RTX (RTX) 26 Oct 212021 Q3 Earnings call transcript

Company Profile

Participants

Greg Hayes	CEO
Neil Mitchill	CFO
Jennifer Reed	Vice President
Peter Arment	Analyst
David Strauss	Barclays
Ron Epstein	Bank of America
Sheila Kahyaoglu	Jefferies
Seth Seifman	JPMorgan
Noah Poponak	Goldman Sachs
Robert Stallard	Vertical Research
Doug Harned	Bernstein
Myles Walton	UBS
MIke Maugeri	Wolfe Research
Matt Akers	Wells Fargo
Cai Von Rumohr	Cowen
Kristine Liwag	Morgan Stanley

Call transcript

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Operator

Good day, ladies and gentlemen, and welcome to the Raytheon Technologies Third Quarter 2021 earnings conference call. My name is Mistie, 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. carried the being is call live Internet. on This results available from note accounting Raytheon there speak where is often website adjustments, items. download to presentation a to will and/or Company Please And and Technologies net excluding significant significant for at by noted, management the continuing other non-recurring from operations, otherwise items, acquisition except referred www.rtx.com as call flow are reminds listeners to provided that expectations cash and also and statements any Company uncertainties. The in and earnings this subject risks forward-looking other the

ask important Our per anticipated as give X-K, by TCS one that, to SEC permits. the may XX-Q, your everyone statement. to for Instructions] and filings queue that those to questions that I ask we turn call Mr. including participate. the call further in its first the XX-K, time you round caller into Form to over [Operator to provide could the You limit details the factors from open Once Hayes. With results will actual yourself cause forward-looking differ question reinserting materially becomes on questions, opportunity

Greg Hayes

Thank you, morning, and Misty, good everyone.

turn quarter. from As delivered the solid this before press A to I few morning, our another highlights. comments we release you saw

good years. continue drive and our growth fundamentals We ability feel about several of to to the over and long-term the our next business margin expansion

to up impacts on in passenger reduction, From And notable grown despite to with about available, operational commercial in starting driving defense nonpartisan, TSA X.X year another million And moment. know, from global as regional International averaged was traffic as said, And positive. about about per the and cost seeing. business investments are technologies. progress side, to QX. QX. here SEC expectations. million borders, in reopen -- day on our to in in traffic the perspective, excellence our ups encouraged that businesses, Defense XX% Overall, line great miles estimated on we're just supporting ASMs see and made we'll and which the to milestones some U.S. That's president's The with air be our in to aligned we day we are is our touch COVID travelers and X.X market in from we also recover are checkpoints we're both new our to optimistic request Congress per Fiscal through the have trends budget spending QX. quarter, cautiously achieved we've the sequentially variance. the on Commercial Defense some that's plus During a continued a that continue through in budget 'XX

Okay.

delivered slide X, the cash quarter. free sequential line quarter we and to what move bottom Let's we was with another highlights expected. expectations, EPS basis. And line top a exceeded in of on growth flow a both from and Adjusted some our year-over-year

areas. $X.XX to As tightening on capitalized again defense the EPS year after-market we our recovery strong Based are to adjusted outlook our to continues and performance increasing we had on portfolio commercial year-to-date, and grow. for $X. the our were we will That's prior also our Mitchill into cash a to and in get share. both $X.XX of flow tightening up on $X.XX details outlook from our outlook where the you free sales Neil

which we that for shares $X repurchased the billion, during was On RTX commitment our talked the the about in back $X of to we bringing capital allocation year front, billion total quarter, QX. about our

turn details on over our to couple results. Before I Neil, more it

significant these acquisition will the we operational highlights and strategic strategic capabilities become we're which and of enhances solutions, we continue And highlights, on some and with to for organizing aviation cover around a me Aerospace. like quarter network programs. Collins aerospace services, areas key capabilities execute Collins for the within our our Let ecosystem where optimizing growth modernization. Starting announce FlightAware, accelerator connected digital strategy, our in business

of Blue problems Solutions. leading the space-based Seeker a engineering, expanding Space advanced and hardware, capabilities customers of Electronics complex reliability competitiveness, we this non-core by most also with continue Seeker of acquisition our satellite to also space enhances strengthens time, We announced provider the customized At our Canyon, and to solve same are integration our offerings businesses. IRS bus the divest electronics. of

agreement During our the business, of and of quarter, we is divest to which part services training announced global RIS. an

to completed the and forgings their prototype air-breathing of the Columbus system Department On to the of target reduction. to track on performance U.S. XX test puts cost hypersonic Pratt, operational first lead jet U.S. and faster continues missiles maneuverability. sustained critical greater HAWC And Defense. tools, a DARPA and HAWC lastly the days concept The hypersonic Force, reduced and the disk in forge business core the the successfully by operating and to offering a drive Air the team of inventory. The speeds, successfully system test time industry side, reduced our quality team cost on powered and to us Columbus at deliver operations weapon defense partners scram up both further or time Utilizing successful and integrate

success quarter have excellence over can the term. over you long it Neil. you that, detail. turn our let in Neil take to to through you As driving organization see, is the a me operational through key With our

