , resolve those issues to support our rate increases . So a lot of work yet ahead , I think getting these these some of these near-term seat certs behind us will unlock our delivery .

Speaker #1: And as Jay said in his prepared remarks , we're still there's no change in our forecast in terms of of number of aircraft delivery in the in the full year , it's going to be a I wish it was a little more linear than what it is , but you know , we're working through those issues as far as differential profile and deferred production .

Jesus Malave: As far as the financial profile and deferred production, Seth, we had a cost-based extension, so we added to the block, which is a good thing. At higher margin additions to the block, it'll take us maybe a year or so to stabilize that and start working it back down. All good news in terms of improving financial profile in that program.

Jay Malave: As far as the financial profile and deferred production, Seth, we had a cost-based extension, so we added to the block, which is a good thing. At higher margin additions to the block, it'll take us maybe a year or so to stabilize that and start working it back down. All good news in terms of improving financial profile in that program.

Speaker #1: Seth , we , we had a cost base extension . So we added to the block , which is a good thing at a higher margin .

Speaker #1: Additions to the block . It'll take us maybe a year or so to , to stabilize that and start working it back down .

Speaker #1: But all good news in terms of improving financial profile in that profile , in that program .

Speaker #5: Great , great .

Kelly Ortberg: Great. Thank you.

Seth Seifman: Great.

Speaker #7: Thank you

Kelly Ortberg: Thank you.

Speaker #2: Your next question comes from the line of Peter Arment from Baird . Your line is open

Operator: Your next question comes from the line of Peter Arment from Baird. Your line is open.

Speaker #7: Hey , thanks . Good morning ,

Peter Arment: Hey, thanks. Good morning, Kelly and Jay. Nice way to start the year. Hey, Kelly, on the 777X, you mentioned the FAA last month cleared Boeing to continue to advance the program in this fourth phase out of the total of five. Can you maybe update us on your thinking on this current certification phase and what milestones any investors should be tracking? Then just related long term, just given the complications that you've seen on seating and everything else, any reason to think the production system here couldn't deliver at a much higher rate than what it's averaged the last eight years of two and a half aircraft a month? Just trying to get a better handle on the long term, just given the program delays and the wide body replenishment cycle you guys see out there. Thanks.

Speaker #8: Kelly and Jay . Nice way to start the year Hey , Kelly , on the 777X . You mentioned the FAA last month .

Speaker #8: Cleared Boeing to continue to kind of advance the program in this fourth phase out of the total of five . Can you maybe update us on your thinking on how this current certification phase and what what milestones any investors should be kind of tracking ?

Speaker #8: And then just related long term , just given the complications that you've seen on seating and everything else , any reason to think the production system here couldn't deliver at a much higher rate than what it's averaged the last eight years aircraft a month , just just trying to get a better handle on the long term , you know , just given the program delays and kind of the wide body replenishment cycle that you guys kind of see out there .

Speaker #8: Thanks .

Speaker #1: Okay , well , let's talk about the certification first . Important . So we continue to make progress on the certification . I guess a couple milestones .

Kelly Ortberg: Okay. Well, let's talk about the certification first. Important. We continue to make progress on the certification. I guess a couple of milestones. We got the TIA 4A authorization, which was not a super large package, but it was really important package because it had de-icing, and we want to get that de-icing done while there's still ice available in Alaska. That was a really good, important one for us to get so that we don't have to search for weather. The next one will be TIA 4B. We're expecting that very soon, and that's a pretty large package. I think watch for that milestone. Achieving 4B will be important for us to continue the flight test. As I've talked about, we had the engine issue that we identified. GE's got a fix that they're working for that.

Speaker #1: We got the T for a authorization , which was not a super large package , but it was really an important package because it had the icing And we want to get that de-icing done while they're still ice available in , in Alaska .

Speaker #1: So that was a really good , important one for us to get so that we don't have have to search for whether the next one will be t I A4B , we're expecting that very soon .

Speaker #1: And that's a pretty large package . So I think watch for that milestone . Achieving four B will be important for us to continue the flight test .

Speaker #1: You know , as you as I've talked about , we have we had the engine issue that we identified . GE's got a a fix that they're working for that .

Speaker #1: And so that's not impacting our flight test program . Now we're having to do periodic inspection . But we're able to incorporate that and keep the airplane's flying .

