RTX - Earnings call transcript Q3 2024

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Operator

Good day, ladies and gentlemen, and welcome to the RTX Third Quarter 2024 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 Chris Calio, President and Chief Executive Officer; Neil Mitchell, Chief Financial Officer; and Nathan Ware, Vice President of Investor Relations. This call is being webcast live on the Internet, and there is a presentation available for download from RTX 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 the risks to flow expectations are uncertainties. and [indiscernible] [indiscernible] earnings cash this in Listeners call that and subject the actual XX-K, forward-looking those important factors on SEC including filings, details from its RTX materially could statements. forms results cause provide anticipated differ X-K, in XX-Q and to that Instructions] [Operator

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

Christopher Calio

Thank you, and good morning, everyone.

and press saw from our X% drove this you half another in across As growth. defense delivered sales the including organic aftermarket strong from of our of remains on release building robust business, morning, Demand year. growth the performance, and RTX the first quarter double-digit momentum commercial

Our billion. sales XXX focus segment on we strong of of to shareowners next billion last since the completed raising and year are the again . Also in the to end $XX the a year. billion billion by putting we capital adjusted on points flow of the outlook on track our and in shareholders. expectations well to over deliver of billion Neil full capital year, EPS, $XX margin we the of accelerated note minutes. We've program Based at in details to October, share repurchase our few these of our the $XX.X expansion quarter, you of was $XX initiated returning on now commitment through us returned merger, free and take for cash here for drove quarter will and $X the basis execution remainder results

provide differentiated and that $XX the We included orders. and experience our Clearly and the book-to-bill our commercial at robust services $XX X.X quarter the a to of and backlog, long-term confidence supporting we saw a ended demand which of of our ahead, our of services. demonstrating performance in for Looking $XXX growth defense with record in RTX. incredible billion our billion customers products and continue billion products growth to

highlights. Raytheon, $XX.X AMRAAM. billion in missile air with XX% and by global record There the demand of defense we for At booked integrated for $X.X for of billion and continued several driven associated for quarter, capabilities international Patriot and $X were included notable $X.X bookings the these billion Key customers. billion with GMT products, our awards SM-X awards a

and for $X.X LTAMs, first XXX-degree next-generation billion air defense we our production Importantly, for missile the system. order booked and domestic international

were air enhanced for team our traffic traffic with contract engine development sustainment we automation system refresh deployed airspace range aerospace And Pratt, Collins, awarded the billion towers the F-XX management view which a At million $X.X for control engine will program, to aviation across control our awarded a contract air FAA the a XXX FXXX upgrade connected assist real-time and the continued provides the all system, U.S. of for deliver $XXX The air variants technical the and safety. at traffic tools at enhancement of and was performance continued of of over well into and the future. core the which

Okay.

practices MRO sequence The continue performance which line of At MRO plan. on and plan. now according below in how customers, parts of GTF and to QX, our fleet continued growth, management XX the implement underlying with consistent At X, X% inspection progressing first associated inspections the strategic support fleet assumptions on our the are to year-over-year team progress our on a and with are move our across engines our core in PWXXXX the concurrent with strong an financial utilizing of operations and expansion Let's expectation to is XX% including and on powdered I'll our is The generation. XX% and remain and start line impacted of fleet. of commitments. consistent optimize our management foremost our track, remains plan. remain comments. and margin continue of of assumptions. operational provide our XX% with reached We our We've to And metal outlook top fallout end executing throughput The to rate assembly priorities our roughly prior covering RTX, PWXXXX with increased is agreements basis. facilities. enablers facilities, Slide output sequentially remains terms flow update all the on the cash we findings best-in-class I'll to improving. are drive

leveraging We're operating to initiatives Industry across drive expanding improvements company and core performance continuous the X.X also our while capacity. system

for which at DAS, focus in with XXX-degree and investments electro-optical the distributed production as known facility core example, our aperture For increased Raytheon McKinney, capacity Texas, has suite stands in system. of our our EO along F-XX, implementation, on significantly for sensor automation

Collins, Specifically, the streamlined an a the benefiting so track our improvement and a from we've XX defects smart torque and with related our in Xx in we production by DAS labor over and torque of increase line factories process move Avionics year. build operations on already are the for and an connected this production resulting connect proprietary factories has now is XX assembly connected hours yield digital analytics system past XX,XXX single automated XX from EO technology, Across test in capacity far resulted to year. end equipment X team by saving deploying RTX, to the And piece our over drove and months. inspection flow business at which

processes, facility engines, resulting also future increasing to will front, streamline deliver for our invest will in FXXX. on Pratt and features FXXX continue throughput. Shifting global programs automation On for state-of-the-art customer growth. technologies productivity foot This Oklahoma FXXX, including franchise the sustainment square XXX,XXX manufacturing a advanced in and improved to efforts City output month, the key capacity on we that that in support This to strong new and military demand. innovating facility opened

its develop continue support hybrid technology XX improve An to propulsion technologies the We a helicopter. RTX and selected map, domains system adapt PWXXX Thermal management given on as a twin will derivative the electric Airbus our electric part technology hypersonic our across fuel Collins next-generation Collins needs. applications. electric in to engine Pratt customers' maps its is high of combined carbon is example Materials improvement of long-term in execute that working Pioneer In efficiency from Lab to cross are XX% engine, provide Collins. for road temperature targeting break together critical level requirement commercial support a on motors Advanced to a Raytheon play. to Helicopters a composite and efficiency. X hybrid with at demonstrator, our of fuel is [indiscernible] quarter, development the high carbon and propulsion speed technology Canada missile technology road And which environments

quarter, extreme readiness parts our conditions. solutions In to next-gen team the perform environmental level and These to products ability and customers. initiatives critical technology the the for the highlight in achieved survive X, our demonstrating of commitment developing

cost footprint driving ultimately productivity. of the breadth common focused to will simplification business. and drive on take complexity harmonizing our This includes RTX. and of scale out leveraging help we're within digital processes the and Finally,

manufacturing this chain over streamline processes. year, we've eliminated far XXX to systems our So and engineering, supply