Neil Mitchill

adjusted X. we I'm I'm and free Sales where Greg. flow. strong versus XX.X pleased XX% of were growth, billion sales Slide cash saw with on organically an our basis. on performance in earnings quarter prior growth, year up year-over-year Thanks, the adjusted

some XXX expect some domestic air pressures was the as by our we cost per It's cash adjustments, and lower headwinds $X.XX driven a net earnings primarily to basis, and near-term, earnings continue expectations, $X.XX $X.XX in from On drive and only non-recurring continued GAAP these accounting Pratt acquisition on Nonetheless, issue. volume. execution And per Our included our corporate in operations and flow and of significant see Collins, while continuing partially and/or share of EPS and continued by growth. items. items. this That defense. of the was by from expense we remain focused and ahead international was OE previously entity supply performance optimize GAAP short-haul to tax actions legal offset operating related $X.XX in adjusted actions program we and took was the a share earnings to the worth disclosed share Adjusted Company's noting structure benefited about and chain to of and per timing both travel growth we of that driven quarter. lower recovery continued

full was billion expectations, for our as well that $X.X worth As about in benefit keeping year. line Free was with on flow track the of pension-related cash $X.XX. us

let hand Jennifer, a little over color it me give to progress. you our on I synergy Before

cumulative we XXX the are the nearly million us billion of target, synergies gross During cost well increasing commitment. quarter, synergies And strong in And cost will gross expect this merger billion we million cost now to achieved since and to our XXXX to $X over on $X.X our given bring again we're our way incremental XXX achieve merger. year. about This meeting synergies. performance, our

So with Jennifer that, to the let results. me through hand it segment you to over take

Jennifer Reed

mix, deliveries, sales OE Commercial in upgrades. in compare. and down XX% were an quarter, end aftermarket in wide adjusted sales X% X. of on body basis, sales expectations. Collins our sales, with billion were offset year. in and XXX commercial down increase prior than in X% channel, military organic a commercial and strength primarily provisioning, period Recall, narrow-body same Adjusted Thanks, lower aerospace recovery XXX. X% a was on aftermarket in Sales basis, on the Higher the the XX% commercial continued military on XX% in Neil. down X.X line in Starting the X% increase aftermarket increase a adjusted X% than By by were primarily million parts were an XXX offset up more profit driven And up and by up driven million and were by modifications organically synergy commercial sales last an year. more were and sales markets. lower X% from volume. a slide up tough X% basis military capture repair, Collins Sequentially, up with roughly on favorable the Aerospace up with XX% operating

expect XXX now to Looking pressures headwinds, mid-single-digit. delivery ahead, sales due be and down to expected we supply OE full-year Collins chain

OE up GTF in sales continued aftermarket Growth commercial the were benefit & offsets sales inputs legacy million commercial than sustainment, basis, an Whitney more year. visit basis, driven military which and last by higher OE Pratt the aftermarket Commercial industry. of volume -- a XXX Sales of up were on range of Sequentially, quarter and XX% of through given up on XXXX. cost increasing in military organic are Pratt, million continued higher XXX SG&A Adjusted up visits the from E&D. were in Collins up on we sales to X.X up in large in the the quarter and XXX the Canada engine sales measures, higher the commercial same and were XXX commercial prior driven aftermarket business up com on and up Recall, large production a development recovery shop were Pratt a within XX% full-year versus offset impact The was tough XX%. containment continued deliveries XX% XX%. period another the the particularly new were FXXX up million commercial sales, of primarily Pratt driven better However, recovery Commercial business. compare. outlook classified to on XX% on the by X. up profit adjusted up ramp operating aerospace and sales was than shop was higher expected to and X% Drop-through programs. of billion profit operating Commercial XX% was XX% with Slide year. aftermarket Shifting by

to expect continued sales mid-single-digit. up aerospace recovery, Looking Pratt's the to ahead, full-year commercial we now be due

full-year operating a are to up outlook Pratt's range XXXX. profit In versus addition, to XX we flat increasing million of new

line to the profit driven organic material XX.X by of was on full in XXX billion. billion Turning the in a prior adjusted of with of sales basis a backlog in worth and It's an basis, results RIS RIS on resulting X% year-over-year million higher Significant Adjusted were we programs. up book-to-bill had X.X the approximately greater bookings noting and expectations by down RIS an an X. year classified be was year on X slide million quarter suppliers. of from now line timing expected, of as in to that basis, and bookings primarily input efficiencies. with primarily billion X, billion X.X X.X of operating than included book-to-build on expect adjusted quarter, program in XX driven

of to Turning from material growing low sales RIS outlook, see inputs RIS now due to the we full-year single-digit. timing suppliers

million to of 's a million pro operational RIS to operating improved to versus as XXX adjusted expect XXX continue However, result productivity, grow XXXX. -- profit forma we

