RTX - Earnings call transcript Q2 2021

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Operator

Good day, ladies and gentlemen, and welcome to the Raytheon Technologies Second Quarter 2021 Earnings Conference Call. My name is Tabitha, and I will be your operator for today.

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

On the call today are Greg Hayes, Chairman and Chief Executive Officer, Neil Mitchill, Chief Financial Officer, and Jennifer Reed, Vice President of Investor Relations. 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 forward-looking XX-K, RTC’s in could important that results statements. materially anticipated XX-Q Once you the everyone one caller ask call opens for give questions, question limit we that the to participate. to your to opportunity round per may queue further permits. Instructions] by reinserting ask as You time yourself into [Operator questions I over that, With turn the will call to Mr. Hayes.

Greg Hayes

everyone. deck of morning, along. Slide Thank you following and I'm for of you, the good X those on Tabitha,

months goals in as Day laid So $XX by and while cash flow we a invest Raytheon out shareholders. continuing deliver XXXX, day, expansion, return all in businesses couple free at to our margin strong that to Technologies. of first our held growth, cash and we to our Investor significant our XXXX billion ago, And least top-line

expansion to be we markets strong technologies focus And market. our because the trends in franchises, the and cash excellence and our future. strong operational on flows encouraging the continue will resilient We future margin and which across to in continue drive operate, confident we relentless into which of innovative see our our reduction, cost

hypersonics. of the differentiated the that year's year plan making to expectations our which and portfolio part Requested is to And our for the classified RTX generally remain overall the for portfolio and request, next defense, of at these strong. of fiscal in request, near as released products funding our year missile you line investments these fiscal programs highs. Department and was remains favorable of including at confidence propulsion as ability noting systems, space-to-base respect generation to in the end targets with supports we’re was technologies, with DoD significant budget last when modernization well Our and funding saw May, ‘XX achieve also request, to overall supported. historic ‘XX. funding which also compared intelligence space Major fared our do the programs overall worth very modernization well It's a Defense

we which at almost and we're billion generation LRSO, and RIS, billion demonstrated This address So, with franchise interceptor. to environment. wins the by included in priorities, we classified bookings $X.X innovative threat at for and $X by the are I'd well-positioned where administration's business, of a the awarded driven is our standoff technologies $X over long-range quarter, weapon and received evolving this significant awards course say the missile the two [ph] for important next or billion defense our capabilities

across reopen to the are still Slide more if also, than on and Switzerland TSA travelers time, work that averaged January and year. can. monitoring per demand impact checkpoints let’s global and At we turn note select do about day for over talk travel in think, evidenced domestic global daily throughout momentum our the $X border to July, reopenings. this COVID there's With we That and the remains X a the many XXth Patriot system. million just Patriot in that's should said, of QX franchise vaccinations doubled that commercial and moment increase. international since variants and as we the to nation of U.S., continues have to becoming as I the the In defense the our vaccinations markets, same traffic partner air gain economies air robust, by

expectations with execution year. with which us million going $X.X EPS grew billion $XX.X the out and $XXX range quarter And to quarter. As we exceeding strong Strong of record our increasing and you that performance I'm by an for cash billion billion release, free sequential adjusted and increasingly going pleased recent sales also raise the quarter. we're laid end enabled EPS press our outlook an backlog our of to range sales new $X.XX saw flow first the deliver and from share. saw and And of To $X favorable strong to we're the performance adjusted our $XX.X cash against of $X billion. in during outlook, year to a outlook full raise X% both a to of to of a new last tighten $XXX basis. our and the those per a we our that's backdrop high-end the to low increase top you company give trends flow billion, a at with growth across to for year-to-date orders end since to range expectations our markets, year-over-year a quarter bottom we're the the line a free

defense Our the $XX in X.XX, billion backlog strong quarter. a defense billion, was by and in over book-to-bill $X.X commercial of resulting a backlog increased

year. we're capital repurchased front, our commitment back $X on buying we at billion track of to allocation a XXX the $X billion in the repurchase million for us share On year-to-date. of to shares bringing shares, over least And meet

And We our synergy by gross merger target than integration execute team. million our That's cost to do. tell you, that of progress raise billion. of to execution I by now would going the there's everything, given on we're be robust also to more activities. the another $XXX always more our the we're And yet. great continue Like realized will the not synergy in done in $X.X pipeline billion to first But $X.X following four there's years opportunities, substantial original commitment, and merger. the XX%

in heard May In we're structural also making our our back targets, our which reduction progress making about good significant on projects, addition on to synergy progress meeting. cost you've

were business. opportunities, have previously actions pipeline hundreds We that across the of with a announced working including the

give labor lean And year. of just of couple examples they're aerostructures specifically scheduled doing. focused are you on In tat this the me Collins in they've by a reduce because our events what such for the we time XX%. reducing pandemic, lean these business events nacelle over invested the allowed the manufacturing throughout time over to AXXXneo business We've has aerostructures nacelle. Let time, XXX as

our a this result design, repair as culture of core other infrastructure A direct course, the normal improvements additional their year. incredible on and by as to the course, over overhaul XX% Altogether, strategic Of an by a Geared is network, curve. drive Turbofan our costs are continue automation. lean an they're team learning in operational track the improvements demonstrated These across XX% exceed digital year. in projects. we across that development, including significant time $X technology, will strong allow excellence the year, billion is us improvement At build to importantly, capability enabled, these drive application goal here and reduction well to operating in save and Pratt, time of about productivity turnaround principles events ways. this has end made on good system the initiatives shop progress of through past the the investments in XXXX. XX% and turnaround network. But The These of of over lean

strong on So, excellence, operational you financial franchises laser market are driving and see the are our performance. can fundamentals We're focused key strong.