XX% end-to-end is example, track help engineering systems to chain leveraging the will flow speed also This optimize this We're within through by savings. reduce their process drive increased standard our our year. on efficiencies, Collins scale supply For work. to and

metals across of common RTX identified than XXX more coordinated XX our approach, we've that pounds alloys million a Through by are procured suppliers. unique

to XX alloys these to that these leverage long-term plan by reduce year-end. cost, We have and our to with suppliers have utilizing currently suppliers times negotiated more and lead agreements can XX agreements add

XX% realize approach. utilizing alloys a to to this on cost expect savings XX% We these

Okay.

So businesses. momentum it overall, take in I'm Neil? third detail. we've the to in the quarter Neil through With turn to I'll and across priorities with we've over results strategic pleased that, our you the more created made our progress

Neil Mitchill

Slide on X. I'm Chris. Thanks,

XX% expansion air billion Defense quarter were expected Pratt with segment Adjusted on as at was was operating our expansion earnings by X% mix global sales XX%, which of sales margin favorable the backlog top execute points X% was were segment Collins. XXX to of operating as organic was per free commercial a sales said, and year. rate cash commercial By headwinds year was by lower up As continue prior versus led up lower aftermarket, profit sales XX% at last up segment another flow. organically lower by basis we share and of share narrow-body growth pension $X.X which delivered we tax strong adjusted partially was and volume growth, $XX.X Chris continues up channel, of higher grow. of RTX of margin as to offset Segment were growth organically. XX% prior up flat offset billion up lower travel by on operating and effective expense that's the XX% driven interest OE $X.XX income. from year, profit and a from growth, also count and

of from and benefited impacts and entity principally continuing GAAP $X.XX a and rate strength program the in charges. share $X.XX In was included some at we the as per to related tax tax legal offset basis, quarter related in was adjustments significant share free $X.X operations closeout restructuring other per the from accelerated And The continued $X.XX billion the owners, nonrecurring principally accounting strong quarter, of inventory. year. and about dividends capital of initiated by to acquisition $X.XX earnings reorganization. to last share a including share of On $XXX flow cash returned again $X billion collections higher helped million, repurchase

portfolio close the year. winch expect the and of to business here the sale On next actuation front, and mid hoist fourth the in we quarter Collins the business

Okay.

Turning to X. Slide

a the me year. few outlook updated Let share on for our details

the remain our businesses through and you've strong, all performance end X seen quarter, markets has of the As third been across our robust.

we shipments at result, for down outlook rates, to of RTX of performance, OE now change no along prior some the to year, prior our year. quarter, the the year This to with latest level mid-single-digit expect for to commercial year long-term OE is to a assessment on to the production, expectation and based restart have from towards prior XX% expectation. of this demand roughly OE OE flat to expectations our our of rest fourth Collins Specific our for our growth. products. the commercial assumes versus see grow specifically, and our outlook we incorporate in end that's production low full of Boeing sales we level the able expected we're As structural And updated now the that be at

prior aftermarket, impacts. these adjusted All more our approximately offset With and in, that sales $XX.X of is from between Defense up outlook we X% channels, continue than increasing X% $XX.XX sales our to million sales to full Original and Pratt range Equipment full to to year. commercial to we're strength year other the across and for expect including said, billion our $XX.XX $XX.XX billion, million, organic expected growth

also $X.XX we $X.XX, up segment $X.XX have increasing $X.XX, some Pratt adjusted are putting $X.XX through outlook We on profit and offset tax $X.XX the more improvements also the at new to items. outlook and our and a low rate range end, the in high end EPS change than that at on and by improved our Raytheon below-the-line flowed from to Collins,

fourth disbursements associated achieve with take items the outlook of On to recorded appendix included and the updated will free as for more outlook approximately quarter. we've we related we as matters contract we payments segment well expect that updates deck. you legal our Nathan in second the cash In and increase the other of billion. powder webcast our outlook flow, $X.X to detail, through on discussed in quarter, the the metal remain track in corresponding

$X to expect expected from CapEx impacts the we million powder offset working the lower This, year, about prior $XXX be expectation. with OE at outflows For capital the combined volume our billion associated to with slightly down now Collins. metal commercial lower is

significant process demand across markets, end expect next as comments how are our hand growth sales with now, our I it segment overall, of flow through and year. on we're we our thinking year another free details, just the few the about current annual organic company. a continued and Nathan well across generation. And over global cash Before working margin backlog segment expectation Right to for expansion of we planning solid the as

for U.S. the continue aftermarket and of extended We rates, growth the production profile aircraft analyze an of scenarios resolution spending. to likelihood commercial continuing around defense

coverage continue chain work and also our pricing forward customer inflation to and agreement We people suppliers, arrangements, increasing our initiatives. our challenges second with actively strategies, through deploying supplier to mitigation sourcing supply long-term including

about good back for our of strength will a with feel be January incorporating these of do, call in underlying the quarter fourth complete the said, always items. that and as our our year, fundamentals, earnings on With we our assessment businesses we and next we latest outlook

Okay.

