- Earnings call transcript Q3 2022

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Operator

Good day, ladies and gentlemen and welcome to the Raytheon Technologies Third Quarter 2022 Earnings Conference Call. My name is Olivia 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 and excluding and/or items where results speak net except as significant continuing management from acquisition often note, noted, items. will the to non-recurring other Please significant by to accounting adjustments 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 to XX-K, filings, could provide its XX-Q materially results details cause important SEC Forms statements. including Technologies’ anticipated and Raytheon those that on factors actual forward-looking in differ from X-K, the call With to Instructions] that, [Operator I will turn the over Mr. Hayes.

Greg Hayes

Thank Olivia, good you, morning, and everybody.

products see can over awards of the led you had commercial $XX another quarter. release quarter in in As our this by morning, strong RTX with the press extremely aerospace billion growth of and solid for demand

near-term think resiliency us I with deliver commitments along balanced important which our noise Not enable is. differentiators some note challenges it's defense our to aerospace portfolio, and sure what to macro remain on and that key uncertainties. the operational despite

I also important from some XXXX in Russia supply it's out strained we've note of a headwinds record transitioning significant to overcome chain. inflation to and think

day-to-day expenditures us for near-term term R&D, challenges, customer-funded our and investments, for it's are think those research future capital the runway over continue of and across our growth as systems headwinds our mitigate the backlogs through demand and $X and each businesses, with significant billion we billion strong development. Those recede. of coupled $XXX positions to short important, we while the also I continue grow work those issues to invest in

the minutes of in markets. some our we're me just Before we get seeing the to spend trends a end few let discussing results,

this side, for to a are budgets about result, environment the no The And On driven allies we defense the how significantly has expect global continue U.S. trend the future. as substantially their capabilities a thinking higher, and has readiness. defense our threat and influenced elevated foreseeable defense surprises.

an strong jets, example, as through Ukraine Europe, of NASAMS short environment shortly. of beyond especially unfortunately, those We're Eastern This recently follow also in threat Ukraine. includes defense decade. continues. for that our demand, signed air the surface-to-air The Russians drive Europe, XX billion the Switzerland their F-XX a and modernizing heightened will system, more for as driving expect systems, significant $X.XX demand buy our advanced in help And people global engine the course, and Just the fleet missile FXXX is to end conflict, contract X to seeing protect orders. -- system the we which of to X continues orders of

that's or and backlog defense strong $X for Defense can first-of-its-kind significant quarter, the a domestic awarded to awards, book-to-bill that a was products hypersonic of or X technology propulsion $X up with greater. note, of speeds Attack that Air a the Missiles sequentially. billion international X.XX about develop missile we Hypersonic Missile During Of particular leverages and number breathing which for our billion saw and at in resulted our It's a of demand the scramjet travel business air U.S. Mach Force. Cruise HACM &

and billion Technologies the these even accomplishments in the At phase a most systems most Pratt to upgrade. supporting maintains FXXX, to and of glide operational continue Engine U.S. known Force, from $XXX that At in Both military Collins, Department from X success is the thrust, national and upgrade for designed FXXX to completed connected hypersonic threats. review through United prototype. is key a the their RIS, counter-hypersonic saw develop the capable awarded range of from and or quarter engine in offers the additional missile contested This space. augmentation R&D hypersonic over to or edge Advanced on to also the These the the And working more our over environment. award which interceptor was enable a This and to of program a was in in for allow best aircraft. the The the and quarter. X,XXXth support value international hypersonic most delivered awarded the the also recently to with aerospace important upgrade mission more positioning integrity FXXX team Medium-Range is EEP. requirement Additionally, strategic an ensure GPS the classified the the which it's awards needed MAPS the was provide to sophisticated advanced the and awarded which area systems, safest, for the missiles million about importantly, program, we team FAA FXXX $XXX have race customers travel increasing $XXX and II $X a Enhanced is safer the The system. Package for cost-effective & award EEP Air protect international leader Gen U.S. as we're the core electrification engine IDIQ million technology Whitney, air upgraded the $X.X to timing solution lowest-risk -- Defense. AMRAAM, battle demonstrate priority the And allies. At within RMD engine F-XX's been maintain denied jet million the Block in the the deploy will Navy received Raytheon operation. we Missile. Air-to-Air adversaries wide an and States of billion the in system of to enhance quarter

and leadership can As to as future awards in defense continue win expect to technology robust, key innovation see, continued the we we demonstrate pipeline remains order successfully our the capabilities. you strength and

nearly Day we remains XXXX traffic TSA miles And to Labor passenger we with to up U.S., of continue strong In -- our flown traffic with commercial domestic The was strong of to third demand as XXXX. long-haul services. XX% and strong XX% driving in XXXX Moving our levels commercial XX% And for checkpoints traffic the hours for global travelers aerospace wide-body to the quarter commercial customers. innovate the Air demand reached products deliver side. improvement value levels. exceeding revenue recovery through year-over-year. steady reached see continue international