turn to and and Neil? through the you to with the So in let Neil over next that, Jennifer me year. take it QX

Neil Mitchill

billion, adjusted basis, pro for as Thanks, We both was X% and outlook I'm up which you adjusted and pleased exceeded Greg. I'm flow. forma Slide expectations high-end $XX.X quarter. range, X, for the on where the organically our and versus year expect, cash share of up with earnings XX% on could free we prior were at landed Sales an our per sequentially.

and was share of On in a momentum Adjusted and included by expected commercial performance and items. expected to significant basis, commercial of cash Pratt acquisition lower from exceeded per expenditures. was net GAAP in expected per better than and than driven expectations, non-recurring strong and but and/or at RMD. continuation operations performance by better ahead share driven $XXX continued share, capital aerospace of aftermarket due of Free primarily Collins, Our expectations, and primarily earnings RIS per accounting settlements $X.XX of defense. at than continuing $X.XX earnings our our collections, adjustments, contract-related the $X.XX the also million growth was flow

the $XXX to our it let $XX $XX million million. we today, savings expect to $XXX total quarter, the of in $XXX acquisition ahead our savings give the million. $XXX hand bringing acquisition little target these Collins new in synergy deal further our I for synergy synergies target Jennifer, XXXX year-to-date Collins year synergy cost on brings over of acquisition since now a quarter, a in on also we're million their to nearly of achieved to me the synergies We And given XXXX. million pace million, of we realized And which meet Before in cost the synergies by Rockwell color year incremental our target increasing you November related achieved $XXX progress. that XXXX, gross million nearly schedule. closed Collins to bringing

by work front. that great the team So, on Collins

hand through talk and the to outlook. bit take to results a the Jennifer and I'll you it over back So I'll Jennifer? with come that, about segment

Jennifer Reed

jets the on X% X% were the an and tough continued well was Collins industry, by were increase OE were increase in with on with period X, up million organically the compare. commercial the XX% Growth than in all expected about XX% to $X.X business prior of of up driven declines year, XX% of driven sales aftermarket was aerospace billion recovery notably, principally by settlements provisioning, narrow-body, XX% sales aftermarket the cost basis, XX% Commercial driven $XX industry. that in Neil. sales, commercial as reduction by parts sales the and up and upgrades, military commercial by growth repair And sales grew three Recall, sales last which and driven an and on regional was contract a adjusted up in higher commercial and up commercial offset the provisioning. XX%. parts profit in aerospace the Slide were in same year. basis. from particularly at XX% grew organic and by a a XX% divestitures, year sales. up Collins sales benefit which were an Adjusted basis repair, By as from military worth Most down up XX% Sequentially, expected prior X% X% million. on prior $XXX Thanks, were wide-body of operating channels. were Aerospace actions, on and and primarily quarter $XXX modifications favorable aftermarket million the and in the recovery primarily OE Starting adjusted year, channel, increase down better in

up the we in to up sales versus were billion year. And the legacy expect up an year benefit million by recovery $XXX shop to ahead, commercial mid- XX%, single digit, offsetting XX%. full of down and the up $XXX commercial the less slightly X, of to mix large XX% to and commercial year cost Shifting $X.X given basis Whitney continue Pratt aerospace to on were recovery visits Collins higher driven and be sales Looking Collins industry. aftermarket of million OE Canada with a XX% shop low volumes organic new full containment basis, adjusted prior the XX% are with on than year, Slide down the range expected primarily quarter to an deliveries. on aftermarket increasing up visits first-half sales in measures, up the favorable profit Pratt of outlook the and engine we operating of commercial expected Commercial

was expected, in was Pratt commercial F-XXX sales lower deliveries profit the the Military and and slightly on material up than XX% saw in driven visits better from million also a platforms shop tough were offset $XXX also of compare, were XX% X%, same sales by up production higher at military ramp period in prior aviation sustainment sales within ramp program. up by million inputs continued Pratt’s the sales commercial As operating than in favorable by general engine shop A more Commercial aftermarket Pratt’s and down mix. on last we Adjusted primarily GTF the continued large GTF year. was given year OEM visits $XX higher expected, quarter. driven were business Canada.