Nathan. me Let turn it over to

Nathan Ware

increase Neil. driven were up provisioning to aftermarket by difficult compare Slide that X%, the commercial an volume. parts $X.X upgrades in were from and offset sales in decrease Starting and and Thanks, Collins year basis, repair, up commercial and on commercial channel, partially With benefited by Sales X% XX% and billion mandate. in organic and a prior upgrades. XX% by aftermarket lower mods driven X% a continuing X. an By defense, both mods on a in the strength be with quarter, OE adjusted against in increase XG

operating commercial volume were and OE versus prior narrow-body the work expense. volume, to and higher due primarily was of of year. R&D sales defense year, OE across commercial driven was the on platforms, X% multiple commercial down including impact for profit up $XX partially Defense by Boeing programs million mix the and stoppage. by quarter lower the lower up Adjusted sales XX%, OE the were higher volume billion aftermarket volume commercial $X.X unfavorable prior Drop-through offset higher versus and

organic basis, this Looking the ahead, we Collins range. digits adjusted single on to an full grow year basis, high low on a and sales of to at end both likely though expect continue

$XXX million to we range the $XXX of between a $XXX XXXX lower million million, impacts. and be as of $XXX updating for by and we partially and associated outlook OE mentioned grow volume We lower higher volume. impact to defense earlier operating compared the profit OE And expect million prior and to our between offset Neil that disruption incorporate versus the commercial volume absorption are

the driven well FXXX the in basis Slide were sustainment were up military and volume driven an were sales were of all across Canada. higher volume by engines the up Pratt Pratt both X% growth FXXX $X.X adjusted in with XX% the quarter, upgrade development large and quarter, sales the commercial engines, by higher Commercial on engine Shifting XX% & in driven as FXXX up driven billion organic Commercial Whitney X. to sales higher sales commercial by engines. volume on in X as Sales by both mix core favorable channels. across primarily up and OE In XX%, program. platforms large aftermarket

$XXX operating of Favorable were $XX driven and Pratt million aftermarket engines versus by mix awards. quarter, the $XXX prior billion profit in costs. Adjusted higher higher volume the drop-through booked year, OE In up was offset commercial million commercial on volume. large and by production delivery of over military lower

$X.X award Engine awards. also In FXXX earlier, Pratt booked core addition the upgrade to billion and commercial sustainment Chris that of $X.X of billion mentioned

Turning outlook. to Pratt's full year

adjusted mix and to engines the an military likely that continue by the we've organic We grow so up million driven the year. $XXX sales of range $XXX million prior this profit favorable are range, for on this And from stronger versus towards between expect volume to basis, million outlook operating between large and in $XXX most XXXX, million. mid-teens higher to far our adjusted $XXX grow and commercial seen and updating we end of

and impact sales divestiture and Raytheon was partially $XX quarter. in Nasim on up higher cybersecurity defense volume were $X.X driven volume of partially as programs by cybersecurity lower drop-through was prior technology million favorable the air higher a X% systems, the billion Sales higher offset improved Now quarter the air as an basis, Patriot, UAS down on mix turning operating result of were the on primarily of by productivity on offset systems. organic driven year, million profit X%, programs. in On the counter land defense volume, net divestiture. space to Slide advanced adjusted $XXX versus Adjusted volume by including an on basis well X. as This and the on first and of up by

expansion. productivity X million of seen program. now X.X. related a quarter And book-to-bill book-to-bill bookings quarter, $XX is $XX.X note, classified impact of $XX unfavorable net quarters Of resulting year-over-year the has basis, consecutive billion, a to included the improved in On Raytheon's of in highlighted, margin of and as a $XX year-over-year and a rolling X.XX. Raytheon In million were backlog Chris XX-month billion an

international, In In earlier, XX over of addition XX% to total, is the now million mentioned awards booked billion Raytheon awards, for million points $X.X backlog $XXX Javelin. last from also AIM classified $XXX XX and up for Raytheon's year.

we so to favorable we to for And Raytheon and seen expect organically the volume continue sales the to this now digits ahead, mix million drop-through of due Looking grow year, mid-single year. expect far Raytheon's and divestiture. between from $XXX the operating this range the $XXX profit million between includes million our XXXX, up and cybersecurity to $XXX $XXX prior and grow million of versus impact you've

back I'll it that, turn to With over Chris.

Christopher Calio

Slide Nathan. Thanks, XX. Okay. I'm on

heard a well installed you record today, leading is franchises We've tail long commercial an base As defense aerospace positioned got has aftermarket are demand. in for that growth. RTX global extremely seeing and that

focused and remains executing outlook performance the full supporting and our commitments, team third year. for quarter our customers our which on led an on strong Our to improved

strategic our sales, organic we flow over deliver our earnings growth and confident term. to to sustained we're cash continue As long the in priorities, . drive ability in

it open Okay. for With questions. that, up let's

Operator

Stallard [Operator Instructions] Our the from line of first Vertical comes question of Research. Rob

Robert Stallard

Airbus you in quarter? fourth in hitting are wondering of the GTF. confident the manage quarter? Chris, line third on you delivery you how was the demands the competing a I pool spares for question the for versus the targets the how And

Christopher Calio

Rob. Thanks, critical us. initiative Yes. Obviously, a Yes. for

both of and year to OE we've ramp this look, So continued deliveries spares.

