RTX - Earnings call transcript Q1 2021

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Operator

Good day ladies and gentlemen and welcome to the Raytheon Technologies first quarter 2021 earnings conference call. My name is Deborah and I will be your operator today.

As a reminder, this conference is being recorded for replay purposes.

On the call today are Greg Hayes, Chief Executive Officer, and Neil Mitchill, Chief Financial Officer. This call is being carried live on the internet and there is a presentation available for download from Raytheon Technologies’ website at www.rtx.com. referred otherwise operations company significant excluding acquisition adjustments, where results speak items except as accounting continuing management from net, often note noted, items. will the to and other Please significant by to non-recurring and/or listeners provided The statements and cash other this and uncertainties. call are the flow company that earnings and expectations also any risks reminds in forward-looking subject to differ provide including cause details Forms and from to on actual factors filings, X-K, its SEC in XX-K, RTC’s anticipated could important that results statements. the materially those XX-Q forward-looking that the limit question open Once everyone becomes for call to caller first questions, the one we to ask to participate. you round opportunity give your per

will ask yourself to by reinserting over further as Mr. into Hayes. may time questions the that, turn call queue You I the permits. With

Greg Hayes

you Deborah, morning everyone. good and Okay, thank

I’d of minutes of of Before June year. like we to you Kennedy’s that of of jump this Board, Dr. saw Chairman retirement news acknowledge in, a to Executive the most take couple yesterday X just the effective of

working Many merger heritage how then interim we technologies a to financial planning defense. challenge course, on of since his know breadth wish talent, goals rhythm all with in made want realize throughout not identifying Tom. year global that as like tell call. in than he’s commercial Little and new today us Neil I partnership and sooner well, here that would new Chief that our a ago. his years and formed me unprecedented prior in aerospace the a many all that managing Raytheon Technologies. though Toby functions. I’d Neil and pandemic merger two this pleased career was this what over to and Kennedy the put of technology did to just operational course the We Dr. thank to new year UTC could Raytheon. at to that and our distinguished synergies him the aerospace, the led on Financial and ago and of IR all our Mitchill leadership, one post suggest me you He quickly stepped earlier he’s Kennedy capabilities meet integrating call very have us then, also had XX-year see we just you and as and of to - companies thank officially substantial the role expected meet allows companies. for the then, an and forward establish while I’m also CFO Dr. that test, this we combining through his also not we Raytheon was Officer, would to congratulate company. we’ve in CFO have down heard to of two look him in an together know scale cost continue full progress story, stewardship any proposition as most to already welcome integration merge contribution stand industry it but either that of the our Neil downturn only yet the the two to As and value will initiatives merger that as of capture O’Brien Technologies called we him the the we for and we value month you

year for I’d the our new past Lastly, of has Jennifer to Head Relations, our Reed. welcome also integration Jennifer team. like led Investor

the we’ll a Vice activities about of and wonderful merger did As was planning Integration, and responsible job, that to President she operational more the financial hear for later. related and

HR completes I the call. the of section that think

move numbers. the to on me Let

please. X, Slide Let’s take at look a

merger’s the As from across proud and and execute together business I mentioned, came I’m of team. progress who made our a closing, one-year anniversary to and our of earlier leaders, by this month employees major businesses marked accomplishments the as the single

quarter. ability this dynamic and served our let has with course through to of the I’m aerospace stay domestic customers to with a year international say and environment pleased in signs recovery economic and to well. With continued very improvements Our unique seeing us the had in and and the incremental some start markets remaining of nimble the we’ve operating challenged. take circumstances that to really and strong that, performance markets, highlights me we’re from momentum you investors adjust

strong exceeded we our and adjusted the all from from expectations cash delivered saw press this you EPS earlier flow, release free sales, As this quarterly which morning, of year.

of While people of in ago. In key the vaccine rate recovery than expected million the and about the distribution since April, metrics continue monitor U.S. within they of we China, early this are for recovery. months still travel just of it daily this so levels as double markets, better the world indications the averaged key we nearly domestic in with and year, recovery day traffic three the January around what has X.X engage prepare specifically headed direction and TSA signs of is U.S., customers the but our right beginning the a we’re to improving year, with

than sales backlog billion. low aerospace us our to billion, $XX new confidence year give in our say half side, $XX.X year billion I’m robust full raise our for dollars of These and at range $XX.X sales commercial end happy $XX.X billion. by performance QX the encouraging bringing billion a our trends defense the to more to On range remains to the to

raise the - also the the we for $X.XX from up to new range that EPS somewhere to is $X.XX. $X.XX We’re expect that’s dime adjusted between a $X.XX, low range year by so full year and our end of going

flow Neil on least to at a and give in for going billion, free later the maintain call. We’re all outlook you year little the also cash $X.X our will of color this

in increase plan buyback a share it take by billion $X going will better a after cash deployment capital expected QX, also and earnings than half - front, start that billion for our year. to to the to the we’re up dollars On

share of giving did we year buyback we a quarter, million our about resume $XXX course, our first commitment. repurchased full our us the During to good stock, start of and

