Earnings call transcript Q1 2023

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Operator

Good day, ladies and gentlemen, and welcome to the Raytheon Technologies First Quarter 2023 Earnings Conference Call. My name is Latif, 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; Chris Calio, President and Chief Operating Officer; Neil Mitchill, Chief Financial Officer; and Jennifer Reed, Vice President of Investor Relations.

This call is being webcast 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 nonrecurring 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

the results and filings, that call to XX-K, [Operator we its statements. -K, differ actual provide could question your limit opportunity on SEC forms forward-looking including that round Technologies ask those XX-Q Raytheon becomes participate. from to per factors details important cause the everyone questions, anticipated one Instructions] to materially to X caller you first open in for the Once give

turn With call that, Mr. over Hayes. will the I to

Gregory Hayes

All trust I press morning, right. everyone see and had you, Thank the good to release. chance everyone. Latif, a

good both was aerospace start the for stabilization supply strong to a for in defense chain. demand we're remains year the businesses. seeing think, And our some It importantly, clearly I RTX, commercial our and and

zero environment. are Before very on Domestic levels, we rebound highlights for macro spend a policy a strong we was commercial the COVID the the their XXXX now reversal. miles in exit couple back of as get to revenue by on levels, the let passenger me side. minutes China This led quarter, to just Starting pre-pandemic following March.

global to year. RPMs, recover nearly With consumer advanced as strong the levels expect bookings, record international have levels. the air XXXX exit fully On XX% demand of improvement traffic we XXXX continued total reaching front, to we seen and in we

capabilities, top proposed key fiscal budget for last The side, many our year's Cruise President's XX% on DoD's programs, Missile, most defense And importantly of forward decision prioritizes munitions fund engine, AMRAAM. line and of billion. both the about top the a for also budget upgrade fighter nearly FXXX that's X%. multiyear year for believe request by support including missile. future to purchases includes the $XXX for the core increase. we're encouraged technologies the up That's budget for On of 'XX And request It budget very most is we as the recent engine Attack a and us, reflects the the to move which war long-range Hypersonic the with taxpayer. broad-based hypersonic HACM, win the that's perhaps

of on and support program provide This to will position Pratt fighter efficiency well into next additional the necessary Whitney's the & the needs will the F-XX range war and solidify thrust, decade.

we're continue internationally, capabilities including recently of GDP on system, strong allies mission. our also RTX spend adding Poland to announced we Ukraine countries. all defense Pentagon's That's Looking seeing Patriot to deployment spending. the across the prioritize X% for of And of plans the another defense Ukraine's additional year. capability the NATO needs, ongoing defense highest their the accelerated demand this level support missile defense to as

to turn across remains as let's highlights. Clearly, the our the with end And a X Slide environment that strong markets. backdrop, for demand QX

backlog key our quarter some from franchises we in record new quarter. of with the exited of billion awards This Importantly, $XX billion. over of a the included $XXX

in nation. billion example, for award marks RIS classified received partner XXth an the That RMD Patriot awarded $X.X awards. was As a for Patriot billion Switzerland. $X.X

XX% strong of growth also organic adjusted year-over-year performance of and $X.XX. sales with financial We solid delivered EPS

capital, will about timings cash flow, slowly which Regarding higher to due bit. you working to year of in free a talk the Neil started we some

of full free Importantly, cash though, of we about our billion remain confident outlook year flow. in $X.X

close commercial by to OEM aftermarket XX% with led to aerospace, and up was year-over-year. close growth XX% shipments sales expected, As up

the approaching cost merger an quarter, ahead. we are the with $X.X opportunities billion more incremental synergies, target, $XX million gross in of and achieved quickly Additionally, still we

On remain saw return $X.XX in of $XX as $X the And X% of production following in line to with billion from track support our million a $X.XX in the automation shares backlog. merger. to our our years increased done commitment billion at this repurchased growing share, shareowners for the R&D, to four the than additional yesterday, we we over while quarter. capacity, continuing our allocation And order in capital facilities to for and on the our least you XXXX. front, dividend to more We've of $XXX we share in all digitization invest repurchases

the growth into As future. you this for can positioned well and year we're well see, extremely

day, of are driving additional a and unlock performance. focus technology and synergies while integration our operational to Every the breadth scale furthering we RTX, all on

to that, Chris? let for we're business me at the to Q&A. in our regards Calio I'll it be Mr. And making over progress back end realignment. a and about turn talk With wrap-up the to

Christopher Calio

Greg, Well, you, thank I'm Slide and X. everybody. good on morning,

Raytheon realign Aerospace, As Collins Pratt Whitney. January, has in into as business our primary you units: portfolio know, this three And we announced objectives. said, to we our & and plan realignment back three

franchises across to customers' more businesses. our effective priorities, our ensuring with The coordination market-leading is align first better our and collaboration

to to our synergies cost structure. and And optimize our performance The capture standpoint. enhance technology from third, to leverage additional and better product our investments is both second a resources and

within we on After content customer objectives. these engagement, where update continued determined So major necessary portfolio in we process. you are internal analysis to the shifts our the and achieve let me

and First, to Systems Collins to will strategic of battle the unit focused RIS connected business command solutions the business multi-domain within opportunities. to transition support a Mission more create control RMD and space

