Q1 2024 RTX Corp Earnings Call

Operator: Good day, ladies and gentlemen, and welcome to the RTX first quarter 2024 earnings conference call. My name is Lateef, and I will be your operator for today.

Good day, ladies and gentlemen, and welcome to the Archie ex first quarter 'twenty 'twenty four earnings Conference call. My name is Lucy and I will be your operator for today.

Operator: As a reminder, this conference call 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 RTX's website at www.rtx.com. Please note, except where otherwise noted, the company will speak to results from continuing operations excluding acquisition accounting adjustments and net non-recurring and or significant items often referred to by management as other significant items.

As a reminder, this conference is being recorded for replay purposes on the call today are Greg Hayes, Chairman and Chief Executive Officer, Chris Kallio, President and Chief Operating Officer, Neil Mitchell, 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 Archie ex website at Www Dot our T X Dot com. Please note, except where otherwise noted the company will speak to results from continuing operations, excluding acquisition accounting adjustments and net nonrecurring and.

Four significant items, often referred to by management as other significant items. The company also reminds listeners that the earnings and cash flow expectations and any other forward looking statements provided in this call are subject to risks and uncertainties Archie ex SEC filings, including its forms.

Operator: The company also reminds listeners that the earnings and cash flow expectations and any other forward-looking statements provided in this call are subject to risk and uncertainty. RTX SEC filings, including its forms 8K, 10Q, and 10K, provide details on important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements.

8-K, 10-Q, and 10-K provide details on important factors that could cause actual results to differ materially from those anticipated in the forward looking statements. Once the call becomes open for questions. We ask that you limit. Your first round to one question per caller to give everyone the opportunity to participate.

Gregory J. Hayes: Once the call becomes open to questions, we ask that you limit your first round to one question per caller to give everyone the opportunity to participate. To ask a question, you will need to press star 11 on your telephone. You may ask further questions by reinserting yourself into the queue as time permits.

Gregory J. Hayes: <unk> to ask a question you will need to press star one on your telephone you may ask further questions by Reinsert yourself into the queue as time permits with that I will turn the call over to Mr. Hayes.

Gregory J. Hayes: Thanks and good morning, everyone. As you all know, next week at our annual shareholders meeting, I'll be stepping down as CEO and turning the reins over to Chris Calio. For the past two years, Chris has had responsibility for leading our three business units, Brad Whitney, Collins, and Raytheon. There's no better evidence of his success than our results this quarter, with strong sales and operating profit growth and a record backlog of over $200 billion. I'll be back at the conclusion of the call for some final comments, but let me turn it over to Chris right now to give you an overview of the company and our first quarter performance. Okay, Chris?

Hayes: Thanks, and good morning.

Gregory J. Hayes: One as you all know next week at our annual shareholders meeting I'll be stepping down as CEO and turning the reins over to Chris Kelly.

Hayes: For the past two years, Chris has had responsibility for leading our three business units bread Whitney Collins and Raytheon.

Hayes: Better evidence of his success and our results this quarter with strong sales and operating profit growth and a record backlog of over $200 billion.

Chris Kelly: I'll be back at the conclusion of the call for some final comments, but let me turn it over to Chris right now to give you an overview of the company and our first quarter performance Chris.

Christopher T. Calio: Thank you, Greg, and good morning, everyone. First, I want to acknowledge and express my appreciation for Greg's leadership. He has created significant value over the last decade as CEO and has shaped RTX into the best portfolio in A&E with our three industry-leading businesses, leaving a strong foundation for our continued success. Before we discuss our first quarter, I want to spend a few moments on the strength of this foundation and how we plan to build upon it in 2024 and beyond. I know we've highlighted this before, but I think it's worth repeating.

Chris: Thank you, Greg and good morning, everyone first I want to acknowledge and express my appreciation for Greg's leadership. He has created significant value over the last decade, a CEO Ms shape, our T X into the best portfolio in A&D as our three industry, leading businesses, leaving a strong foundation for our continued success before.

Chris: Before we discuss our first quarter I want to spend a few moments on the strength of this foundation and how we plan to build upon it in 2024 and beyond.

Chris: I know you've highlighted it before but I think it's worth repeating.

Christopher T. Calio: Collins is an industry leader, number one or number two on 70% of its product portfolio, and has an off-warranty installed base of $100 billion, which will create decades of aftermarket growth. At Pratt, the large commercial engine business has an installed base of 12,000 engines and a backlog of over 10,000 GTS, which will also drive growth for decades to come. Pratt is much more than the GTF.

Chris: <unk> is an industry leader number one or number two on 70% of its product portfolio and is an off warranty installed base of $100 billion.

Chris: Which will create decades of aftermarket growth.

Chris: At Pratt the large commercial engine business has an installed base of 12000 engines in the backlog of over 10000, GTS, which will also drive growth for decades to come.

Chris: For Pratt is much more than the GTS.

Christopher T. Calio: Bratwini Canada remains the premier small engine business with sole source positions on over 200 platforms and 63,000 engines in service, which also comes with long aftermarket histories, and Pratt's military engine business is set to power the F-35 and B-21 bomber well into the future. At Raytheon, our defense franchises are essential to the U.S. and our allies as they confront the threats of today and tomorrow with programs like the Patriot Air Defense System, GEMT, NASAMS, SPY-6 radars, AMRAAM, Tomahawk, and the Standard Missile Family, and future technologies like LTAMs, hypersonics, and LRSO, the Long-Range Standoff Cruise Missile.

Chris: Brent when he Canada remains the Premier small engine business with sole source positions on over 200 platforms and 63000 engines in service, which also comes with long aftermarket tails.

Chris: And perhaps military engine business is set to power the F 35, and B 21 bomber well into the future.

Chris: Raytheon our defense franchises are central to the U S and our allies as they confront the threats of today and tomorrow. The programs like the Patriot Air Defense system, GMT Naas Ams spy six radars Amiram Tomahawk and the standard missile family, a future technologies like LTE Ams hypersonic and now.

Chris: So the long range standoff cruise missile.

Christopher T. Calio: So as we move forward, our focus will continue to be transforming RTX from the best portfolio in AMD into the best company in AMD. This means being recognized by our customers as a trusted partner that executes on its commitments. It means leveraging our core operating system to help drive operational excellence in terms of quality and cost. It means being the provider of differentiated technologies that create a competitive advantage, and it means converting all of these attributes into best-in-class financial performance and long-term shareholder value. All right, with that, let me move to the quarter on slide two.

Chris: So as we move forward our focus will continue to be transforming our TX from the best portfolio in A&D into the best company in A&D.

Chris: It means being recognized by our customers as a trusted partner to execute on its commitments. It means leveraging our core operating system to help drive operational excellence in terms of quality and cost.

Chris: It means being the provider of differentiated technologies to create a competitive advantage.

Chris: And it means converting all of these attributes into best in class financial performance and long term shareholder value.

Speaker Change: Alright with that let me move to the quarter on slide two.

Christopher T. Calio: We've gotten off to a strong start to the year with organic sales of 12%, segment operating profit of 10%, and free cash flow in line with our expectations. Commercial OE was up 33% across RTX, driven by continued strong demand for new aircraft. The commercial aftermarket was up 11% as we continue to see strong growth in both domestic and international RPKs. So clearly, commercial aero demand is there. As you all know, the industry is still working through supply chain constraints and other challenges, which is leading to some OE production rate uncertainty. And this will continue to be a watch item for us for the year.

Speaker Change: We've gotten off to a strong start to the year with organic sales up 12% segment operating profit up 10% and free cash flow in line with our expectations.

Speaker Change: Commercial OE was up 33% across our TX driven by continued strong demand for new aircraft.

Speaker Change: The commercial aftermarket was up 11% as we continue to see strong growth in both domestic and international RP case.

Speaker Change: So clearly the commercial Aero demand is there. So as you all know the industry is still working through supply chain constraints and other challenges, which is leading some OE production rate uncertainty and this will continue to be a watch item for us for the year.

Christopher T. Calio: On the defense side, we delivered 7% growth year-over-year and ended the quarter with a defense book-to-bill of $105 billion and a backlog of $77 billion. We're pleased the fiscal year 2024 spending bills have been enacted and provide $886 billion in defense spending, which is up 3%. But more importantly, the budget supports key programs and technologies, including next-generation propulsion, critical munitions, and upgrades to the F-135, ensuring it remains the only engine powering every variant of the F-35 Joint Strike Fighter.

Speaker Change: On the defense side, we delivered 7% growth year over year and ended the quarter with the defense book to Bill of 105, and a backlog of 77 billion.

Speaker Change: The fiscal year 2024 spending bills have been enacted and provide 886 billion in defense spending which is up 3%, but more importantly, the budget supports our key programs and technologies, including next generation propulsion critical munitions and upgrades to the F 135, ensuring it remains the only engine powering every variant of the F 35.