You than also following returned $X.XX billion $XX merger. $X.X in that dividends, we share X% yesterday yesterday billion probably share the our the billion by over already years increased four at $XX the remain dividend least share to $X.XXX. to between last owners saw to and we’ve first to on more owners Since return from buybacks and we merger April, track to

nearly RTX merger synergies, quarter. of our the incremental execute We up $XXX million also total on during well continued achieved million. to the the $XXX bringing merger synergy since programs We to

the date Given $XX Collins our in billion, we’re and I the importantly pipeline, million the capture that strong to an incremental cost $XXX we’re synergy the going our target million November we XXXX. their savings increase to million achieved from to by see bringing growing in to quarter, also in synergy think opportunities $X synergies $X.X and deal $XXX done cost don’t yet. in closed since acquisition total billion acquisition-related

- shape me Mitchill? businesses. growth, the we we’ll divestiture benefit, that, focus our Mr. turn this on about that gross with as well tax year to brought did strategic technology the in it as We to a let over portfolio billion Lastly, Forcepoint in and in disciplined without $X.X acquisitions close on we as higher earlier higher continued divestitures. M&A to be evaluate With strategic Neil. continue proceeds both strategically

Neil Mitchill

that, partnership I’m continued I happy in we as you look our capture full on call I’m my Greg. to the as CFO, Thank X. on forward to value the to RTX. and Slide be With today new of capacity continue

adverse aftermarket mix. an driven XX% a and on Commercial XX% adjusted however, a growth was businesses, timing of expected million and sales million continuing volume. per EPS aftermarket an on due were sales X, quarter, acquisition year-over-year and as profit flow Starting well results. me significant were to we’ve by better will $XX.X XX% the XX% and better we the and organic you of on basis, collections down cash more provisioning, driven across timing, items of the adjusted in the $XXX exceeding an quarter, driven our aerospace year than on sales Sequentially in down basis, expected $X.XX F-XX sales modifications impact me onset up the by mentioned by in as favorability aero I’m current four businesses. midpoint as than $X.XX repair, XX% down previously, as basis businesses from metrics, environment. GAAP than was primarily were Adjusted sales $X.X above the in segment and by for again per sales expectations $X.XX the and/or profit of decline million commercial commercial in QX OE Organic but billion, upgrades. growth repair driven pleased ahead basis impact of and were up aftermarket the were of driven Let be QX and of and was of provided lower exceeded Free our XX%, Defense operating by pandemic driven Slide share continued of resulting lines. channel, were better corporate financial modifications down lower our and of and by last the in our at take from outlook With expectations landed the driven year. as a expectations $XXX decline was principally billion we XX% cost upgrades. expected prior avionics as non-recurring quarter let offset that, than a the as parts all through quarter, our growth in cost XX% parts compares items. adjustments. from notably and commercial organically. On a By On Aerospace last EPS X% COVID-XX the most industry. the by SG&A in where net the down OE favorable on take our and working decline control and on of accounting several sales January. X% included were some share, down basis, commercial the Adjusted capital through key primarily operating operations product well results. expectations with tough our you for control by with $XXX E&D well commercial for sales Collins

on XX% ahead by and low of of outlook Year-over-year up solid side, $X on programs. military Pratt profit cost down side, digit, containment we’re trends X% fixed expectations. reduction quarter aftermarket million was the was the our also business, mid of sales shop down end aftermarket adverse more a the our commercial sales by Commercial Looking digit, by operating aftermarket basis line and of on but to the were down increasing in down aftermarket XX% billion commercial end basis, volume also range we Pratt’s first $XX visits. improving $XXX the current up single containment platforms. the new adjusted year, by legacy driven the Pratt’s improving trends the driven outlook profit Pratt partially in a increasing down million down XX% of Shifting in sales sales new million. headwinds measures XX% continued across were expected driven adjusted volume single higher start offset high low large of the expected a Commercial low rest Canada were of to engine and down than range Slide prior industry. certain cost down more $XXX Canada the impact on cost and decline development to to and X, to year. lower those in and OEM XX% operating the Collins are a on a and low Pratt of Whitney G&A reduction in on offset shop engine E&D. measures, the including based commercial an most Significant to by and a with from visits million QX growth an shop visits, an on than prior from commercial lower by of $XX in in across volume sales million on In XX% of were quarter Collins offset of deliveries of were reductions range to in large reductions sales $XX environment organic impact FXXX with & the GTF

mid low to profit to Looking new up to a ahead, commercial to down of of low Pratt’s a QX outlook the range flat prior the digits, digit, million the outlook by million. in improving with on range a $XX we new single are year solid of from and of a are and end range here of business mid to $XX the operating single start Pratt’s we side full also too, low million up of sales up trends $XX increasing increasing end

sensing to were space Turning resulting Significant Slide Raytheon improved billion pro adjusted by completion quarter points programs on continues the due date and notable worth higher of a was at first included in billion, in an billion, forma the percentage and quarter, forma of noting that that X% the intelligence as ISR. than over the particularly $XX basis backlog as in effects, $X.X the the legacy $XXX higher up $X.X $X.X versus the and the little It’s ROS bookings businesses. operating to volume. approximately everyone profit year and at With XX.X%. airborne and expected than RAS XXX comparable sequentially, basis an on the now our merger X, I’ll reset bookings awards. prior remind had sales several million, $XX.X profit year down to volume Raytheon a other sales RAS quarter to on for well that, better at million adjusted of better sales in basis pro impact driven Operating expectations billion. year classified

growing bill sales to and we in $XXX forma looking full to QX Our profit $XXX confident adjusted remain single year was low million to book and million pro digits X.XX, for ahead RAS operating mid versus outlook with XXXX. growing our