XXXX. increasing profit new to expect operating to be Pratt’s $XX to sales we full continue outlook $XX the digits. a down ahead, year million low full versus we Looking by are range up mid-single up million of of Pratt’s to million low-end And $XX to year

first XX% and as sales up system by an the FAA and were technology. driven STARS generation worth versus the program Turning band RIS a adjusted as noting pro full year Slide period, Navy award continue $X cyber also forma now $XX.X book-to-bill resulting be $XX in RIS well including quarter adjusted RTX had approximately Airborne industry-leading included million was on award awards mid profit programs well system one. operating $X.X benefited utilizes as was implement as a On of a up pro in billion. automation real pre-merger better that ISR classified slightly strength the X.XX, Significant an of of within a terminal the stub estate strong basis, the basis, And bookings and efficiencies. RIS strength in $XXX on services. from were backlog year-over-year their by on the for other nitride forma up to several to and basis. including for gallium and airport. the cyber, jammer $X.X year that quarter quarter, the about U.S. to sales than driven an primarily X, programs, expect billion gain classified our transaction. notable production on The bookings to training sensing follow in X% book-to-bill in prior billion million next a of on billion effects, we Adjusting within adjusted It's program expected,

the digit, RIS’s to Turning profit to low-end of forma operating $XXX we're range to million to year sales by mid-single outlook XXXX. to to RIS $XX of adjusted up continue low increasing outlook, a new and versus full $XXX we expect million grow pro million

prior period, higher international XX% were year resulting up program, Turning pro sales on operating profit $XXX book-to-bill the million was RMD expected, now stub were pre-contract in driven on billion to $X due $XX.X favorable up X.XX, was forma program sales the billion. on pro includes to billion liquidation mix included volume up of in and higher pre-merger both by again Slide RMD adjusted program adjusted quarter, year costs. bookings which had and backlog which up strong X%, versus X, basis an adjusted basis, Stormbreaker prior an and of of of Patriot and efficiencies. on of million Adjusted $X.X better slightly than forma primarily and basis a to $XXX exceptionally

In addition a that franchise number discussed. awards had Greg of to RMD in notable also awards other the quarter. the

continue RMDs about also We expect to be full one. year book-to-bill to

sales mid-single RMD’s to continue the full to to RMD’s we're and million new rest some XXXX I'll Turning expect grow of $XX low profit year. basis. a by to up to the digit, turn year $XX range back operating versus outlook, million it color on an of Neil increasing we low-end million to on $XX pro forma provide to to of adjusted the

Neil Mitchill

look of markets, the to year. many Starting discussed as the Thanks, Jennifer. our vaccine we the Slide by end how I’m pace you domestic me demand are commercial our as outlook. critical second-half on improving the times commercial of and I've markets. see we of continued the encouraged with said, let environment distribution, we before, in recovery travel on signs shape air X, current to the the many update remains of That

around expected mind travel reopenings we air see international continue to we international. traffic border of had XXXX the slower than recover XX% about in Keep air and However, world. was

the of drive need in of the expected, signs international borders year. continued first-half haul we're routes still the aftermarket and sequential growth strong to While travel, the of of was return a seeing year the long to stronger little the of summer than second-half reopening see we and

the domestic Looking to we and air expect to of XXXX, levels wide-body return international commercial to before narrow-body traffic by XXXX continue end recovering longer-term, with and fleets fleets.

defense to from core flexibility the merger on cost and And that's we driven look implementing Moving as segment we're $X.X underpinned which At consolidations, as investments operational our corporate reduction synergy to focus savings. business same businesses. deployment the grow Greg we gross by we our finally, Shifting our across saw increasing And businesses ability billion. system and to were our operating fiscal in higher our our our markets, the target our mentioned, end year commitments. well defense is we additional maintaining requests. ‘XX excellence, chain with by remain supply our structural driving as pleased in procurement we're what time, to as a sheet strong the balance the financial capital confident savings in budget defense supports ahead. And and cost

in strong following our turn outlook. full our confident So, let's Slide first-half, we're XX, to year

discussed, other we're by about is benefit half The per tax increase lower by of raising range segments, primarily about of sales As $X.XX optimization that Greg Collins, to tax we're million, or of and the the company's up we discreetly driven the our from share, and and from of corporate share comes our expect improvement structure third legal tax prior our quarter. and $XXX range of $X.XX is to per low-end $X.XX to the $X.XX up the realize About items. the bringing financing the from midpoint earnings the ongoing $X.XX in $X half adjusted outlook. of

mentioning With it things items for Greg the And finally, earnings $X.X the the an free updated some line we flow given billion wrap outlook, in expect outlook, now webcast of to well as the updated cash in to side, segment the of billion that, cash it's hand for improved dependencies. to back we've up. included below the as On $X that the outlook range worth an year. I'll

Greg Hayes

Neil. Thanks, Okay.

to first our support foremost, priorities priorities and to here. and during slide again, final pandemic, These surprises the just Slide same our that to keep continue employees customers, here, reiterate for suppliers employees, want and our the XXXX, our no and and our is the to remain communities on we're So safe. I XX.

business, dedicated to and to to cost team going same investing to we're capitalize across integration most deliver on we're to solving reduction our time, to drive strong franchises. owners businesses. strong share by years continue complex support excellence customers’ to billion we cash with our at and a synergies, first the as our further shareholders, financial $XX very our including problems our the flexibility Our provides to in committed commitment generating in combined cost sheet, the the is all have to structural on said, At And to technologies of finally, our merger. Neil execute balance least capabilities, returning following capital differentiated operational the investments in and four

ahead So open with go for and it Tabitha? questions. that, let up me

Operator

First Instructions] with line [Operator of from UBS. question comes Walton the Myles

Myles Walton

at much And Hey, GTF curious. was the unit as translating Could the just the unit? incurring glide maybe I you currently off on think are how you're cost How an into are costs? cost the about prior side, Thanks. you're on you slope around actually doing maybe size I and comments improvement per engine, good mentioned talk you losses morning. of of Greg, XXXX, just in peaking reduction efforts that then, you the losses far the were that the peak? that improvement look from