Speaker Change: Joint strike fighter.

Christopher T. Calio: The budget also supports investment in key capabilities to address current and future threats, such as systems that counter unmanned aircraft and hypersonics, where RTX provides leading technologies. We are encouraged by the progress on the Ukraine Supplemental Bill, which the DoD will use to further deepen critical US munition stockpiles such as TOW, JAVELIN, and Excalibur and provide needed air defense capabilities to the region with NASAMS and Patriot. Internationally, we continue to see heightened demand from US allies. In the quarter, Raytheon was awarded a $1.2 billion contract to supply Germany with additional Patriot air and missile defense systems.

Speaker Change: The budget also supports investment in key capabilities to address current and future threats such as systems that counter unmanned aircraft and hypersonic for RPX provides leading technologies.

Speaker Change: And we are encouraged by the progress on the Ukraine supplemental Bill, which the Dod will use to further deepen critical use munitions stockpiled, such as toe javelin and Excalibur and provide needed air defense capabilities to the region with Naas Ams and Patriot.

Speaker Change: Internationally, we continue to see heightened demand from U S allies in the quarter Raytheon was awarded a $1 $2 billion contract to supply, Germany with additional Patriot Air and missile defense systems.

Christopher T. Calio: Okay, let me move beyond the end market dynamics and talk about some of our critical initiatives. I'll start with an update on the GTF fleet management plan. We continue to stay on track here, and our financial and operational outlook remain consistent with our prior comments. As you may have seen, in March, the GPF airworthiness directives were issued and are consistent with our service bulletins and service instructions.

Speaker Change: Okay, Let me move beyond the end market dynamics and talk about some of our critical initiatives and I'll start with an update on the GTS fleet management plan.

Speaker Change: Continue to stay on track here, and our financial and operational outlook remain consistent with our prior comments as.

Speaker Change: As you may have seen in March the G. T. F. Airworthiness directives were issued and are consistent with our service bulletins and service instructions on.

Christopher T. Calio: On the technical side, the results from the ultrasonic angle scan inspections have all been in line with our initial expectations and assumptions. With regard to new engine production, as we said in our last call, all GTS engines being delivered to our customers' final assembly lines have full life HPC and HPT discs. And on the MRO side, we have started the process of incorporating full-life disks into certain engine overhauls, and as we previously said, we expect to gradually ramp up this effort throughout the year.

On the technical side the results from the ultrasonic angle scan inspections have all been in line with our initial expectations and assumptions.

Speaker Change: With regard to new engine production as we said on our last call. Our GTS engines being delivered to our customers final Assembly lines have full life, HBC and HPT desks and.

Speaker Change: And on the MRO side, we have started the process of incorporating full like desks into certain engine overhauls and as we previously said, we expect to progressively ramp this effort throughout the year.

Christopher T. Calio: In addition, the PW1100 engine shop was completed in the quarter. We're in line with our plan and up 50% year over year. With regard to overhaul turnaround time, our average wing-to-wing turnaround time assumptions remain consistent with our prior guidance of roughly 250 to 300 days.

Speaker Change: In addition, the PW 1100 engine shop visits completed in the quarter were in line with our plan and up 50% year over year.

Speaker Change: With regard to overhaul turnaround time, our average wing to wing turnaround time assumptions remain consistent with our prior guidance of roughly 250 to 300 days with.

Christopher T. Calio: With the AD now issued, we are now essentially at our peak AOG level, and we continue to expect an average of roughly 350 AOGs per year from 2024 to 2026. And lastly, we have reached support agreements with nine of our customers, and these are in line with our assumptions. With that, let's turn to slide three, and I'll share a bit more on how we're leveraging our core operating system in our digital transformation to drive quality, efficiency, and productivity. As I said before, our core operating system is all about driving continuous improvements that compound over time to create a significant impact on our business. Let me give you a few recent examples.

Speaker Change: With the <unk> now issued we are now essentially at our peak ALG level. We continue to expect an average of roughly 350 <unk> from 2024 through 2026.

Speaker Change: And lastly, we have reached support agreements with nine of our customers and these are in line with our assumptions.

Speaker Change: With that let's turn to slide three and I'll share a bit more on how we're leveraging our core operating system and digital transformation to drive quality efficiency and productivity.

Speaker Change: As I said before our core operating system is all about driving continuous improvements are compound over time to create a significant impact on our business.

Speaker Change: To give you a few recent examples.

Christopher T. Calio: Our Nacelle business within Collins deployed core across seven factories that support the H320 NEO program, resulting in an 8% improvement in on-time delivery and a 17% improvement in quality. And at Raytheon on the TP2 program, which is a radar designed to detect and intercept ballistic missiles. We leverage core practices to help double first pass yield on high volume circuit cards, resulting in a 40% reduction in manufacturing hours per unit and improved on time delivery.

Our NFL business within Collins deployed core across seven factories that support the <unk> hundred 20, Neo program, resulting in an 8% improvement in on time delivery and a 17% improvement in quality and at Raytheon on the <unk> program, which is our radar designed to detect an intercept ballistic missiles, we leverage core practices to help double first pass yield on <unk>.

Speaker Change: High volume circuit cards, resulting in a 40% reduction in manufacturing hours per unit improved on time delivery.

Speaker Change: We also remain committed to enhancing our factories through digitization automation and connected equipment last year, we connected 20 factories and have another 20 planned to be completed by the end of this year once fully connected these factories will achieve improved overall equipment efficiency better quality and ultimately higher output.

Christopher T. Calio: We also remain committed to enhancing our factories through digitization, automation, and connected equipment. Last year, we connected 20 factories and have another 20 planned to be completed by the end of this year. Once fully connected, these factories will achieve improved overall equipment efficiency, better quality, and ultimately higher output. And lastly, we will continue to invest both directly and indirectly through RTX Ventures and our cross-company technology roadmaps to develop differentiated technologies to fill our product pipeline. These include areas such as advanced materials, electrification, power and thermal management, and microelectronics.

Speaker Change: And lastly, we will continue to invest both directly and indirectly through our T X ventures, and our cross company technology Roadmaps to develop differentiated technologies to fill our product pipeline. These.

Speaker Change: These include areas, such as advanced materials electrification power and thermal management and microelectronics.

Neil G. Mitchill: This year, we will invest about $3 billion in company-funded R&D, along with $5 billion in customer-funded R&D, to develop new technologies and products. We're also expanding our manufacturing capacity in key areas to meet customer demand, a key priority within our $2.5 billion of capital investment in 2024. One of our most significant new products coming to the market is LTAMS, which is the next generation advanced 360-degree air defense radar that provides significant performance improvements against a range of threats, including UAS and hypersonics.

Speaker Change: This year, we will invest about $3 billion in company funded R&D, along with $5 billion in customer funded R&D to develop new technologies and products.

Speaker Change: We are also expanding our manufacturing capacity in key areas to meet customer demand our key priority within our $2 5 billion of capital investment in 2024.

Speaker Change: One of our most significant new products coming to the market as <unk>, which is the next generation advanced 360 degree Air Defense radar that provide significant performance improvement against a range of threats, including UAS and hypersonic <unk>.

Neil G. Mitchill: This program recently completed another successful live fire event with representatives from seven countries in attendance. We expect both the first domestic LRIP and international FMS contracts this year. And today, we're announcing a $115 million expansion of our Raytheon Redstone Missile Integration Facility in Huntsville, Alabama. When complete, the factory's capacity for integrating and delivering several of our critical munitions programs will increase by more than 50%. So with the best portfolio within A&D, a strong core driving our continuous improvement in operational excellence and ongoing investments in next generation technologies, I'm incredibly confident in RTX's future and our ability to transform into the best company in A&D. With that, let me turn it over to Neil to take you through our first quarter results. Neil.

Speaker Change: This program recently completed another successful live fire event with Representatives from seven countries in attendance and we expect both the first domestic <unk> and international Fms contracts this year.

Speaker Change: And today, we're announcing a $115 million expansion of our Raytheon Redstone missile integration facility in Huntsville, Alabama, when complete the factory's capacity for integrating and delivering several of our critical munitions programs will increase by more than 50%.

Speaker Change: So with the best portfolio within A&D core driving our continuous improvement and operational excellence and ongoing investments in next generation technologies I'm incredibly confident in <unk> future and our ability to transform and to the best company in A&D.

With that let me turn it over to Neil to take you through our first quarter results Neil.

Neil Mitchell: Thanks, Chris I'm on slide four as Chris said, we got off to a really good start this year on a number of our key financial metrics across our TX with Collins, Pratt and Raytheon, all making progress in line with our expectations.

Neil G. Mitchill: Thanks, Chris. I'm on slide four.

Neil G. Mitchill: As Chris said, we got off to a really good start this year on a number of our key financial metrics across RTX, with Collins, Pratt, and Raytheon all making progress in line with our expectations. Additionally, we completed the sale of Raytheon's cybersecurity business at the end of the first quarter for a gross revenue of $1.3 billion, and we've made progress on deleveraging the balance sheet, having paid down over $2 billion of debt since we initiated the ASR last year.