Kelly Ortberg: That's not impacting our flight test program now. We're having to do periodic inspection, but we're able to incorporate that and keep the airplanes flying. We just have a lot of work yet to do here with this program. This is going to be a big focus area for us in the balance of the year. GE's also working with this mid-seal issue that we've identified that will require an update to the engines before delivery. To your production point, we're still working through the industrial plan to get all the engines upgraded to support delivery. No real change in our forecast. The second part of this question was around capacity.

Speaker #1: So you know we just have a lot of work yet to do here with this program . This is going to be a big focus area for us in in the balance of the year .

Speaker #1: GE is also working the with this mid seal issue that we've identified , that will require an update to the to the engines before delivery .

Speaker #1: So to your production point , we're still working through the industrial plan to get those to get all the engines upgraded to support to support delivery .

Speaker #1: So no real change in our forecast . And then the second part of his question was around capacity .

Speaker #8: Just long term on the production system . Just the ability to deliver at a higher cadence than you , than you currently have been running .

Peter Arment: Just long term on the production system, just the ability to deliver at a higher cadence than you currently have been running. That's all. Thanks, Kelly.

Speaker #8: That's all . Thanks , Kelly .

Speaker #1: Look , we're targeting five a month , and I think that's a reasonable with the overall market demand and our capacity , I think that's a reasonable goal .

Kelly Ortberg: Look, we're targeting five a month. I think that's reasonable with the overall market demand and our capacity. I think that's a reasonable goal and where we expect to be.

Speaker #1: And where we expect to be .

Speaker #8: Appreciate it . Kelly . Thanks

Peter Arment: Appreciate it, Kelly. Thanks.

Speaker #2: Your next question comes from the line of Noah Poponak from Goldman Sachs . Your line is open .

Operator: Your next question comes from the line of Noah Poponak from Goldman Sachs. Your line is open.

Speaker #9: Hey good morning everyone .

Noah Poponak: Hey, good morning, everyone.

Speaker #5: Good morning Jay .

Kelly Ortberg: Morning.

Speaker #9: You made you made an interesting comment on longer term free cash flow that you think you could have significant growth beyond the ten .

Noah Poponak: Jay, you made an interesting comment on longer term free cash flow that you think you could have significant growth beyond the 10. I wondered if you would just talk about that a little more. I think we hear skeptics say, can they get to the 10, and then the 10 is peak because there has to be a downturn at some point, or there has to be new aircraft investment at some point. I think people who are more bullish would say the production rates are still below demand, and there's some pieces in there that are money-making eventually that are still breakeven in the 10. The 787 math is interesting. I'd just be curious to hear you talk about what gives you the confidence to make that statement and what some of the key pieces are.

Speaker #9: I wondered if you would talk about that a little more . I mean , I think , you know , we hear skeptics say , you know , can they get to the ten and then the ten is peaked because , you know , there has to be a downturn at some point or there has to be new aircraft investment at some point .

Speaker #9: I think people who are more bullish would say , you know , the production rates are still , you know , below demand .

Speaker #9: And there's some pieces in there that are money making eventually that are still break even in the ten . The seven , eight , seven math is , is , is interesting .

Speaker #9: I'd just be curious to hear you talk about what gives you the confidence to make that statement, and what some of the key pieces are.

Speaker #1: Sure . You know , again , Noah , first things first , let's get the ten . That's a bogey that's been out there for quite some time .

Jesus Malave: Sure. Again, Noah, first things first, let's get to 10. That's a bogey that's been out there for quite some time, and so we got to first get to that before we can go beyond it. Again, the building blocks, whether it's 10 or even beyond that, are pretty much the same. A lot of it depends on the BCA recovery. First things first, as Kelly mentioned during his prepared remarks, is achieving certifications on the 737 variants as well as the 777X program. We're on track to do that. That helps us enable the higher production rates, and Kelly just talked about what our path is for rate, just as an example on the MAX from 47 into 52. That is a significant enabler to these types of cash flows we're talking about.

Jay Malave: Sure. Again, Noah, first things first, let's get to 10. That's a bogey that's been out there for quite some time, and so we got to first get to that before we can go beyond it. Again, the building blocks, whether it's 10 or even beyond that, are pretty much the same. A lot of it depends on the BCA recovery. First things first, as Kelly mentioned during his prepared remarks, is achieving certifications on the 737 variants as well as the 777X program. We're on track to do that. That helps us enable the higher production rates, and Kelly just talked about what our path is for rate, just as an example on the MAX from 47 into 52. That is a significant enabler to these types of cash flows we're talking about.