Neil Mitchill

It's Neil. Myles. this Sure, Thanks. take one. Good I'll morning.

the in profits. you the all, decline a and year-over-year second quarter, Pratt the slight Whitney large OE commercial operating think very engine about business of First saw if

than previously expected. of really out making we costs much lower had progress So good we're of in engine volumes the driving spite

I feel that. about good So

again, drive pre-pandemic. absorption slight you continues we'll look year-over-year, rest at the and cost see to that were we the expecting year, of relative we're what As improvement volumes curve. with significant today's And in the headwind some to the cost spite of dealing team versus down

negative at into the OE sign, the pressure we is do aftermarket, those to aggressively that period. time an appropriate engine in today. the Looking not we do team continue some reduction as as volumes are upward a margin actions up frankly, going going and making in to out, bit Whitney negative XXXX positive further increase. see investments to level. volumes engine that little we working see see get But And that But margin on do Pratt the a we're cost quantifying future contain

Operator

Okay.

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

Ron Epstein

I if years bit four the well did you're of quarter guys three, on you Can good How with for are thinking foreign years a the defense order mean, did for in Hey, think sales morning. do now, we what from go for if Europe, So, the military mid-term a in you in on But not on Patriot. out defense the the business? what speak industry about out mid-term just we we particular, now. well, the growth you you? saw but business maybe year, next from step growth? couple in

Greg Hayes

going probably what across Ron, havoc seen the the much pretty side, Patriot it's international. back time, international we've F-XXs and both as the at pandemic a system. on to defense see as we’ve defense obviously, that growth backlog there. year Switzerland, in of little about this strong both low continue mix know, think the spending I U.S. we digit mean, the and same And, the But organic impact interestingly, to a of to I well budgets. think talked is, May, on all I bit an as we mid-single done businesses. with And had you see in which we're that's defense

we internationally $XX backlog, strong quarter. good. billion at of business The remain defense remains said over the end the So as

hypersonic it Of all think, it out the right kind again, that, who weapons, easily through not the So cyber technology of that beyond it's we next the having about see XXXX, X% space-based weapons. for, mid-term, would call And it technologies, conflict, I knows to the I'll means that growth. last I conflict. means means because say X% but having

enable might be. things conflict the that to warfighter to help those going of whatever are in us All next

Ron Epstein

Thank you.

Operator

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

Sheila Kahyaoglu

for morning, you the Thank Good time. guys.

core million second-half settlements really on margins, productivity. just it that, are top-line better of Collins $XXX about X% ex-contract How hasn't X%. seems about of changed? given the implies to and that drove And do think at first-half margins the So outlook the are it be what $XXX we million

do about the off the So, why the think how improvement contraction And in base? second-half? we that

Neil Mitchill

I'll start. Sheila,

the Collins drop in the the by I'd was through substantially, First part, due all, way side, driven about I think second quarter profit was higher it would say I that. aftermarket of think really to on

about cost million dropped bottom of line to with and the the mix. from $XX reduction, realize did that combined same about number also We productivity

most drivers. very, are really key halfway up reason year, bottom recall, that sales the for to not range the de attributed very We're into of RTX a go We've was that. now. range we on those the through So seeing risk. year. you're year and billion broad had aftermarket the the We're six The $X is overall up the risking the taken sales into a coming months

you at $XX would of or RMD. million at a attribute probably and some about Whitney. the end, $XXX improvement I bit increase, less seeing And rest $XXX that so than Collins, that think that on million million to we about and Pratt RIS also bottom to little As are the then

one-time were that called out. those I the I the to think rest for second-half We look at So, the to about you those expect settlements and margins, year. of $X.XX want don't just of highlight it the quarter a in $X.XX of that you. items in things second we there's as the about at I had couple call of I'd the repeat Collins contract year,

land that margin about to pre-contract a driving given RMD. related some another well, liquidations and We at RMD expansion went through then in basis penny had RIS XX also our points within as sale, in a penny about

the in we're discretionary spending. Collins. incremental place cautious EMD now the first-half our expired about year that into you the the year. as cost that the $XX second-half. second-half as second-half the the had so of head see for particular, furloughs we are in Those We'll to of strength the of of seeing So, the and have headwind we up, And in in year Remember, probably they'll million now we at the and aftermarket. have million think of in of been ramp Collins, terms phasing that $XXX

Sheila Kahyaoglu

so Thanks much.

Neil Mitchill

You're welcome.

Operator

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

Robert Stallard

morning. Good Thanks so much.

Greg Hayes

Good Rob. morning,

Robert Stallard

Maybe just a Sheila's on follow-up question.