Neil Mitchell: Additionally, we completed the sale of Raytheon cyber security business at the end of the first quarter with gross proceeds of $1 3 billion.

Neil Mitchell: And we've made progress on deleveraging the balance sheet, having paid down over $2 billion of debt since we initiated the ASR last year.

Neil Mitchell: <unk> sales of $19 3 billion were up 12% organically versus prior year and that is on top of 10% growth in the first quarter of last year.

Neil G. Mitchill: RTX sales of $19.3 billion were up 12% organically versus the prior year, and that is on top of 10% growth in the first quarter of last year. Demand strength was also reflected in our backlog, which is now $202 billion and up 12% year over year. However, segment operating profit growth of 10% was partially offset by expected headwinds from lower pension income and higher interest expense. And our effective tax rate for the quarter included a current period foreign tax benefit.

Neil Mitchell: Demand strength was also reflected in our backlog, which is now $202 billion and up 12% year over year.

Neil Mitchell: Segment operating profit growth of 10% was partially offset by expected headwinds from lower pension income and higher interest expense and our effective tax rate for the quarter included a current period foreign tax benefit.

Neil Mitchell: Adjusted earnings per share of $1 34 was up 10% year over year.

Neil Mitchell: On a GAAP basis EPS from continuing operations was $1 28, and included 29 of acquisition accounting adjustments for 'twenty, one benefit related to tax audit settlements and <unk>.

Neil G. Mitchill: Adjusted Earnings Per Share of $1.34 was up 10% year-over-year. And on a gap basis, EPS from continuing operations was $1.28 and included 29 cents of acquisition accounting adjustments, a 21-cent benefit related to tax audit settlements, an 18 cent net gain related to the cyber business sale, a 13 cent charge related to initiating alternative titanium sources, and three cents of restructuring and other non-recurring items.

Neil Mitchell: <unk> <unk> net gain related to the cyber business sale, a 13th <unk> charge related to initiating alternative titanium sources and <unk> <unk> of restructuring and other nonrecurring items.

Neil Mitchell: And finally free cash flow was an outflow of 125 million in the first quarter in line with our expectations and a $1 $3 billion year over year improvement.

Neil Mitchell: As planned the timing of defense milestones and increase in shop visits along with inventory build to support our growth drove higher working capital this quarter.

Neil G. Mitchill: And finally, free cash flow was an outflow of $125 million in the first quarter, in line with our expectations, and a $1.3 billion year-over-year improvement. As planned, the timing of defense milestones and increase in shop visits, along with inventory levels to support our growth, drove higher working capital this quarter. Okay, let me turn to our business units and some of the progress we made in the quarter. You heard Chris give a status update on the GTF fleet management plan.

Speaker Change: Okay, Let me turn to our business units and some of the progress we made in the quarter you heard Chris give a status update on the GTS Fleet management plan. So let me touch on our top priorities at Raytheon and columns.

Speaker Change: At Raytheon the business continues to see incredible demand and as we sit on our last call. We're taking actions to advance our key franchises improve our supply chain and drive margin expansion.

Speaker Change: In the quarter breakdown saw 50 basis points of sequential margin improvement and 20 basis points on a year over year basis on the material front, we saw a double digit increase of material receipts in the first quarter versus prior year, the fourth consecutive quarter of growth, which of course is driving the top line, but more importantly, helping to alleviate bottlenecks in the manufacturing.

Neil G. Mitchill: So let me touch on our top priorities at Raytheon and Com. At Raytheon, the business continues to see incredible demand. And, as we said on our last call, we're taking actions to advance our key franchises, improve our supply chain, and drive margin expansion. In the quarter, Raytheon saw 50 basis points of sequential margin improvement and 20 basis points on a year-over-year basis. On the material front, we saw a double-digit increase in material receipts in the first quarter versus the prior year, the fourth consecutive quarter of growth, which of course is driving the top line, but more importantly, is helping to alleviate bottlenecks in the manufacturing processes and burn down overdue sales.

Speaker Change: Processes and burned down overdue sales moving over to Collins, our focus remains on driving incremental margins through continued commercial OE and aftermarket growth and the benefit from ongoing structural cost reduction.

Speaker Change: In the quarter, Colin saw strong sales growth and 90 basis points of margin expansion on both a sequential and year over year basis, and we expect future volume increases to drive continued fixed cost absorption benefits across the business. This year.

Speaker Change: On the cost reduction front, we continue to make progress as well for example colleges in the process of shifting $2 7 million manufacturing hours to best cost locations by the end of 2025.

Neil G. Mitchill: Moving over to Collins, our focus remains on driving incremental margins through continued commercial OE and aftermarket growth and the benefit from ongoing structural cost reduction. In the quarter, Collins saw strong sales growth and 90 basis points of margin expansion on both a sequential and year over year basis, and we expect future volume increases to drive continued fixed cost absorption benefits across the business this year. On the cost reduction front, we continue to make progress as well.

Speaker Change: To date over $2 million of those hours have already been moved with 400000 more planned for the rest of the year.

Speaker Change: And finally, we also achieved an incremental $105 million of RPX gross merger cost synergies in the quarter and we're approaching the $2 billion target. We updated last year. So good progress on our top priorities to start the year with that based on our first quarter results and strong backlog, we remain on track to deliver our full year outlook include.

Neil G. Mitchill: For example, Collins is in the process of shifting 2.7 million manufacturing hours to the best cost locations by the end of 2025. To date, over 2 million of those hours have already been moved, with 400,000 more planned for the rest of the year. And finally, we also achieved an incremental $105 million of RTX gross merger cost synergies in the quarter, and we're approaching the $2 billion target we updated last year. So, good progress on our top priorities to start the year.

Speaker Change: Full year sales of between $78 $79 billion.

Speaker Change: Which translates to between seven and 8% organic revenue growth in.

Speaker Change: In addition, we continue to see adjusted earnings per share between $5 25.

Speaker Change: And $5 40 and.

Speaker Change: And free cash flow of approximately $5 7 billion.

Speaker Change: Now, let me hand, it over to Jennifer to take you through the segment results Jennifer.

Jennifer Reed: Thanks, Neal starting with comments on slide five sales were $6 7 billion in the quarter up 9% in both an adjusted and organic basis, driven primarily by continued strength in commercial aftermarket and OE by channel commercial aftermarket sales were up 14% driven by a 17% increase in parking repair <unk>.

Neil G. Mitchill: Based on our first quarter results and strong backlog, we remain on track to deliver our full year outlook, including full year sales of between $78 and $79 billion, which translates to between 7 and 8% organic revenue growth. In addition, we continue to see adjusted earnings per share between $5.25 and $5.40 and free cash flow of approximately $5.7 billion. Now, I will hand it over to Jennifer to take you through the segment results. Jennifer.

Jennifer Reed: 1% increase in provisioning and a 3% decrease in margin upgrade commercial OE sales for the quarter were up 14% versus the prior year driven by growth in wide body narrow body and biz jet platform and defense sales were up 1%, primarily due to higher volume adjusted operating profit of 1.05 billion was up.

Jennifer Reed: $145 million or 16% in the prior year with drop through on higher commercial aftermarket volume, partially offset by unfavorable OEM mix higher space program costs and increased R&D expense looking ahead on a full year basis, we continue to expect calling sales to grow mid to high single digits on both and adjust.

Jennifer Reed: Thanks, Neil. Starting with Collins on slide 5. Sales were $6.7 billion in the quarter, up 9% on both an adjusted and an organic basis, driven primarily by continued strength in commercial aftermarket and OE. By channel, commercial aftermarket sales were up 14%, driven by a 17% increase in parts and repair, a 16% increase in provisioning, and a 3% decrease in mods and upgrades. Looking ahead, on a full-year basis, we continue to expect Collins sales to grow mid to high single digits on both an adjusted and an organic basis, with operating profit growth between $650 and $725 million versus 2023. Now, shifting to Pratt Whitney on slide six.

Jennifer Reed: And organic basis with operating profit growth between 650 and $725 million versus 2023.

Jennifer Reed: Shifting to Pratt <unk> Whitney on slide six.

Sales of $6 5 billion were up 23% in both an adjusted and organic basis with sales growth across all three channels.

Jennifer Reed: I shall OE sales were up 64% in the quarter and higher engine deliveries and favorable mix in the large commercial engine business.

Jennifer Reed: Commercial aftermarket sales were up 9% in the quarter driven by higher volume within large commercial engine, primarily related to GTS overhaul activity as well as an increased volume at Pratt Canada.