Solutions what into call flight data consolidating ecosystem connected business. of Collins' will further the business we one and Additionally, management into strategic RIS' Air Traffic Connected Aviation integrated Management unit, business be

will our These company-wide responsible half projects. two be synergy Collins collaboration the of more revenue put center They now our of at will efforts. moves than for

applications. for surveillance will to intelligence, combining our parallel, customer imaging business new improve and business the multiple unit, and In complementary we to reconnaissance Raytheon move Collins' sensing technologies offerings

and such business as Army, merge of customers, each specific these Force, aligned the Air defense. for of When will space Raytheon business that XX% more business missile account complete, the sales. units and business of top the lastly, is RMD RIS customer strategic units new into Navy, And or around the unit this strategic remaining will businesses

establish unit We'll well merchant business strategic that operate us components to these within into to a channels. and In subsystems array as centralize more as government, a the business customers. we'll Raytheon are addition, internally sell prime a effectively supplier will of other unit. like that enabling broad commercial and sold

we're across President product multiple currently lines of this within of that business. and unit business Wes new will part RMD. to by led to this and As businesses of uniquely Raytheon realignment, qualified Kremer, the has the pleased years experience announce Wes XX is Raytheon be lead over

of validation Paris investor gross now provide cost on meeting those middle savings are in the We the including status, design and new savings. the at We more at the our analysis implementation details phase, including Air the our of targeted and implementation Show.

as new good on structure in progress thus our beginning focused overall, So we July. operate under far remain the goal to

to and our With update not a current X, Slide on provide January, an we strong end the changed remained back and that, environment. in lot markets. across since spoke I'll demand let's move has In general,

in as mentioned upfront, awards the On Greg some record received the backlog. side, quarter we the and our defense of

very season. in aftermarket maintenance parts, to summer and quarter we end our With saw retirements as traffic remaining we provisioning preparing in commercial see support low, markets. increasing the are airlines the across air to strength growth strong repair, the continue side, travel On busy and

Given we commitments this to necessary ensuring focus to and our customers. our chain demand, on performance capacity, supply remains meet the have excellence operational

automation StormBreaker, GEM-T. on and capacity. color some provide and key and AMRAAM, such new start our programs support at in ramp-up SM-X Huntsville invest to In to tooling me and let Patriot equipment, facilities as So the we Andover continue SM-X, Tucson, RMD, on test

of North to site, production turbine productivity in and May, towards FXXX site inspection XX% of by we of programs. article and Asheville, high-volume and Carolina the are Pratt airfoil on our way At the GTF cost have first assets improving support on progressing now machining end

completed years HACM, expectation XXX number as capacity over seats RMD While additional This on with of conversion, total HALO by of our such recent almost past will X,XXX, the classified space development to a bringing and execute of we recently more 'XX. end the lab in to an two create classified wins classified NGI. the added the for Tucson,

facilities a on XXX,XXX which and are This cost network. quarter, MRO Furthermore, of our be Japan aftermarket Airlines past of to continues at very supply foot GTF and also focused chain, new the perspective. the a network, in shop expanding joined two square a from Delta course, we MRO the performance health Atlanta. shop remain second challenge We, in a TechOps

Starting with performance.

our heard challenges experienced supplier to areas, in increase. support have before as we about such you've us and certain stabilization and castings, continue machining. continues While our in-person that electronics, embedded experience forgings, to raw talked sites, materials in And

with more on-site engineering quality increased locations. specific allowing a are focus on better suppliers, significantly support last initiatives bottlenecks, clear the we than have overall to quarter, Today, help provide in execute and in present defense, visibility. and high-impact improved And us we XXX to

through X% receipts yield RMD, a factories. this improvement helped material increased enabling at in our And year-over-year, flow

a to to held action we conference we positions. reduce current just detailed key Additionally, review supplier engaged an weeks RTX few about ensure overdue capacity plans suppliers future XX with to and ago, where

overall On attacking high, pressures from the are remains inflation the those inflationary side, and we angles. picture persistently cost several

terms, raw our total embedded both nickel, reduction going improved purchases, cost non-product, our aluminum, throughout understand picture and usage complete product We chain, supply negotiating reduce including sources also projects part lower constrained to contractual better value can X,XXX deeper our drive to work transitioning we of and and cost to to have titanium into materials, a stream. redesigns spend get almost related secure We're our cost. supply as ongoing of to chain raw cost better their material and such and positions so leverage supply

cost lastly, system our core initiatives on leverage And as continue as to modernization. to reduction footprint we our execute operating well

door operations. line of previously we projects, which costs process many we completion out from the machining of enable without things at to and reduce ongoing one hours redesigning thousands have range any operator manufacturing intervention. time, closed a labor flow are material our of level machining or cycle about, to take continuous cell of to like in talked part These and As implementing the

small a improvement of are commitment part initiatives and with these They relatively paybacks. But short continuous are efficiency. to

to want financials, do to Neil the provide So before GTF on I a it update turn program. the brief recap to I over

you introduce and went have improvements durability. in reliability since program service increase As and into XXXX, to continued we know, GTF the upgrades to

met This operations for level the to on, have have expect. program inception. respect of mature the respect operated we yet durability, at our not time engine are meaning Again, needing be we since But improved the With This for to we can wing dispatch engines the reliability. time With on long customers stress target reliability, level now levels. how has at put before and maintenance. be fleet. to on removed is we

current We continue to to configuration the upgrades to durability. GTF develop improve