also OE above that sequentially. That's and the part numbers. composite. composite well those in individually up aggregate about I'll note think of as XXXX So also But spares tell XX% if about our about we're volume. both also up are I'll you and deliveries X% you of that year-to-date,

balancing that the to And to fleet. the balance is we're going to allocate support spares amongst as to continuing So going again, MRO needs. and ramp all and continue

to We've our customers. fleet with our situation with metal. those in the got continue know trades potted You support to make and order to

to and And production we've that that balance that families. continue is big balance part drive of got to of part key a supporting

a improve got forgings, So castings. some And plan, they say take would XX% fourth longer say to to to isothermal with year. helping the the of are then have what that Rob, at going continue to I But them to ramp little we're end numbers piece aligned I other and bit We've area. need that quarter I on and is recover. that in year-over-year. recovered all here in Airbus deliveries all, think There make some would part up their laser-focused structural continue they the in the the are

Operator

Next question Research. Wolf line the Walton comes Myles of from of

Myles Walton

'XX quickly really and I and good into organic but was beyond. higher mix from type that What's could sitting does 'XX perspective, touch -- mix shift all should mix in couple has and 'XX. in a how that around a for X% we hoping bookings . the points Obviously, think the been backlog, sales And about in XX Raytheon. acceleration the significant you a the also impart on years. growth into of of

Christopher Calio

Miles.

you today. backlog. book-to-bill got over noted, this story as it's about $XX.X the billion now if of points, the piece rolling The of international XX% right is a the about bookings And X.X XX-month at you fantastic. right? think Raytheon up billion is total almost mean quarter, demand the this is backlog is incredibly of the $XX XX look, strong, I So and they've

to take have XXXX. to backlog in going we take work work not materialize got to time. that's going going large in the that to to that's some That's be continue something going that's through and We've measure Now to time some through. to

need also seen talked to that's in and the We continue. Texas build that about supply We've continued of Tucson. in material We've capacity. to at quarters efforts We've well before Redstone out are heartened X and and by as and continues flow the fact chain going be to growth. straight expansion Arkansas, to healthy.

coming put is this place. got be continue just into So think materialize supply work to talked But there. will mix is about is at getting chain I we've that Demand healthier, tailwind Raytheon again, being shift to through years. We in growth the and backlog. to capacity that

Neil Mitchill

good And about Neal. show mix we're already benefit would quarter, that margin dealt Myles, as I frankly. you we to with up. improvement highlighted, XXX news that attribute seeing it's improvement of think productivity headwinds in the well Nathan And of add over basis in and would just definitely we're in I seeing quarter, the the mix as the that's points the some the as in the year-over-year spite that that of And alone. there

about still this feel good So year.

As then a backlog been supply at with. some commensurately dealing Chris we've the see up, going as to free that. those has talked line strong we've And top challenges length, continue grow about Clearly, . with we'll got chain though. that forward,

Operator

question next from line of comes of Jason Citigroup. Our Gursky the

Jason Gursky

mentioned talked comments, your remarks. made -- some today, Nathan well. just you you know add Kind Wondering if his about we where I some you context are of I about as it in maybe productivity. relative to kind productivity were expectations years Chris, your your can productivity growth bit . views in kind say, a of in on we you multiple your the do plan? should that where your of time, and of all businesses and go maybe think building about you're over pre-pandemic ahead into across this expectations and where to prepared kind the quarters

Christopher Calio

Jason. Thanks, Yes.

a see we're couple and talked now had. And at a starting of look, the here. Raytheon, thoughts productivity I to lack would some shoots that for productivity say about there. So green of we've while we've

talk You just heard Neil that. about

big well, that The those backlog. programs consider make the of our business would business some improvements quality a things with come of that fundamentals the and that of the to performance be there. all we that's and we up core to that know of making, I I legacy function think period as do get driving what shortening that part into improvements of, really be core to we're how going again, a that

already before, being I there. productivity factor there I -- continue of chain health to critical the think we continuing and see supply a the mentioned

I think we've got the labor in place.

to it's here. through respects chain continue in say, get factory automation driving But need the productivity again, we to many of we're the parts X.X. our across supply hold other in I'll business,

commercial. drive go that got factories, makes automation labor again, you to take factories we of and to sure both across the to across our the businesses. to our chain making kind defense automation X supply all X continuing strong, continue we've connected place productivity, this to to we will segments continue and the business The hours get If And the into it as It's across in as to continue healthy expansion connected in see today, margin tailwind business. exceptionally the need sense, where we're come to we I see drive expect in the all frankly, the out drive productivity backlog we is be factories, think, there.

Neil Mitchill

million $XXX to Maybe productivity benefit about seen we've year-over-year. already with Raytheon, respect to of add

programs full on really largely We supply of now, causing XXX kind think basis. embedded them. are replenishing consternation prices And to are priced current So had backlog lead the at the in current with with have that. a chain I that traction. good new seeing been that backlog about we're diminishing bookings track The and aberrations we're talked in year on do that think about I times

at continue we're So as progress where across portfolio we'll in doing our of long-term far, so areas I all Chris and to Raytheon the particular. encouraging But that in to the contract expect continue said, . accounting. see think to

Operator

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

Sheila Kahyaoglu

on if So OE maybe could X. X%. was the we Collins, up was please, side the OE aftermarket. about both talk Collins and down aftermarket

guidance down XX%, now. it OE, implies given the just on the First flat QX

around there benefit about any volumes? seeing tough you some Are down and shipset businesses comps in the secondly, So you and you could up between I correlation color then from there, OE about you deliveries? how aftermarket? could If but the know expecting aftermarket delayed what do any of think the are you the aftermarket give X%. the just if maybe talk

Neil Mitchill

Thanks, Sheila.