Jennifer Reed: Sales of $6.5 billion were up 23% on both an adjusted and an organic basis with sales growth across all three channels. Commercial OE sales were up 64% in the quarter, driven by higher engine deliveries and a favorable mix in the large commercial engine business. Commercial aftermarket sales were up 9% in the quarter, driven by higher volume within large commercial engines, primarily related to GTF overhaul activity, as well as an increased volume at Pratt Canada.

Jennifer Reed: Legacy large commercial engine aftermarket revenues were down slightly versus prior year as a result of increased allocation of material to support the GTS fleet.

Jennifer Reed: And in the military engine business sales were up 21%, primarily driven by higher Sustainment volume across the F 35, F 117, and F 100 platform.

Jennifer Reed: Higher development volume, primarily driven by the F 35 engine core upgrade program adjusted operating profit of $430 million was flat to prior year the benefit of favorable commercial OE mix and drop through on higher commercial aftermarket volume was partially offset by headwinds from increased commercial OE deliveries.

Jennifer Reed: Legacy Large Commercial Engine aftermarket revenues were down slightly versus prior year as a result of increased allocation of material to support the GTF fleet. And in the military engine business, sales were up 21% primarily driven by higher sustainment volume across the F-135, F-117, and F-100 platforms and higher development volume primarily driven by the F-135 engine core upgrade program. Adjusted operating profit of $430 million was flat versus prior year.

Jennifer Reed: Unfavorable commercial aftermarket mix and the absence of a favorable 60 million prior year contract banner.

Jennifer Reed: Higher military volume and favorable mix more than offset by higher R&D and SG&A expenses.

Jennifer Reed: Turning to <unk> full year outlook, we continue to expect sales to grow low double digits on a adjusted and organic basis and adjusted operating profit to grow between 400 and $475 million versus 2023.

Jennifer Reed: The benefit of favorable commercial OEM mix and drop-through and higher commercial aftermarket volume was partially offset by headwinds from increased commercial OE deliveries, unfavorable commercial aftermarket mix, and the absence of a favorable $60 million prior year contract matter. Higher military volume and favorable mix were more than offset by higher R&D and SG&A expenses. Turning to Pratt's full-year outlook, we continue to expect sales to grow low double digits on an adjusted and organic basis and adjusted operating profit to grow between $400 and $475 million versus 2023, as the large commercial engine aftermarket continues to ramp up and military volume grows. Now turning to Raytheon on slide 7.

Jennifer Reed: Large commercial engine aftermarket continues to ramp and military volume growth now turning to Raytheon on slide seven sales of $6 7 billion in the quarter were up 6% in both an adjusted and organic basis, primarily driven by higher volume on land and air Defense system and advanced technology pros.

Jennifer Reed: Graham.

Jennifer Reed: The increase in land and Air Defense system program reflect higher customer demand for the Patriot counter UAS systems and Nathan.

Jennifer Reed: Adjusted operating profit for the quarter of $630 million was up $46 million versus the prior year.

Jennifer Reed: Given primarily by higher volume and improved net productivity, partially offset by unfavorable mix.

Jennifer Reed: Also recall that Q1 2023 net productivity included the exercise of the significant unfavorable contract option that did not repeat in the first quarter of this year bookings and backlog remained very strong.

Jennifer Reed: Sales of $6.7 billion in the quarter were up 6% on both an adjusted and an organic basis, primarily driven by higher volume on land and air defense systems and advanced technology programs. The increase in land and air defense system programs reflect higher customer demand for the Patriot, Counter UAS systems, and NASAM. Adjusted operating profit for the quarter of $630 million was up $46 million versus the prior year, driven primarily by higher volume and improved net productivity, partially offset by unfavorable mix.

Jennifer Reed: In the first quarter bookings of $8 1 billion resulted in a book to Bill of 123, and a backlog of $53 billion.

Jennifer Reed: In addition to the German Patriot Award that Chris mentioned earlier Raytheon also saw significant orders for the Gen T Nathans and classified work looking ahead, we continue to expect Raytheon sales to grow low to mid single digits organically with operating profit up between 100 and $200 million versus 2023.

Jennifer Reed: Also recall that Q1 2023 net productivity included the exercise of a significant unfavorable contract option that did not repeat in the first quarter of this year. However, bookings and backlog remained very strong. In the first quarter, bookings of $8.1 billion resulted in a book-to-bill of $1.23 and a backlog of $53 billion. In addition to the Derman Patriot Award that Chris mentioned earlier, Raytheon also saw significant orders for the Gen-T, NASAMS, and Classified work.

Jennifer Reed: A reminder, the profit outlook include an $80 million year over year headwind from the sale of the cyber security business with that I'll turn it back to Chris to wrap things up.

Chris: Thanks, Jennifer I'm on slide eight.

Chris: With our portfolio strength and current demand our overall backlog is at a record 202 billion and our focus as a team remains on executing this backlog to meet our customer commitments and driving operational performance.

Chris: And our top priorities for the year remain unchanged.

Chris: First at Pratt, it's about continuing to execute the GTS fleet management plant.

Jennifer Reed: Looking ahead, we continue to expect Raytheon sales to grow low to mid-single digits organically, with operating profit up between $100 and $200 million versus 2023. As a reminder, the profit outlook includes an $80 million year-over-year headwind from the sale of the cybersecurity business. With that, I'll turn it back to Chris to wrap things up.

Chris: Second at Raytheon, it's about delivering the backlog had improved margins in.

Chris: And third our Collins, it's about generating strong incremental margins.

Chris: As I discussed our core operating system underpins our execution on these priorities and drive continuous improvement across our TX the.

Chris: At the same time, we're investing over $10 billion in research and development modernization and digital capabilities continuing to evaluate our portfolio for incremental opportunities to further enhance our focus and prioritize future investments.

Christopher T. Calio: Thanks, Jennifer. I'm on slide eight. With our portfolio strength and current demand, our overall backlog is at a record $202 billion, and our focus as a team remains on executing this backlog to meet our customer commitments and driving operational performance, and our top priorities for the year remain unchanged. First, at Pratt, it's about continuing to execute the GTF fleet management plan. Second, at Raytheon, it's about delivering the backlog at improved margins.

Chris: And as we do this we remain on track to return, 36% to $37 billion of capital to shareowners from the date of the merger through next year, So with that let me turn it over to Neil.

Neil Mitchell: Thanks, Chris before we go into Q&A I want to quickly update everyone on an investor relations team leadership transition after three years, leading the team Jennifer Reed is moving on to our next opportunity.

Neil Mitchell: Jennifer took the helm in an unprecedented environment and worked tirelessly to ensure all of our stakeholders had timely and clear information during the critical post merger years for RPX I want to thank Jennifer for her leadership.

Christopher T. Calio: And third, at Collins, it's about generating strong incremental margins. As I discussed, our core operating system underpins our execution on these priorities and drives continuous improvement across RTX. At the same time, we're investing over $10 billion in research and development, modernization, and digital capabilities, and continuing to evaluate our portfolio for incremental opportunities to further enhance our focus and prioritize future investments. And as we do this, we remain on track to return $36 to $37 billion of capital to shareholders from the date of the merger through next year. So with that, I will turn it over to Neil.

Neil Mitchell: And I also want to introduce Nathan Ware, who is coming over from our Collins business to lead Investor Relations. Some of you will remember Nathan as he was a member of the UTC IR team, leading up to the merger, but since then Nathan is held a couple of roles at Collins and most recently as CFO of the interiors business.

Neil Mitchell: Jennifer and Nathan will work to ensure a smooth transition for all of us and all of you.

Speaker Change: And with that we're ready to open the line for our first question.

Speaker Change: And the interest of time and to allow for a broader participation. You are asked to limit yourself to one question to ask a question you will need to press star one one on your telephone.

Neil G. Mitchill: Thanks, Chris. Before we go into Q&A, I want to quickly update everyone on the investor relations team leadership transition. After three years leading the team, Jennifer Reed is moving on to her next opportunity. Jennifer took the helm in an unprecedented environment and worked tirelessly to ensure all of our stakeholders had timely and clear information during the critical post-merger years for RTX. I want to thank Jennifer for her leadership, and I also want to introduce Nathan Ware, who's coming over from our Collins business to lead Investor Relations.

Speaker Change: Our first question comes from the line of Myles Walton of Wolfe Research. Your question. Please Myles.

Myles Alexander Walton: Thanks, Good morning, and thanks for the help Jennifer over the over the years.

Myles Alexander Walton: Can you talk to the Pratt aftermarket first to start and sort of if there's risk to achieving our full year guidance given the harder comps that play out for the rest of the year.

Myles Alexander Walton: Given the 9% in the first quarter and low double digit is expected for the full year.

Myles Alexander Walton: Good morning, Myles. This is neill I'll start out and Chris can add anything here, but a.

Neill: Couple of things on the Pratt aftermarket I think 9% aftermarket growth in the first quarter was largely as we expected. We took the first quarter to make sure that we started off on a strong foot with respect to the GTS aftermarket overhauls and I'm sure Chris can provide a little more color there.