Collins seems compared did increase it like big you're in sequential little a You see aftermarket a extrapolating QX. forward. that in QX very bit about But cautious the going to

you if actually more about this into you bit a you're in a perhaps color little what the maybe, bit why little in continuing of go saw QX, So and second-half? squishy

Greg Hayes

start Rob. there, let me, me Excuse

recover start actually airlines the think, QX exactly year in time, China this surprised demand, six how month came talk in The the quickly typically what especially us expecting the heard aftermarket the commercial anticipation historically seeing from and And back, we a was I in about start U.S. you've anomaly delay they in seeing. we seeing recover. until the money a aftermarket the resurgence have RPMs time are been was is in of spending of ahead what the recovery which us

going really think putting expected quarter January especially I than had we back into is this, plans for together think the better, was the as anybody second much, so the much And year. to

satisfied still the piece here XX% that And transatlantic shut we quarter. are the on that demand hope fourth do reopen Collins down. in see their think into still the routes tell its well The routes shut part remember wide-body. here of think of is also we in well to would transpacific and bigger I So haul that quarter you some The recovering here But pretty we as been XX% is of to has the back-half a got about the you the we lot is pent-up year, QX. in aftermarket not back-half. pretty third see long down. Asia, some inner the you'll reopenings, Again, already

the tell back-half the haul at so Collins you governor, on marketplace. wide-body I the And is would kind that's of long

the wide-body say in domestic of in back-half. starting China, on I that some U.S., So the overall to the strong governor in Europe is, that demand it's really now. see But domestic again, strong demand the would

Neil Mitchill

of Yeah, and points add let other a me too. couple just

I notable think sequential that one in very provisioning. the and XX% quarter was of growth second things the was the

the in here increase I the think the second-half the that's in airlines getting again, ready expected of demand So for all year.

kind of we think about So back-half. watch item as that's a the

we quarter. side talking you On Collins the growth growth, here pointed XX% in sequential strong particular, I'm as second the in really out, aftermarket and had

As we more X% about in look that's at what sequential were January. back of still think growth. the higher next of here we a off base And again, ahead quarters, about two talking quarter, in second I mean the

seeing that's forecasting we sort that of at as calibrating improvement, what our but look in today. we're we're things So

Robert Stallard

Thank helpful. very That's you.

Operator

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

Noah Poponak

Hey, good morning, everybody.

Greg Hayes

Noah. morning, Good

Noah Poponak

reset see I in we can Hey, continue back-half those future the can to where defense again, Raytheon that the quarters. recovery the to that higher on over segment the would from they and margins, they linear and that just accounting side, me stepped doing were clear We're the and in notably why improvement improved, steady implies we see second quarter. input, the you're your be. in wondering long-term can the given before down cost But are. targets target versus understand few what the it's last there, just legacy you is, have what not guidance that acquisition given acquisition happen. how The past accounting that, the had

Neil Mitchill

on bit So try to that. me Noah, of let share little perspective a

than and first-half stronger of expected. First, in both about as RMD think the the we strong, year, RIS had I think margins, the we are

items recall international we commented tailwind, You'll couple mix. we had pension had quarter, I of first on some a the in RMD, in the also

costs contracts us sheet. that that resulted RMD We had accumulated had in awarded some some were on liquidating that second balance the the also quarter here in in

and Now recognize can on profit that. revenue we

in second year. the are year I our quarter don't we that providing of asset RIS, pointed in repeat the that And the couple of we had sale of those expect second-half uplift that to in some as So the well. things out RMD the at first-half

that in consistent fairly back-half are in you'll RIS, you the the what of for just quarter. that the If year saw see second take out margins with we

Now, from a those seeing it's productivity $XX each segments. million perspective, in we two productivity, improved and are about

products but But, improvement where the of mix quarter, into year sales. will you a a that's are in EACs of and will way. we done So in about that the at net goes, mind at in as DoD being the we we've hundreds as in of the we year, a as margins favorable in FMS RMD, the more the keep second-half the Investor that function productivity see each talked get our back continues, underlying seeing see Day, shift

margin still that longer-term the and set they're feds I May those. the out pleased where of we’re mean, sort in targets that's business, So heading, achieving story. see with we very

Noah Poponak

you. Thank

Operator

the Your Melius Copeland next with line comes question from of Carter Research.

Carter Copeland

we're Hey, cumulative segments speaking good to sure the million, two gross $XX Hey, of are that morning, million When those the two refer the I the net each make excuse to all or gentlemen. so were can adjustments in you you language the productivity the just $XX across saying me, same EACs here. Neil, segments?

Neil Mitchill

basis, On a EAC yep. year-over-year Net yes. year-over-year,

Carter Copeland

you it's QX, is up driver target, you're just you just incremental EACs some big when the cost put we're putting that's you plan. that the And in earlier. flowing stated the reasons into into synergy the and we of realized for because And sort getting that out all that of the

Neil Mitchill

then dropping through both businesses. we're But that's and done neck goodness, so sort net of us the favorability. But sort and is generally and everything. since good of speaking, XXXX. in form every seeing further that in EACs get that evolution the effect the of a natural of in of to of that had seeing complete, getting back quarter you're And, RIS the goodness, through There's productivity along lot EAC RMDs right. percent we reset play April that's Yeah, of that

Carter Copeland

stick Okay, great. Thank you the for to I’ll one. clarification.