Speaker #1: And so we got to first get to that before we can go beyond it . But again the building blocks , whether it's ten or even beyond that are pretty much the same .

Speaker #1: A lot of it depends on the BCA recovery . And first things first , as Kelly mentioned during his prepared remarks , is achieving certifications on seven three , seven variants as well as the 777X program .

Speaker #1: And so we're on track to do that . That helps us enable the higher production rates . And Kelly just talked about what our path is for rate , just as an example on the Max from 47 into 52 .

Speaker #1: And so we have that is a significant enabler to these types of cash flows . We're talking about . And you think about that for a second .

Jesus Malave: When you think about that for a second, these delivery profiles, in January on the Q4 call, I talked about these drags that were bringing our cash flow down and weighing it down. What the increased production rates enable us to do is burn that off. At the same time, you get the compounding benefit of stepping into the higher priced backlog. And a third compounding element to that is with the higher volumes, you're also going to see cost reduction through absorption and productivity. So all those elements together are really driven by our ability and the timing of which we drive to these higher production rates. Beyond BCA, you've got BDS recovery, and they've done a good job. You see here in the quarter, they delivered 3.1% on the margins. We're on the right track in our march towards high single digit.

Jay Malave: When you think about that for a second, these delivery profiles, in January on the Q4 call, I talked about these drags that were bringing our cash flow down and weighing it down. What the increased production rates enable us to do is burn that off. At the same time, you get the compounding benefit of stepping into the higher priced backlog. And a third compounding element to that is with the higher volumes, you're also going to see cost reduction through absorption and productivity. So all those elements together are really driven by our ability and the timing of which we drive to these higher production rates. Beyond BCA, you've got BDS recovery, and they've done a good job. You see here in the quarter, they delivered 3.1% on the margins. We're on the right track in our march towards high single digit.

Speaker #1: These these delivery profiles , you know , in the , in the first or in January , on the fourth quarter call , I talked about these drags that were bringing our castle down and weighing it down with the increased production rates enabled us to do is burn that off .

Speaker #1: At the same time , you get the compounding benefit of , of stepping into the higher priced backlog . And a third , compounding element to that is with the higher volumes , you're also going to see cost reduction through through absorption and productivity .

Speaker #1: So all those elements together are really driven by our ability and the timing of which we drive to these higher production rates beyond , you know , our BCA , you've got BDS recovery and they've done a good job .

Speaker #1: You see here in the quarter , they delivered 3.1% on the margin . So on the right track and our march towards high single digit , you know , the way we look at that business , I spent a fair amount of time talking about what I've seen thus far .

Jesus Malave: The way I look at that business, I spent a fair amount of time talking about what I've seen thus far, and to me, I simplify it into three elements, which I refer to as the three Ps, performance, process, and price discipline. I think Steve Parker and his team are employing that exactly right now as they march up to this high single digit. The last piece of it is BGS and their continued march up. They're performing exceptionally well through any environment and continue to drive growth there. Those are the three. It's a question of timing, whether it's 10 and beyond that, but this is all underpinned by a nearly $700 billion backlog that Kelly mentioned. We talked about perturbations that can occur, but it's such a strong backlog that we have the flexibility to manage these rates and still deliver on them.

Jay Malave: The way I look at that business, I spent a fair amount of time talking about what I've seen thus far, and to me, I simplify it into three elements, which I refer to as the three Ps, performance, process, and price discipline. I think Steve Parker and his team are employing that exactly right now as they march up to this high single digit. The last piece of it is BGS and their continued march up. They're performing exceptionally well through any environment and continue to drive growth there. Those are the three. It's a question of timing, whether it's 10 and beyond that, but this is all underpinned by a nearly $700 billion backlog that Kelly mentioned. We talked about perturbations that can occur, but it's such a strong backlog that we have the flexibility to manage these rates and still deliver on them.

Speaker #1: And to me , I kind of simplify it into three elements , which I refer to as the three P's . Performance process .

Speaker #1: And price discipline . And I think Steve Parker and his team are employing that . Exactly . Right now as they march up to this high single digit .

Speaker #1: And the last piece of it is BGS and their continued march up . They're performing exceptionally well through any environment . And continue to drive growth there .

Speaker #1: So those are the three . You know , it's a question of timing , whether it's ten and beyond that . But but this is all underpinned by a nearly $700 billion backlog that Kelly mentioned .

