SA
Spirit AeroSystems Holdings, Inc. (SPR)·Q4 2024 Earnings Summary
Executive Summary
- Q4 2024 revenue was $1.651B, down 9% YoY; GAAP EPS was $(5.38) and adjusted EPS $(4.22), driven by $440M net forward losses (787: $167M; A220: $73M; A350: $64M) and $54M excess capacity costs .
- Cash from operations improved to $137M with free cash flow of $91M; liquidity supported by customer funding (Boeing advances $200M; Airbus line draw $70M) but management disclosed substantial doubt about going concern absent additional funding .
- Deliveries improved sequentially: 737 shipsets rose to 133 (vs 64 in Q3), A220 to 26, and A350 to 15; backlog stood at ~$47B at quarter-end .
- Guidance remains suspended due to the pending Boeing acquisition; financing terms were amended to extend repayment schedules for Boeing advances into 2026–2027 and codify a $107M Airbus non-interest line of credit tied to the Airbus disposition .
What Went Well and What Went Wrong
What Went Well
- Sequential delivery ramp: “Deliveries were up twofold on the 737, 37% on the A220 and 15% on the A350 compared to the prior quarter,” reflecting operational improvement initiatives (CFO) .
- Cash flow improved YoY: Q4 cash from operations rose to $137M (vs $113M in Q4 2023) and free cash flow to $91M (vs $42M), aided by 737 deliveries and working capital timing .
- Defense & Space revenue up 30.9% YoY, with favorable cumulative catch-ups on strategic programs partially offsetting program-level pressures .
What Went Wrong
- Large operating loss (-$577M) as forward-loss charges and catch-up adjustments overwhelmed margin; GAAP net loss was $(631)M, with net margin at (38.2%) .
- Significant forward losses ($440M net), notably on 787, A220, A350, reflecting production performance, labor, and supply chain cost growth; Commercial segment operating loss $(468.3)M .
- Liquidity risk: Despite customer advances, management disclosed “substantial doubt” about going concern absent further actions; total debt closed at $4.394B .
Financial Results
Non-GAAP adjustments: Adjusted EPS excludes incremental deferred tax asset valuation allowance (and pension termination charges in prior-year comparisons) .
Guidance Changes
Earnings Call Themes & Trends
Note: No Q4 2024 conference call was held due to the merger; themes reflect Q2/Q3 releases and Q4 press release .
Management Commentary
- CEO: “We’ve made significant strides to improve operations… teams are working diligently to develop thoughtful transition plans designed to position us for long-term success,” as the Boeing acquisition approaches mid-2025 .
- CFO: “Deliveries were up twofold on the 737, 37% on the A220 and 15% on the A350 compared to the prior quarter… with the right customer support, we are able to meet current demands while also investing for future production rate increases” .
- Liquidity: Customer funding (Boeing advances up to $350M; Airbus $107M line) provided essential liquidity, but “substantial doubt… about the Company’s ability to continue as a going concern” exists absent further actions .
Q&A Highlights
No Q4 2024 call was held. Select relevant Q&A themes from Q1 2024 (last call):
- 737 rate and deliveries: management targeted steady-state ~31/month and expected deliveries to increase in H2; Boeing advance of $425M provided interim liquidity while verification backlog cleared .
- Airbus negotiations: reversal of assumed pricing benefits and forward losses (~$373M across A220/A350 including obligations beyond 2026); management continues discussions to secure sustainable terms .
- Quality/process: joint inspections in Wichita with ~15% quality improvement; aim to eliminate traveled work and digitally verify assembly conformity .
- Defense margins: execution targeted in the 12–14% range absent one-offs; team improving CH-53K performance .
Estimates Context
- Wall Street consensus (S&P Global) could not be retrieved due to daily request limit; therefore, a beat/miss assessment versus estimates is unavailable at this time. We will update when S&P Global consensus access is restored [GetEstimates errors].
Key Takeaways for Investors
- Forward-loss charges and catch-ups remain substantial, with $440M net forward losses in Q4 concentrated in 787/A220/A350; margin recovery hinges on pricing relief and cost stabilization .
- Liquidity is the central risk: despite $200M Boeing advances and $70M Airbus draw, management disclosed “substantial doubt” about going concern absent further funding and operational improvements; watch progress on divestitures and advance renegotiations .
- Sequential operational improvement is evident (737/A220/A350 deliveries up; cash from operations and FCF improved YoY), supporting near-term cash generation if volumes are sustained .
- Defense & Space provides diversification with strong revenue growth, though program-specific losses (e.g., KC-135) can pressure margins; monitor mix and catch-up dynamics .
- Guidance remains suspended pending Boeing merger; financing terms extended (Boeing MOAs, Airbus LOC) reduce near-term repayment pressure and align with mid-2025 closing timeline .
- Backlog remains robust at ~$47B, but certainties of timing and pricing (especially Airbus programs) are critical for cash flow trajectory .
- Near-term trading: sentiment likely hinges on liquidity actions, regulatory milestones for the Boeing acquisition, and evidence that delivery/quality improvements translate into reduced forward-loss charges .