MRO reduce we benefits, also do availability. wing capacity able take to service to improvements times are in realize VXXXX turnaround over are we as our continuing invest improve the shop course on visit to We program. some to working expanding these of time It and time will to but were the

Program, continue And parallel, configuration, we execute our Development experiences incorporate GTF our next-generation will of into that in on service. learnings since to of our and technical entering course, GTF all Advantage

With walk through to it results. to turn Okay. me financial that, Neil let over our

Neil Mitchill

X. I'm Chris. Slide on you, Thank

aerospace X% segment income the and of a noted, to of operating and continue were with XX%, some share face. expected growth profit partially per higher a strong up $X.XX the Greg billion This year-over-year, earnings As prior XX% effective was growth commercial year. by lower of was challenges of organically up we offset Adjusted rate. pension versus environmental by driven defense, the tax strong despite sales both $XX.X

defense the And share year On and the $X.XX cash of and lightest of which from compensation restructuring flow basis, and free acquisition $X.XX billion businesses. a seasonality quarter $X.X operations per was first items. accounting of earnings GAAP timing the our finally, to incentive is of in per included in continuing due adjustments, an quarter, share payments outflow was our nonrecurring historically

dynamics, well timing and as constraints the chain supply the first addition and working of higher these to of quarter in In as this drove capital cash capacity collections typical year. sales

cash achieved. milestones other free second the generate commercial as flow are as accelerate in expect and performance well We quarter deliveries beginning funding as positive to

in And billion said, confident flow the delivering we year. cash free importantly, for Greg full $X.X as remain about in

the into to So that, and turn with let's Slide get X segment results.

hours end with commercial quarter, were aerospace by adjusted basis, $X.X XX% Sales higher billion up rates. XX% on Beginning higher in recovery and on basis an in Collins. in the continued flight markets, and resulting an up driven the production organic primarily OE

driven parts XX% were a Adjusted And Commercial the offset up by organically, quarter. million widebody. upgrades up $XXX operating year, ramps driven military while with and an $XXX production a X%. XX% throughput. channel, in basis up increase prior sales year, prior provisioning sales the were By XX% sales business was aftermarket organically material production repair, to expense. commercial million X% both costs higher on and increase SG&A mix, narrow-body, volume on up by aftermarket in the higher were jets manufacturing X% up due commercial up in XX% receipts in and favorable of OE and XX% from sales adjusted and higher and profit partially drop-through modifications higher and were and by versus Sequentially, were

grow double continue expect year million $XXX and and basis, full million digits Collins' increase $XXX to low between of sales a ahead, versus Looking we XXXX. on profit operating to

on on Pratt on driven basis by across to organic Canada Commercial with Commercial businesses. were up on aftermarket within XX% $X.X sales basis, OE an volume of were growing the Whitney and XX% Slide both the primarily higher sales X. and in deliveries up billion XX% Pratt's up Sales increased & XX% engine engine in favorable all commercial quarter, large and were sales Turning an adjusted segments. mix. quarter

military quarter the the FXXX and last by sales the And volume. up business, sustainment in in contract XX%, award year FXXX were driven higher production of second

higher million favorable aftermarket, primarily matter commercial contract by million OE was offset Adjusted sales, which on driven higher and drop-through $XXX by military from operating conversion profit year, commercial of partially was prior on the $XXX higher up volume.

Turning full outlook. to year Pratt's

growth to $XXX $XXX versus continue to profit We low of to grow sales mid-teens operating expect million million to XXXX. and

prior Shifting was in lower on was flat Services adjusted This billion $X.X which revenue expectations X. an on and mostly to and by offset basis. year, line RI&S driven and with versus from Cyber both Slide Sales our programs, command, were control organic and higher communications by programs. of

a million with Adjusted $XXX four-quarter driven RIS' of $X.X book-to-bill several backlog $XX versus over X.XX net prior quarter $XX in of programs. the RIS operating quarter billion. This resulting X.XX. in profit began strong the down and the efficiencies was of orders spread to of rolling year, by lower across million a program billion, in book-to-bill primarily brings year

Space $XXX the to constellation. a and bookings RIS Greg a mentioned tracking jammer for addition award earlier, In Development significant received the for also million million Agency missile next-generation $XXX award satellite

continue $XX million Looking to of ahead, flat we to sales growth expect be profit with to $XXX versus RI&S' full million year XXXX. operating

in X. Turning Advanced Power Air partially efficiencies driven by basis an versus operating up the mix, by offset $X.X higher up by now profit and was $XX program of volume. million sales million driven -- billion, $XXX year, net higher prior the lower program down to organically, higher lower development X% adjusted Slide primarily Adjusted on RMD sales the and programs. by X% Technology were and

billion $XXX as of bookings on This a quarter, unfavorable SPY-X four-quarter Lower a basis which RI&S, were significant over of an the quarter impact of $X.X book-to-bill resulted exercise Like and on XXX option the quarter, million impact a to had bookings net both the rolling a billion record year well the X.XX including backlog very strong start program a margin. basis. about efficiencies in in of in in as included the with $XX also award. point RMD's the