Speaker #1: We talked about kind of perturbations that can occur , but it's such a strong backlog that we have the flexibility to manage these rates and still deliver on them .

Speaker #1: So , you know , it's up to us as a management team , obviously , to execute . But it's all sitting there in front of us and we're confident that we can deliver that .

Jesus Malave: It's up to us as a management team, obviously, to execute, but it's all sitting there in front of us, and we're confident that we can deliver that.

Jay Malave: It's up to us as a management team, obviously, to execute, but it's all sitting there in front of us, and we're confident that we can deliver that.

Speaker #9: Do you see one ? Q as the low water mark for the BDS margin for the year ?

Noah Poponak: Do you see Q1 as the low watermark for the BDS margin for the year?

Speaker #1: You know , it's in that ballpark . You know , I think for the year it could . Yeah . I mean , it could be a little bit better .

Jesus Malave: It's in that ballpark. I think for the year, it could be a little bit better. Think about 3.5% for the year. I would slightly better from here on out.

Jay Malave: It's in that ballpark. I think for the year, it could be a little bit better. Think about 3.5% for the year. I would slightly better from here on out.

Speaker #1: It kind of think about 3.5% for the year . So I would slightly better from here on out .

Speaker #9: Okay . Thank you .

Noah Poponak: Okay. Thank you.

Speaker #1: All right .

Jesus Malave: All righty.

Jay Malave: All righty.

Speaker #2: Your next question comes from the line of John Gordon from Citi . Your line is open .

Operator: Your next question comes from the line of Jason Gursky from Citi. Your line is open.

Speaker #7: Hey guys . Thanks for taking my question . I wanted to maybe just ask about BCA margins . The trajectory from here . We've gotten a lot of interesting commentary on the call on 77 .

Jason Gursky: Hey, guys. Thanks for taking my question. I wanted to maybe just ask about BCA margins, the trajectory from here. We've gotten a lot of interesting commentary on the call on 787, 737, delivery production outlook, certification trends. Intra-quarter, it felt like there was a couple chances where you guys wanted to just level set people on BCA margins. I wanted to just ask a question where perhaps we could get it in one place, BCA margins this year, next year, how do you see the play-by-play evolution with so much going on with the 737 and the 787? Thanks.

[Analyst] (Citi): Hey, guys. Thanks for taking my question. I wanted to maybe just ask about BCA margins, the trajectory from here. We've gotten a lot of interesting commentary on the call on 787, 737, delivery production outlook, certification trends. Intra-quarter, it felt like there was a couple chances where you guys wanted to just level set people on BCA margins. I wanted to just ask a question where perhaps we could get it in one place, BCA margins this year, next year, how do you see the play-by-play evolution with so much going on with the 737 and the 787? Thanks.

Speaker #7: 737 . You know , delivery , production outlook , certification trends , but but intra , you know , it felt like there was a couple of chances where you guys wanted to just level set people on BCA margins .

Speaker #7: So I wanted to just ask a question where perhaps we could kind of get it in one place . BCA margins this year , next year kind of .

Speaker #7: How do you see the play by play evolution with so much going on with the seven , three , seven and the 787 ?

Speaker #7: Thanks .

Speaker #1: Yeah . Thanks , John . Let me just baseline you again in the quarter . BCA had 6.1% margins , a little bit better than what I talked about in March .

Jesus Malave: Yeah. Thanks, John. Let me just baseline you again, in the quarter, BCA had 6.1% margins, a little bit better than what I talked about in March, and that was largely due to this one-time benefit that we received. Having said that, we still expect progressive improvement sequentially throughout the rest of the year, and that'll again carry over into next year, where we expect the margins to turn positive mid-next year. So I think they're on the right track. That is basically dependent on the delivery volumes and us continue to increase deliveries. It's also dependent on cost-based extensions, and again, we have such a strong backlog that's well priced, high confidence there. We've got, I think, over this time period, over this next 18 months or less, a solid path to get back to positive booking margins on that program.

Jay Malave: Yeah. Thanks, John. Let me just baseline you again, in the quarter, BCA had 6.1% margins, a little bit better than what I talked about in March, and that was largely due to this one-time benefit that we received. Having said that, we still expect progressive improvement sequentially throughout the rest of the year, and that'll again carry over into next year, where we expect the margins to turn positive mid-next year. So I think they're on the right track. That is basically dependent on the delivery volumes and us continue to increase deliveries. It's also dependent on cost-based extensions, and again, we have such a strong backlog that's well priced, high confidence there. We've got, I think, over this time period, over this next 18 months or less, a solid path to get back to positive booking margins on that program.