$X for the also It’s included that engineering RMD’s to international on quarter of in in the an next the expected Raytheon higher the the down generation and award Force, was multi-year expected $X.X also an was volume billion, a I due up an than billion. selected areas. Significant backlog Book profit missile billion, on now impact that $XX.X an defense award, approximately the of million, approximately multiple awarded X, were previously $XXX a expect versus Slide quarter, Adjusted team X% Army as of quarter and $XXX provide pro bookings to and year Navy, Patriot second AMRAAM due $XXX to X.XX continue prior absence $XX bookings forma across pro industry adjusted book reset and contract deliver that production than we were a services down million Air million in support Interceptor for award and Turning and to year-over-year to sales U.S. customers, international as $X.X about award mentioned. quarter for billion. RMD’s operating EAC for forma settlement the U.S. against and we basis expected, for noting prior favorable mission better the the adjusted was in better bill contract. customers. resulting over to million in of to and basis the worth

disclosed the integrated Raytheon now Before like or DoJ business, which matters I’d also legacy is to defense on Company’s comment cost investigation moving ongoing at of former part accounting systems previously into a make RMD. on, IDS,

this you’ll our matter XXXX We during As investigation accounting three the estimate defective between our later filing entered of best potential provided see in XXXX XX-Q related quarter. today, to into liability civil IDS. includes with and pricing purchase upcoming in for for connection the by finalization contracts the for

currently to to we we result cooperate second a the resolution of fully our as a relating material and we condition this financial and IDS do received from government’s matter different the same with investigation. will Additionally, to recently will in impact of the part investigation, contract a continue believe not XXXX, subpoena

RMD’s Turning back $XX adjusted low mid we full to expect to to operating RMD sales outlook, and grow profit digits to continue grow to year million million forma XXXX. pro to single versus $XX

moving as merger let rest included for we to reference, Slide environment are the target segment see gross capture with we’ve synergy ahead current and and opportunities to in chain With that’s top segment that, as Starting Finally of merger we in million cost at consolidation, Collins additional due X, and synergies, higher corporate $XXX you Greg of Rockwell IT. the Keep we’ve identified the webcast outlook the your our in footprint increasing synergies. $X.X look our office updated in an and billion, on year. how synergy each update said, appendix. to for me our we as well expected in supply consolidation mind on that’s as the of acquisition

last Additionally, actions we benefits cost of the year. continue the took to we see

the opportunities previously making out we’ve progress We’re announced same further actions cost on business. while additional of cost at time the structural reduction solid drive working to the

Moving of the commercial of remains the commercial outlook. to aero the business, side to our recovery the critical shape

vaccine on we’re signs however, As and border watch we the of we’re pace Greg reopening. many the Europe travel encouraged routes; increasing of mentioned, seeing international by and particularly distribution demand, continue to domestic

While the travel prepare we’ve as and demand, travel increasing slightly as still travel as summer need growth customers of strong season. head for see and at demand better evidence year, into season, in Collins translate sequential ASMs particularly the strong expected peak through a to to we as results to start seen than summer RPMs we future this well

the second profile a the the period year. for critical determining in remains quarter rest such, As recovery of the

longer Looking to XXXX least take traffic that continue we levels. commercial term, XXXX to expect it for to return at will until

as over program continue defense both growth defense international business, the remain billion For domestic to expect backlog. we robust, our evidenced to $XX side of and our by

domestic businesses these customers, international our strength our growth us gives with current high innovative ability positions environment. areas Our even in in in and grow technologies, budget our the to confidence

our commitments. our and underpinned financial Finally, of capital supports strength balance strength sheet by is our the deployment

end remain of start X, our and following up full in strong low Slide we confidence end sales range and bringing to coming as our remainder from by by low we coming mentioned, from year, our Moving range adjusted are bringing $X.XX, the year Greg our $XXX the outlook, EPS the to the improvement corporate million of about in items. some $X.XX and segments up with the

updated just an color outlook It’s and also of worth in cash the billion, an range level, impact share, the appendix. includes per the pension bill items flow. QX. outlook it EPS of company the hand we $XX.X the updated some Now $X.XX in Greg in and in COVID that let to billion on see webcast the At range the little we’ve of adjusted improvement me sequential give $X.XX line $XX to included see you below mentioning things a to that we sales of up. free back I’ll to wrap for With latest that, relief the

Greg Hayes

communities, Neil. surprise to our No confident RTX Okay, it’s but to not all our going about deliver employees, the flow to while leadership drive well technology think outlook as term. strong to for and our positioned innovation cash foremost is long priorities, thanks suppliers, XXXX we earnings for be and for the to and the to just customers, our first here new industry the and this continue growth, support - invest future. for I in company. sales, continuing in am foreseeable

a note. Before get Q&A, to we just

day strategies long of a I let’s growth lot term that our coming it Deborah? Mike you transformation get on meeting. and as synergies over on where May forward with are an a We going have business at Q&A. investor sharing look Dumais. to initiatives unit With from revenue information from up that, our also as our XX well leaders turn to you’ll hear to chance to on our

Operator

Carter Melius question instructions] comes Copeland first The with [Operator from Research.

Carter Copeland

Gentlemen.