Let side. me OE on the start

in as As really the us by impact things. that the say you strike was down. volumes fact year, We I little as the a into was narrow-body well of side. the from driven that a about, The Collins saw both AXXX heard for down did the obviously outlook well. account. as we had start on OE We talk side of our and quarter, taking bit recalibrate of few would a rest little were XXX bit the the

And what some shipments quarter. level here done and resume forward rest we're do the the we've year calibrated. to expect is of in think a the getting we've situation like reasonably of We calibrated to that forward. at tomorrow in got going we We impact the And later everybody, resolved. Boeing looking

quarter Russia on was OE profitable heat movement weighting the about for the a is all And and we But what's There's I wide-body the in is higher That's within not XXX got really up United as the you wide-body us bit AXXX. towards driving know, line of going into we the what the calibrated. U.K. X% on little think from saw the So majority that exacerbated States exchangers the headwind that. side. little sales also a bit been line. the mix XXX by a of That's and lower on of

So a side, the reasonably rest that look But number. what couple calibrated things of with we're down take us as got we I the that think we've the on the that's year, and there. causes of to dealing at OE

at going good to provisioning, Now repair continuing see aftermarket the through work side, good on Collins. we're

feel about still that. I so And good

to seeing I that supports are strength expect We've continued as fly. that very plays longer and to remains continuing it seen think year and term about Collins, aftermarket seen low to at this into next out. levels I how older of platforms be But the continue well. clearly, that retirements we're

a are on few those there X So items. comments those

Operator

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

Peter Arment

set Neil, maybe on maybe, to cadence us forward. free cash kind of think level the just you flow Neil when it going about

about over out you payments the kind if we of and XX% guys are talked everything, You've this conversion. year, Obviously, probably back

'XX, Or conversion established about that of How you're thinking a productivity how and with thinking? Just all parts should of of at moving do has or when think any terms Chris we minuses on or improve whatnot. be you in the initiatives does high that? about level, think pluses thinking we kind

Neil Mitchill

Peter. Thanks, Yes.

billion. First confident the remain in we 'XX, of all, in $X.X very

As I think able remarks, benefit moving I year. we're be year-over-year. going headwind got capital some we've that to big of on in couple with pieces, inventory prepared out the opportunity And $XXX we'll manage but We're million deal significant for a that's think still laid I seeing working forward RTX. about the this counting this a my year,

As look we right been ahead the our We've us. sheet, doing protect balance supply of sales we've the to chain. significant got things at

So for want to flow. opportunity free to drive cash ready higher be turns, those that. and an more to But continue working some capital deliver to on up us convert we the . that's deliver

I strength think organic lot free cash of in big picture, we flow. see the a

cash XX% adjusted we've flow to as we term, with reason business I some generate expecting operational why the deal with payments about quarter. think to look free $X cash seen longer that some we last that's got conversion another we're against year-to-date. no flow XXX% But We've net consistent income. what talked here quarter. are going free of evidenced fourth that by the billion We're won't I see strong

is and underlying kind inflation. remain broader So drivers strong. the business the of term, right everybody's of an and demand the in I calibrate got think to pieces eye deliveries longer right all the But underlying around economy now, OE the need place, on We there.

Christopher Calio

still profit as just big we've year. up about, growth to on add year, the piece of the see base $X about robust, And in seen aftermarket I low flow continues has out that, continue RPK of talked consistently, this XX% strong. Yes. billion. last think, there. pretty Peter, We've growth growth. so that that's Collins XX%, growth Year-to-date be a warranty, that to that's cash strong to and VXXXX installed retirements is to

in that big as of to the So cash pointed story. the aftermarket fundamentals, continue be Neil piece really strong, out,

Operator

of line Next question is from the [indiscernible].

Ronald Epstein

can you Hopefully, hear. Yes.

they of traction, a right? Palantirs roles to getting USA are what of year at who days like world. they spending company bit seemed about that the is Tech? about, Are So know Ventures threat? be RTX of you've that? this them? or threat? you takeaways? your about are the How got potential thinking an a How I the thinking So division. talking next are a broadly, thinking . it a you of I'm and after opportunity about couple competitive But this partners? seems you are generation Are It And little how defense

Christopher Calio

Ron. Thanks, Yes.

both. I it's think

about marketplace. I I think competing we these always and think established there players we're areas are think new in And remain across the the paranoid where landscape, players. some of competition I

and our in and story. R&D I our to system a in heavily advantages got road able maps invest we've and to And to of sophisticated one innovation production is production, scale continue be to and the think that We very scale ability scale.

about day, fantastic getting are the competitors come. learn our of at our product adapt. that's can all there But and when end from about portfolio at look landscape, going looking market things we we seeing Now how things at critical agility, bringing the the to low a U.S. the we've be to also things, cost, that Again, I about faster. parts got to out decades for we're allies of think and the to in-house, we competitive

But I'll opportunities. I expertise. we're And potential partnership be your they view Again, things perhaps I hardware products said Ventures. as invest us capabilities side with to performance. at we add and upfront, that product a investments you that use in into few this access our noted looking portfolio companies our as made integrate to will reviewed we think you to RTX do established technologies that on that There both well, just it give we've promising in can as question, we tell given our And our the very early-stage it continue software to also, ways. could are that of There's board. through

Operator

Our next of Gautam of line TD from the question comes Cowen. Khanna

Gautam Khanna

big Raytheon when I wondering up if it's you change could you frame takes think was more year-over-year. a obviously, us productivity mean, do turn. I for this at a defense year, significant

some When when that that also to is You get off? do at kind do challenged imagine plus negative programs of that roll do prepandemic point, realistic? And favorable? have to the kind if of I kind back And ledger. we $XXX of of some so, million those a ever are

Neil Mitchill

for XX question, Thanks and over following the thank call. to to our years for the want Kai I welcome of company.

