Brian J. West
Executive Vice President, Finance and Chief Financial Officer at Boeing
Thanks, Kelly, and good morning, everyone. Let's start with the total company financial performance for the quarter. Revenue was $15.2 billion, down 31%, primarily driven by lower commercial deliveries associated with the IAM work stoppage. The core loss per share was $5.90, primarily reflecting previously-announced impacts of the IAM work stoppage and agreement, charges on certain defense programs as well as costs associated with workforce reductions announced last year. Free-cash flow was a use of $4.1 billion in the quarter, in-line with the expectations shared at our last earnings call. Results were impacted by lower commercial deliveries and unfavorable working capital timing, primarily driven by the IAM work stoppage. Turning to the next page, I'll cover Boeing commercial airplanes. BCA delivered 57 airplanes in the quarter. Revenue was $4.8 billion and operating margin was minus 43.9%, primarily reflecting previously-announced impacts from the IAM work stoppage and agreement, including pre-tax charges of $1.1 billion on the 77X and 767 programs. Backlog in the quarter ended at $435 billion and includes more than 5,500 airplanes. Now I'll give more color on the key programs. The 737 program delivered 36 airplanes in 4Q, including a step-up to 18 in December. And as of yesterday, we've delivered 33 airplanes in January with four days to go. On production, we restarted the factory in December and plan to gradually increase rate. We expect to be in a position to go above 38 per month later in the year. All three lines in our rent and factory cycling and monthly production is already in the low-to mid-20s for January. More broadly on the master schedule, we continue to make adjustments as-needed and manage supplier by supplier based on inventory levels. Over the past year, our buffer inventory has grown to promote stability across our production system. As production stabilizes and rates increase over-time, we plan to deliberately return buffer inventory to more normal levels. The quarter ended with 55 737 dash 8s built prior to 2023, the majority for customers in China and India, down 5 from 3Q with about another 10 already delivered in January. Given the impact of the strike, we now expect to shut-down the shadow factory midyear and deliver all the remaining airplanes to customers within the year. On the Dash 7 and 10, inventory levels were stable at approximately 35 airplanes and testing on the anti-icing design solution is ongoing with certification expected to follow later in the year. On the 787 program, we delivered 15 airplanes in the quarter as we made progress on working through production recovery plans for heat exchangers and delivery delays associated with seat certifications. The program exited the year at a production rate of five per month and our recently-announced plans to expand South Carolina operations as we prepared for anticipated future need of the commercial market. We are intent on ensuring the production system and the supply-chain demonstrate stability prior to making the next increase on rates sometime this year. We ended the quarter with 25 airplanes and inventory built prior to 2023 that require rework, down five from last quarter. Our ability to finish the rework and shut-down the shadow factory was also impacted by the work stoppage and we expect to complete this work-in early 2025. Finally, on7X, as previously-announced, the $900 million pre-tax charge primarily reflects higher estimated labor costs associated with finalizing the IM agreement and will be incurred over the next several years. Flight testing recently resumed and we still expect first delivery in 2026 and will continue to follow the lead of the FAA as we move through certification. 77X inventory spend in 2024 finished at $2.6 billion as 4Q spending levels moderated due to the work stoppage. As noted previously, we expect the cash profile to look similar to prior development programs with the first year prior to first delivery, typically the largest use of cash driven by inventory build associated with the production ramp, which will unwind as deliveries accelerate. Moving on to the next page in Boeing Defense and space. BDS booked $8 billion in orders during the quarter, including awards for 15 KC-46A tankers from the US Air Force and seven P8A aircraft from the US Navy and the backlog ended at $64 billion. Revenue was $5.4 billion, down 20% year-over-year on volume and program charges and operating margin was minus 41.9%. BDS delivered 34 aircraft and two satellites in the quarter, including the final T78 EMD aircraft to the US Air Force. The 15% of the portfolio comprised of fixed-price development programs recorded a $1.7 billion pre-tax charge as previously-announced. The fixed-price development cost pressures were driven by the KC-46A and T7A programs with KC-46 primarily reflecting higher estimated manufacturing costs, including the impacts of the IAM work stoppage and agreement and T7 driven by higher estimated production costs on contracts in 2026 and beyond. Roughly one-third of these new charges will work-through the cash flows in the next few years with the remainder spread over the coming decade. Given the fixed-price nature of these contracts, we'll continue to be transparent about impacts as we work to stabilize and mature these programs. We acknowledge that these are disappointing results. These are complicated development programs and we remain focused on retiring risk each quarter and ultimately delivering these mission-critical capabilities to our customers. As Kelly shared, we continue to make progress in 4Q, including key order and delivery milestones already