million Turning order bookings award versus XXX -contract liquidations GEM-T adjusted was expectations volume. several in on XX on XXX XX slide was resulting the RMD X.X now of well driven quarter franchise. were up were the on seven. Patriot quarter profit in for on of a prior X% and in RMD's billion an costs sales line the received Lot up notable million operating the year a AMRAAM up other ramp of an awards. XXX Significant organic pre Amram sales X% to as [Indiscernible] Adjusted billion, bookings and X.XX million, primarily by XX.X as with higher an the expected of our and in in billion. quarter, and basis, million, our in a X.X basis, backlog for book-to-bill included approximately

color also rest growing mid-single-digit for in it I'll outlook to forma full-year and with We back to confident versus sales RMD, XXXX. low book-to-bill now, profit And adjusted be the XX turn provide than Neil to of year. some remain X. expect full-year to the RMD's million XX our We to operating greater growing pro on

Neil Mitchill

Thanks, X. on I'm Jennifer. Slide

year. aftermarket recovery As by to so we the fourth this of has continue driven air encouraged at ahead far be growth that sequential commercial quarter, look we the travel

more rates build the recovery the traffic continues the significant international our come on down lag year. However, outlook than in impact And resulting OE a side, we long-haul to had expected, have top-line XXX of to expectations. for

some isolated Additionally, the seeing and RIS. the immune chain, primarily we from chain are aren't global to supply at impacts supply that pressures Collins

low vaccination And to we build the mandate timing put travel finally, may prior However, forward. we're full-year confidence we continue these end slightly issues. in that backdrop, outlook With to higher supply of suppliers rates our our outlook. of while and our on than about with the chain the the going adjusting safety of higher now pressure sales $XX air pending billion further the sales see working are vaccine will anticipate near-term, in mitigate

low-end cash billion flow free wrap things to and appendix. With for the about included cash adjusted capture, side, free the from I'll comes year. and control, outlook to that, of However, and tightening the outlook. we approximately Pratt cost raising line our $X.XX to now $X.XX below some hand About on And an improvements from the are from segments $X.XX Collins up the we on execution, it and per the range raising also are see and corporate in $X synergy updated items. the performance the flow that to our prior strong our the of in of share, $X.XX and program the given EPS or Greg It's remainder worth webcast comes mentioning up. items we've midpoint increase segments, outlook of for back the full cash

Greg Hayes

Neil. XXXX just we're that to XXXX. pretty kind Okay. be our of to to this specific today, what environment Thank we're and into year. next give nine much with for other on our view you, to is going seeing slide operating guidance facing that we We're say going not We're talked in on of about trends are the May that Conference Investor the proving track on than

we trajectory -- course, expect continue ability Fiscal bipartisan On And demand to robust about of XX feel with the the the budget. products commercial Defense year for recovery our international and grow and about. we system to the Again, to margins talked operational it backlog for obviously, billion margin be operating cost support in that franchises continue $XX strong. positive side, XX our and driving aerospace the Fiscal our our good to in we the us to really laser-focused we technologies roll grow excellence is gives further the also reduction a part continues This We're can our deliver confidence along -- out. core that of

can hurry. pressure here. also anticipate are are, if of think monitoring will these I face will global next rates inflationary looks that We'll the borders. that the change far, you COVID we new We XXX tax to something reopening chain supply On in and Again, year. the the year. industry. challenges and And impact through but side, all everybody build COVID And in of we of are next into real no is lower surprises as watching, going will, manage guess, lastly, but of continue, about so I the be carry to a us. international to positive It them -- Global none again, concern of the environment think the variance mandate. a vaccine course,

our the of know, by work all customers you contractors disruption expect through federal to All going employees have certainly that all with vaccinated. it. there and Xth chain required be both our but will in December we're As are of right. supply to result way a some We as our this,

returning flexibility questions. financial following Sheet our us the capabilities by With to four our businesses shareowners it pleased the continue up with our commitment first finally, performance that we close $XX will let capital the in supporting just of to while return get the to look our Balance least in And as let's want our but cash-generating me I'm communities, business merger. saying along I we including to I'm ahead. that of keeping with business the strength quarter. our And for reiterate, in our is customers, important focused most safe. our Q&A, to in investments mission the billion employees, strength confident remain to on suppliers, our provide our the open with before years at and of So we employees to shareowners, Mistie, really support still

Operator

if time this At like you question, a [Operator Instructions]. would to ask

with question [Indiscernible]. comes from the first Your line Arment Peter of

Peter Arment

Good that that seeing little and all thinking in how Hey, lost about Greg, talk morning, a chain sales could Greg, Jennifer. how do you're supply Neil, expect color get any you're about about maybe that in just just Maybe challenges report. we Defense. maybe Nice the and back bit to you Defense. in XXXX Thanks. recovers the