So to welcome with us, work be good to you. [indiscernible] following

seen to I the productivity that the -- not close like on We've million to the Patriot, on comment be improvement, a expect year-over-year Just $XXX here. said, $XXX million.

on So will Programs I are well be. the some of difficult as go get will I next productivity, there. to get won't think year, depends forward. levels operating and and And go expect We will certainly stuff. the in. I corner into we're the we think, to still specifics some always that in improve there. think kind I entirely we have turning back but same pointed we're to some challenges. Whether the And mix as you environment that there for headwinds do we continue the there of out,

of to the levels buy our clearly material that where backlog, large already need And us volumes. that's the the greater have and of to well is we see really rocket motors we will of chain, drive at to productivity improvement to the we supply as on lot factories have side. our Now tend we of And come allows which majority assembly a productivity the to do relative in bidding to about to productivity. talked margins importance value here in stream. that with What

and is international aligned where productivity improve. not the seeing watching, So backlog good inflation in the last few those we're embedded a with through we've positive are lot say cost the the business. the that years. things kinds would pricing over the working of mix but experienced of We're the I there was we're that

and opportunities start productivity. large we'll term, see well, and come longer think for more give as to into other will franchises those LTAMS play us I

hard to on see a this So going but bottom line, we're put it, it improvement. number to seeing We're margin year. that

of all of next productivity hoping business steps year. I the think we're that corner has forward the expect And more We terms turned for. in this see that to

Operator

Seth line comes of from the Seifman question of JPMorgan. next Our

Seth Seifman

would follow to wanted talked of estimate around the seem need strike and that you absorption a you I the at the other really should be it of And think, up margin you I missed pickup $XX of the could about kind that impacted kind relating this on QX what that, kind like wonder versus what's stuff? Collins is down, how in if driving box quarter, talk of down guide in of ahead Collins. which much guide and that my the There seems about which in all But And quarter. about us. it shortfall in was you to the absorption is the fourth I million, guys a quarter.

Neil Mitchill

Sure, Seth.

that me Let one. take

Let the me ROS talk for about a on few quarter. of the the pieces moving

did defense First see in positive volume XXX basis of we of from points aftermarket Collins about lift channels. higher commercial all,

to from was the commercial saw unfavorable XXX see, that about associated that, the lower good impact disruption basis and OE Offsetting dropped So we of through. that in quarter. absorption volume and and mix points and headwind the

So that. we mix and down experience side. some the The unfavorable did and year-over-year OE on on are drop-through sequentially volumes

as past volume to third, about business bit SG&A. pieces first I and so Talked So higher our a with saw of some already the wide-body, the of more there. little the of talked creates Avionics a little seating, in the bit we us our platforms, XXX those challenges within headwind well. And of a being about basis R&D, moving few broadly and about in class upgrades as within certification some we across interiors that the heard was seeing, the invest in business saw is And industry. that talked that business and we We've about you've continue about of to class headwind business. We higher slightly about headwind that higher to the I that combination points things. XXX year timing attribute million. $XX from had a mostly of inside

the million don't about contract expect did of I Again, we headwind in quarter. repeat. So $XX to that have

interiors QX, in in of outlook particular to we third undertaking headwind see reduction as deliveries at the business our we mitigation that from that's OE of EAC quarter. about the the I that course, largely come look So XXX basis from we absence think Collins the And points going of to we're uptick. the the actions midpoint at saw QX margin the to address on here and the temporary in

we're So the behind term strong short work balance in The to getting strong. as good nature, I drop-through Collins restart gets We're very, sure characterize there. is deliveries factories aftermarket has warm our to taken them. and very strength in kind strong. Defense the been as really business. good good has as these And stoppage we that make There's of items one-time. supply proactive measures so prepared our keeping here chain boeing moving soon underlying

Operator

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

Noah Poponak

up following margin. Just Collins there on the

of framework are get moved to the them put in on service. margin in and of a wing, off how stepping 'XX gone the engines then had can segment just incremental a any back a in are in And that have next line many we the shop? engines shop the the or actually of lot numbers how framework many are see . had through have process lot just GTF You the Is metal, you versus up can around and a year. then that things implied XX% around? below And still directional powdered

Christopher Calio

chime and on question. Yes. the Collins with start can in No, Neil powdered I'll margin then metal the

I ramp, going as XXXX. of on say it's again, and head metal to been reiterate, I be a really today, to airframers to going line pretty year. a on this, just off of it's the the again, insertion start parts the MRO, coming So into throughout you're of the corner metal the to we the as everything balance and to the again, as material said, would allocation powder full parts. powder that consistent turn going life

to XXXX. the in said, we're putting in up ramp to forging, in to that all up and place capacity stream year-over-year, continue I pieces continue we XX% ramp as exothermal value continued As of

in XXXX. to have we of material balancing So that do less

powder on story metal. the that's So

of multiyear are what big being number significant what's situation Again, in going remain still particular that's inducted yes, to terms period. what's of there a engines In a awaiting part power lot, of that induction. and through us it's to take this the over parking a

which visit our shop into MRO had previously, healthy the the in our and material what pockets gate are consistent mix we've a as before, about with We've said shops. our light. talked I've we between still say accumulation I when get this however, is line And X, times, would throughout spot. of heavy still turnaround

on work exceptional. turnaround in Our times, heavy particular has scopes been

again, better flow going point get through that material once has to get we'll our and balance we get start a And that try to XXXX spot. flow in So continue in to again, we've do, to pronounced. with the to engines where and less see got inductions a to become