Greg Hayes

Carter. Hey

Carter Copeland

ask the urge question Greg, instead about-- resist to I’m a numerical you to ask going and

Greg Hayes

I’m good numbers, Carter. with

Carter Copeland

respect you’ve help to to what of this Tom’s take away know the I done in to lot on been going them that know, into and things numerical the culturally. biggest you accomplished, its that light to in do still needs that synergies In anything is - you in where has understand to to two and Have integration was? yet be you merger, have can what from history that the you and retirement, I the of a is integration of announced and be any do led us Toby’s aside and there. virtually. we’re aerospace to and pieces the mergers but where where along give to Just relative a plan of year trying cost regard from With want change defense go? surprised and more things departure some I’m stand the of companies us obviously process, to the do where way the

Greg Hayes

on Yes .We’re something tell there realized I a lot been is policies over have consistent, these a $XXX with with has are Reed cost reducing that you We’ve in million do. we me, effort. of past here XX who I’ve making that. time months it’s over of work integration fortunate of many leading terms of hard spent that got lot the things done Jen synergies, we’ve Carter, yet but sitting but staff, done the to of not sure again would

a we opportunities more digital to reduce of a the than the less have dozen. to still centers number lot centers. biggest the made a reduce have XX front, the where we are than just We’ve data try investment data to to big of think and work from on do I

the We’re supply through and also connect do everything call from operations, that we - thread product digital you on working what sustainment. is, chain development how

Lastly, I tell out our rolling operating common is would it system. you

about hear a You’ll need operating we this more common in system. May, but do

world, facilities work the to around yet. we manufacturing and XXX have consolidate do have to those We

to $X.X us is It making take both the identifying but four non-product, it realize and savings. to procurement, time. good synergy of a We’re cost reduction. We years savings will progress, full us progress related product made take some billion good on going to

are remind early victory. those to but too track, just declare All I of on would it’s things you

there’s $XXX Collins Just synergies over of million, their still on has to $XXX work to there. like million way now got do

victory. going We’re declare not to

Carter Copeland

you charges the of Are segments just around in Raytheon pricing. thinking the defense the the in has, guess, surprised process some anything find to made the subpoena the comments these regarding you? surprising and you about I’m you? things that DoJ Did legacy I

Greg Hayes

mentioned. first of I are XXXX, We’ve contracts. you, be DoJ, and call clear, so doing Raytheon. surprise. is out I would the on we different we is the been appropriately and wouldn’t the about those and just that it Well legacy What defectively businesses surprises the been defense we’ve the as fact a that I same not suggested there think tell people between at XXXX some the Neil provided customers investigation, like aerospace UTC always and were think these DoJ big the to were was working culture, look, an there that that our at through for of when The priced all defense exposures, with side the many the contracts business from cultures same.

aerospace is been we pleasant and have terms again been is that you remarkably two I has well I continue, going defense that probably ever. for in would how integrate easily it but the merger the a able surprise think to tell will of process and largest what businesses culturally

Carter Copeland

Great, thanks Greg. for the color,

Operator

comes Your of the question next Robert line Credit Suisse. with Spingarn from

Robert Spingarn

the is Jennifer. Neil, you’ve isn’t second, I to half said in essentially Why about EPS pace little year, QX you, improvement or there half the what expecting, first even on recovery, so slightly think You rate? against be at you’re elaborate mentioned for quarter to given the Greg, a assessing the you guiding good Hi, you’re especially of this bit morning could just least and to if QX buyback the for lower is guide? for around each maybe from this what tax a second more $X.XX conservative key going QX. Neil, a

Neil Mitchill

think don’t that. I it’s No,

are as need so keep of still segment of you first profit do know, rest do that in uptick was at than and airlines bit us, summer some We We pre-buy, the of at year. have the quarter will for see for were March some $X.XX travel would so operating Collins it, three so corporate corporate as you lower we specifically. a look the QX on that think cash give as that our - ahead the in reduced headwinds first things one year, flow, better on quarter interest of in promising interest benefited from part side, we efficient the as expected of call there’s with synergy we well the me second mind synergy But pick some growth front here of think QX I did I for so more that sequentially. and on in Pratt got as our somewhere you the the quarter ahead investment between about the we $X.XX, in headwind being let quarters I season, up few--you that more investment $X.XX spending second spend. you’ve but on you if expenses in We that on as see the color know, the will $X.XX we a quarter, little and had well.

I half relates of and so of have and summer be a it year, strong going season, think our plan see contemplated to travel bit, certainly but the to wait second to important. end the the is real a why QX we’ll As back that’s

Robert Spingarn

throughout on you year, it just bit little on the then into go perhaps more detail. but there, just if you cash cadence flow could the touched a And

Neil Mitchill

Sure.

As end know, our tends you we flow loaded to and the cash through back year. be as then ramp deliver

expected hundred million to Still pay dollars go by better improvement our improvement--better to about better $XXX attributable quarter, working that performance million flow break and get cash coming customers year in some full first progress. early a ways expected, $XXX see from was long capital $XXX probably working down improved capital. timing I of at better million about good collections. of expected than than the a customer had for our million, were you, As to end but think quarter. the think that than of If happy all about We We I we disbursements $XXX to million free improvement, the on of inventory. to couple that

of think the seasonally and up. and see probably some ramp clearly more would continue expect of in sequential the they as to then at least year back sales I growth, collections, ramp I QX, that half As do, about doubling, to the as

Robert Spingarn

Thank you.

Neil Mitchill

welcome. You’re

Operator

with question of comes the from Your next Raviv John line Citi.

Neil Mitchill

Hey John.