Neil G. Mitchill: Some of you will remember Nathan as he was a member of the UTC IR team leading up to the merger, but since then, Nathan has held a couple of roles at Collins and, most recently, as CFO of the interiors business. Jennifer and Nathan will work to ensure a smooth transition for all of us and all of you. And with that, we are ready to open the line for our first question.

Neill: In doing so there was a little bit lighter material allocation to the V 25, hundreds were actually down.

Neill: Handful of shop visits year over year in the first quarter, a little bit around 175% or so we still feel confident though that will hit 800 shop visit inductions on the V 2500 for the full year and so what we expect to play out over the remainder of the year is that we will see more and more of those shop visits come in we will also see the content on their <unk>.

Operator: In the interest of time and to allow for broader participation, you are asked to limit yourself to one question. To ask a question, you will need to press star 11 on your telephone. Our first question comes from the line of Myles Walton of Wolf Research. Your question, please, Myles.

Neil G. Mitchill: Morning, Myles. This is Neil. I'll start out, and Chris can add anything here. But, you know, a couple of things on the Pratt aftermarket. I think 9% aftermarket growth in the first quarter was largely as we expected. We took the first quarter to make sure that we started off on a strong foot with respect to the GTF aftermarket overhauls. And I'm sure Chris can provide a little more color there.

Neill: Visits increased so we will see better drop through on the legacy aftermarket back in January we talked about the PW two thousands and four thousands theres some puts and takes there they largely offset for the year. So it's really about seeing that legacy aftermarket continue to grow so full year still expect.

Neil G. Mitchill: In doing so, you know, there was a little bit lighter material allocation to the V2500s. We're actually down a handful of shop visits year over year in the first quarter, a little bit, around 175 or so. We still feel confident, though, that we'll hit 800 shop visit inductions on the V2500 for the full year. And so what we expect to play out over the remainder of the year is that we will see more and more of those shop visits come in.

Neill: Low teens sort of growth in the aftermarket at Pratt and we're confident that we'll see the material flowing to support that.

Speaker Change: I mean, I guess only thing I would add miles the stresses to Neil's point, we know we needed to come out of the gate strong on GTS MRO given the situation in the fleet management plan and so we were allocating material and resources with that in mind I think we saw the fruits of that here in the in the first quarter, but as Neil said.

Speaker Change: We continue to see that the demand on what we'd call the mature fleets, the and others and in that ramp up is calibrated in our number for the year. So still feel confident is going to deliver the full year shop visits that we need.

Neil G. Mitchill: We'll also see the content on those shop visits increase, so we'll see better drop through on the legacy aftermarket. Back in January, we talked about the PW2000s and 4000s. You know, there's some puts and takes there. They largely offset for the year. So it's really about, you know, seeing that legacy aftermarket continue to grow. So full year we still expect, you know, low teens sort of growth in the aftermarket for Pratt. And we're confident that we'll see the material flowing to support that. Yeah, I mean, I guess the only thing I would add, Miles, is Chris, is Danielle's point.

Speaker Change: Alright, Thanks makes sense.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of Christine Li Wang of Morgan Stanley. Please go ahead Christine.

Speaker Change: Hey, good morning, everyone.

Speaker Change: Interesting.

Speaker Change: And then Greg. Thank you for your leadership over the years and Jennifer wish you. The best in your next endeavor, so maybe on GTS Chris.

Speaker Change: Thank you for providing more color on the GTS fleet management plan and at this point it seems like everything is progressing well.

Speaker Change: Well, so as we look forward to understanding the risk retirement are there other milestones you're monitoring to see if there could be potential risk reduction is there a number of specific completed eog's or more customer agreements to be completed any sort of gauge to help us understand.

Christopher T. Calio: Yeah, I mean, I guess the only thing I would add, Myles, this is Chris, to Neil's point: we knew we needed to come out of the gate strong on GTF and MRO given the situation in the fleet management plan. And so we were, you know, allocating material and resources, you know, with that in mind. And I think we saw the fruits of that here in the first quarter.

Speaker Change: Risk retirement would be helpful.

Sure Thanks, Christine and good morning.

Christopher T. Calio: But, as Neil said, we continue to see demand for what we call the mature fleets, the V, and others. And, you know, that ramp-up is calibrated in our numbers for the year. So I still feel confident it's going to deliver the full year shop visits that we need.

Speaker Change: So look.

Speaker Change: The GTS fleet management plan is a multi year process and we're going to continue to grind through that over the next three years or so and we've laid out all of the key enablers, we lifted him on the call today, we've done it historically and that's going to be <unk> levels, that's going to be turnaround times and so again, we've given though.

Operator: comes from the line of Kristine Liwag of Morgan Stanley. Please go ahead, Kristine.

Unknown Attendee: Hey, good morning everyone. Morning Kristine.

Unknown Attendee: And Greg, you know, thank you for your leadership over the years, and Jennifer, I wish you the best in your next endeavor. So maybe on GTF, Chris, you know, thank you for providing more color in the GTF fleet management plan. And at this point, it seems like everything is progressing well. So as we look forward to understanding the risk retirement, are there other milestones you're monitoring to see if there could be potential risk reduction? Is there a number of specific completed AOGs or more customer agreements to be completed? Any sort of gauge to help us understand risk retirement would be helpful.

Speaker Change: Those.

Speaker Change: Sort of ranges on each of those key enablers and we're going to continue to do everything we can to stay within or move to the lower end of those range ranges and again the single biggest enabler for US is MRO output, we had very good first quarter, but we've got a large growth plan here in 2020.

Speaker Change: <unk> and so for us it's about material flow, including the new powdered metal parts that were going to be putting into the engines. As we said during the last call and during our comments, we continue to add the full life HTC in HPT.

Christopher T. Calio: Sure. Thanks, Kristine. Good morning. So, to look...

Christopher T. Calio: Sure. Thanks, Kristine. Good morning.

Speaker Change: Morrow and it's going to ramp throughout the year, so that'll be a key indicator for us the more output. We can get obviously the more relief we can get the fleet the less <unk> days and then the less penalties.

Christopher T. Calio: [inaudible] The GTF fleet management plan is a multi-year process. And you know, we're going to continue to grind through that over the next three years or so. And we've laid out all of the key enablers, we listed them on the call today. We did it, you know, historically, and that's going to be AOG levels, that's going to be turnaround times. And so again, we've given those sort of ranges on each of those key enablers.

Speaker Change: Really that simple so for us it's all about the MRO enablers, chief among them continuing to ramp up continuing the powdered metal powder production.

Speaker Change: Production insertion.

Speaker Change: MRO MRO MRO MRV MRV.

Speaker Change: MRV MRO MRO.

Speaker Change: Tomorrow.

Speaker Change: Great. Thank you very much.

Speaker Change: Yes, sorry about the feedback there.

Christopher T. Calio: And we're going to continue to do everything we can to stay within or move to the lower end of those ranges. And again, the single biggest enabler for us is MRO output. We had a very good, you know, first quarter, but we've got, you know, a large growth plan here in 2024. And so for us, it's about material flow, including the new powdered metal parts that we're going to be putting into the engines, as we said during the last call.

Speaker Change: <unk>, Steve So hopefully that that all came through.

Speaker Change: Very helpful. Appreciate it.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Seth assessment of Jpmorgan. Your question. Please.

Speaker Change: Okay.

Seth: Thanks very much.

Seth: Hey.

Seth: Maybe kind of a small picture question here, but it is one that we get a lot.

Seth: When you think about the.

Seth: Trajectory of aircraft on ground and it seems like we are right around the highest level, we'll see here at.

Seth: And the $5 50 ish level.

Christopher T. Calio: And during our comments, we continue to add the full life HPC and HPT in MRO, and it's going to ramp throughout the year. So that'll be a key indicator for us, the more output we can get, obviously, the more relief we can give the fleet, the fewer AOG days, and then the less penalty. It's really that simple. So for us, it's all about the MRO enablers, chief among them, continuing to ramp up, continuing to powder metal, power production, and insertion.

Seth: When we think about where that goes from here do we think of that more as a plateau for the remainder of the year for a couple of quarters.

Seth: Or do we start to see some progress there and when you think about where turnaround times are kind of now and the improvement that you can make over the next few quarters is there anything that you can kind of lay out for us to gauge that.

Seth: Hey, Seth this is Chris Thanks for the question, Yes. So we are as we said in our comments essentially at peak AIG I mean, there'll be some perturbations, a little bit above little bit below but we see that as kind of the peak and we're going to start to gradually.

Unknown Attendee: Great, thank you very much.

Unknown Attendee: Yeah, sorry about that feedback there, Kristine, so hopefully that all came through. Very helpful. I appreciate it.

Unknown Attendee: Very helpful; I appreciate it.

Operator: Our next question comes from the line of Seth Seifman of J.P. Morgan. Your question, please, Seth.