Operator

from of next line Harned Bernstein. question Doug Your comes the with

Doug Harned

how talk words, interiors looking how traffic traffic How that I with you you for about do really in When and and other those trend? back. see the In you morning. what And Collins Collins of at avionics how XXXX you're end Pratt do be by would about recovery UTAS Good be that Collins, down in say, lining if on up that by recovery? think you traditional you respect would think could I break it trends, to to perhaps your helpful. maybe you. aftermarket and you're traffic said, Thank modeling

Greg Hayes

RPM the have don't lot I back, months the recovery. see we XXXX. as of the of six this as line expect, traffic it, that say Well, we've a That's demand. return see originally just on because recovery. had not about come out business from say tracking that here year, people growth will pretty see trajectory. line recovery been think will pretty seen to well, there's much kind that aftermarket And years, our different of a a you pieces play of pent-up complete air pre-COVID over that guess RPM would we again, if Doug, of much with to I various the Again, it levels delay have historically, forecast we next -- I expected We think we see I with aftermarket would couple see the until obviously way

still while If for from interiors wide-body sequentially, a you little dearth still departures. that think instance, is bit, up suffering of about the business, business it's the

we're so in traction great not seeing And interiors.

of recovering power expected UTAS we're you kind with I On front, of The seeing what as normal for and them, controls the say we're the traffic. wheels recovery. would much business, brakes, avionics and things as those with though, seeing pretty a legacy businesses our same some of in gear, line call all landing

So the again, it’s wide-body margin We're Collins we're will about back. weakest come is to a I going think some in recover, again, customer interiors, high traffic going but the that equipment. probably And business, time. to see that's link it's relatively it furnished all take just if convinced business

‘XX that will probably Collins into play recovery ’XX, the the out at of as So that margins well, into timeframe.

Neil Mitchill

with add about And on we more about QX. And all as ASMs. mean, I let to, that. year. a I of I'll some in a what comments ASMs the the year we Yeah, rest Maybe XXXX see focus saw I from about, agree XX% to QX Greg, color me think little for increase making QX, XX% aftermarket to the more level we out Getting going ASMs, with recovery. kind from starting start through Greg further look from And QX what to the should that's probably X% those to range. it to back said, QX in trend XX%, that's digit as mid-single our to QX. of growth call out,

Operator

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

Peter Arment

on capital Pratt? going you inventory believe maybe Good about morning, can and the progress I Hey, just Collins at talk levels results. kind best on the of Nice that's kind making you're working maybe you the Thanks. on of thinking any there is And of flow kind the just cadence expectations forward? in cash then free to gains change your second-half? show and for here long-term around in opportunity goals, everyone.

Neil Mitchill

Thanks, Yeah. Peter.

Pratt So we're pleased both actually, with what doing inventory very on and Collins. I'm in

we're the level, much that quarter the in the inventory to With back-half $XX down higher exited work line. have million known levels of to stayed year. that the ramp increase in we first obviously, a company And significant in we're than up pretty At with. do sales that seeing facing, the some drive

in I'm that working we see see pressure little the here, we Could capital inventory to sure bit focus very good year, of have we're I be there'll making markets on the we'll still we be as that forecasting strengthen improvements As a happy suppose, that? and exit place. management. turn that inventory but on

we're As on but right I'd our the we're the to from we'll improved at customers, CapEx. you bringing sure that that that slightly We cash got ready not focus don't the get the free time, but say end billion $X we profit, will to the need. inventory ready same be of be for on it. for make billion comes we of watching in think want able working capital, the range, our And recovery, to the that increment if $X.X midpoint to about higher likely flow improved at

I In QX. as of the third free probably saw terms about same increase in QX of from the year, that the quarter the cash we second-half profile, for about to flow think calendarization

playing with we're quarter right seeing. third So that's very that see how happy out. of the And, again, we're I now, collections sort

Peter Arment

Appreciate the color. Thanks.

Operator

Kristine of Stanley. Your next Morgan question comes with from the Liwag line

Kristine Liwag

guys. morning, more more the back-half in EMD $XX million deferring Can have Collins how $XXX what to in you million to And the mentioned details you you much earlier for on year. good Neil, variable provide spend? is? that the of Hi, flexibility

Neil Mitchill

of the of existing really we Collins can where very We EMD, it's last our generation to money. is sure but those businesses. dollars you as we say upgrades we specific that the technologies and want to to did That on dive I'd probably pandemic, not across do were portfolio. spending make there's always wanted we're through expect on our insert deep our into to where investments, interest that make sure around platforms. next a focused the We in that spend any Collins the especially we we our make the the Sure. flexibility year, really allocation sure starve

ways we're from long think that. a I doing

spending the You've our years. of X% between I talk is four money about poised our over capital Steve next heard about $X we're years. investing of Tim And sales right, think and the the of EMD billion each several invest about about over next to own

long that there's team but Kristine of do a working. know Collins there, projects So, I some that important flexibility we've got list is aggressively

Kristine Liwag

Neil. Thanks,

Neil Mitchill

You bet.