Neil Mitchill

Thanks, Chris.

provide few not today. On no, margins, and the let We'll as ourselves ahead back to I of get be a talk to do me going I'm But January about more in a things we're we lot guidance 'XX I little watching. that. think the are just specific think about, on bit through have clarity levels, fourth going ingredient. look here, OE get there business, to the And an that's what Collins that's Notably, we'll quarter a as the on important like.

in at in now, were volumes time XXXX. business higher are to Collins we've And some about is we cases, than a As the are XXXX and higher long in where deliver where much talked than we much for frankly, capacitized that today. certainly

continuing of of Collins that OE we're get to story, pressure our to a unit part increase the renew cumulative agreements comes on and us. the on years. long-term That's to the is important need for with see the really inflation deliveries. effect cost better and we watch everybody, absorption update a volumes the So over like some -- item

Embraer. for So this OE both something strong, the strong. that we we year. We also really, Boeing demand. repairs strong right want But our get platforms, to Collins are side all has Airbus, the underlying demand sure for the They're outlook on and continuing into been the provisioning make next really calibrated see is

at that grow calibrate into So it we the the items strong to margin said, need I few is watch kind margins of really to Collins. a That story. but fundamentals, expect

convert profit well. we as and growth year, operating next expect flow growth good expect cash free that We to to

So the strong both business of remains follow. and for years year to and the fundamentals next are there

Christopher Calio

accentuate continue is of Collins. actions Neil drive cost it margin installed It's that going out to the part and to $XXX a of here obviously, the aftermarket Noah, laid just think base, this. maybe billion at add, expansion But the And key to the reduction out-of-warranty profitability I that well, part are equipment. I'll and

tactical. Just the

structural You put volumes some lower get of a the result But of that more of economies of happening place talk have excellence The there. been in of OE parts so value movement about hours cost reduction to there. the centers talk that's of stream. the cost actions like scale X.X about also areas, electronics as those formation heard Troy the pretty stoppage low-cost million team in to and work the the of Neil we've and curtailment important aggressive

of the piece other the on. that's Collins story team focused So is the that

that's be As Neil platforms, to important continue as said, is going going on the provide really well. focus right to cost to tailwinds. The on

Noah Poponak

in Neil, did appreciate the you Collins quantify the really EIC quarter? that. in I all

Neil Mitchill

$XX the about side. it's interior million Yes, on

Operator

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

David Strauss

there. wanted I the on So spend follow to GTF up and

for maybe I just are cash out relates level, it can Or It it 'XX. your guess agreements I lot think, you're of something about why in 'XX guess, a your doesn't in you with what on reaching aren't like if else from on like you like more? service. Neil, the year, here less future? to us had But swapping maybe high QX. looks it compensation path if you customers, of It up did. aircraft I the paying customers and the help ramping sounds spending plan look ground have as talked this you you payments

Neil Mitchill

there. more Sure, to little a David. Happy color provide

AOGs. just billion We've XX% about agreements the million worth everyone's year-to-date. of to make of $XXX covers made about all, year. expect this number that of have little It's over now, do a of grounded, $X we payments customer about First XX We've place. we in the talked so

make customer the applied that so what our a we payment. practice that a occur. a a years, payment And account the is credit we as we're matter crediting consider cash when to cash customers of or We do AOGs as

with do to executed that us of I we What we've a agreements, coming get We charge consistent the those credits reserve place. we're remain also a payments. put all how the to time we're It's and So that quarter. quantifying fourth took in in financial assumptions issuing the overall, some agreements the say if we these it's underlying impact taken ramp and then the little once that's equivalent, to will, up agreements because the rise down up of remain is you have or And those underlying assumptions. cash expect it. during gave those bit terms year. It's agreements those following now that we can the to consistent making and

we're we about provide business. make ultimate get level all and a I won't we're of payments at what underlying all same we're expect to organic that into we'll to spending so we specifics when the have spending the transparency place, So the much around the but good and you look performance how continue what of

I today. payments those where say as into next planned as and year the come down that's would over exist of next we years fallout of continue are place We'll as So AOGs we then certainly see through these 'XX. couple the move take to

David Strauss

$XXX I the to that had 'XX. It's to in year shift and doesn't right? think next tail out hold kind more anymore? Does $X.X million of said likely you then million

Neil Mitchill

an remain provide full update and what we're on for well. exactly Again, time. transparency accrued different, as Well, January accordingly. assumptions amount everybody visibility outlook make over update in to this to same. We'll our at I would next X say years, that we'll just the it's . that sometime the assuming. we're going we've the The If the giving that

Operator

Company. of the Harned comes line next from Our of Doug question Bernstein &

Douglas Harned

Raytheon, missile you've focused and great orders international, very strong here, defense. got whistles On much on

and But good, as side that been expansion and of have difficult there can talk airborne you going it a in the which strategy margin about you on part So bit terms ahead. you business, out? growth. that's of how the space going . playing What's the other for more little very for I systems, see see for

Christopher Calio

Yes. Thanks, Doug.