$XXX the low year, $XXX million profit of RMD mid-single versus to with to XXXX. million and we for growth continue expect And full sales digits to operating between grow

things it back Greg With to turn that, up. wrap to I'll

Gregory Hayes

Neil. here. on you, I'm Slide Okay. XX Thank

Q&A. we a of before open Just it up thoughts for couple

given a the market and we, foremost, continued backlog end first and we of remain strength XXXX the as and extremely confident think our guidance team, 'XX our can demand, our commitments. I deliver

and businesses. you course, and on begins our meeting eye a of would external critical of We're leadership that I factors. success, that Our all customers' efficiency laser-focused keeping and tell improvements mitigating needs. productivity chain And Chris the we're senior driving team across ensuring supply watchful remain with entire on constraints the most

and to we're invest More to innovative drive in growth. technology continuing will that importantly, long-term solutions differentiated continue

month is, make lot know anniversary and a we the which more lot environment, earlier to merger. success a thought this we set the RTX for able with this the so challenging marked decades can up third accomplish come. of far even Last been progress there's with ongoing realignment, business We've will to for

outlook this of and Investor at We transformational XX. efforts to on Day our look information our sharing the on Air long-range forward Paris more Show during June our

the for that, call With up me Q&A. Latif? let open

Operator

Wolfe the of first [Operator of Walton from Myles Instructions] line The comes Research. question

Myles Walton

it Greg know been was even obviously, for of a on the this Hey, trying It or the exercise. sort where the points. basis it RMD, the like But in you of an option sounded that, bottom issues. has contract to with you're I guidance. implied one But get don't XXX was year Chris, margin And have obviously maybe the rest which. of XX.X% to

I'm the How is one be the it built what's backlog questions that you've now curious, up? obviously. exist, So everybody of but that's just know RMD realignment, business, the won't think part after of I driving profitable that? still And will has. growth I

Christopher Calio

is the margins rate. to like a Look, backlog. be agree, be the the Hey, we'd it business Thanks faster when improving of for you in there Most this seeing bit Myles, some But this question. are back. at of real step Chris. a positives will

which key last franchise some think XX months, with is it's If some wins X.XX, over in areas. potential the about a you the phenomenal, book-to-bill really

business. good remarks, first in contract It's a exercise option did Neil noted As have we a quarter. his the in

accounting a points. a XXX mistake negative about basis of that. no in resulted bit the of But impact, about make Let's because

bit were we at where of over that, in sort with it would line in you If put XX%, exclude QX. a RMD

As improvement to margin our look you RMD sort profile, factory. margin principal the flow material flow and of are that going of the in two ahead be to drivers

course, of just absorption it. goes receipts course, brought with of And on higher by and labor the material that

flow, in of if terms had about material think XX% QX factory a the we So increase in you sheets.

Another the we're the in in X% results here and QX, to factory. see starting

You rate XXs. in flow the prior we've about The XXs. low fill lately brought fill has talk kit the material rates seen the kit being up into heard that Greg

of in then And in you'll more And flow second see is continue rate better kit mid-XXs. material historical see With volume that's our the one, performance. to going absorption is fill we to period the up. those Our again, reduce more But of we're rates again, in math. support material factories, the material, more just to getting as costs. drive increasing indirect and going labor, fixed the

productivity more So there.

So that's in of and story RMD. the profile sort margin

Myles Walton

is loaded out to And half? Okay. it second particularly management of year in the the back-end

Neil Mitchill

is the this on. I Myles, as year But Yes, half. that to I second would expect Neil. accelerate to point goes the

kit the will As improve. as said, the Chris in around to with performance productivity, show the that into fill that see up as XXs the the of confidence the the and And progresses, period grows XXs, that our year EACs. you'll rates shorten higher ability then in

The is of said, on customer business Chris I'll heels really other coming may increased be one. say good had, option as this we business. another But the is There again, demand. thing again, that good

sure talk we'll that. So continue be about to to

backlog But strong. I of think the are fundamentals the

time. in that, gives confidence will margin and at us come backlog, that over we XX%, above that the the that margin embedded As it's look expansion

Operator

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

Noah Poponak

the And much there the we more than pricing normal. Pratt specifically time spend guess, in what's in margin? the is pricing on maybe Can sounds parts industry, that a maybe MRO happening limited out limited with better engine? just in like supply, little aftermarket, Just the given bit availability I

some you're of that on on And a that especially what going version forward? curious front, the So are that things long-term Pratt agreement? for margin what does seeing not mean

Gregory Hayes

let No, Greg. me start. It's

months, in catalog over side, First Collins would the were last inflation year say and of with that Pratt we've the pricing of aggressive I XX all, on all price the both last relatively increases. seen

increase. And that some of we aftermarket part think are the so seeing I of benefits

of those agreements. support mind, customers GTF, instance, are in keep long-term XX% on than for on more of But all

really the Similarly, based very of again, but of we limited it upon pricing, seeing indices. you the aren't contracts, So there. pricing the some is benefit on OEM have benefit