Operator

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

David Strauss

seeing ’XX, Investor so side? ASK you're in everyone. the what far light then talk about Day, in QX. you're that maybe rates? look you've guided rates we And when highlighted with think morning, that, what out growth you XXXX? came aftermarket Good Greg, could on change in guess, higher of the do in you expecting the And how of since look those Neil, of Thanks. I July to sequential like much potential production terms ’XX. Pratt as Airbus out and ’XX, that potential narrow-body Collins guess, Thanks. out I

Neil Mitchill

We we even is as about shop a regularly. baked consistent visits. start. that July of growth, to into I'll but continued think haven't with example, our data at forecast we've the we outlook. say, Obviously, in look think the the Sure, legacy head we as the happy for got Pratt, would I large We're second-half that see shop I big year-over-year of month piece visits. seeing were we into XX% closed really yet, do What July

probably be of I XX% about fourth XX% in XX%, and we north over quarter. the will even As think year-over-year QX, growth

particularly sight, indicators of pretty of look we've Pratt on the back-half good line the some there, good So as at the got side. year, shop visit we

Greg Hayes

laser I surprised, challenge support David, so XX little we market Airbus we month to tell to XX some aircraft we're that high both Airbus, it production. need up they're rate out and will, Right working company those narrow-body point. would to you, figure Guillaume I in focused you, if So get ramp capacitized I and was us have we pretty remains XX latest to to Boeing you'll that take been now a XXXX. We our was with were whatever levels. trying aggressive think a about the by will a to, you I would Obviously, as do are on I talking we see and to to to, think starting for the tell showing ramp, while share Airbus. we're but being know are think customers.

year. to Obviously, actually materializes, grow Now, the great not the the with rate XLR as advantage I as And of that be want a question. is aircraft. AXXX the I marketplace. they in X% that whether see. along air Again, Airbus will guess to or But, a this, we'll X% or I got coming going XLR, think think about traffic take

able bit to of ramp AXXX eye for We're get the And the now time So what I be but engines, all with And And content you're serve hopes. both, going we're to there's there. an question then the on ready and this. to see on what obviously a is with demand XXXs? there it happens. supply we'll it But we'll plenty out that different keeping we're we'll is plenty quickly think, work as Airbus if of on to narrow-body. neo see continue positioned to will our be, between actually little Or, AXXXs? chain, capacitized sure a make customer of adequately occurs as the

David Strauss

Thanks much. very

Operator

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

Robert Spingarn

here? good see from traffic we aftermarket talked vaccines the about year both we wide-body narrow-body you long haul if a And have capacity and do talked demand have quarter or a even it? words, address could Greg, surge some you could the strength, lagging into wave the recovery. also with in we And, more narrow-body second other at maybe curve now end turn sooner, Hi, the a getting headcount about reductions, point traction, time? to maybe sine demand wide-body you same the up In the demand. and surprising But given the at for morning.

Greg Hayes

God's to lips your From ears.

only we about it's a the a fact, keep is And it's should vaccine of vaccinated, China, rollout. in But also in that half globally, get mind, is the are vaccine we recovery, the U.S., getting in population think same about taking robust X%. we more could I be Europe. in to optimistic faster see hold.

China So The a air way traffic, go and long to between the we've got most of I the think. of in is course, news is U.S. good and Europe.

we could adequately a to capacitized that from I aftermarket we more So you take would see quicker perspective. than are tell recovery advantage an recovery. of that

those cuts took we didn't capacity. close cost we what or of all lot do last year, of billion As $X of lot kind factories cost a that eliminate takeout, was a of

the really a we still of but if It's This do Collins a overhangs capacity probably we'll portfolio. is facilitized the the X,XXX that's kind unabsorbed one saw same from of get ramp. As all this exists. overhauls, It's we year, still facilities. the you Well, overhead. because across Pratt course at standpoint to Neil before, We're GTF. do mentioned the XXX still that on V's of the same the cost Vs have

can We shifts back, on we bring we up to pick extra closed and the factories haven't folks demand. can work

expect we are see were good. worried today, actually if we for of a to Certainly, we not be kind that what it. would I'm So recovery. It ready not but

Robert Spingarn

Thank you.

Operator

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

Seth Seifman

a Greg, And And maybe for little next business year. was talk resolution into wondering the Hey, no on everyone. much. still the thanks morning, you your getting the about R&D of good roundtable where year. and if second-half there's I very bit put could tax issue hat on

from that could about of prospects to I law kind the some get removes wonder with Congress, the so, from for that the outside some interpretation if prospects the And customer that B funded the equation? And Congress? you R&D in maybe of talk IRS A relief of

Greg Hayes

the four hopeful, clearly, hill, through question, winding as was I the ago, were were the Act And R&D the in XXXX amortization we in are We People infrastructure was that very we to Jobs months Senate were both of this House bill the great very as side. the to a of helpful or is want that Congress. about having three not the terms it fact in kind that's that say we sympathetic investments on discussions Yeah, technology. driving see thinking and would Seth. its language way

will to there's relief. goes. extenders back folks have relief corporate to where we imagine we still the type that's as been amortization in relief typical pressure want investing up. there. as see we're the get that take We'll the think maybe so from rate from I some to hopeful comes bill infrastructure is just comes out with in some that tax see folks on to include And formula we And any pressing But R&D you December, of that here. stop it pandemic. the academy the It's R&D, in hard Obviously,

business So, and up to are a going it goes. again, at job where good not we're on roundtable see we're folks still Congress give hopeful, doing educating But this, hope. the we'll

this have just to done. get something I we is think

Seth Seifman

anything of And outside Right. Congress?

Greg Hayes

of seen Jobs statutory haven't a pathway language Treasury We And change the to actually I explored haven't for regulatory the XXXX IRS Act. or a role.

now, to it's right of think I Congress. an So require act going

Seth Seifman

you much. very Thank

Operator

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

Cai Von Rumohr

Thanks Yes. much. so

the have in at going having Thanks. for also, problems? the pickup uptick their of in you and forward where been could do at OE MAX own And commercial the Collins. So on much What you on didn't bizjet comment trends Legacy see you Boeing's an rates XXX UTX?