Seth: Chip away and move that down so.

Seth: So again as I said to Christine's question. The number one enabler of that is our MRO output and again strong start to the quarter, but we've got a big plan for the year and we're focused on turnaround times and new material at the end of the day.

Unknown Attendee: Hey, thanks very much and good morning. Maybe this is a small picture question here, but it is one that we get a lot. You know, when you think about the trajectory of aircraft on the ground, and it seems like we are right around the highest level we'll see here at, you know, in the 550-ish level. When we think about where that goes from here, do we think of that more as a plateau for the remainder of the year, for a couple of quarters, or, you know, do we start to see some progress there?

Seth: In terms of our MRO output, it's not so much about capacity, we've got enough shops, we've got enough labor, it's about material flow faster than we can flow material faster, we can take turnaround times down increase output and then burned down the backlog of those engines waiting for induction.

Speaker Change: Great. Thank you very much.

Speaker Change: Thank you.

Speaker Change: Our next question.

Comes from the line of Ron Epstein.

Unknown Attendee: And, you know, when you think about where turnaround times are kind of now and the improvement that you can make over the next few quarters, is there anything that you can kind of lay out for us to gauge that?

Ronald Jay Epstein: Bank of America. Your question please Rob.

Ronald Jay Epstein: Hey, good morning, guys.

Ronald Jay Epstein: Good morning, Ross could.

Ronald Jay Epstein: Could you speak a little bit too.

Ronald Jay Epstein: The supplemental <unk>.

Speaker Change: Got through the house.

Ross: How that plays out for your defense business.

Christopher T. Calio: Hey, Seth. This is Chris. Thanks for the question. Yeah, so look, we are, as we said in our comments, essentially at peak AOG. I mean, there'll be some perturbations a little bit above and a little bit below, but we, you know, see that as kind of the peak, and we're going to start to gradually, you know, chip away and move that down. So again, as I said to Kristine's question, the number one enabler of that is our MRO output.

Ross: What good is there in there for you guys.

Ross: Hey, good morning, Ron This is Chris so as I'm sure you've seen if you break down sort of a supplemental in two big buckets about 60 billion for Ukraine, another 25, or so for Israel and $10 billion for Endo pay com. So we look at.

Ross: Our product portfolio against those big buckets, we look at Ukraine, and say about two thirds of that is addressable with RPX products think GMT, ne Sam's Patriot Amiram aim nymex.

Christopher T. Calio: And again, a strong start to the quarter, but we've got a big plan for the year, and we're focused on turnaround times and new material. At the end of the day, in terms of our MRO output, it's not so much about capacity; we've got enough shops, we've got enough labor, it's about material flow. The faster that we can flow material faster, we can take turnaround times down, increase output, and then burn down the backlog of those engines waiting for induction.

Ross: Israel, we kind of handicap that as about 30% addressable.

Ross: Powell replenishment iron Dome, David slang procurement, and then into pay com again, roughly that 30% addressable with the <unk> product suite, namely SM six Tomahawk aimed IMAX. So again the services will have their specific lists of what theyre looking for but again.

Unknown Attendee: Thank you very much.

Operator: comes from the line of Ron Epstein. Bank of America. Your question, please, Ron.

Ross: We think our product portfolio is pretty well positioned to address the needs in each of those theaters.

Unknown Attendee: Could you speak a little bit about the supplemental that got through the house? How that plays out for your defense business, and what goodies are in there for you guys?

Ross: Great.

Ross: With the start just a quick follow on you had some challenges with the fixed development fixed price development program within missiles how's that going.

Christopher T. Calio: Hey, good morning, Ron. This is Chris.

Ross: Yes, so again when you look at the productivity story at Raytheon, Ron Thats, a big part of the continued margin expansion and so in the quarter. We saw improvements in productivity, which is which is really helpful. Again as you know our productivity plan for the year is effect.

Christopher T. Calio: So, you know, as I'm sure you've seen, if you break down sort of a supplemental into its into its big buckets, it's about 60 billion for Ukraine and other 25 or so for Israel and 10 billion for IndoPACOM. So we look at, you know, our product portfolio against those, you know, big buckets, we look at Ukraine and say, about two thirds of that is addressable with with RTX products, think GemT, NASAMS, Patriot, Amram, AIM9x, Israel, we kind of handicapped that as about 30% addressable, you know, stockpile replenishment, Iron Dome, David Sling, procurements, and then IndoPay.com, again, roughly that 30% addressable with the RTX product suite, namely SM6, Tomahawk, AIM9X. So again, the services will have their specific lists of what they're looking for. But again, we think our product portfolio is pretty well positioned to address, you know, the needs in each of those theaters. Great.

Ross: <unk>.

Ross: No no productivity, but last year of course, we had some some headwinds in the productivity department. So again overall an improvement for the year. We've still got some classified programs of fixed price that we are continuing to work through we said thats kind of a 12 to 18 month journey as we work through those I would say on a <unk>.

Ross: Number of them, we've made some good progress towards milestones and others, we're going to continue to battle our way through during that period.

Speaker Change: Chris I'll, just add with respect to the productivity in the first quarter, we saw about a $58 million year over year Q1 to Q1 improvement of course, we had the exercise of an option last year, which accounts for maybe 55% of that improvement, but nonetheless, we're expecting $200 million year over year.

Christopher T. Calio: Great. And if I may, just a quick follow-on. You had some challenges with the fixed price development program for missiles. How's that going?

Speaker Change: And continue to expect $200 million year over year, and so good progress in the first quarter, but there is still <unk>.

Christopher T. Calio: Yeah, so again, when you look at the productivity story at Raytheon, Ron, that's a big part of the continued, you know, margin expansion. And so in a quarter, we saw improvements in productivity, which is really helpful. Again, as you know, our productivity plan for the years is effectively, you know, you know, no, no productivity. But last year, of course, we had some headwinds in the productivity department.

Speaker Change: Three quarters to go but we are encouraged by.

Speaker Change: The shift that we've seen here in the first quarter so far.

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of Cai von rumor of TD Cohen.

Speaker Change: Your question please Scott.

Scott: Yes. Thanks, so much so you have a.

Speaker Change: 23% gain at Pratt in the first quarter, if were going to low double digits call. It 11, 12% you have to have a sharp deceleration as you go through the year and yet you're still guiding to two one.

Christopher T. Calio: So again, overall, an improvement for the year; we've still got some classified programs, fixed price that we are continuing to work through. We said that's kind of a 12 to 18 month journey as we work through those. I would say on a number of them, we've made some good progress towards, you know, milestones, and others, we're going to continue to battle our way through, you know, during that period. Chris, I'll just add with respect to the product.

Scott: Low teens for the aftermarket, which would suggest either you or total guide and slow or we're going to see a flat to down year in commercial and military as we go through the year can you give us some color in terms of each of those three parts of <unk> business and their quarterly sequences.

Scott: As we move through the year.

Speaker Change: Sure. Let me let me start here I mean, we had a really start a strong start to <unk> first quarter.

Neil G. Mitchill: Chris I'll just add with respect to the productivity you know in the first quarter we saw about a 58 million dollar year-over-year Q1 to Q1 improvement of course we had the exercise of an option last year which accounts for maybe you know 55% of that improvement but nonetheless we're expecting 200 million year-over-year and continue to expect 200 million dollars year-over-year and so you know good progress in the first quarter but there's still you know three quarters to go but we are encouraged by the shift that we've seen here in the first quarter so far

Speaker Change: Most of that was on the back of commercial OE deliveries up 40% almost in the first quarter on a units basis. So that obviously drove the top line and some good mix there too between installs and spare engines as we look to position.

Speaker Change: The GTR fleet as best we can to start the year I think some of that is going to moderate clearly as the rest of the year unfolds. So I think we had a good start out of the gate on installs on the aftermarket side.

Speaker Change: Youre right were going to see more of the mid single digit type of growth in the next three quarters.

Operator: comes from the line of Cai Von Rumor of T.D. Cohen. Your question, please, Cai.

So again that will be fueled by 'twenty five hundreds coming up a little bit the topline is going to be also bolstered by GTS aftermarket.

Unknown Attendee: Yes, thanks so much. So you had a 23% gain at Pratt in the first quarter. If we're going to low double digits, call it 11, 12%. You have to have a sharp deceleration as you go through the year. And yet, you're still guiding to low teens for the aftermarket, which would suggest either your total guide is low, or we're going to see a flattened down year in commercial or military as we go through the year.

Speaker Change: Which of course doesn't come with nearly as much profit, but it will certainly help to fleets get it get healthier and military also had a really strong first quarter startup the material coming in in the first quarter was positioned to support the aftermarket principally in the military business and we do see that slowing down a bit in the next.

Speaker Change: Part of the year. So those are the key ingredient is not going to get into the specifics on our quarterly cadence here, but.