John Raviv

Hey, good morning everyone.

say, going what can or items, to be which--you be and person in settlements or or and on you. these you the expect the to clarify On going the are connective a ’XX are or theme, is any instance, XX-Q, items FMS the just tissue ’XX also the any or [indiscernible] for tied or material referenced, comments those ongoing rhythm impact any those the on - material business to not kind and And color back Thank the do to then know, either, those narrative all [indiscernible] structure? ’XX you I’d for DoJ not any they second to of the team subpoena, around item. particular incentive on contracts functional between of

Greg Hayes

appreciate the investigation ongoing not it. answer I can I we question. by John, sure an DoJ. really say is I’m will this

tell to these we’re than that, we have you, priced are sharing be and get to investigation I again, clearly, Again, facts we’re into begun older continue much think alleged would with would that not dollar investigations in liability for it DoJ. been view are all to to DoJ defective as I into a it, the looked our detail you pricing contracts. Again, with of to these going our for bring We was some amounts tell time. things these own have work quarter, discover where is defectively we but that there I we can’t facts, material more we and today. those going take the contracts resolution. potential we’ve provided this

these result we’re be occurred--should don’t a they any the think We’re have on. did, through there investigations. ongoing still to to work, We that to doing we going believe and clean it events one-off businesses going as impact were not occurred, up but any of but some of there’s going and move

John Raviv

Okay, that. Greg I’ll thank one. you stick to for the

Operator

Your from Bank line of the comes America. Ron with next Epstein question of

Ron Epstein

good Hey, guys. morning

their offer at because in with and could times, question Air investment with engine in this was issues on you rhetoric XX has the maybe that that do they’ve on Pratt, so try the an I they Force rhetoric the Thursday are there, hearing a engine GE second on on entrée think community. all guys F-XX, been raising FXXX the been Just you to to mentioned is remedying this. the for the have engine, least Pratt fear the around guess that, I How get

Greg Hayes

in great all, in Well Business, of year was not sitting Bromberg, the we times line be didn’t I is it’s We did enough personnel provision a sustainment in OEM volumes deal do were is engines We’ve Unfortunately would actually the job we at equipment ended test shop. there the the terms saw into who all pretty nice fact, I on about front Military delivering Ron, the contract; Engine coming done that today. of where we engines. at on to the XX the you some for good to center, publicity well. F-XX final with assembly Matthew explained good and and our the of this XX a - job think mentioned issues--and in of terms first or respects. President production But tell the

As a are a do about aircraft engine. today are not serviceable there result, sitting that have that XX there

and problem is We we to we contract by performance the customer, Matthew place the the it’s work know, in them of again in of assembly amount some surprise engines solve of this of easy. tomorrow, were say of than maintenance, could to for we but procurement will terms equipment the color to get necessary by working these, being with one engines hours different were committed so flown. that surprised JPO and week in operations on, do, this you the of the but it not the lot the last scope we were have I’ll pointed for work as end money But those that up. of out some with in take over sustainment testimony, the put at the this on the that levels center solutions--I year. from back A that catch think final was required caught we line and such Now, his at of the is of put but service

in I does multi-year a to F-XXX ultimately give is capability, fact far effort you, targets, going the question the cost, to not it quite money can’t that back Lockheed, kind engine challenges though, the sustainment to it’s procurement. GE is than our in and The is completely. that engine on, I bring engine, that thing actually well spend because multi-billion meeting we’ve the the given F-XX build line, with for do in services working As reduce, burn that are is other targets. entrée cost with that an with sustainment engine, issue this program, the performing answer the any dollar, cost will that seems is of on we that think service as to that would I be tell an JPO initial the bigger how to cost when and meeting again and unlikely reliability fuel the work extra committed the the the of

Ron Epstein

guys. thanks Great,

Operator

the of line Your next Kahyaoglu question comes Jefferies. with Sheila from

Sheila Kahyaoglu

still Collins. Good do the how Maybe you. commercial start-stops of in Decrementals that, thank given the and we the think Max? morning ask moving What improvement guys, margin that on of are just on I’ll are and range. trajectory in one XXX about pieces business, OE the XX%

Neil Mitchill

take I’ll one. Sheila, that Thanks

year, the and were today better are seeing continuing. slightly so Collins, saw at decrementals we taking implemented what we’ve than that’s You hold actions containment The XX% last cost good. that -

quarter. maintaining year, difficult cost doing costs. growth in team in in excess E&D, QX, some QX in you’d took you of year, of very you’ll of look as know, QX was the with terms our the average XXX% we see the about that last those should job if incrementals QX, They nice XX% and a the because happy the but rest As the steps in deepest started Collins I’m strong, year, you think year, of range control the SG&A what you the the at as containing continue last being as they that there we factories. probably team’s done to to around be recall has

back little are good back volume year furloughs as be and of a come bit it a year. as up, story the really reduced picks Collins the quarters that three but see reinstate should we will and of the We for in the second merits half of

Sheila Kahyaoglu

what’s the and you Max expect with the Neil, on rates year? on comment of can what ’XX, going you for kind just the

Neil Mitchill

are you Boeing. we aligned XXX, can the Boeing aligned five the XXX, schedule, with starting with that ship production so think around so sets about with being Sure, per month. On also

I for with think there deliveries they’re the year. out expected XXX

of the of have of uptick that, a As OE will the so to deliveries a third a amount we’ve fair about, in half delivered in year. talked Sheila, produced start XXX half the the we and that, back

Sheila Kahyaoglu

Thank you.