Greg Hayes

So the of meaningful. Those Government think I X side, That Not the providing on lost U.S to there's X, but the full-year category to about in goes recover services are or that I of not will Afghanistan, revenue. would sales issues XX there, Afghan huge, were categories obviously. prior Government so million pullout impact we the the $XX Defense kind away. pullout -- to the

million XXX our fact on generate actual were the is [inaudible we bring supply is chain people getting to that able expecting. board issues, that revenue That's material and then XX:XX:XX] supply other we're the we probably people another people got mean, enough the where You've actual issues. haven't of And -- not in. I to been chain by pressure the

Defense know, customer billed Peter, the the we that in when material As revenue. gets you to and side, recognize get the we on right -- away the we

So come hiring will back, the back. piece Afghanistan back, come piece won't will the that piece come

So we'll not think quarter, be million. it's it that expect not going -- see XXX clearly that what about to but quarter fourth we're year. tell can't get we're back. you the in, I but in to don't I to of going lose going next

Peter Arment

Greg. I the and appreciate color all thanks,

Operator

the question of Barclays. next is David line Strauss with The from

David Strauss

morning. Good Thanks.

Neil Mitchill

Good morning.

David Strauss

talk you well? anything? a on there, doesn't And as Thanks. rates if talking happening. is ramp error rates. XX AXXX like going Airbus you actually Can where are you year are Greg, it a deliveries, on to exactly I Are talked of On but big all, of you producing you their about at today? look up that. where on couple are want look you hit is you actually you AXXX, XXX, ask I about guess, questions about to the on This that? first actually know much

Greg Hayes

David. All Go. right,

that. to unpack try just Let's

start We XXX. aircraft. to first because inventory. those Let's in this Boeing the they is we mind not were delivering really half Keep deliver in Boeing going still with material for of their it to believe year, had

so, $X.X XXX. Collins million in roughly OE And of just we've keep the set the again up started and of deliveries out about really ramp mind that's on ship to revenue

they So aircraft go there, their XX:XX:XX] of here ramp-up process. be they [inaudible Boeing fully the we up taking production through XXX as undelivered through backlog expect and on still will work

XXX, as far question maybe that right think, As now. have is that big I the we

expected today revenue mind had And anything shipping per a to million a $XX that's keep delivering five XXX. impact. We not are month. We aircraft on about in be

So of you at will think about be the -- in QX problem part the XXX Collins deliveries.

Now, again, up, catch not but probably back year. this they'll

it's so got We've XXX the to see GTF shortage about characteristics. rate. market The on got position we X.X the we flown -- the it It's towards what? great just I to continuing of continue probably a relates And think As the a great XX.X hours. up, we've great AXXX. at on we're today demand -- mind any don't over reliability the in to the -- grow for a of again, on XX. of And clear they're XX rate million get delivered. We've demand and I engine's going building clearly bit way aircraft A-XXX, in we Not believe a next got month But rate AXXX. a year. opportunities performance to think [Indiscernible] all keep we aircraft going AXXX. we to and but see our near-term rate goal, XX, dispatch see strengthening the little

David Strauss

much. very Thanks

Operator

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

Ron Epstein

morning. Hey, good

Greg Hayes

Hey, Ron.

Neil Mitchill

morning, Ron. Good

Ron Epstein

that? I on Defense you There a - transition discussion been noise the the program. lot defend do engine about the talk a - engining? on guess, you around adaptive and of, in talk FXX has guys Where offering? yourself how community GE There been bit the you the re Can has And little it guys some the hill. against are engining, on re

Greg Hayes

Ron. Okay,

So let's through go that.

the tests new have thought a sometime the test. adaptive XXXX, did A, into with frame, flight So summer, doing the I'm year. in which not we'll to XXXX on engine does aggressive. The adaptive Whitney marine sorry, would is be carrier-based test -- the fit The We're and version, on is this ground the GE is Force version, engine Air now There both development the extremely the [Indiscernible]. F-XX Pratt shortlist adaptive issue of early next fund going we re-engineering cost or engines time the the version, engine. it of entire the have navy the right corps

we've The the technology. with hours brand-new venture, has And adaptive of FXXX, other talking the a on about got you're is Unlike fighter. millions issue which this flight the it single-engine on core.

I F-XX going putting in to the tough the on a about be engine think think paper brand-new to a near-term. part it's

the or XXX, more than engine. We to XX:XX:XX] about we to provide thrust, cost the enhanced have cooling significantly more lower at a upgrade to offering talk engine FXXX current the [inaudible the can and of brand-new a centerline and

work engine we're going current look services the It's be to to we're with Again, thought to think not continue the going the it's that's I version. brand-new improve not going this. So for say of ways putt. on to to to a tough a

a question we gets introduced, plan to just need finding the Block-X we thrust. JPO. need going I funding as to cooling, are with are more we more the address But to going because the a that have think that's of