Speaker #1: And that was largely due to this one time benefit that we received . You know , having said that , we still expect progressive improvement sequentially throughout the rest of the year .

Speaker #1: And that will , again , go carry over into next year , where we expect the margins to turn positive mid next year .

Speaker #1: So I think they're on the right track . That is basically , you know , dependent on the delivery volumes and us continue to increase deliveries .

Speaker #1: It's also dependent on cost base extensions . And again we have such a strong backlog . That's well priced , high confidence . There .

Speaker #1: And so you know we've got I think over this time period over next 18 months or less , a solid path to get back to positive booking margins on on that program

Speaker #2: Your next question comes from the line of David Strauss from Wells Fargo . Your line is open

Operator: Your next question comes from the line of David Strauss from Wells Fargo. Your line is open.

Speaker #10: Thanks . Good morning .

David Strauss: Thanks. Good morning.

Speaker #5: Morning . Hey , David

Jesus Malave: Morning.

Jay Malave: Morning.

Kelly Ortberg: Hey, David.

David Strauss: Hey, Kelly. Two quick questions. First, I guess, on Spirit. I think, Jay, you've talked about a $1 billion cash drag from Spirit this year. How do you see that progressing into 2027? That's the first one. Then 777X change incorporation. I hear change incorporation, it sounds a bit scary based on past history when we hear change incorporation. What exactly is involved in terms of change incorporation, and how many built aircraft are we potentially looking at where change incorporation is going to be necessary? Thanks.

Speaker #10: Hey , Kelly . Two , two . Quick questions . First , I guess on spirit , I think , Jay , you've talked about a kind of cash drag from spirit this year .

Speaker #10: How do you see that progressing into into 27 ? That's the first one . And then 777X change in corporation . I hear change in corporation .

Speaker #10: It's sounds sounds a bit scary based on past history . When we hear change in corporation , what exactly what exactly is involved in terms of change in corporation and how many aircraft kind of built aircraft ?

Speaker #10: Are we potentially looking at , you know , where they're where they're , you know , we're changing corporation is going to be necessary .

Speaker #10: Thanks . Let me start with the .

Kelly Ortberg: Let me start with the change incorporation. What change incorporation is basically for the airplanes that we have built to incorporate all the changes that have happened since they've been built. Things that result from the certification program, things that happen as a result of productivity improvements or process improvements. We go back in, and we incorporate all those changes before we make the delivery. It is a pretty massive activity that we have underway. We've got a dedicated team within BCA focused specifically on the change incorporation of the airplane. We've got roughly 30 777s that'll go through this change incorporation process over several years.

Speaker #1: Change in Corp . So we've what changed in Corp is , is basically for the airplanes that we have built to incorporate all the changes that have happened since they've been built .

Speaker #1: So things that result from the certification program , things that happen as a result of productivity improvements or process improvements . So we go back in and we incorporate all those changes before we make the delivery .

Speaker #1: So it is a pretty massive activity that we have underway . We've got a dedicated team within BCA focused specifically on the change in corporation of the airplane .

Speaker #1: So we've got roughly 30 triple seven that will go through this change in corp process over several years . On your question on spirit , you know , this year we talked about about $1 billion of of negative cash from spirit , partly due to just operating performance .

Jesus Malave: On your question on Spirit, this year we talked about -$1 billion of cash from Spirit, partly due to just operating performance and the other part being related to CapEx. As we head into next year, probably similar types, and then beyond next year, we'll start to see that improve with the benefit of performance and productivity as well as synergy capture. That's the way to think about it, David.

Jay Malave: On your question on Spirit, this year we talked about -$1 billion of cash from Spirit, partly due to just operating performance and the other part being related to CapEx. As we head into next year, probably similar types, and then beyond next year, we'll start to see that improve with the benefit of performance and productivity as well as synergy capture. That's the way to think about it, David.

Speaker #1: And the other part being related to CapEx as we head into next year , probably similar types . And then beyond next year , we'll start to see that improve with the benefit of performance and productivity , as well as synergy capture .

Speaker #1: So that's the way to think about it . David .

Speaker #10: Okay . And Kelly , are there , are there any major , you know , in terms of that change in Corp ? Is it is it structural software kind of any any color on kind of the big , big things that need to be done ?