Obviously, a band there's dead there.

what's on I power not really will getting, that we was as improves, not wing, line we're is this. driving improve, lot but This about, here. pricing would margins Chris say pricing as today. won't a talking is of to the It's driver say, top So is not of improve time demand-driven

Neil Mitchill

the engine we rest add XX% deliveries just the we I'll to Pratt. year, Noah, the the and about as about profile expect increase. between of Think Obviously, look of Maybe at margin XX% year-over-year.

come then, of I $XXX first year in quarter. in rest that out would obviously aftermarket margin that engine headwind. engine goes saw of year coupled at continue number the margin you'll deliveries to with You that the as with some That put see level XX% negative Pratt, around strong a expecting NEM will sort headwind those terms would million we're the increase. of and on

Operator

Rob question Stallard line of the Our comes next of Research. Vertical from

Robert Stallard

AXXX Maybe those follow-up to, aggressive how bit low. growth versus XX% question ramp do GTF on in given Greg those Pratt. price that referred increase quarter, compare the Airbus' secondly, volumes, year-on-year just plan? regard on And the with actually Noah's a then a feels aftermarket to

Neil Mitchill

Okay.

XX% ago. a growth on top on aftermarket. & So year Pratt the start level let me of Whitney aftermarket consolidated XX%

about still So when that, I very strong think growth. it's

rest We here year of first low digits have the increased shop that seen we the in the continue double business continues, to quarter, as expect Rob. and

I even would remain the very PWXXXXs the legacy XXXXs. you that tell engines strong, and

shop issues They the of are we've that paced about. casting talked by visits continue. some structural VXXXX, the the On

still do to & basis. year up to accelerated Pratt will we in year-over-year. We let about So aftermarket a in the I be growth XX% terms a and expect see of Whitney XX% think aftermarket improvement we've talk Pratt's think as on seen there, I'll that Chris minute, full

for we Pratt as concerning of of the nothing incredible engines. So you the flying the the in quarter look first rest demand year fleets at the results, know, as

Christopher Calio

just mentioned on OE in stabilization comment say Rob, I Greg would on continue to and Hey, see for a Maybe chain. critical obviously the is structural we improvement, that's supply deliveries. some Chris. the castings, Pratt. this

at think about about Pratt, sequentially are key castings you the constrained they this If up quarter. XX%

Now to of we level the that's need. not that flow

and address be continue that, see be labor it supply of whether improve We process. challenges manpower to we're the that some sort offload, whether taking to in actions helping it to some yields try in manufacturing chain, to

on again, But lockstep we Airbus demand of the are of now the And lockstep given But hand-to-mouth the the increase into the demand, are to we half year. for back with constraints. as with their some we right and that continue will year. move

Neil Mitchill

to add bit. been maybe we've that structural castings Chris, in in first improvement number a castings, is The to that little just a get that of able the on quarter. key the constrained to sequential XX%

we momentum good So year. starting have continue as challenges, sign gain to the but the

Operator

of Our the Matt of Akers question next comes Wells line from Fargo.

Matthew Akers

we've if assets QX touch seen contract a wonder I mean kind impact drove in a could more is across that quarter? I year you of little little than bit anything bigger this that of receivable prior of on a bit inventories, spread kind working capital.

Neil Mitchill

slight that in characterize constraints, about million Sure. the on but would expecting adjustments $XXX It's silver than inventory build, About seen build. quarter. little MRP that increased the about million our a the lining year, Thanks, type chain make in. million. our to an capital we was of We breakeven-ish inventory I'd typically drag $XXX here outflow. we would we've worse of rest I as supply were balance the looking we inventory come bit also is incredible and that there probably I easing a with cash of Certainly, of an a look We're Matt. The the with say obviously excess associated as inventory call of at flow. working see -- $XXX that. a amount the the

to I So news year. sort the we situation, expect fully grew a further. of little the rest grow as turn and we other a go of that to way inventory it bit the through plan our good

them, was milestones. side, our that that of really performance in rest milestones collections On those Again, the expect those make We of asset products. defense the performance be year. in and we businesses. businesses go contract meet through to seasonality we we milestone the we then ship the the as invest is as met I

planned. than again, had So slightly and they've April, We higher in get collected. early billings did already we those out been

terms increase little couple about of concerned was slight March. collect to that. the in in a first timing not last probably piece here later in of We'll our quarter. I'm the a of dollars. sales. frankly, receivables, million the the quarter that a Then that's came in hundred saw about bit So due we They And second

the So realize. would year from The from we've to think as the billion, come that $X.X so, outflow how to yet we look here's of to that at or up I the rest of and I characterize about that objective of getting our of X.X profit walk. going majority is

So there. $X billion nearly billion, $X.X

to working expect capital flat be We year-over-year.

about of an billion, $X.X So come from improvement which have half we'll will about inventory. of

little to And pension if the then, in to math, year. that few puts of left all CapEx the capital, We've taxes you under of and got a you billion. about get of a dollars do and takes, go hundred some net and million billion $X $X.X course,

quarter the of look year, think $X.X last billion fourth about you I of If we at generated cash.