Ron Epstein

Great. right. All you. Thank

Operator

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

Sheila Kahyaoglu

Can you much Neil, about air-frame be XXXX driving at Jennifer. we stack Thank you overall program rate. I and about that just the talk Greg, levels. and Is so that also growth at lower morning, it of at the look guys. ask XX% a two-year to And aftermarket. growth seems of Pratt Collins for aftermarket the time, to differential? versus Good Hey. is basis, some When maybe XX%, mix? what's engines want

Neil Mitchill

performance the with me aftermarket in quarter. Sheila, very let pleased morning. Good the start. obviously We're

recovered. Collins Pratt the and comes share XX% The -- X% in and almost offerings difference, yet of to has XX% wide-body talked that saw down our as year-over-year, also a expectations sequentially, Collins of mix with line and frankly think, hasn't I XX% X%. about, up product at we've fair sequentially You

growth Collins As we to as international we year for and that expect the reopen. routes next be know, next get to into all the start we driver do

Neil Mitchill

induction. a XX% legacy little very the come On visit thought see. XX% saw than XX%, year-over-year Pratt in. that the higher we we That's side, shop a visits good We would shop

$XXX-million rest of contributing of a year. that million upside full is probably outlook increase sales the to this in So about Pratt the $XX for year

the with recovery. narrow-body pleased So

quarter, continue to neighborhood look the quarter, fourth we Pratt in had because a third there. we'll but the bit will to shop ahead sequentially, continue then perform Down legacy we at well-positioned year-over-year, see still As visits We're very parts see on solid up some narrow into of same to aftermarket. well. and XX%. the quite thing, to support pull Collins, probably the little those with And inductions body at side we

stepping just come of see rates Greg about, Boeing's XXX the of with and we'll next with aftermarket as then the middle our the Probably start well, and deliveries. deliveries MAX to As talked wide-body. year, will up. that by align we'll

Sheila Kahyaoglu

for detail. Thanks so much the

Neil Mitchill

bet. You

Operator

line next JPMorgan. with is Seifman Seth of the from The question

Seth Seifman

of not, came Collins towards it kind U.S. in then the might Maybe of everyone. morning and international line continue optimism. if for with mid-single-digit And along of year looking in are us good trends with in questioning. any earlier The little kind Collins Collins, the much aftermarket that you've pace growth any of September returning of kind the update think of quarter? but in the domestic provisioning was this demand a being or that travel and could maybe did correctly that way or on was and at away think, growth, there I aftermarket did end are supply I bit And both the slow ahead the more issues? improvement affected Is quarter? the Greg, spoken people at you in the by of much, you still fourth give very the line I'll help how sequential thanks Hey, outlook,

Greg Hayes

Yes.

-- I Collins me so Neil X%. about think said, up X%. Let We were was sequentially, as expecting

more the of a expected. than slowdown was So think of X% middle the in saw bit move closed quarter we that attribute single-digit QX. growth -- variant little see what X% is we I we slower that the I and we sequentially, the kind summer. mostly low kind that COVID. That became September in to August as Delta that of Again, October, would problematic. it and into as And had is of in we out again,

to were the going real is a Neil faster XX% we wide-body. markets. XX% see say I the of hoping this reopening would their of Collins tepid at issue aftermarket. They think I reopening a we And were exposure to and are on rather pace. their to That's hit international at

XXXX pro good. so I on Collins good. all -- VXXXX all there is would is you growth. of fleet. going we're great, COVID And means not governor seeing -- see of is until don't to a opening probably back levels similar, fleet the XXXX, pre aftermarket on Narrow-body 'XX up, at full but really which the to we operated end it's now we're that reopening North the And operating is of XXX that's the Collins. - XX% see tell that still the out XX% until recovery a and routes. that's and really international seeing which right real That's is a Atlantic The about Asia not the issue like wide-body until get we expect to routes, thing you're

Seth Seifman

All very right. much. Thanks

Operator

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

Noah Poponak

morning, Good everybody.

Greg Hayes

Noah. Morning,

Neil Mitchill

Hi, Noah.

Noah Poponak

margin margin has in guidance, the full-year the segment. down segment -- Neil, think the updated I every sequentially 'XX

you've dollars to the broadly be the down wondering in And headwinds I cited EBITDA conservatism in the particular, guess with XQ, headwinds. a here. have of Collins of much even and specific up. sort that in margin amount versus Just Notwithstanding decent is how revenues still

could us you why that walk through If happens.