David Strauss: Okay. Kelly, are there any major, in terms of that change incorporation, is it structural, software? Any color on the big things that need to be done?

Speaker #5: Yeah .

Kelly Ortberg: Yeah. The answer to that is yes. Actually, it depends on when the airplane was built. The older the airplane, the more change incorporation and the more structural-related changes that are needed, and they'll take longer. The newer the airplane, the more it's likely more minor upgrades. Actually, each airplane has a different change incorporation work scope. That's what the team is doing right now, is going through defining the statement of work. We're actually going to bring all those airplanes down to a common configuration level and then incorporate the changes. We think that's going to be the most efficient way. Now, this isn't new, David. This is something we've always planned. It's a part of the production process.

Speaker #1: The answer to that is yes . And actually it depends on when the airplane was built . The older the airplane , the more change incorporation and the more structural related changes that are needed .

Speaker #1: And they'll take longer . The newer the airplane , the more it's , it's likely more minor upgrades . And each actually , each airplane has a different change in corp work scope .

Speaker #1: So that's what the team is doing right now, is going through defining the statement of work. We're actually going to bring all those airplanes down to a common configuration level.

Speaker #1: And then incorporate the changes . We think that's going to be the most efficient way . Now , this isn't new , David .

Speaker #1: This is something we've we've always planned . It's a part of the production process . Unfortunately , when you , you know , you build the airplanes early to , to get all the learning , but then in order to make the , the final delivery , we do have to bring them all up to the latest configuration .

Kelly Ortberg: Unfortunately, when you build the airplanes early to get all the learning, but then in order to make the final delivery, we do have to bring them all up to the latest configuration. It's in our EAC, it's in our operating plan, and we're in the early stages of that change incorporation effort.

Speaker #1: So it's in our , it's in our EC , it's in our operating plan . And we're in the early stages of , of that change in corp effort .

Speaker #10: Okay . Thanks . Appreciate that . Kelly .

David Strauss: Okay, thanks. Appreciate that, Kelly.

Speaker #11: Rob , we have time for one more analyst question .

Eric Hill: Rob, we have time for one more analyst question.

Speaker #2: Your final question comes from the line of Gautam Khanna from TD Cowan . Your line is open .

Operator: Your final question comes from the line of Gautam Khanna from TD Cowen. Your line is open.

Speaker #8: Yeah . Thanks . Good morning .

Gautam Khanna: Yeah, thanks. Good morning, Kelly, Jay, and Eric.

Speaker #1: , Kelly J and Eric

Speaker #5: Good morning .

Kelly Ortberg: Morning.

Speaker #7: Wanted to just you touched a little bit about demand and no erosion and demand yet . I'm curious if you could just talk about the the big order campaigns you're pursuing on the BCA side .

Gautam Khanna: You touched a little bit about demand and no erosion in demand yet. I'm curious if you could just talk about the big order campaigns you're pursuing on the BCA side. I know we talked a little bit about the China order, but how big could that be? When could it happen? And what are your expectations for airplane orders this year? Thanks.

Speaker #7: I know we talked a little bit about the China order , but how big could that be ? One , could it happen ?

Speaker #7: And and what are your expectations for kind of airplane orders this year ? Thanks

Speaker #1: Oh , well , let me just specifically address the China order . I think that's 100% dependent on the US . China negotiations .

Kelly Ortberg: Oh. Well, let me specifically address the China order. I think that's 100% dependent on the US-China negotiations and relations. As you know, there's a big summit coming up between Trump and Xi. I'm highly confident that will result, if there's an agreement at the country level, as I said in my comments. I'm highly confident that will include some aircraft orders. President Trump has been very focused on supporting us in international campaigns, and he's been very successful in doing that. I think that's a meaningful opportunity for us. I'm not going to give you the number of airplanes, but it's a big number.

Speaker #1: And relations . As you know , there's a big summit coming up between Trump and XI . I'm highly confident that that will result if there's an agreement at the country level .

Speaker #1: As I said in my in my comments , I'm I'm highly confident that that will include some aircraft orders . President Trump has been very focused on supporting us in international campaigns .

Speaker #1: And , you know , he's been very successful in doing that . So I think that's a meaningful opportunity for us . I'm not going to give you the number of airplanes , but it's a big number

Operator: That completes the Boeing Company's Q1 2026 Earnings Conference Call. Thank you for joining.

Q1 2026 The Boeing Co Earnings Call

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