I in quarter back we'll $XXX impact. in of year, that because here last the quarter, second do the positive and pretty which incremental in the was R&D $XXX cash we about after it but turning taxes saw with what of So cash ended, range consistent pay expect million million that's to absorbing second be the

here have full given the all we're in feel we the the the nice in strength of do, So seeing year. it's confident Obviously, a inventory lot but demand that the to business. to

Operator

from comes question Jefferies. of the next of Our Sheila Kahyaoglu line

Sheila Kahyaoglu

of about of And What strength for GTF so the Neil, what the ask we versus aftermarket another sort commentary the drives And the wanted of PwC drove I as you implied drop-through we you're in the how the think us X.X% since the and lower some think military to do margins well? quarter with X% year? how giving on one aftermarket? performance. prior the given on mix and And keep Pratt detail, the good numbers margins for about do 'XX?

Neil Mitchill

questions. Four

Let all. back remember me and seat them

go. we Here

in aftermarket So there margin quarter, really Clearly, Pratt, from the about we first would the point think drop-through as had growth. for two to. X.X% the are that I I the things

So you have that.

also That contract was million. matter about $XX favorable $XX a We million settled. had or

So as also through of but about good it step negative was we go won't million. we those -- about headwind million I But year-over-year up. year, the another expect said $XXX earlier, I headwind volumes engine repeat, And that as rest $XX had obviously, margin we engine as in news. the of of had

So We think that will help the the that's with on clearly higher to negative of continue come margin Pratt story. get in the should drop-through that We'll engine and remainder year. headwind that, grow partially the to will offset good engine I see the the deliveries.

that other The about piece our the thinking everything RTX and already on whole. estimates wing, Pratt our challenges resources contract any with area in accounting. additional we put are basically, is We we time about in that say feel we the to what in need we and the where engine. for of with contemplated of as terms know for outlook a of or comfortable terms GTF contemplate And have can are cost I very into that today that

a the year. So one those. being of I I headwind for I missed expectations our feel don't like see as that against

Sheila Kahyaoglu

many. okay. have you. too Thank It’s I

Operator

Arment Baird. of comes from line Our the next Peter question

Peter Arment

is of Greg could wins. big very are RMD Chris, is of about bit billion I focusing little one. Obviously, to engagement for just just big the Switzerland or some a a booking Maybe $XX could had backlog. you've obviously, some mean if the was you or high But maybe Question talk to out just levels backdrop, and just on talk about opportunities highest bigger there? the ability at kind or you backlog its continue grow ever. customer probably still that maybe

Gregory Hayes

over $X.X Chris. let we had RMD. a at Peter, I'll very Patriot, then turn start, bookings look, Obviously, Yes. me But and billion for quarter it very, strong to Switzerland. the

$X still is It's see We far, replenishment. not XXth instance, So years. related we've backlog. a of that country munitions in seen demand to know that's of been we've the But we for number Ukraine working Patriot about only on to continuing the a so war billion even awards operator. be -- for a

next We expect this up coming that year of that and into we'll later see year. more

We to this that for start know later the as orders system, also we'll pick to the up see upgrade is certified Patriot start as internationally which DoD. that LTAMDS, LTAMDS year, U.S. well also is as

just bookings Also, year low Navy. SPY-X new SPY-X. contract production future. into initial I again, on strong SPY-X, not the the but you're very rate going radar on We've more system the think, that, much come the to see for this but had to on is

backlog couple very, RMD over top will that, continues next the think, the going very course, of of only be we at There's AMRAAM solid. be of fact the is by On years. to eventually is replaced The to LRSO. Tomahawk, which grow,

That this that will grow. again, one some of is year and some RMD around margins as get these has, if lower next. to going but going new contracts, into is on depressing I but think, you time, going see of will, is it's we start margin the XXXX, to issues to which take the development turn that to you're

other is as LTAMDS, delivery. in levels. the our next international only the now, AMRAAM That's lot below international get generation XX%. should of historical improve customers. piece are RMD puzzle other the we sales about about And Right of That we a talk also really don't into the

there. lots point. And news us, it's So door good of this just the a of question out getting at it for out

standpoint, supply we at of As We work still still hell Pratt. constrained and structural a talked about it's a we getting castings do, have although chain a are Chris mentioned, to better. lot from

all that SM-X, Stingers, motors. rocket impacts that impacts that RMD, that For SM-X. impacts impacts And about TOW, Javelin, it's

growth through we motors those issues as drive also should supply chain work that over again, the rocket next extraordinary on years. line couple in of So top the

Operator

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

Ronald Epstein

-- GTF when A long-term that's been among come with wrong, with think correct a up lot variance about question of was all it the me sold it about have is have its engines if that I'm you those contracts? long-term contracts XX% investors been the and and sold the

Gregory Hayes

Correct.