Neil Mitchill

don't Sure. believe. conservatism, Thanks. Not I

would but each if see you Noah, quarter two calibrated, in get the if let were got favorable. are X% helped comp Ross the which had that looks items in that reasonably sale, the tune X%. form third Collins range fourth it a you in worker's this a Collins' $X.XX. quarter. you'll in a adjustment There had the we like we've think business items, I to We neighborhood unit. Collins, take through adjust land you've done of the At was also doing couple Those math, me margins Quarter the of Third you about

see I for between and fourth that see R&D of of more some So We the Collins we've and the of that in in saw QX spend. in Recall flattest some think happen talking discretionary QX. about third quarter. the margins We'll we quarter. the been ramp

that's Pratt, Collins different So it's story. That's The on sequentially neo. AXXX down. story. the margins largely higher At a are

be quarter. the will In fact, GTF of all than higher the third deliveries our in fourth quarter

persist. headwind engine And and loaded Pratt to we just how the job out. D and will the bit. positioned depending little turned control it margin a see Collins then continued Both as spending, companies, ourselves was and have done to similarly, back So E& negative adjust nice grow the year on a really those SG&A we'll but

around For RIS, XX%. should continued We margins we'll see there. see productivity

with they last RMD, in And changes fourth So are year days the out and much year. there. major no around than year there fewer quarter exit will the point third both line of were quarter. RIS the four XX%, this in there R&D, pretty I'll for

but will just of so of that give And timing. bit just headwind us course, a that's little

Noah Poponak

slow specifically year, we need and the is wide-body, to do respect the on AXXX's a calibrated wide-body do XXXX be to a I -- aerospace path comments guess with to ramping in all to AXXX, then the to next the margins, bit if targets, to in Pratt? still we with your be business what's Given happening need calibrated non-linear

Neil Mitchill

to that a recovery the we've X about big going in since the now this call lumpy, for almost airlines that. routes, years pandemic talking including the to going body is started, Noah, been I'll the depends it be, piece that be of on and wide fact, is I think

think mind that little to XXX margin the trajectory. So will a aftermarket. just get lumpiness in about that's I big there be you into the Keep huge do a the until a Greg contributor, contributor, talked revenue margin not

on for fair color think fourth we here 'XX quarter. give I little assumption. the like be what certainly more a see to back in what January during based us We'll So that's a looks on

Noah Poponak

Thanks Okay. much. so

Neil Mitchill

bet. You

Operator

of question the Stallard next The is from Vertical line with Robert Research.

Robert Stallard

Morning.

Greg Hayes

Rob. morning, Good

Neil Mitchill

morning. Good

Robert Stallard

Airbus about happy a sounded AXXX ago, but ramp plans, months perhaps of couple sound it. skeptical a today bit Greg, you you a about little bit

your wondering on latest AXXX if whether could you So feel do this and now. maybe comfortable I more on you thoughts on elaborate was the

Greg Hayes

would I rate I skeptical remain about tell somewhat you, XX. Rob,

that's think natural. just I

could probably ready XX Boeing I basis I support XXXs kind there's there going demand a be see would Boeing's. you hear production, unless demand it if I up And is to indeed XX X-year Airbus it really it -- We'll rate do if we there. market that -- customer, we're the and companies happen. comes a to Again, will maybe does. we -- plans getting our tell Again, support to again, leasing airplanes think our as up the ramps call up production, not month. will But it, anticipate conservative. by of XXXX. you'll Airbus, being are monthly it's support? is, we our out But plans that that XXXX, that the again, it AXXXs of customer on a question XXX ramp and from or not will

Robert Stallard

great. very much. Thank That's you

Operator

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

Doug Harned

you. Good morning. Thank

Greg Hayes

Hi, Doug.

Doug Harned

to follow about the two on guess are here. talking was you things Rob up A-XXX at -- I wanted what look I there because I there family, just if

some the skepticism -- expressed said You planned increase. rate about

have Your CFM also done that. counterparts

motivations go when move have to customer will break? forward, have for they holding has. But plan. you Some are and -- forward? In do facilities have. this fast XX-a-month we or community this they How in your Everybody investment. that How Boeing this production when okay, counterparts process the could different does other here. make words, say, does you

Greg Hayes

in the sure we goal our is to the family, Pratt most that profitable shared platform share here is business. of so CFM it make keep though AXXX and and mind piece & a have between that Whitney, So

And so most engine money. But chase going get we continue campaign engines every to again, to we rate. will a we're sell the make the not think again, just we higher to to last can where

but correct, whatever demand will our be is. there, Gilman our maybe really disciplined single And pricing. demand be is there, talking out Airbus So we fair maybe -- if won't to XX%, of day. will it's be want will the Maybe fair we're share. get to ultimate it the it share we'll on again, demand we are XX%, is If the if customers get XX%, it every be

Doug Harned

you're the A-XXX of family. for in How that And them, majority does engines in gap if right because, are planning and quarters? is deliveries deliveries plus Airbus this I be that affect deliveries lagging can of few on and terms airplanes to you if production in going you have just the XXX a would next production on and Airbus thing that that's and your follow then in now one parked they today other probably

Neil Mitchill

Airbus continuing not We're do for in and, I in to as foresee in up fourth fact, said, go quarter engines. just them the I delivery We expect gap our the produce, sequentially. to profile a

the Not Airbus are delivery As a we get foresee huge has in as customers predicting how you they for we delivery. to their they sure going deliver, make backlog they gaps are into any our many but with and profile. engine don't will take working AXXX know, to