right. I us. think story It more a been has you're challenged for

that's strength that a at and As driver look when frankly, the are evaluating, in at Doug. of defense. beyond, in integrated you we're missile error size you pieces There that Raytheon 'XX pointed significant And of business going be the this out, backlog. demand in in when the other to the of you backlog look today,

think we've got, strength for business. our I some in real instance, space

been We've chase That's We want to future. that go space really business continue to will are of historically now. have strengths, space into where buy difficult got ISR, parts CX. and don't make what that things certain development difficult business into Now There want really, our is we've to programs. for to and a we're strong margins at the right business not of today to that sort evaluating. profitable been that it fixed-price protection, anybody really, be really in That's who space. like play we domain [indiscernible]

that growth invest the in areas portfolio strengthen that's look decide and where are do say, not we that foundation other the we business in and coming. those to we're this need continuing we see the So that at of pieces how either or further to

Douglas Harned

that frame for see much where time can a you'll growth. there a Is new strategy and . positioned you pretty in have place

Christopher Calio

business we In think all, positioned as these well would question. evaluation of kind first a say we're I areas, particular what do, to as portfolio yes, your undergoing is exceptionally you determine those we I growth. Aren't the Well, large, of Raytheon decisions Doug, the might in of board, be XXXX. it across for always ongoing. that every We time of some business the going and into That's forward. while going make of strong part as we'll of year around do this necessarily head be parts a historically. to year

Now again, Doug. these are long-cycle businesses, as you know,

of some strategy will areas going be a take some to about in pivoting So and thoughtful we're these it. time,

Operator

of next UBS Gavin question from line Our comes Parsons Gavin. of the

Gavin Parsons

learn But resume front, you're that wanted that to I the destocking we'll to wanted I think just stopped. but you know Boeing possibility for resumes learn your tomorrow said would full more you there? if some you . there's on tomorrow or I if is clarify expectation anyway. Boeing when And

Christopher Calio

Yes. Gavin.

not be you, good Boeing a but us industry. news tomorrow. the closely just about the Pleased So for news, watching regarding potential resolution we'll for yes, for be would like

work everyone value material healthy, think prior want has to be in that. that. is volume we've to actually material, Boeing product. build to Neil referenced try and that. and on in streams means to beyond. happen rooting to for higher all to prepared once continued our keep of We've programs and to certainly the to is mean supply this to I to value our are our answer, continued we facets continue take the be ramp stream we've able enough make certain for this factories. stoppage whatever And That to in receiving logistically start is and then over, that going obviously, sure Boeing 'XX to do We want to healthy do want base

we supply turkey So I wouldn't be that the haven't healthy our stopped chain. wouldn't just cold factories. just be healthy for for

So because large, that again, we ready we've do the that. be arrives. of taken certain that parts other product reramp Boeing when But we've by to, in that continued to and cost we stopped the continued build curtailment have product to portfolio material and we've take measures. have want are There

Operator

of Bank. line the Deutsche from Scott Deuschle comes question . final Our of

Scott Deuschle

Lufthansa Chris, have at customers, And airlines? for Charleston, those you're seating of you for think there FA on either Collins seating where for for Collins actually is supplier Is and American. the of sitting seats, do waiting any those it then for those? assuming lot I for sense seems like of built already the in supplier mostly I think, there's a XXXs either review

Christopher Calio

it not but is of It those, supplier is of of yes, And them, them. absolutely Yes. certain you're certain all seating a on right.

and are FAA. through working both certification the the We with Boeing

ongoing. So that is

when make to the that's make their this need go ongoing. us, a lift. who that. has the that flow tier And to again, said can can is and then so and before, for behind I deliveries out strike of we We're that gets XXX the drive it obviously part get continue customers point are sure chain the as we've material not we happened, to that supply looking While the they continuing got

take the parts wants to need been as rate we've just environmental that making There continue content ready on system. support do the to to in XXX got so control are it. to do sure we And it of Boeing. and up we've what that Neil other and ahead decides ramp of terms to referenced that Boeing exchangers full steam there to there heat we're

and that's of sure make know to crucial poised going to help recovery, We we're a their we to be there. part want them

Scott Deuschle

aftermarket next And a about think Neil, sorry to starts lot flight if Pratt can is on and but Just ramp I been up? framework would the installed now I given activity you be year? I at share military missed there growth assume how the any delivery directional lifted, think base, this, hold growing has to

Neil Mitchill

that. want mean the in really aftermarket No far problem. quarter. would ahead Thanks, get right Scott. too at I in of Yes, strong a I say we was saw us, growth to XX% I line the don't military but with Pratt

we're levels pointed seeing as baseline of the shift as the top prepared military business growth around but installed sustainment we production out it's today, it's do there. side. the of see growth on that a as pointed there, the a you Pratt. from line on grow then expect base, continues of going as So on strong great I and margins business a as in be continue won't FXXX, line Pratt That's continued it's OE to mix well number sort to out, top not grow, FXXX the to to put the I grows of it And goes well the just benefits remarks. the our of as

so see in a at growth what Xx the Raytheon. even The ago more at there. So were orders they were and year quarter continued Pratt

businesses the in So we ahead. as all again, look remains defense backlog of our strong really really,

Operator

to I now Ware. conference the With would Thank to that, like back Nathan turn you.

Nathan Ware

call. today's concludes That Atif. you, Thank right. All

the available and always, follow-up As will Relations Investor for team, questions. be I

have appreciate joining, really everyone and I a day. So good

Operator

conference. concludes now today's This

may You disconnect. now

RTX (RTX) 22 Oct 242024 Q3 Earnings call transcript