Ronald Epstein

this were Sheila, And get put that were this issues. we in contracts actually time time, ones Like the not it's right, those confidence that we mentioned go out how an as having year. program? over But can earlier wing the place you're priced you issue particularly on the in

Gregory Hayes

Obviously, spot intimately I'll in this in Pratt. the to one is turn contracts business years would with it commercial run to Ron, Chris. Chris bright say familiar those let having engine over the me XX I of most is were length. eight

in were it, XXXX. think If engine -- you they introduced this was back about

margins what those with some about relook am on is time a because to I the a expected at obviously, very improve have challenge going are because chance think not confident But to outlook, contracts. you be. we'll today it to long-term wing margins as of there's we So

And challenge. wing couple dispatch the Reliability we've see Chris of is some got years. to durability again, think on solutions that, next But explained, reliability. XX.XX% two reliability the are issues. as over which is the I great. and Time we'll

Christopher Calio

as on build why talked visits. the are shop areas. the fleet is of D And aimed on time insert sort which upgrades wing improving those this is hot as during really that We've continue to This running Chris. Yes. at we we block the that, just to before fast are section, upgrades, Ron, can combustor about to in into

through the That's only those of only upgrades. of fleet in about the XX% we're about way terms

we is and impacted network, levels customers which MRO And MRO the that so again, capacity labor our MRO shortages has constraints to had want, and we're to we've which has network. ability more output some which and adding our that to part why in our

Japanese the heard provider obviously, a facility, joining network You me helpful as new there delta, about the well. talk top-tier

accelerate time these upgrades we wing. where networks on the to and to capacity adding improve continue So

the end day, what all the of that's about. it's At

MRO about it's times. parts. mix improve that the at our got suite having development, repair to addition in can talked also parts In of Greg making networks about, a We accelerating better repair a sure contract our that repairs always replace turn and cost to we've full not that we're so

Ronald Epstein

a It's was is fine. the gear understanding did just if My is the question, this -- that about How the everybody quicker. was wearing it Because happen? not And gear, same out worried stuff. other may, thing. to I follow-on as the other that's stuff

Gregory Hayes

gear reliable. think be extremely proved has your to the point, Ron, I to

the harsh places not you or would we're any environments. time We in so of India. probably there tell harsh again, specifically enough operating we X,XXX seen spend engines But out that that in And we've a like very have gear delivered. environments, some didn't failure I those testing for

And conditions blades lower there. because that's of seen turbine the life the the where seen on life the combustor. we've harsh just some lower We've

coming before of take we we out have It's can of move from This learnings there couple advantage lot a wing. us on should more in of those It's upgrades terms fleet. time as Chris' to got years more point, all online. to existing forward introduced. be the It's got So going get all the testing. a the durable we significantly

Neil Mitchill

and have mind, gear To your expectations. we've point, you're meeting a right, the on Keep in had performance the Ron, XXX% new burn and this way. along the learnings Greg, some been was spot and fuel in architecture,

the on to us service. into we the a journey the in ramp course, has my a up people The that of enjoying it you, remind went the VXXXX. ramp I similar GTF versus I'll only today to remarks, had massive get of on are this been the difference, mentioned And been when on Big the V took thing while has levels kind VXXXX.

into manage the follow it is buffer little V. But there was to would the there's it We've service. a got more, on So that bit fleet GTF. help as I say, and the on entering playbook to time

Operator

next Strauss Barclays. the David line question from Our of of comes

David Strauss

specifically XXs that the MAX with for have rate on expectation all full new you're and you even developed to what the be was Collins the MAX, in think the commented you the that I still for here? around Greg, the growth Is issues thinking there the OE previously that for low year.

second then of rocket motors. just on question, part And the

Your of view how acquisition terms in of and by that Aerojet LHX potentially availability? improve the motor things could potential rocket

Gregory Hayes

Yes.

moving course terms is to XX bit of I at set talked XX now, all ability year. it of tell in is month. Boeing the current the year. meet a month. the MAX, XXX a In to that end XX again, an you, I But right issue of better during the about of to I production a about would rate be little terms that. had think I the month And up we're think, Collins by our production ramp that might think a get wouldn't

at so. both Airbus Boeing challenges. got OEM constant We'll Pratt I with But would in has to what we're, right on Collins. say now, say, and again, or I they hear both think day But rates here some Boeing have contact and another at in

about. think surprises talk no of there So to or to

suppliers rocket you laser potential as discussing. have by been there's is that acquisition we focused. something quality. merger on far are, through the we is a one of key And when concern, always acquisition that have -- LXHarris again, a focus they As I lose motors, your obviously, of and Rocketdyne The or going think, an delivering

relates relates Aerojet in obviously that. been Rocketdyne know it LXHarris what day. with And to with now every as have contact single there's right it a request everyone to happens. We've out second we see I as got their We'll folks at potential acquisition.