Greg Hayes

about both and though, of or there's that airline AXXXs the of the some for it'll today this to the rate. But continue really think industry we a of just go that And in in the financing. up few the you as backlog If next. that it fact Doug, X state got production see parked, any year will said, thousands airlines we've don't interruption that's and Neil looking

Doug Harned

you. good. Very Okay. Thank

Operator

next Walton of Our the with question is UBS. from Myles line

Myles Walton

-- risk what's and raw wondering And the the sort quantifying material? also, the fading growing guess operation risk the chips? Is the chain or the I booking it Thanks. people? morning. was bigger of issue are your chain. And sort it supply of Is what's the how you it Greg Good mandate, in you Thanks. vaccine and around Neil, I supply hitting that's risk? now? Is what's

Greg Hayes

in $XXX it Myles, terms about number part impact is third. the So that year, throughout we of before a in million of supply to the chain people

level that's all just not so of keep level some well. prime of to subcontractors we just it's the mandate the contractors, disruption, the in -- follow in because that expecting they're need mind -- some of challenge chain, are also our as supply And but it's

So are of expecting disruption. some we level minor

revenue, is some Xth, we but of be to closer deadline grand there get date impact. huge this scheme the could expected billion will not the of this $XX.X as of Now December pick And up. in

out suppliers, talking we're key So we're to and talking that. we're to just monitoring all our of stay trying to customers, we're it, our on of top

for the this, year. it keep are all got pretty proving tell As long-term be will piece -- just good team just people we and would agreements, far in a to while and are coverage these We're robust a and chain to But supply it's not lead material, double of -- through it us a issue times we've impact us, of But going raw also grand under also out we'll is seen materials. have watch always trucks huge I shortages, some it. supply, raw a well. materials -- managing it. meaningful that you be think there's we've challenge. in we but or as of in for Chips, a material We've there's logistics, scheme adequate a up pick item RTX. on got operations at the again, getting over managing think getting to material that's on I looking it's don't The I there.

Myles Walton

right. All you. Thank

Operator

of with the The line Maugeri next comes MIke from Research. question Wolfe

MIke Maugeri

for Hey, on bit year, how your you year. that can capital of then And capital time working the next Capex Capex Capex this Neil, you is cash through for away? good flow the the end into or that a going morning, trim the spend then is and little up that related pushing more working year. time. sets on thank and And

Neil Mitchill

morning. Good for question. Thanks the

a of of Year-to-date obviously improved you the One, profit pretty around flow. lower two, been by pointed and the that's billion thoughts share cash an up $X.X couple just end working as outflow. bottom And things. me capital for Let free slightly took capex We out. has couple typical range us. the on a

the expecting billion-and-a-half side our we at of the capital. of positive lot customers, cash we're fourth quarter from working receive that the Again, from So is. of that receipts least comes receipts as defense a a business

a progress. about we the have beginning we number of we capital make working just that pretty So net issues a continue Greg for as all-in-all little about, the It talked feel talked to could than [inaudible amount at really an some but good XX:XX:XX] year good [inaudible the and see in stock XX:XX:XX]. be places of we'll appropriate buffer sure we

million to real nearly down in fact was bright or give QX million QX you to a Collins, couple from And a has been their spot, Pratt is frankly. of Just thoughts, $XX sequentially. sequentially, inventory up QX. inventory $XXX only

this inventory as fantastic So recover managing the are teams doing job through a of we cycle.

that. happy I'm very with So

to January grow Day. outlooks. more contained free won't could in expect the the Capex. as get flow of expected we'll details do that's also which got is with us. large fourth our those I the we're year good cash all terms projects it into where but on And the our quarter, in next we're seeing into year completing of think year, kind I we've structural savings Investor for within at a do the projects. unfold. how be in In we we've that But it's timing this budget of big I the is ramp typical back particularly, slip some about of to next see cash back around so news talked

MIke Maugeri

Thank you.

Neil Mitchill

bet. You

Operator

the of is Fargo. Your with Matt line next Wells question Akers from

Matt Akers

Hey. Thanks. Good morning.

Neil Mitchill

morning. Good

Matt Akers

the of anything your the some there? customers from maybe the and into aircraft Just to you're flying comment prices year-to-date. put Is it flow for a seeing potential differently older little bit a of there demand side, savings? or of uptick get to about efficiency behavior starting just fuel to customer that on aircrafts new all kind your kind through fuel either Is commercial

Greg Hayes

saw up. have significantly we somewhat up except And buying a this today not fly I summer. we the have really place, going going you're see seen gone to out impact prices any what to if think any Matt, pricing from you're ticket

I near-term compensate fuel costs. so the that, now, airlines demand to ground, form higher costs are being of there of are wouldn't there North raising it those of higher still there's the on that increase, higher up, a We if while prices the believe airlines are prices the are So fuel pass out the for in sitting impact expect to it's barrel, -- fuel able along oil would a Obviously, of next-generation for right aircraft ticket be prices. prolonged like a And clearly, course, $XX does a lot but drive aircraft.