Operator

question of Seifman next line Seth Your comes from Morgan. JP with the

Seth Seifman

first question, continuation Thanks Sheila’s that Collins last very saw margin much, mid-Xs seem guidance an era we so recovery that see but and continued quarter, there’s potential we of good up for morning. Maybe to imply of this just the for the and off through as we follow move on why in on the wouldn’t kind efforts that to margin level year? of the efficiencies, would expand

Neil Mitchill

Seth, I’ll thanks Yes, that. take

we’re spending. first for our say our right that we given comes, about expect it of see natural will to will if particularly some see really year E&D some through. smart would drop plan, Those quarter, range; but when and in that margins we timing about saw reinstate being as when Collins, it’s the aftermarket as those in expect we I better to of contained for we the be I strength growth, however, discretionary of guide of the think you than the terms - in the what spend the You’re of you’ll rest are here offsets then growth aftermarket the

Seth Seifman

and growth remainder that you the you Okay, the the you talk on for about the strength expect pieces think that, what where the the year? I most at Collins of are showing quarter, just XX%. sequential and aftermarket then Can mentioned in of aftermarket now right

Neil Mitchill

commercial the yes. It’s and seeing, encouraging Provisioning we closely is coming OE But intake call see deliveries, and parts it repair mods that. I’ll so more exited expect little I’m on - we the it again lagging to as places the in March and bit, particular. are two and a upgrades. started cautiously but to Sure, April from you’d tracks repair, not surprised signs that

Seth Seifman

thanks Great, much. very

Operator

Goldman with Noah the of Your line next from Poponak question Sachs. comes

Noah Poponak

could thought, How positive signposts Hi, than with happened there. those the It cycle there, question good add pension everybody. how Then the lever? tackle like aftermarket guidance revised for more things the just improvement, little we what is some despite Neil, less also decide flattish you questions some you tackle with to it looks what inputs? with you the are these how based the for the being still did signposts through the morning that to about how but year last just of to include aftermarket, aerospace given changed implies a all color flow on were uncertain? cash maybe could your inputs shorter

Neil Mitchill

Sure.

try build the aftermarket. to me upon Let

a and up start. we As definitely on the in think forecast the think U.S. Clearly that aligned. today are picked January about months a did and I looks three we international I were a and slower little change think helping at about the March. the IOTA different RPM side, pretty a the thought. we than year much China It so in but today, RPMs, it that’s the on little When particular, slow ago. domestic data us; recent the well little bit it’s industry I bit That in stronger, of looking about and think routes, February are we’re than

ASK in we the or those in consistently ASM what are miles, seat thought On side, tracking pretty available January. see the with we or would January, saw

to-- XX% that little XX% bit a but kind the QX, then thinking Shifting we RPMs to really here in we QX to and see think XX% and we’ve see we’re likely that between think then QX go, to long second look a growth, sequential how of and I it’s that to If corresponding QX. call to and stronger in more think the of about see I’m quarter, second ASM way the QX, year, that on just we half, the to growth the and is had sequential that. a That’s still need RPMs thinking about and point too then ASMs early side from I thinking at and at this QX again a there’s increase corresponding those QX we as about rest growth and XQXX will

Noah Poponak

those really happens, really that If make the I saying correctly, than types your much the of just keep I there are guidance have what correctly am is case or more things there you’re signposts travel, just sequential the not quickly, be volatile close, just to still I fairly interject guidance moves, does that? need to restrictions to it could you that conservative could given hearing imply uncertainty vaccine sure and how and the virus but feeling are rollout with the so in

Greg Hayes

year, is you not we still think The back months the here has recovering in half the Noah. and of go right tremendous--I rollout nearly keep China, lot is upon fact as there’s of correctly, down in that still optimistic aftermarket said mind in the Collins’ I to to. mean, and that what we’re what was a vaccine XX% these based it seen as market exactly of there body, is that eight year, is in a we’ve Yes, it’s and the going so while significantly wide thought next fast

in markets in that on be when May, the international bottom rollout know, guidance, be there start the to and see April, top though faster, full Neil’s you point, recovery instance, if the still and overall bottom improve, for could worse, see happens and season we in the So if debated--you to the line, about it numbers we vaccine again. to Again, talk could in it’s upside you’ll year and confident travel the domestic to we start markets so better better, line these summer see and Europe, line. we’ll guys but

but have the end in to Calio seeing to better and still what the we’ll quarter. Chris view cautious. see second we’re Steve a Timm of You’ll marketplace, to obviously have they’re optimistic Right a talk to by then and chance now, the

Noah Poponak

okay. Sensible,

Neil Mitchill

up. take new Thanks some too. out there. question me pension Yes, put the and for did we bringing let numbers it Yes,

As see you the We near that result pension funding in passed don’t know, currently a to domestic do as term was the need reduced of relief bill any that the funding. bill.

bill. XXXX that in there’s nothing that pre-funded million have ’XX so been a $XXX would we recall result contribution, as changed that You’ll of in the our XXXX

basis get the up. of million in we news. pricing. - into we’ll pension as looking about little However, recovery $XX $XX get a little less CAS a it think, cost got this bit so little bit good plans. forward to last We’ll is less the here XX really on next The Probably bit CAS thing it’s I’ll points of and, million we do little in our forward a improvement, so QX a RMD year fund XXXX, where our bit a have benefit margin P&L is add rolled into we’ve showed about improvement lower segment of at I

I for the forward pricing. Going don’t of rolled year, our much rest expect the to forward that see of into more we’ve and that,

Noah Poponak

take future down How funding? the domestic far the into it did

Neil Mitchill

of I right and course could all depends now, the for to years the years on three change. for out. a that things equal, at But assumptions next least. several five of next other that far pretty It’s would lot say