Long prior ago, fuel total development a For weeks of flight France. few Pratt the COX the plant compared for significant testing GTF The engine engine's AXXXXLR and milestones X aircraft GTF-powered the engines. extending efficient example, of Toulouse, flight to test the began AXXXneo most of lead reduces in during just completed GTF by the first Range, family Extra family. the the Also emissions the GTF Advantage for Advantage engines, Pratt AXXX on XX% the of the generation quarter, as power or a consumption

challenges, to invest growth air we for travel near-term even So in with in to meet and continued demand. continue innovation defense the some strong

some year. commercial were ahead In was is as was turn amortization. up Okay. our additional flow the cash to Slide Sales XX% delivered the X, despite quarter, a related prior and $X.XX, ahead growth expectations sales tax highlights quarter. of at that the of by sales background, let's another we Adjusted of the organic led X%. made our EPS free also expectations growth payment strong strong With aftermarket to a that again billion we of over RMD $X.X

and availability However, businesses. our labor in each we of continue to supply to see chain challenges related

we return the the shareholders shares $XX we've of putting we repurchase the front, on over X following the capital billion of over returned to since at Through year-to-date. of least at in way us $X.X quarter, our years on to track commitment billion at billion end third repurchased to the merger, the remain our capital for merger. $XX we're the well quarter, $X.X allocation and $XXX first -- to year. least in On And million billion the

same. notwithstanding we're Before our the in Neil, it demand seeing that I the remain we're hand over facing challenges to businesses, industry-wide strength across the

labor But me focus talk control through the we heard about to and chain, them dynamic we inflation. these managing continue by times. can businesses supply before: proactively what on You've

what you doing. give of me some Let we're examples

to working capacity our and the microelectronics we're OEMs On front, the more with online. closely bring distributors

progress we're problems to agreements engagement, management acceleration source direct We our to also higher rocket wafers in mitigate recoveries an leveraging we've deliveries the senior with motor of impacts We're RMD, we led RTX's expected meetings help contract -- holding hand in actions. been hand for has and time. solve work to At labor which working also real supplier inflation, base. have multiple To track take and supply certain technical labor multiple and taking daily chips. a of our in

said, frustrating, material stabilization, for the by suppliers our For well. business. these contracts disruptions best and business. get signals leveraging And chain seeing the supply from encouraged raw we prices demand while our example, to across the to That headwinds are from RTX continue business we're as some pressure we're are the

a sales outlook to up have finish going of we year So of billion We're thoughts. slightly a the take our billion. new that, $XX.X to to as to Jennifer $X.XX. me just and year. free range the billion continue year, Neil? And to of to going bottom see We're you let couple cash $X.XX, adjusted details. out bring full adjust we to $XX about the our through the of over EPS by Neil for range $X.XX turn flow to $X With it to

Neil Mitchill

Greg. you, Thank

better absence pension ahead and flow tax at the Adjusted RMD. GAAP a versus of continuing was but from travel challenges year, results included continue I acquisition and let's $X.XX our more restructuring. mentioned. summer in Sales X. per earnings was performance ahead into XX% free payment mentioned. adjustments the benefit Before of impact drove and strong X% look a commercial of accounting organic while our travel $X.XX grew income. cash $X.X earnings growth supply by to RIS commercial than the the per full offsetting share on of Collins, recovery than the season billion of and cash ongoing operating in Pratt year more and of as expectations lower a Segment organically of of at with chain, operations of year-over-year share, QX Greg offset that was we share the million prior $X.XX Slide $XXX per The X% growth aero. our prior expectations get was on billion aerospace also $XX profit down just air included of decline see Greg And our year

an of merger our we in gross bringing commitment million years our date front, total synergies reduction following to of $X.X achieved $X.X cost merger the cost quarter, to incremental the in merger. X On the billion the $XXX billion

to continue will it exit Before levels this travel we that over commercial global recovery and continue about year. expect few on international recovery remains a hand XXXX to to I we to The also RPMs as our outlook. air long-haul short-haul comments international strong, Domestic full we steady see XX% year remained travel. in a recover robust, Jennifer, and of and

Greg on to certain discussed, businesses. stabilization labor and we're constraints market, supply put chain some the while our as pressure However, seeing in areas continue of these

year As we're sales range sales a our and to to This growth. reducing $XX range X% full of billion, between result, down $XX.X $XX.XX of RTX $XX.XX to a which is organic translates our to billion billion X% outlook prior billion. new from

raising to bottom $X.XX by despite $X.XX outlook, However, we're from range share our lower end the the of $X.XX prior to per $X.XX range sales $X.XX. of to our adjusted EPS

strength, our offsetting lower and RTX productivity OE actions partially containment favorable Continued mix cost in lower are aftermarket and businesses. across defense sales

happened, this that year. the about segments estimate below-the-line is billion that deferred full year-to-date In expenses R&D repealed international of for the continue front, realized legislation $X and we share. Since finally, the And purposes about would be for updated Webcast we're the recall per items And lower benefit hasn't free tax also on previously we requiring assumed $X.XX in an appendix. flow the quarter, EPS payments impact that cash year of year. $X.XX or expecting the some provided for capitalization we we expect several the outlook large to tax an full of cash in fourth receipts. about and You'll

me to take let quarter hand the that, it Jennifer through and third to updated results outlook. with segment you Jennifer? over So