Matt Akers

Got it. Thank you.

Operator

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

Cai Von Rumohr

much. very Great you results. Thank Yes.

us impact A, quite to are worry. bit looks peak prime. F-XX the And has supply to and F-XX mentioned the a maybe issues recently, color because like on chain know, supply emerged rate bigger where you you a has does as XXX. production the But the So what it brought the does give you issue down been chain could it you target, secondly, biggest as clearly

Greg Hayes

Yes, Cai.

a a to think budget. roughly, XXX, have we XX think down not, month. a so engines down piece going defense to small it you're call It's about what, it's impact as the it of talking, overall about XX you're let's in our million engines month from when so $XX lose going Pratt. it's XX a So will engine -- But million again, I a month, an on

it's to just you prime important that parti kinds So the is much XX -- defense going more that $XXX revenue of billion significant. those the forward. a Again, of see million may on lose on Obviously, you backlog not dollars XXX, of

Greg Hayes

reductions.

get other aluminum the than door prices lead seeing, supply probably In that's steel, input. vaccine a be the terms our next of continuing going in -- point also I know to all And supply it's that. basic single of to that out. going time. slowing in supplier chain, help which raw down don't also mandate, specifics is I -- components, of materials. not times again, materials, to I on material Think thinking a going And problem into the up, is of about harder And chain, raw could on it's year. that to pushing labor think And just course, shortages we're it's

side on us commercial gets vaccinated. everybody if help aerospace will the probably mandate vaccine a Although

we're So for all that.

Neil Mitchill

add aftermarket. the makes, that that let mods also mind there's pieces the one Cai, me in on rates. that just FXXX Keep support Pratt but there's engines, and thing production power

production you'll so on of month rate. And so X.X engines X, top per equivalent get

that and all long-term So it'll year. we the month outlooks talked in be XX a of a that our earlier little has about this below been calibrated

drop. lower on side, not bit certainly the production a So a but full little

I add extra just there for So to you. wanted point that

Cai Von Rumohr

then escalators raw you price chain, raw your have in on To material do what contracts? you Greg, And mentioned materials. the supply Terrific. extent

Greg Hayes

you our know, as we've from in say, escalation protection typically, contracts. Cai, got So abnormal

material. a we in of dead-band the for of the majority for we also for But of have most of us there's supply vast inflation cover also, So terms raw which most those materials, the contracts. long-term agreements

otherwise not long recover pass we're term, say, seeing contracts. to that, our the say, that materials for that to would prices then able impact. LTA. -- dead-bands of that we be extent So on will again, will And So, through you be thinking the these an greater we'll If these in coming prices impact see extent of under persist might that today about. and all is I the, Most spot of that's than

Neil Mitchill

XX% Put XX% LTA, at XX% we're of Pratt some on that, Cai, protected. average, are probably numbers and about that Collins products 's so under on

us. issue Greg a again, said near-term, for not the as in So major it's

Cai Von Rumohr

much. Thank Terrific. very you

Neil Mitchill

You're welcome.

Operator

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

Kristine Liwag

afternoon, guys. morning. good Hey, Good

Greg Hayes

Good morning.

Kristine Liwag

nicely, thinking can coming the along recovery how you discuss your and point priorities? in time? this at deployment you M&A With Aerospace capital are Defense And stable about and portfolio

Greg Hayes

Sure.

of -- going same time, no divestiture. the us for and the say in investments at do. to like the we news as enhance continue Seakr portfolio FlightAware always is lower going on and to think at margin, offerings no that we're lower We're to already the like for businesses especially nothing right the there there now, Engineering is today. At We'll space announce that look we And continue in have. the growth in keep looking business. to and I can I would change for look to focus portfolio. software

as will And $X should capital we're that going number first far to year, E&D about be As Capex. billion. invest think allocation, and about it this in and you foremost, I think

between make next and the be &D. the buyback billion invest is got future over fully of to the do closer of a of end the then in focus for growing We've we with of time there. not got if to plenty probably E&D, that cash billion that the And we've is at continue $X more. share billion to we've to But to investing in bit share that, of the business. to generating same out We for there first some Balance Capex in we've hit got we able on of business, to couple going billion up got a to third E And do another we'll be investments decide cash, flexibility take expect investments. $X $XX the liquidity year it. quarter. That And to will target priority At Next be time, again, little Sheet. to want investing we're if of being, got lot buyback years. other the and the of the $X.X we

Kristine Liwag

Great. Thanks, Greg.

Greg Hayes

you. Thank

Operator

to the over like back now closing will I to turn call Mr. Hayes for remarks.

Greg Hayes

Mistie for the and A everyone Okay. listening quarter, questions. available and in. all Thank day your today would team everyone will I be you, thank Neil Jennifer hope take agree. you, to good and

much very thanks So take listening Bye. for care. and

Neil Mitchill

Bye.

Operator

call. Ladies and today's conference concludes this gentlemen,

disconnect. now may You

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