Noah Poponak

you. thank Okay,

Operator

Walton question next Your from Myles UBS. with comes

Myles Walton

the and around to full where on there, think you pick give Thanks, about no think still change the good segment on least there, it pension a which wondering talk for I we rate. off left it but on bookings when confidence clarity from that up look was run and trends outperformed margins, morning. to thanks revenue if obviously turn stability the Neil, and Then year. maybe lighter, perspective at the contribution in and I - could more could RMD the I hot, obviously was running

Neil Mitchill

XX.X% quarter, we XX as basis minute margins with ago. in were repeat. a mentioned as Sure, saw, the happy of a points tailwind that, just Yes, I you as RMD very that no Think pension won’t that about problem.

here award mix, in CFR also first timing the international We I’d about quarter. say, basis helped of of the XX through had points, That some liquidation. RMD acceleration with came that

so couple for those we’re kind improves you the year, that again adjust continued would expect If we items, that margin productivity still seeing see as absent two you’ll the those progression, growth through margin of of items.

Myles Walton

trends? bookings sorry, I’m And

Neil Mitchill

The bookings yes. trends,

we next booking had dollar talked a some awards as in in there, the little a book significant expect down is Patriot year bill But burned year, we we billion that, are will the - do has listen buys, so our other backlog year. know, this bit here some XX second be quarter, RMS we’ll and that that a lower. in over months past the later later You book ago, and generation international Interceptor - multi-year to the that LRSO about forthcoming

book matter. I year for of X.X basis in RMD all that on for to about and a expect So RIS, bill still a full all,

Myles Walton

all Okay, Thank right. you.

Operator

line comes with Baird. question Peter Arment of next Your from the

Peter Arment

recovery, Pratt in you at & engine or inductions. second visibility at Hey sequential the least planning how and is then or Greg, large on a just just maybe in highlight good Pratt from the you Canada resurgence we Thanks. move given seeing that could How forward doing, the wise Whitney also about, we’re biz activity. jet improvement least on flying thinking are as half

Greg Hayes

compare only high recovers. back, to that XX% fleet, year fleet that if about Right about had and now, the come exactly you into think is domestic think flying we quarter, as it V is think, which engine I about - Yes the powered Peter, XXs. in of first will we will we which GTF on Vs, throughout and the travel is again, accelerate, so expect the the in shop XXX Vs the inductions, plan,

expect of a in bit going fully a a So see big we little sequential lag improvement. to again, but is sequential--or a there we’re demand,

get X,XXX V, to markets. we’re in more to on that trend clearly back way more actually as to this years engines very these going domestic lift probably encouraging. We’re the not but need two for year, not going people That’s

again the about as in good traction aftermarket, their far Canada, As rest aftermarket. Pratt talking the of

biz or We’re in don’t a significantly, on arrangement, so there cost of some most translating jet mind revenue would out that’s and until Keep engines are the that engines into those imagine, seeing we come actually see as you are up, the back. higher have the flying we power-by-the-hour aftermarket. hours we recognize

transport. contracts. might at up, be So Pratt the is challenge marketplace the continues regional Canada of a the because Biz expect engine right Pratt really this in just are nature of recover. something are It’s to challenge but that - certainly very regionals flight deliveries, for PWXXX, just that a to the deliveries hours has slower you the you The again area uptick know, That are the it’s year. think not see up, big to Canada. as been engines jet PWXXX we solid, solid. now helicopter one but regional next aftermarket year, It’s market much for is not the as

Peter Arment

color. Appreciate the

Neil Mitchill

Peter, it’s Neil.

in back XX% the Just Pratt and QX that to to see visit you holding, to mentioned quarter, go Greg back we’ll expect on - the so growth. as good know, shop the first start all to visits, range, still QX that’s shop we then XX% growth half

about feel more, point pretty majority is would is that watching Europe but there so good our those throw the of the that other or XX% The region, outlook. fleet or more not shop I V around out we’re I’d planning obviously, Europe in and visits, XX% say

Peter Arment

comments, those Appreciate thanks Neil.

Operator

question of next Your line with David comes the from Strauss Barclays.

David Strauss

good Thanks, morning.

March XX% turn can I then weren’t how that the Can in talk would in you in think quickly up and saw back I mentioned imagine the February about you’re was aftermarket good. seeing Collins April? you sequentially. on, you January also of airlines and terms it maybe what what very

Greg Hayes

U.S. would month to in that the that uptick what turned an correct. January as traffic by a is last had through up little saw to. air the in I that directionally, say we was want David, in wave, we I don’t and was picking February and March. all because, absolutely were we again, expected it into going not China know around the virus compares. and get month so as fast That scary

past. better, are in six very to little things remarkably about usually for aircraft and rollout, China it’s there coming getting surprised demand parked but season, recovery parked second The see will this was are a for proactive drove and in the in XX,XXX With April, China. under getting ready service benefit not pandemic that’s being you’ve and This as in They of today, is in with think and because very really case, got in in to what bookings months waiting they a March, than and is quickly the their the they in what parts need which the and a out we selling are we U.S. recovery many airlines what’s and of we I out it see see the demand summer different us repair, seen the airlines quarter yet see the kind world aircraft the XX,XXX driving actually bit a RPMs. have back know before the control, got advanced what vaccine the lift. think when three recovery around typically RPMs, - in so