Jennifer Reed

were year. Sales XX% up quarter, X. a organically and up up OE up decreased were narrowbody. Adjusted programs upgrades strength prior in SG&A modification on by the Sequentially, Slide basis organically than on profit and well increase billion volume. commercial from offset By as versus X%. XX% million receipts end sales $XXX military commercial Military provisioning up and R&D aerospace were the and channel, continued and OE on up driven Drop-through a as primarily driven in by recovery Aerospace the was operating driven primarily were prior an quarter. higher adjusted million Collins $XXX of expense. aftermarket repair, down parts and year Commercial by sales XX% increase commercial XX% while by $X.X with Starting Neil. driven in higher volume in aftermarket material sales more principally markets. Thanks, aftermarket lower sales were X% were in X% lower and commercial the up the in XX% XX% on

prior to aftermarket, low than from large OE Collins’ of more we engines a by Slide continue million the lower to adjusted we're up million sales Commercial full Whitney on favorable digits. basis $XXX of low up to up within were & down of to last year. $XXX Pratt's in large offsetting military and production by military engine large commercial and million And engine higher ahead, higher XX% The more in volume. $X.X with see range visits. the SG&A X% Looking profit Pratt up primarily growth from commercial double of were FXXX and $XXX organically year in versus as the new stronger growth adjusted Pratt quarter Canada were mix $XXX an Canada's end up X. a commercial commercial result range and and sales sales Commercial adjusted aftermarket on commercial that FXXX both Pratt of up XX% $XXX up were operating bringing higher million XX%. Collins’ sales. Sales XX% sales and driven the were prior in billion offset shop XX% expected Shifting of Canada up to partially on military Pratt sales driven aftermarket commercial million lower up drop-through profit offset operating GTF Pratt along $XXX mix sales Canada legacy OE higher by million expense. up sales and Sequentially, R&D business, with favorable The the was sustainment volume than businesses volume. In aftermarket was with year. commercial

million sales to low range million continue strength teens. million up we're range we $XXX And a ahead, the Pratt $XXX from to increasing million aerospace to to new operating versus of recovery. of prior Looking $XXX Pratt's XXXX, adjusted to reflecting expect be our the up up $XXX profit of

to quarter $X.X an by versus X% Turning including due programs. lower sensing and sales effects year. million offset were billion now in basis Adjusted in X% Slide to X. of operating basis, prior command, adjusted sales divestiture prior $XXX sales and Global $XX sales partially Training by Services higher that RIS and classified were driven business. control the expected were the million down was an on lower communications, sales the of On organic down year year communications versus in up of prior tactical versus profit

book-to-bill in billion. primarily of efficiencies. $X.X a impact X.XX of by $X of program profit in $XX divestiture, a of the Excluding the net up favorable operating million and RIS driven was had bookings quarter, billion backlog resulting the

book-to-bill to expect continue to For be the RIS' greater year, we full than X.

expect outlook. And productivity low of outlook. result our as reducing as digit the availability prior cost to million million of digit are reported versus range to of from digits associated reduction a award $XX impacts be outlook as adjusted profit about new now slightly of ongoing a from year of to sales to expect to sales RIS' result we year. end of down flat RIS' our full we our basis, down down a prior down delays, reducing outlook outlook versus efficiencies, organic RIS low down sales program an On range actions $XX million basis well And down be now a lower down on single delays are year. prior mid-single prior versus sales prior and RIS and operating of to to material the RIS $XXX flat. and Turning anticipated we A to mid-single prior

material million million in year and programs missile continuing programs, primarily partially as by volume lower lower to on in including and now chain unfavorable programs. down lower was of was land, X. $XX on Naval billion. adjusted Air Adjusted warfare driven than and billion, billion, volume Land efficiencies X% organically, offset as This X.X Slide program quarter continued $X.X defense down by approximately and Defense backlog $X.X lower well $XX prior and labor volume, supply driven delays and in operating strategic of RMD by Next-Generation were Defense Warfare was Turning higher book-to-bill in and sales and $XXX mix resulted Power Air of program net constraints. profit bookings development. an RMD's primarily from basis the X% a resulting Interceptor in availability

we be better year, full to book-to-bill or expect X.X. the now For than RMD's at

of our productivity result availability the RMD material actions, impacts and efficiencies, versus expect are of from a down range $XXX as single to operating range associated million of down low outlook and $XX ongoing versus I'll adjusted back we digits result the lower reducing And XXXX. flat turn up sales delays Neil. prior outlook lower profit be a to it $XXX reduction prior slightly that, now versus As million and sales cost down to the program of RMD's XXXX. to million With a to of down we new

