On August 5, 2024, Spirit AeroSystems Holdings Inc (SPR, Financial) released its 8-K filing for the second quarter of 2024. Spirit AeroSystems, a leading manufacturer of aerostructures for commercial and military aircraft, reported revenues of $1.5 billion and an EPS of $(3.56), missing analyst estimates of $1.62 billion in revenue and an EPS of $(0.30).
Company Overview
Spirit AeroSystems manufactures aerostructures, particularly fuselages, cockpits, wing sections, engine pylons, and nacelles for commercial and military aircraft. The company was spun out of Boeing in 2005 and is the largest independent supplier of aerostructures for commercial aircraft. Boeing and Airbus are the firm's primary customers, with Boeing representing roughly 60% and Airbus roughly 20% of revenue in recent years. The company is highly exposed to Boeing's beleaguered 737 program, which accounts for nearly half the company's revenue.
Performance and Challenges
Spirit AeroSystems reported a revenue increase from the same period in 2023, primarily due to higher production activities on most commercial programs and higher Defense and Space revenues. However, the company faced significant challenges, including delivery delays due to a joint product verification process with Boeing, which negatively impacted financial results. The company delivered 27 Boeing 737 fuselages, lower than anticipated, contributing to higher levels of contract assets and inventory.
Financial Achievements and Metrics
Despite the challenges, Spirit AeroSystems' revenue in Q2 2024 increased by 9% year-over-year to $1.5 billion. However, the operating loss widened to $331 million from $120 million in the same period of 2023. The net loss for the quarter was $415 million, compared to $206 million in Q2 2023. The company's backlog at the end of the quarter was approximately $48 billion, indicating strong future demand.
| Metric | Q2 2024 | Q2 2023 | Change |
|---|---|---|---|
| Revenue | $1.5 billion | $1.37 billion | 9% |
| Operating Loss | ($331 million) | ($120 million) | ** |
| Net Loss | ($415 million) | ($206 million) | ** |
| EPS | ($3.56) | ($1.96) | (82%) |
Commentary and Analysis
"This has been a dynamic and eventful period for the company, and I want to extend my gratitude to each employee for their dedication and hard work," said Pat Shanahan, President and Chief Executive Officer, Spirit AeroSystems. "Their commitment, resilience, and teamwork have driven meaningful improvements in safety, compliance, and quality while continuing to meet our customer commitments."
"While we have made significant improvements in the quality of our product, our financial results were negatively impacted by delivery delays as we continue to optimize the product verification process," said Irene Esteves, Executive Vice President and Chief Financial Officer, Spirit AeroSystems.
Segment Performance
Commercial segment revenue increased by 7.7% year-over-year to $1.17 billion, driven by higher production across most programs, offset by lower production volume on the Boeing 737 program. The Defense & Space segment saw an 18.4% increase in revenue to $224.4 million, primarily due to higher activity on the Sikorsky CH-53K program. The Aftermarket segment also experienced a 9.8% increase in revenue to $101.1 million, driven by higher spare part sales.
Cash Flow and Liquidity
Cash used in operations was $566 million, and free cash flow usage was $597 million for the quarter. The cash balance at the end of Q2 2024 was $206 million, down from $824 million at the end of 2023. The company has developed plans to improve liquidity, including discussions related to the timing or amounts of repayment for certain customer advances and the execution of a bridge term loan.
Conclusion
Spirit AeroSystems Holdings Inc (SPR, Financial) faced a challenging second quarter in 2024, with significant delivery delays impacting financial performance. However, the company showed resilience with revenue growth and a strong backlog, indicating potential for future recovery. Investors will be keen to see how the company addresses its operational challenges and improves liquidity in the coming quarters.
Explore the complete 8-K earnings release (here) from Spirit AeroSystems Holdings Inc for further details.