Neil Mitchill

start Obviously, bizjet me you with let quickly. today? has some context. very doing Cai, bizjet rebounded Yeah, how

we're even business, slightly I'd general whether were performance the near that there, aviation, or or Collins at seeing we where the the both so, affecting very above with good at Pratt that's or And combined XXXX. Canada business, in say are

a within performance, aftermarket to Pratt Collins. it the part of we're is well. that here contributor the QX major as So seeing

having think aligned As third delivered schedule, think contributor. talked already. OE but will Pratt. that And a year start of I about the I we a Collins production about the growth be requirements year, this of about at MAX Boeing's seeing are XXX certainly as see for and We've both their to with being OE, about we start back-half bigger to

quarter second, more up as course, get another third, or so, we on two-thirds we'll of go fourth more we as that up step the the in pick rather, through third that'll if heavily about into fall. quarter. which into talk ‘XX, ramp later start And And the then, will, we you to and as

Greg Hayes

that's picked month. XXX think to obviously Cai, a down You also the I five

In delays, little even be slower fact, some than these because of production think a of bit it's it that. might we

So there's some impact there.

You for recall, ship that's Collins revenue about on $XX a million set the business.

OE, as of we So even this should here behind production that the said, there here, quarter. as governor, get And these once expect Neil XXX on issues some end of year is little third a should the the and XXX I we pick say production bit at as into next a towards on again, Boeing well the Collins year. that the line help rates up would into of

Cai Von Rumohr

Thank you.

Operator

Research. Wolfe with Mike next comes Maugeri from Your question line of the

Mike Maugeri

the for having right morning, time. mentioned Hey, Thanks you for Greg, everyone. the next good the conflict. technology

So can shift you missile supply peer from as adversaries talk about customers of in sort the priorities asymmetric the business towards demand your balance longer-term DoD threats? back

Greg Hayes

Yeah, Mike, discussion. an it's interesting

about next the the right what think technologies as having the you about we for -- If conflict. talk

and As we see I’ve fought in outer cyberspace this space initially. next the before, this in gets war right, said it

of across focused or how to the you and And this. Joint compromise space of communications. communications to being lot defend were Europe. that in having do to to Collins. the in this those this processing reliable, the we cyber-attacks, You Command a We our what replenish and see replenishable Having you'll from battles communications, piece think assets, some Asia aren't project to those the to is to at there strategic of out And RTX of assured systems going of have attacks we as at across assured sensing are And we're positioned played you going really sensing uniquely to able systems part communication that and come is about RMD What see hear RIS able All-Domain well. again, across other really being business JADCX and assets wars is Control. do the see on course, is land the systems portfolio. comp you're systems, against going that assets we also to tank in

I the There's it. we It's It's microwaves it's replace have be answer. a think as missiles one all we and with still SMXs, would as going lasers. which and you're going high well see about going threat look, single not things be So hypersonics, microwaves. you're high like to SMXs powered defense, where a to as complex the with, is to to or of battlefield we're some emerging layered need missiles, primarily to AMRAAM of still say no we going deal powered think powered high going to

So, there, technologies a can differentiate in but, again, lot that those of spaces apart all I have pull think to us. we

Mike Maugeri

Thank you.

Operator

question last will with And Fargo. Akers Wells of the Matt from our line come

Matt Akers

of outlook? on military on forward. about profile of Thanks. of the we've kind year, going some Good seen kind bit of here sort a Could last year. this a side you the morning. aircraft And the of light just disruptions specifically touch slower And little engine in growth Lockheed’s maybe comments of F-XX

we that trending how kind of forward? about think going should Just

Neil Mitchill

take I'll Yeah, that.

business year, it. As our we're halfway We're And, sort Pratt we the of military need close clipping on for we're schedule look year be engine the rate, we're the we to pretty engine. pretty at quite or the F-XXX the delivery but near And along. to on not through of steady. at for the rest

kind we've much the expect that our see deliveries. as terms similar foreseeable talked first-half the pretty year back-half pretty I'd the did, engine there. So for holding in the look we in And steady to future to rate of of of what past,

Greg Hayes

We're into keep years. next going and into the to the then test, the it’s production just the be And in on on too, not that we're B-XX F-XX KC-XX Matt right, in tanker. couple next flight mind of as also generation goes

old. is and more for out opportunities that us utilize And to there. just XX-years platform to F-XXX the there's a So than S-XX literally JSF continue remains the

more engine piece, military the there's Obviously, the important pieces So to are JSF. those just biggest it’s but business as than well. other

Matt Akers

guys. Thanks, it. Got

Greg Hayes

in All right. everyone, you, listening for Matt. thank today. Well, Thanks,

As and always, prepared take team questions. your and of Jennifer to ready all are

Bye-bye. thanks be soon. Take see listening in guys well. So, for you and we'll and care

Neil Mitchill

Bye.

Operator

ladies you, call. That Thank conference concludes and the gentlemen.

now You may disconnect.

RTX (RTX) 27 Jul 212021 Q2 Earnings call transcript