Neil Mitchill

Thank there. Slide Jennifer. A on lot you, I'm X. cover to

expect free profit growth how outlook providing another of aren't let you RTX. sales we tell year. at year about today, me flow generation segment our next with I'm and While Overall, cash organic 'XX thinking solid we operating

defense will the commercial continue global air and traffic On for strong. the to demand will positive our technologies products that remain side, we recover expect and

convert to above exit should levels at global the sales. have orders And defense traffic. or to to year significant expect for next air We begin XXXX won we

drive with The RTX and with improving to already factories, operating cost of targeted to will and we reduce yielded technology. improvements the XXX on our focused growing collaboration focused further across approved our align system We're XXX over has will which competitiveness. using best that apply future automation operational projects and a core projects, practices pipeline on upgrades We costs. excellence, continue are smart goals machine are drive to structural

scale, year actions our labor to to constraints supply leverage year. many and are the into will pressures well as to do help We working day remain we mitigate to chain elevated pricing well. expect while will across opportunities we into And the expect every and said, our additional pressures reduction next continue these impacts cost these availability, I next address we as of businesses inflation persist that

that we today, from anticipate a due volatility see here market about could sit headwind rates their geopolitical an year-to-date. environment. resolution year-over-year as well energy a course, pressure funded in and Additionally, year That everyone Europe, interest and said, of the it's important we seen U.S. conditions. current landscape, to our tax $X.XX note to funded plans the And improvement watching remain that even increasing next and is the supply have the be pension continuing in market global and on status basis

closing that, back let So for me hand to remarks. some with it Greg

Greg Hayes

Okay. Neil. Thanks,

going any get couple a remain we're pieces. the people not there's beginning be of lot year. over key or $X year the to lot out commitments remains this sight. laid from I off line, those, of bottom And I year going years. a billion future $XX The we in absolutely hope investing bright on, takeaways top ago for may it these to that we're that from billion importantly, RTX. moving the a next back since And the And The cash. line this going growth that's So XXXX is our support backlog think of to is most up of come

giving on of year. challenges at And On of problem all you XX,XXX right? that That's them the giving sees about XX,XXX of out a deployed about it, things out supply doubt Everybody And we've suppliers supply RTX interesting month to us. labor to There's them chain, it. what's work I raw got material, 'XX. of are think it's -- people for challenge. XX,XXX, laid us hired daily challenge. that in doing. right, basis, It's those in a But availability, Neil XXX support, of technical for is we them suppliers. We've them contract about are So with X getting chain. the them those teams there, no almost the to all a be beginning would have labor, X,XXX since especially the a expect a

XXX,XXX. The over though, is need today challenge, more XX,XXX people. about we headcount total is would Our

labor. RTX lot work a to mission. of yet the And place out on because It's a great do there. of work. to to So It's come people

I of in continue this have the the And be challenge about think, supply good again, expecting the cost at And into inflation, We'll so a will chain. we $X.X turned between to we rate. On $XXX That pipeline. to very and growth we hire saw then a, and billion came the we we out additional about chain closer came expect of year. billion, that so into to what supply billion prices. million compensation in $X headwind the didn't be energy $X.X has as year

$XXX with the million the back million good to is came we that about Russia of found You The year and news ways to $XXX headwind headwind about activities had that couple we into overcome. we there's from save. of in have cessation February, that of in

the cost-reduction We business. we're have that currently across costs working. We've got projects about cut XXX

year it $XXX back able in for that January despite million, saw to just the been maintain guidance we so this where year. And we've of

year. a it fact forward. all tough year But been and happen. make We know recognize the a going tough tools the we be it's people is to It's going that. We it. So to the have

So and have. I'll might to questions back it we'll turn take stop whatever there, and operator, we'll the you

Operator

Instructions] Baird. coming Peter And Arment question first from line our the with [Operator of

Peter Arment

but guidance, how finally of 'XX. to growth? obviously, commercial some and line top maybe these some and at you maybe Would actually obviously could start The convert high showing you you're thinking that defense, growth. you're level just, if expecting giving know I high aerospace -- across-the-board you're formal of kind a not just wins will is continue Just level, maybe to just feel Street thinking Greg, how XXXX you'll about about recover --

Greg Hayes

Yes.

you're I think, exactly right. Peter,

back commercial the aerospace side strong RPMs to continue. to growth We recover to continue levels. on will XXXX the expect

strong Boeing so we the keep strong And up as they growth going planes airlines and to we're Airbus production growth Again, take to as aftermarket see flying. capacity continue to and as have and see expect OE add And well. try rates.

commercial So year. all think next I aero, it's good for

we growth. start -- see the be material challenges. as those some we the third a that bit about we but as like. again, chain talked back would a supply robust in go. we But should to bringing way to availability it will we little we've It side, about. saw defense and stabilization labor quarter won't in of We've it's to would tell here some I of challenges chain. you, in, the the better gotten On Really, terms in supply long goes got

that the will say. of material coming shops. simply backlog. would not the governor, the It's in So I the be It's to availability

Neil Mitchill

to other to see Yes. I do a said, growth Peter, expect points agree the sales single-digit I And in would sales mid- with. from high everything add we XXXX. Greg perspective,

I Greg expect from as most good businesses. our of growth, So top line come mentioned. do commercial to that

growth think I segment more exceed of profit the sales. see rate importantly, even growth operating we'll

into as remarks. we well a And also where my heard do planning at we higher next bit our me be we to tax that's come headwind be off So the year margin assumption. do rate of least will as a that We'll year, expect normalize in year. next repealed little for a pension you have current R&D mention to expect expansion prepared

what a course, extra But points back We'll, in to on the come So going just at a few that. like. on XXXX with the look of segments January much better come are more to look outlook.

Operator

coming Goldman And line question from next Poponak with Sachs. Noah of [Operator the Instructions] our

Noah Poponak

you Can hear me?

Greg Hayes

Yes.