Unknown Attendee: Can you give us some color in terms of each of those three parts of Pratt's business and their quarterly sequence as we move through the year? Sure, Kai, let me start here. I mean, we had a

Speaker Change: We're just one quarter into the year, but do good.

Speaker Change: Good start to the year.

Speaker Change: We'll see we're kind of holding onto our guidance at this point.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of Sheila <unk> of Jefferies. Your line is open Sheila.

Neil G. Mitchill: Sure, Kai, let me start here. I mean, we had a really strong start to Pratt's first quarter, you know, most of that was on the back of commercial OE deliveries up 40% almost in the first quarter on a unit basis. So that obviously drove the top line, and there was a good mix there too, between installs and spare engines, as we look to position the GTF fleet as best we can to start the year. I think some of that's going to be more clearly moderated as the rest of the year unfolds. So I think we had a good start out of the gate on installs on the aftermarket side.

Sheila: Hey, Good morning question, Neil Thank you and good morning, Jennifer Congratulations on your next slug of wishing you all the best and thank you.

Sheila: I wanted to ask one on Colin maybe Neil or Chris.

Speaker Change: Just the guidance for the year.

Sheila: Why the step up 16, 6% margin vessels at that 0.7 adjustment in the quarter.

Speaker Change: Hi, Justin.

Can you maybe talk about what drives that.

Speaker Change: Margin expansion as we progress through the year at Collins, and if you could give us any more detail on the impairment of $175 million.

Neil G. Mitchill: You know, you're right, we're going to see more of the mid single-digit type of growth in the next three quarters. So again, that will be fueled by the 2500s coming up a little bit. The top line is also going to be bolstered by the GTF aftermarket, which of course doesn't come with nearly as much profit but will certainly help the fleets get healthier.

Justin: Alright, let me start Sheila.

Justin: As I think about first of all let's start with the first quarter for Collins. It was a really good quarter, we had about $145 million of profit growth on an adjusted basis.

Neil G. Mitchill: And the military also had a really strong first quarter start, you know, the material coming in during the first quarter was positioned to support the aftermarket principally in the military business. And we do see that slowing down a bit in the next part of the year. So those are the key ingredients; not going to get into the specifics on a quarterly cadence here, but, you know, we're just one quarter into the year, but do you know, a good start to the year.

Justin: We've talked about the Collins growth trajectory really being driven by the aftermarket now there's still a long ways to go we put out a range of $650 to $7 25 for the full year and so we're going to see is increased drop through on the continued cost reduction essentially that Collins embarked upon several years ago and we're starting to see.

Neil G. Mitchill: And we'll see we're kind of holding on to our guidance at this point. Thank you. Thank you. Our next question comes from the line of Sheila Kahyaoglu from Jeff. Your line is open. Hey, good morning, Chris and Neil.

Justin: The cost associated with achieving that cost reduction ease as well as the benefit from the actions start to drop through in the form of stronger Incrementals. So feel like the aftermarket trajectory supports that at this juncture and.

Operator: comes from the line of Sheila Kahyaoglu of Jeff. Your line is open. Hey, good morning, Chris and Neil. Thank you and

Justin: I think it's going to really continue to be the key driver for the Collins profit growth for the rest of the year.

Operator: All right, let me start Sheila. You know, as I think about first, let's start with the first quarter for Collins. It was a really good quarter; we had about $145 million of profit growth on an adjusted basis. You know, we've talked about the Collins growth trajectory really being driven by the aftermarket. Now, there's still a long ways to go, you know; we put out a range of 650 to 725 for the full year.

Justin: I would just comment for a minute on the $175 million as we said in our remarks that charge related to some procurement of titanium, which I know you. All know is an important commodity for the aerospace industry.

Justin: Given a number of ongoing supply chain dynamics around aerospace grade titanium in particular, especially as it relates to the titanium that we use in our landing gear manufacturing at Collins, we've taken some steps to secure alternative sources for that supply and it's taken us some time to do that frankly.

Operator: And so what we're going to see is increased drop through on the continued cost reduction, essentially, that Collins embarked upon several years ago. We're starting to see the cost associated with achieving that cost reduction ease, as well as the benefit from the actions start to drop through in the form of stronger incrementals. So I feel like the aftermarket trajectory supports that at this juncture. And, you know, that I think is going to really continue to be the key driver for Collins profit growth for the rest of the year.

Justin: So specific to the charge, we reached an agreement with two new suppliers during the quarter.

Justin: In connection with those agreements as well as some sanctions imposed.

Justin: By Canada, which were announced in February we took a charge to reflect two things one was the higher purchase commitment cost that came about as a result of these two new agreements in the second is the impairment of about $75 million of costs that had been previously capitalized on the balance sheet associated with specific program that are no longer recur.

Operator: If I just comment for a minute on the $175 million, you know, as we said in our remarks, that charge related to some procurement of titanium, which I know you all know is an important commodity for the aerospace industry. Given a number of ongoing supply chain dynamics around aerospace grade titanium in particular, especially as it relates to the titanium that we use in our landing gear manufacturing at Collins, we've taken some steps to secure alternative sources for that supply.

Justin: Comparable so as we've talked about since 2022.

Justin: We've been evaluating our global sourcing strategies to mitigate.

Justin: The potential impact of sanctions and other restrictions and frankly, we've derisked that in many areas and I think this is an important step in putting this issue behind us so feel good about the agreements we have but there is certainly at a higher cost and so we took a charge to deal with that.

Neil G. Mitchill: And it's taken us some time to do that, frankly. So specific to the charge, you know, we reached an agreement with two new suppliers during the quarter. In connection with those agreements, as well as some sanctions imposed by Canada, which were announced in February, we took a charge to reflect two things. One was the higher purchase commitment cost that came about as a result of these two new agreements. And the second is the impairment of about $75 million of costs that were previously capitalized on the balance sheet associated with specific programs that are no longer recoverable.

Justin: Yeah.

Speaker Change: Great. Thank you.

Speaker Change: Youre welcome.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Come from the line of Doug Harned at Bernstein. Please go ahead Doug.

Douglas Stuart Harned: Yes. Good morning, Thank you.

Doug Harned: Doug.

Douglas Stuart Harned: On the defense side, so and Raytheon you made a leadership transition West Kramer retired in Q1 can you talk about how if at all you're thinking about the strategy differently and I'd say in two areas. One you mean.

Neil G. Mitchill: So as we talked about since 2022, you know, we've been evaluating our global sourcing strategies to mitigate the potential impact of sanctions and other restrictions. And frankly, we've de-risked that in many areas. And I think this is an important step in, you know, putting this issue behind us. So, you know, feel good about the agreements we have, but they're certainly at a higher cost. And so we took the charge to deal with that.

Douglas Stuart Harned: And a little bit about this before in terms of bringing margins up to your objectives in 2025, which presumably fixed.

Douglas Stuart Harned: Fixed price contracts play into that but also the supply chain progress and then second.

Douglas Stuart Harned: Well back in Paris, you talked about the need for a new strategy on the space side to really reinvigorate growth. There can you comment on how youre thinking about those now with the new leader in place.

Operator: The next question comes from the line of Doug Harnett of Bernstein. Please go ahead, Doug.

Unknown Attendee: Yes, good morning. Thank you. On the defense side, so at Raytheon, you made a leadership transition. Wes Kramer retired in Q1.

Unknown Attendee: And Bill Jasper Thanks.

Unknown Attendee: Yes.

Speaker Change: You bet.

Speaker Change: Good morning, this is Chris.

Chris: So let's start first on on.

Unknown Attendee: Can you talk about how, if at all, you're thinking about the strategy differently? And I'd say in two areas. One, you mentioned a little bit of this before in terms of bringing margins up to your objectives in 2025, which presumably fixed price contracts will play into that, but also supply chain progress. And then second, Well, back in Paris, you talked about a need for a new strategy on the space side to really reinvigorate growth there. Can you comment on how you're thinking about them now, you know, with the new leader in place, in Phil Jasper? Thanks.

Chris: The first part of your question here on the supply chain and Raytheon margins and how we're thinking about that if you just take a step back for a sector gets a tremendous backlog at Raytheon you saw the increase here in Q1.

Chris: Big part of that obviously is the continued focus on execution in particular the supply chain.

Chris: Had four consecutive quarters of material or seat growth.

Chris: Raytheon, so feeling like the focus on the supply chain and the health of the supply chain is starting to pay dividends and we're seeing that flow through again with some of the margin increases here in Q1, and so again when Phil and team are incredibly focused on execution head down.

Christopher T. Calio: You bet, Doug. Good morning, this is Chris.

Christopher T. Calio: So let's start first with the first part of your question here on the supply chain and Raytheon margins and how we're thinking about that. If you just take a step back for a sec, Doug, there's a tremendous backlog at Raytheon. You saw the increase here in Q1. A big part of that, obviously, is the continued focus on execution, in particular the supply chain. We've had four consecutive quarters of material receipt growth at Raytheon.