But current is have certain we'll done. I antitrust to you, in would deal tell the So actually see no is happens. until what it environment,

again, how focus that, this see distracted sure plays continues to have get and on make not and we'll out this to Rocketdyne delivery by deal. Aerojet So the

Operator

of of Our next question Spingarn comes line Melius Research. from Rob the

Robert Spingarn

back if wanted widebodies. relative year how bodies, I and this Neil, of to there in on update next? from maybe And just us is about think XX% XX%, trending that it's the aftermarket see you going now? could narrow Collins. XXXX, And was to to where I

Neil Mitchill

question, the Thanks Rob. for

is say still Collins of narrow-body. I majority I now the would is the think the about growth it coming what from at right

to have have started today. number exact to on We improve. I in wide-body don't of see front begin the that mix me

seeing in business are the that wide-body coming continue the as volumes as the OE on take would those up. to up. think interiors environment, levels those we particularly production they about But say, I side,

stop there. OE the just sorry said, side, -- -- XX% you then Collins me more about XX% to about on probably the from with as is I'm -- sales today, side And I narrowbody. relate And think aftermarket let on of in widebody, their OE the

enough think I for numbers now. those that's right

Robert Spingarn

the that just on I things just that How ask -- improve I $X million If for about And words, on versus you those learning which much to the will Ron's mentioned engine losses, recently think follow-up In question delivery. follow curve -- GTF productivity a for the Okay. is of on could somewhere three new of need that's engine. per versus most? volume? Yes. other a

Neil Mitchill

in engine pre-pandemic, as reduction going to you tailwind, will, to are up ramp on Clearly, engine levels saw we a be that back per Volume. negative we volume, the continue to margin. if

As we you'll XXs entered were kind recall, XXXX. high the of we as rate in into already producing

up about first as think we the expect higher here we're on in to when quarter headwind we getting that absorption those continue good take volume, XX% saw engine you I continue. And the to volumes.

costs We're we're side. always to working productivity. that the seeing, growing We're the working particularly on casting offset productivity

the absorption But So that those driven the that. I that things. drop to by bottom volume line say going comes we're be all to doing to would what's is and of higher going from

Operator

of from the comes question RBC. Herbert Our Ken next of line

Kenneth Herbert

to Collins' stay I for on aerospace wanted a minute.

to first quarter The numbers aftermarket be pretty continuing strong. were

aftermarket upside within Or fundamentals do of year sort to of that the sort expectations how tough Collins? comps, You're the see in seeing the it full progressing there's very of but we the still to fair remainder pricing. with with demand? year assume Is better strong

Neil Mitchill

first $XXX seeing the first and Collins in Ken. quarter of growth and a happen over XXX encouraging. certainly our between was in lot quarter year-over-year XXX profit good question, that start. little that Clearly, has million was the plan operating a strong for Thanks of

at And obviously. Collins, I look when that we you from think provisioning saw numbers very the strong,

to driven the the summer in was to prepared through put getting fleets be to their a that travel by fly season. up think lot I and airlines these continue of air ready

I today, It's item certainly say. would watch a

plus low Our aftermarket teens range. in outlook for the Collins is

they But at quarter this see up. bottom kind certainly, early year. positive So if one level, those goodness. to that be It's take continue little And we'll the goodness into indicator, but the a will numbers certainly, there it's a line. of to drop

continue a And little to stabilize a gave least at of The I will in And OE see too there. and certainly deliveries this some quarter add a that think for on. things. grow first But certainly, as all right by reopening great a driven Collins. bigger goes the start the number kind to as early year point. the boost give China But at we tailwind

Operator

the from of Rumohr comes question Cowen. of Cai next line von Our

Cai von Rumohr

two issues So Pratt. at

to you up NEM at XX, should XX, a And quarter. First, X first it the was look mentioned in Deliveries of something unit. if back that's be so XX a little we were another yet the XX year, than like million million more the that. part

And level so the why in acceleration does an per That to NEM go XXX? unit. up seems

aftermarket was and casting parts X%. it your up you're having year-over-year tough And the OE? to And flat the that up recognize of so a to probably If first shortage in secondly, quarter, I to price, XX%. it's out I allocate low? is compare. Why take And part

Neil Mitchill

first the take me let So one.

little you can I it take Cai, offline, a can help Jennifer and we bit. think

the think stable, I that spare we But little rest at is negative engine of you with engines margin reducing of find that we that through as when year, new as bit. and our you'll go volume the a combine uptick not the if look mix the

different engine number There's of I families that make So up. good a that feel that. about

So there the or don't engine issues in cost of terms we the per goes. any see as year basis headwinds a rest degradation of on

availability. MRO material that allocations with a there. Certainly, a aftermarket, the addressing OE of couple about in think in flow playing we terms and that deliveries. you As dealing of mentioned castings are were amongst the part thoughts I and had and

business year, we through. & on also Whitney, The all Whitney But up large also and portfolio dropping improvements and is segments every content as the the almost business across Pratt do price the shop of we small see well. & the stepping as volume did is engine in Pratt

that see as seeing drop that see the there. goes top the I through alleviate and do on, also And year to bottom momentum the expect as the we're line. So right in we improvements continue casting you'll

Gregory Hayes

to the And for Yes. see VXXXX. I of Pratt strong back goes aftermarket we input. the in terms very really mean, Cai, key

in more shop quarter. think XX% visits the were I than here up

as more. So is these really, it coming point, the back pricing shops engines the is a part flying of volume but the it, are into to Neil's

Operator

the to over time, closing Hayes this like to turn remarks. I'd for Greg Sir? At call any

Gregory Hayes

you, for listening in today. everyone, Well, thank

care. always, around you. for Bye. again days. and and be to all next her Jennifer see take answer We'll questions team As will Thanks your couple over of the listening of

Operator

This now concludes conference. today's

disconnect. now may You

RTX (RTX) 25 Apr 232023 Q1 Earnings call transcript