Noah Poponak

defense little top a it largely but factors. happening by be what's surprising, is industry-wide with explained can your Obviously, line

this move margins top it's your volatility don't I there's industry are we're But inflation. obviously, versus aren't quarterly the the impact, and seeing And know think from line of from around margin movement that we maybe where that peers and there's margins seeing much an that really quickly, surprising. kind you. more absorption really

the year, your look targets? you that little to when can segment further? closer to about closer longer-term And just maybe should So think to we explain next defense being then level or your we margins a 'XX

Neil Mitchill

I'll focused of I'm on we start with to margin of not that But thoughts on on margins. the through year's making one. this a sure comment year. now, we're Right profile. get the going next Noah, couple rest

that's dragging And our jamming down relative material thing up receipts, the that here. businesses, really been of about delay the talked shift productivity. RMD the most and also RMD. across the this obviously has the many lack margins expectations upgrade driven cycles is of year to initial and We've production in the are The by lack productivity which first principally gone of development at mix product in notable within really a it's products. platforms a has through our

about more thing sequentially, encouraging through last is quarter an whereas certainly, in say quarter, had we during favorability has actually net $XXX the that And One contracts. that was we'll was had So overall. that expense, into rate-type a as negative that production productivity. productivity of impact margins turn seeing million the on we come I'd we're

wanted near to affected levels that we productivity is the which RMD your are the starting been adversely that But that's the some So causing start of on absorption be we're positive throughput as slowdown nowhere productivity see don't from see when will billion that? $XX you to well. to deliver we I backlog, improvements the factories used know anything add volume muted else we up seeing. Greg, as what in coming albeit a to and productivity to. expect used improvement I rates, through in that we're was for to We've result RIS point as that the and of starts fill to to there. defense do there's to if

Greg Hayes

years down covered are is I more we it. newer until for margin margins mean, production had international I there transition obvious a Patriot on we low mix going And much the No, production, side from contracts some rate through profitable the get see of of the tend LTAMDS the on what pretty the defense big to to sales, other lower which contracts. initial comparatively. think degradation of some a existing to be you're have again, well -- you shift as issue than couple or we

Operator

our the Jefferies. Sheila line from question of And Instructions] [Operator Kahyaoglu coming next from

Sheila Kahyaoglu

Neil, we actions think year-to-date as the about XX% some I bps a maybe comms about you QX if implies XXX the in margins year? ask want versus and do on to of How on mix And inflect you drivers price well. as profitability. there the could bridge that Guidance and comment rate about margins. exit up

Neil Mitchill

part, Sheila? last I'm sorry, the

Sheila Kahyaoglu

price Just and as XXXX. mix we head into

Neil Mitchill

Sure. Yes.

Collins at we've They've controlling margins costs already the we've that do been as recovers, through months international with of I the the first so will more trajectory gone as well, expect the pleased I'm year. job of that substantial expansion they'll here doing broadening continue in see the to of X on. margin traffic quarter. wide-body seen a fourth a And we the as great pretty Collins. and they're And

We'll As usually Collins about Whitney Canada that the revised you taken our the look do into Pratt the pricing out & as we've some Pratt talked business. of year. we've at also we business, of in our year, introduce next pricing and actions already beginning

what that than with the do seen across to inflation considerably in reflecting the we've past, expect higher we're we the So business. that dealing be

going So cost forward. business as both the look at price attacking we're we and

the So we of particular, that couple much we're are think a said few of and I of the projects are looked seeing factories in the looking a number as -- projects inflationary I attractive our the consolidation in that more of around and at. all of have months many And that Collins, pipeline with today. footprint a digitization and pressures businesses at ago, automation

sure forward. XXX and ready profile going to structurally move to, those business the that we on those So that change make alluded forward cost of I our projects we're

Sheila Kahyaoglu

XX% So margin forward? XX%, incremental a assume should we going it's business

Neil Mitchill

I back think see start Investor back we're of we at to getting muted on year, this in little margins committed But challenging. Day the the out clearly, a you'll more get to that our way incrementals compares XX% our because to XXXX.

Operator

from next Vertical line our Stallard question Robert Instructions] [Operator And Partners. Research with the coming of

Robert Stallard

strong come things, but you -- you in any RMD, supply out this this will you're is When from getting side customers are demand from continues Greg, equilibrium? of fixed? defense How X do where be this very defense help to panning And of on constrained. interesting the sorry, sort these situation into see seeing clearly your here? particularly in

Greg Hayes

we up there many the think Yes. working It's defense. I the talking are. we're yeah, as here the in the And the again, try welders at trained Washington in we putting on all and they're move together. to folks And year, availability. issue. and remains this not DoD how it's things about tomorrow, be get challenge. But to you ratings been with it I labor go just challenges about on challenge. -- challenge, it's -- Look, I as chain castings DFAS a I structural in mean, capacity we're all to queue it's And not the chain. supply going And concern a supply remain sit to is efficiently. we've Pratt talking a do and necessarily a still that mean,