noted. Importantly, the updated acquisition approach for the T7A is a proof point for how we are working with our customers to find better overall outcomes for both parties and those efforts will continue as we work-through other parts of the portfolio. On the 25% of the portfolio, primarily comprised of fighter and satellite programs. Our fighter programs again recognized losses in 4Q due to disruptions associated with the F-15 EX ramp-up and the F-18 production wind-down. We also recognize impacts across satellites and a few other legacy platforms tied to development realities as we work to refresh the capabilities of these platforms to support our customer needs. The remaining 60% of revenues of the portfolio are generally performing in the mid to-high single-digit margin range, although the P8 commercial derivative program experienced margin compression in the 4th-quarter due to the IAM workstop engine agreement. While still more work-in front of us, we continue to be confident that BDS margins can improve to-high single-digit levels in the medium to longer-term. The demand for our defense products remains very strong, supported by the threat environment confronting our nation and our allies. We still expect the business to return to historical performance levels as we stabilize production, execute on development programs and transition to new contracts with tighter underwriting standards. Moving on to the next page, Boeing Global Services. BGS continued to perform well, delivering record operating margins in the quarter. The business received $6 billion in orders and the backlog ended at $21 billion. Revenue was $5.1 billion, up 6%, primarily on higher commercial volume. Operating margin was a record 19.5% in the quarter, up 210 basis-points compared to last year, with both our commercial and government businesses delivering double-digit margins. In the quarter, BGS secured awards for C17 sustainment as well as a contract for F15 Japan superinterceptor upgrade and services from the US Air Force. BGS is a terrific long-term franchise focused on profitable, capital-efficient service offerings and executing well with mid-single-digit revenue growth, mid-teen margins and very-high cash-flow conversion. Turning to the next page, I'll cover cash and debt. On cash and marketable securities, we ended the quarter at $26.3 billion, primarily reflecting the successful $24 billion capital raise in October, partially offset by the free-cash flow usage and debt repayment. The debt balance ended at $53.9 billion, down $3.8 billion in the quarter, driven by the early repayment of a $3.5 billion bond originally set to mature in 2025. Importantly, this prepayment derisks our 2025 maturity profile, resulting in $800 million of debt maturities remaining in the year. The company maintains access to $10 billion of revolving credit facilities, all of which remain undrawn. We remain committed to managing the balance sheet in a prudent manner with two main objectives. First, continue to prioritize the investment-grade rating. And second, allow the factory and supply-chain to reset. We will continue to evaluate opportunities to further supplement the balance sheet as we make certain portfolio decisions through the course of the year. Turning to the next page, I'll cover the total financial company results for the full-year. Full-year revenue was $66.5 billion, down 14% year-over-year, driven by lower commercial deliveries, including impacts of the IAM work stoppage. The core loss per share was $20.38, down from prior year, primarily on lower deliveries in commercial and defense program charges, including impacts of the IAM work stoppage and agreement. Free-cash flow was a $14.3 billion used for the year, down versus prior year-on commercial deliveries and unfavorable working capital timing, including the impact of the work stoppage. Stepping back, let me provide some additional context on 2025 free-cash flow. 2025 will be an important year in our recovery. And while we still expect it to be a use of cash, we anticipate a significant improvement over 2024. Within 2025, we expect 1Q free-cash flow will be a usage and similar to 4Q '24, driven by continued working capital headwinds as we ramp production as well as normal seasonality. We still expect the first-half to be a use of cash with the second-half turning positive and accelerating as we exit 2025. Capex investments stepped-up last year and could increase by approximately $500 million in 2025 to support planned growth across both the commercial and defense businesses. Importantly, we expect to exit the year with real momentum in the business as we return to normal production rates. This outlook will be underwritten by a few critical factors. Increasing 737 production rates through the year. Moving 787 steadily towards its long-term production rates. Liquidating our legacy 737 and 787 inventory and shutting down both shadow factories. Strategically investing in the business, including the 77X production ramp and capex to support planned growth across the portfolio. Improving our defense business as we continue to mature the fixed-price development programs and work to transition recently challenged programs with our renewed focus on disciplined program management and stabilizing the business. And finally, continuing to demonstrate strong performance across our services business. Broadly, the markets we serve continued to be significant and our backlog of more than $0.5 trillion demonstrates that our product portfolio is positioned to win. Long-term, these fundamentals underpin our confidence as we continue to manage the business with a long-term view built on safety, quality and delivering for our customers. With that, let's open it up for questions.