David Strauss

expectation margins ask how the Okay, can EACs you’re pre XX% to there anything as average all about legacy different and those where the able I terms wanted that. we to were Raytheon to and about of anything on accounting again? businesses there. Those start and should around of blended the structurally about together in booking Is think get margin adjustments businesses

Neil Mitchill

a give me of couple Yes, you let thoughts.

you’ve But they as these be this expansion to businesses. the reset. a exit are synergies, a implement that our be--that it to bit going factor of which great bit production where as they’ll mind about give-back do could do margin more be investor little that. margin us the First reduction we us these see day talk little as makes on expansion. those the think competitive, expect largely in all got got come with driving behind It’s margins. longer get about to year, cost opportunity We Wes contracts. our both But to throughout EAC that are We that also great a are you their Roy more throughout and issue a we all, which laser for focused talked we is businesses upcoming May, that’s and great productivity businesses year. we’ve to into question the about for a keep so customer, do see so great, at to We’ve term in in because more

in a you so replaced have particular, the a the program, but with the we’ve had expansion you’ll of so LTAMDS Patriot side future, there, of potential do of lot been get programs, late transitions will of that of contracts programs good today. more early as sort be in ’XX, the us you see between A and of a mature in shift get the we there very On will for some program we’ve those bit LRIP mix and the the missile little get margin when there. replenishing out ’XX that RMD margin into

David Strauss

Neil very right, Greg. thanks much, All and

Operator

the Your of question comes line Research. Vertical Robert next with from Stallard

Robert Stallard

wanted Whitney wondering was side very on much, if could Peter’s Thanks follow morning. up there. I question good of other you and the about portfolio to the & just engine Pratt I are you’ve tell there seeing the us out some on freight of those older out. aircraft Thank older helping has and what been that engine perhaps aircraft how variants, variants been you.

Greg Hayes

tell year, Those has surprise, that those or chain. were XXXs. of the year of freighter engines are about PWXXXXs, of about as XX-inch That about think if Pratt’s XX% up freighters. because old so freighters, base is so, pleasant you would installed actually you and significantly Yes, XX,XXX-plus the--so given the XXXs supply been if the is push and over global traffic, a ecommerce I everybody you, knows, think

of not significant we see pretty the it, it’s the line number Freighter is starting in bad As think but expected, the about We in putting what down, to end older the Pratt, but not we especially I retirements service months had aircraft a a of out they going - XX we It’s configuration. engines someplace not on there, but news. year think this will we’re those some same be JAL with all up time, retire aftermarket for still before were to some freighter probably their thought much traffic in At those good. - that else, retiring fleet surprise. will engines XXX-inch the saw XXX. that’s a

still again, stuff aftermarket. the a So the still meaningful older of piece is it’s there, out

XX-- about it’s think I

Neil Mitchill

so frankly, in you shop visits than yes, considerably it Pratt pre-pandemic ’XX. XX%, is helped all cargo significant traffic the that has that was it’s higher even and, at still About very know

Robert Stallard

a to And you quick how demand be is I freight do may question, a if follow-up, tough may, be? sustainable this likely but this think

Greg Hayes

is phenomenon. is Point a this to way efficient how towards parts temporary stay. thin at chains from B, is are look think trend supply I just sustainable ecommerce as and global fact Look, today, think global I Point this I stretched A are so this supply not is chains, freighters most and The here the to get to

Robert Stallard

That’s great, thanks Greg.

Neil Mitchill

one Deborah, we’ll more take please. you. Thank question,

Operator

question Your Rumohr the Cai of Cowen. comes final from with Von line

Cai Von Rumohr

QX business. sequentially, and the this at Collins have rest assumes on from conference like your year our Yes, to on should year in to out, at, more there’s to full XX% aftermarket and your maybe of the seems Toby you the Collins aftermarket very guide kind guide, more with some commercial improvement basically of margin build. sequentially at QX much first brought QX. had headwinds something over commercial from thanks not so strong basically you if much. the growth all talked February, quarter QX, in Seth your because gain huge growth implies for yet you At That of part fits XX% as in orderly million, volume by of it that Could like lucrative at moves up us margin color give lower an it $XXX profit but your we look

Neil Mitchill

Cai. Thanks

a couple here. thoughts Just

QX de-risked about performance growth in Think another bit in maybe seen. of the we’ve by and XX% aftermarket in QX, to year, and QX little QX, quarter, or about in X% rest we’ve it’s a QX As commercial because the of that’s for to the the bit growth. sequential commercial that Collins terms to think what the first X% a X% I we QX about talked in aftermarket, than lower

million we take during question. cost you come about in $XX investment will hold. first and the the of see team recovery strength Appreciate element strong about the of E&D the share that that thinking the the very can spending back because of there. until you the on I containment, we’re about discretionary of That’s that really terms In the combined phasing lot saw improvement, and quarter, what is work year good to with a trying a because be prudent SG&A our

Cai Von Rumohr

much. so Thanks

Neil Mitchill

You bet.

Operator

I to remarks. for conference the Mr. over like back would to now closing turn Hayes

Greg Hayes

IR know in time. thank Okay, whole to everybody’s today available appreciate listening or it’s questions, look forward team will day Jennifer Neil talking earnings Bye you you and answer the and there, out to a care. on everyone and Take we seeing but today. all you your day I to busy XX. be May for bye.

Operator

Thank conclude you participating. does conference today’s for call. This

You lines. may now your disconnect

RTX (RTX) 27 Apr 212021 Q1 Earnings call transcript