XX not build X% think at I our about about We're hope kit than a quarter. there. the about hoped higher get be As be incremental of that. though, improvement We had we points XX%. -- this by That's to this, efficiencies we going the end -- to in to we or year, saw

next I get of of we take think had by is about XXXX. some by year, path on the a do which end why recovery looking some should guidance reason until this I to RMD available the XX% fill first through to the contract we're year, is sales as the to we're we'll motors, But not kit -- the down. things there a that think end we see abate. this rate of do people if lucky, like supply economy because rocket the down, the sometime to work. in we half literally see to chain slowing in start Again, more of

fully not this And fix. that chain. next of think going prepared kind is short-term So on year I mouth hand be to the is to a we're supply a

that course, the comments, things have need of the we we have the lot that to here. about billion year of is make it's inventory sitting to added do products. that like inventory OE, some offset that, supply, sure worked these build be with We've $X.X for opening to OEMs in we working. of said a The of assured the the seems the manufacturers, As I and to chip get

most going yet, to woods chain. and out long-winded of the be think it's on get before it's I not So really XXXX answer, we supply of over the

Operator

coming line next our the of America. And with Instructions] from question [Operator Bank of Ron Epstein

Ron Epstein

propulsion little switching technology, RMD. Maybe when you is going to gears could you the guys aircraft’s geared bit focus maybe I'm have platform. Greg, about a little discuss if bit, think you everybody and a on sure

on go from much gear thing, that fan. of does how what to you competitor happening? -- where how that is of if unducted we unducted to working primary can much Your the beyond fan? mean, many do an go then How see threat is an I propulsion, we legs sort -- have? -- here? that X all where And step hybrid a What

Greg Hayes

now. from time long A

go Advantage years in cycle, or Let's be engine, long Advantage XXXX. clear, XXXX the That the just have GTF life it. We're XX service a AXXX like on into right? the will very introducing engine. will That

Over the to regional to turboprop least know years, you're an going at towards propulsion there's next XX going what and in evolution you this, electric hybrid Ron, and jet see, markets. think I be probably

different option. with the a mean, efficiency. to case anything depending an the of we're to really yet we're for other is not things with have challenge. with with -- that's long-range working We're And ammonia. SAF feedstocks. find upon We're to I talking It's the way working Jet interesting make a number hydrogen. carbon-free improve We A. working than propulsion

So solution. it's but that's terms the mandate, -- again, the not that help of will in emissions

are of technologies that gear, those scale next do in we've to and engines that I have, out. it going mean, think think as as And scale incremental XX I And down. aisle these the the up, probably say, said improvements would think always technologies. -- or done, it investing Collins we XX right? now between today. family I kind gear great the gear. a whenever electric And next-generation going in got money it's again, we're XXXX, a to Maybe A. you still know, demonstrator turboprop. jet with project, engine to got we're it's today. still Pratt regional talking I the I But advanced evolution as lot that but turbomachinery be a of the hybrid Jet see SAF, a And it gear. on we're is, today a But about you we've So it's not same single about of can think is we've going today all the can to focus of years We're on

Operator

our from of Strauss next question line [Operator Instructions] David coming the Barclays. And with

David Strauss

about flow see I some wanted free XXXX cash cash could to hit. grow It initial flow XXXX. give if like $X the you free in billion. That's R&D will thoughts on looks

Neil, obviously, working to have EBIT of headwind. you're for sure probably I talking close of I But pension billion Not a think guess, $X CAS So you growth. bit you're a what expecting capital. about pension,

So help pieces on 'XX through maybe with cash some flow. the moving

Neil Mitchill

growth, -- David. to that keep But of these I'll but more in facility some completion convert Pratt. high I'll an details. at expect that as a we little as off little operating investments, of you a would I Thanks, at profit expect level, particularly the our business capital the a this free a well with just as tad inches flow. up we the coming facilities upgrade certainly back RIS cash on Asheville for as headwind bit large Texas January, to in give of of finish the

see. expect to chain our prepared We'll that in business we're continue sure flow see of capitalization expect inventory year. working faced this pieces. that I anticipating other of we all we're short, the ultimately try parts tax there payments to we're story and that with also of is this certainly, manage want R&D need a we making a moving capital, -- growing other capital. through on deliver couple -- to to a We of the do assuming But grow Again, organically. grow. refund year. inventory to However, to that that aftermarket I payables we'll cash Working provision. Long repeal free we'll and We'll constraints supply the the OE make growing the the

for better walk. me leave that in let we'll now. So a certainly, it provide at But January,

David Strauss

this of a Is $X.XX. that that incremental pension, on the you $X.XX think or follow-up $X.XX versus year? Is incremental that quick incremental just already $X.XX I anticipating incremental to this for hit. A year? kind $X.XX were

Neil Mitchill

as to really asset as rising the well And interest returns rates already causing interest incremental driven by forecasted. higher being $X.XX $X.XX expense. that's below had we ROA our

be those end funding offset And will all where us. the the the as see issue assumptions any of major more it there cash requirements, higher CAS in at recoveries that if not a are those but So we to do I for FAS up come. obviously year, by to of future. that's today. expect We threw be future

right So not a P&L now. a cash issue, issue but

Operator

with [Operator question from our Seifman the next Instructions] coming line And of Seth JPMorgan.

Seth Seifman

about million little I for results the Pratt quarter if per bit running could wonder talk profit you strong of quarter, And been about a $XXX year-to-date. a second? in

fourth guidance the or in that bit quarter. below down step little a basically think to is the I for X.XX a

increase higher Now a I'm well was But spares. sure mean, I price there deliveries. when I you're about engine ask talk about to I as that, think going for

here of make from think can progress do so that where goes the much as toward Pratt why so about quarter, and we you as in down in evolution Pratt, the much margin target fourth well how have? comes And it it out-year 'XX that how

Neil Mitchill

head. hit as the nail to about, the kind profit pushed the the in as if is into -- look back QX, of down you the So end on of from most you engine QX step commercial of will, year. the higher we've talking been been you shipments, degradation, It's sequentially have which, that

walk on from terms you see So driver that's really major the in of op QX what QX the profit. to of

about to our As some with XX% VXXXXs. here, that business requirements. large PWXXXXs there going out see I'm that and get deliveries towards seen into further, also certainly fleet And long the we'll in ways Recall a be the that customer next do X.X by little we step goals look specific movement of engine aftermarket, go years powers growing I margin will not lot but a in the considerable out put aligned a the numbers, strength but fueled cargo to recovery There's year aircraft. We've expect XXXXs. ago. of a OE Pratt to expect we on up that the

to So middle we -- of shop And be into of there. on visits And next the will see we and we begin profit. turn side, GTF see to as the get aftermarket will strong will the continues year really course, through decade. the the

going SG&A So an some positioned about cost through as actions that the structural driving a well of the lot facility. There's expand they're operational in costs do. of still element margins. talked exhaustive taking. business the both terms every Pratt out manufacturing to as They're of of to is in Greg incremental the work of reduction review

it find get some out see not encouraging, but I to numbers in transparency you'll going that to today, that full commit So January, I'm we'll then. again and there but in

Seth Seifman

Great.

Just Pratt if been part of I stabilize this that has could military the year. real Can again quickly, down 'XX? or follow up in grow

Neil Mitchill

sustainment growing FXXX the talked can. deliveries. been for That's I well. it's we we've grow in as partially planned continue engine FXXX about future Yes, will been lower and it for that offset as think aftermarket to down by the revenues,

military year. mid-single I for the the see phenomena begin we to XXXX. down is digits we turn do So page stabilize. as that Collins, Similarly, same into expect should at

Operator

Instructions] from our of [Operator Wolfe from coming next the And question line Myles Walton Research.

Myles Walton

there looking I the would that cash receipts portion, tax here? international fourth margin And payments Neil, wonder international approvals? those large to mentioned I be awaiting receipt -- quarter just are fourth in you're RMD? quarter, government at Is you And by you driven several are the targeted receipts. a international risk mid-XX% think is for lower on timing tied

Neil Mitchill

to are great fourth tied receipts the quarter. The in cash not international margin So question. the

item less, rest payments the I R&D. subject But approval. as government to out flow. a of us, there watch it's some in of year, there's here. within line the couple in a Tax And actions quarter the have the of item will required for we year. But of the year. make to rest within rest not very we're is we just had about flow, them to the it's make get $X.X I We I us, law the for believe a to for large ones watch subject to do to every sight not that hence, very, if certainly reason the meet of But we advance certainly However, payment at But our it be notwithstanding good and cash billion timing. strong payment. script called the the international risk. obviously, the look very free as feel new cash drive the certainly fourth

Myles Walton

the business? U.S. review Okay. And of high impact in Greg, terms level, U.S.-Saudi on your a there just the any of relationship, expectation

Greg Hayes

of Saudi we Right the side. defensive Arabia still and work the to with especially the continue sales lead State now, DoD and We follow Arabia. on on to Saudi

very the means I think a antimissile relationship primarily, the for defensive with missiles battery. capabilities. it's us is long-term important, we've anti-aircraft Patriot Saudis. Saudi's that And the had providing for the GEM-T And again, key

some impact of about talk have from any seen we not arm the in suspending sales. So Washington

perspective, we'll our ally a I difficult Middle I that to player Saudi sales an East number. Just Eastern get staunch of it's important in put a ally. it are think time relations through now big diplomatic X.X% right about believe in the we're go of key because they in ultimately, in and But It's this Arabia. terms total it's And a that seeing not to, Middle again, stability.

Operator

Stanley. Morgan [Operator line the Instructions] And with Kristine our of next question coming from Liwag

Kristine Liwag

continuing expand pass said, to highlighted provide challenge you Greg, expecting year. you're mean, as you and right, next Can Neil XXXX. look inflation I you margins to that more a also able out as you we lower color that of can exposure? through remaining about how pieces think how with on and should much the cost you're offset much how to customers, to inflation moving

Neil Mitchill

going a do pieces for. to and moving where terribly we planning as And is here. at levels to there's what crystal ball of XXXX, Kristine, I that's lot going. not our we're obviously, So it's clear inflation elevated But go is into as think persist

price you under And looking supply suppliers at good continue those back with solutions And pricing so beat of committed -- agreements. we're to portion roll increase long-term long-term our have a is of fortunately, over. some as know, to But those base working our we, requests. and

able I historical the new that they increases But every lot commercial as On begun top government update to our a on talked that than side, forward year. pricing we the take that set up actions are and larger customer And business. our we pricing we're significantly aftermarket them rate. pass line, with we've to to our the take the contracts defense through of about pricing in

seen going that. of next about even working to we've we're I'm year. number the this not on of level it year, So it, put through I inflation a and but talked be to Greg expect larger all

So teams those they the the got process were right very require of to even more to in of projects. them We've savings we're starting going now. accelerate those many aggressively from projects. working all the And it's our terms across are bear and of digitization and fruit that systems started around were the company. of company, in ago, undertaking to upgrades improvement flow of years information The

of a So lot to for a a to sustained X% some of us going here lot level of of mitigate take inflation But lot it's rates. X%, singles, types a of doubles. actions, work X%,

Greg Hayes

Yes, just to to add that. Kristine,

compensation. really I biggest inflationary comes impact the in think

a what's around So somewhere on every X% productivity improvements, that compensation, we We're productivity the today. more compensation. is in the productivity the looking billion XX for roughly this do. we increases. seeing we years, targeted factories, year And in in X.X% fact not or back-office we've and given going always on improvements year, spend obviously in But $XX And is, new. last for the marketplace the are functions everything pressure

the margins concerted of know not, about it's terribly know the how on So I business. impact that we again, out just to effort. I'm concerned a because cost take

our Some of of I said, to side pricing overhead rates on, our the business. being And it commercial through on the customers. aggressive Neil think, we on we're also, government as get pass to

will Inflation, the while. of even think So got I here proven a it we've word a because But lot been I that's won't -- be transitory levers. for hopefully, it's use myth. a

think to So we day. do we're every ways that's to to cost continue pass cost and to what just drive on. And going look I for out

Operator

coming Cowen. Cai of line von the next our question And [Operator Rumohr Instructions] from from

Cai von Rumohr

Yes.

longer-term given for really pushed you do that you to cash share get though out, get good. repurchase, should pushed $X.X how going billion you're indicated looks the pretty XXX year a lot Section -- windfall the So flow in do going firepower. at repurchase cash is flows a you're XXX impacted your least If clearly out, even next have to And about share that think by if outlook of you to we XXX.

Greg Hayes

committed in billion with is the get look obviously, hoping, a end like upon the a number $X This XXX disconcerting the plus. here I year, billion of cash of do year extenders said again, suspect Cai, $X.X know, XXX going on Yes, share see nonsense tax number. second I will aggressive little billion the of the And that refund the sometime if next to actually. $XX tax we because we in already first I capital return. to that billion think the year that will we we're that -- year a we're which, will of firmly along a give plus buyback you law about increase with be continue the depend of when Section from as us timing again, But are each this can really we share again, the count at we've next to to continue year. we you dividend repeal. as the the April, fact change paid to us think quarter But guess, $X.X buyback, is,

Cai von Rumohr

do Section $X how plus But share if of is that not XXX much billion of you would repealed?

Greg Hayes

We'd still do $X billion.

next we Keep to And timing mind, deductions the the the hit programmed of years back. a in is XXX in eventually, billion for $XX We issue. target. this Section have do couple get that

by amortize to deferred get the of a this of to has it deduct XX% but year, abated we'll what most year, most impact this this. is timing. of And Next of XXXX, we the ability of because

it's again, going allocation terms have we while committed not in important, to. to So change really of capital it's what

Operator

the our with line question from Herbert coming RBC Ken of And Capital. last

KenHerbert

color could & you bit more provide on Whitney. Pratt to I see a if little just wanted

the How should think sequentially XX% in you think sort see maybe obviously, about shop that's, how where versus that and are, this the big recovery? we And VXXXX how shop a the year know of next Can was just year? about And the year? much in talk this from? I Because And have was where volume price? next in specifically how about visits aftermarket. of growth visit You much part you we do story year. that did in the you

Neil Mitchill

Ken. Thanks,

the what So you're shop really of a seeing at just Most through in about we a on here couple XX% the of growth a volume. going about basis. thoughts. have XX% And up third is We the quarter Pratt visits third full saw quarter. talked year about

I got line at good sight we've quarter fourth think a this of the to point. pretty

year-over-year So still I think the up XX% sticks.

other last at visit, sustained couple much The aftermarket is see that us seeing is the content are the now and than was greater years. flying as which for higher of over these again per element shop they were to levels aircraft expected of Pratt that

kind pricing date. to the don't but think story good yet through the to I reported of aftermarket, have in any the on results of So actions flow

Ken Herbert

at realized for flow think more 'XX, understand actions Great. -- And I pricing if you in in as those through you're quick, XXXX, step-up than correct? the looking just real properly, I pricing a little

Neil Mitchill

That Keep in mind, as place in of number contracts customers our is have well. a true.

them And that do headwinds see number some that that muted, the offset So some is of there will through, not. with increase of as a but you to will dealing and that well. drop help we're of that there's

Operator

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

Greg Hayes

and all listening in. Okay. for you Thank thank you,

team just RMD. last questions. earnings Also note, will and business for Jennifer to our CFO your reminder, a be is a with She [Erin on today call is this International be on us. available moving Just take of Somers'] to

Erin, to we'll you Take to you listening, all care. today. talking her see guys if are congratulations So later soon. you and for Thank

Operator

Ladies Thank concludes this conference. gentlemen, and you. today's now

Everyone, disconnect. day. a great You have may now

RTX (RTX) 25 Oct 222022 Q3 Earnings call transcript