Chris: And execution on this backlog at the margins that we need and again big part of that is supply chain and we're adding production capacity as well to meet the demands of this ramp you heard us announce today Huntsville.

Christopher T. Calio: So feel like the focus on the supply chain and the health of the supply chain is starting to pay dividends, and we're seeing that flow through again with some of the margin increases here in Q1. And so, again, Phil and the team are incredibly focused on execution, head down, and execution on this backlog at the margins that we need.

Chris: Last quarter, we talked about the expansion in Camden, Arkansas, So again, putting in the production capacity that we need in driving materials. So that's where the focus is.

Chris: On space, we did talk about a bit of a bit of a pivot Doug from a.

A space Prime if you will to being more of a component supplier to the space Brines and I think when you look at our strengths in that.

Christopher T. Calio: And, again, a big part of that is the supply chain, and we're adding production capacity as well to meet the demands of this ramp. You heard us announce today, you know, Huntsville last quarter. We talked about the expansion in Camden, Arkansas. So, again, putting in the production capacity that we need and driving material. So that's where the focus is. On space, we did talk about, you know, a bit of a bit of a pivot, Doug, from, you know, a space prime, if you will, to being more of a component supplier to the space primes.

Chris: And that portfolio I think that pivot is the right one.

Chris: Historical strength in some of the some of the exquisite space areas. We've got some.

Chris: Other strengths and some of the key components that go in to the prime satellites and buses, but again I think that's where we're going to be shifting away from perhaps being a space prime to being more of a component supplier.

Christopher T. Calio: And I think when you look at our strengths, you know, in that portfolio, I think that pivot, you know, is the right one. We've got, you know, historical strength in some of the most exquisite, you know, space areas; we've got some other, you know, strengths in some of the key components that go into the prime satellites and buses. But again, I think that's where we're going to be shifting away from perhaps being a space prime to being more of a component. Very good. Thank you.

Speaker Change: Very good thank you.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of David Strauss of Barclays. Your line is open David.

Speaker Change: Okay.

David Egon Strauss: Thanks, Good morning, Best of luck, Greg enjoyed working with you same thing Jennifer.

David Egon Strauss: <unk>.

David Egon Strauss: Chris.

David Egon Strauss: On the GTS.

David Egon Strauss: I think it is calling for.

Christopher T. Calio: Very good

Operator: comes from the line of David Strauss of Barclays. Your line is open, David.

Unknown Attendee: Thanks. Good morning. Best of luck, Greg. I enjoyed working with you.

David Egon Strauss: Just replacement replacement on 3000, or so engines can you just tell us at this point, how many have actually seen full replacement actually.

Unknown Attendee: Same thing, Jennifer. Chris, on the GTF plan, I think, you know, it's calling for. Disreplacement, replacement on 3,000 or so engines. Can you just tell us at this point how many have actually seen full replacement actually being done at this point? That's my first question. Then the second question: you reached an agreement with Spirit Airlines in the quarter that was made public. Is that amount kind of on a per AOG basis representative of your other customer agreements? Because that would seem to imply a higher compensation number than you've baked into your forecast. Thanks.

David Egon Strauss: Having been done at this point.

Speaker Change: My first question and then the second question.

Speaker Change: You reached an agreement with Spirit Airlines in the quarter that was that was made public is that.

Speaker Change: That amount kind of on a per <unk> basis represented.

Speaker Change: Other customer agreements because that would seem to imply a higher compensation number then you baked into your forecast.

Speaker Change: Yes.

Christopher T. Calio: Um, on the first question, David. Yeah, the disc replacement. So again, we're in the early stages. I told you this was going to be a three-year process. Again, the priority was making sure everything we delivered to our customers' final assembly lines had full life powder metal parts.

Speaker Change: So on the on the.

Speaker Change: First.

David Egon Strauss: Question David.

David Egon Strauss:

David Egon Strauss: Yes, the disc replacement. So again, we're early stages I told you. This is going to be a three year process again, the priority was making sure everything we delivered to our customers final Assembly lines had the full life powder metal parts and that's what's happening today and it was going to be a ramp.

Christopher T. Calio: And that's what's happening today, and it was going to be a ramp throughout the year in 25 on the insertion of those full life parts into MRO. So I would say today it's early days. And so there haven't been a ton that have received all of those things. But as we said before, we're working hard to optimize the work scopes there, depending on where the engine is operating, what configuration it has, and whether it was going to come in for another visit within this timeframe anyway, depending on where it operates.

David Egon Strauss: Throughout the year into 25 on insertion of those full life parts into MRO. So I would say today, it's early days and so.

David Egon Strauss: There hasn't been a ton that have received all of those things, but as we said before we are working hard to optimize the work scopes there depending on where the engine is operating what configuration, it as where theyre going to come in for another visit.

David Egon Strauss: Within this timeframe any way depending on where we are and operated so again, our focus is on output and part of that is optimizing the work scope, but again early days as for the customer composition, we've got about nine agreements under our belt, which represents about a third of the fleet and I think we're close on a number of other.

Christopher T. Calio: So again, the focus is on output, and part of that is optimizing the work scope. But again, early days. As for customer compensation, we've got about nine agreements under our belt, which represents about a third of the fleet. And I think we're close on a number of other, you know, significant ones in the compensation for all those remains within the guidance that we provided on this.

David Egon Strauss: Significant ones and the compensation on on all of those remains within the guidance that we provided on this.

Operator: comes from the line of Rob Stollard of Vertical Research. Your line is open, Rob. Thanks so much. Good morning. Good morning, Rob. Greg, all the best for the future. And Jennifer, thanks for all your help. It's been interesting times, obviously.

Speaker Change: Thank you.

Speaker Change: Our next question.

Speaker Change: Comes from the line of Rob Stallard of vertical research. Your line is open Rob.

Robert Alan Stallard: Thanks, So much good morning, good morning, Rob.

Robert Alan Stallard: Greg all the best in the future and Jennifer Thanks for your help and interesting times.

Robert Alan Stallard: Obviously question.

Robert Alan Stallard: Hey, a question for Chris probably.

Unknown Attendee: Obviously. Obviously. A question, a question for Chris, probably.

Robert Alan Stallard: At Collins.

Chris: Ladies and things going on with the 737 Max at the moment I was wondering what sort of implications that could potentially be for the college business and what do you see as the risk.

Christopher T. Calio: Yeah, hey, hey, Rob. Yeah, as you pointed out, you know, significant content on Collins on 737 and 787. So across the main growth platforms there at Boeing, I would say that, I mean, we've kind of mentioned this upfront. We've got some, I guess, some uncertainty around rates. Today, we think that we've calibrated a lot of that in. But again, I know the Boeing company will provide its guidance tomorrow, so we won't get out ahead of them.

Chris: Potential destocking as this year progresses.

Chris: Yes.

Chris: Yes.

Chris: Hinted out significant content Collins on 737, and 787, so across the main growth platforms that are Boeing I would say that I mean, we kind of mentioned this upfront.

Chris: We've got some I guess some uncertainty around rates.

Chris: Today, we think that we've calibrated with a lot of that in but again I know the Boeing company will provide their guidance tomorrow. So we won't get get out ahead of them were just kind of focused on working with them supporting them through the dynamics in play and preparing to take whatever actions, we think necessary depending on the guidance that they provide.

Christopher T. Calio: We're just kind of focused on working with them, supporting them through the dynamics in play, and preparing to take whatever actions we think necessary, depending on, you know, the guidance that they provide. But I'll just say that the team has worked very hard to get the material in that we need to support their rates, and we've got the capacity to do so.

Chris: But I'll just say that the team has worked very hard to go drive the material and we need to support their rates and we've got the capacity to do so.

Speaker Change: Okay. Thanks, Chris.

Speaker Change: Thank you.

Speaker Change: Our next question.

Operator: comes from the line of Noah Poponak of Goldman Sachs. Please go ahead, Noah.

Speaker Change: Comes from the line of Noah <unk> of Goldman Sachs. Please go ahead Noah.

Noah: Hey, good morning, everyone.

Unknown Attendee: Um, two follow-ups on topics already asked about, but on the powdered metal process, can you quantify even if roughly how many engines that are off wing are actually in an MRO facility now versus waiting in line to get into one? And then Neil on the defense margins. The guidance implies that each quarter of the rest of the year looks roughly similar to the first quarter. Thus, you have the framework next year for a decent amount of expansion. I would have thought you would have sort of ramped up this year into that 25 expansion. How do we kind of flip in 25, or do I just have the numbers wrong?

Noah: No.

Noah: Two follow ups on topics already asked about but on the.

Noah: Powdered metal process can you quantify even if roughly.

Noah: How many engines that are off wing are actually in an MRO facility now versus waiting in line to get into one.

Noah: And then Neil on the defense margins the guidance implies that each quarter. The rest of the year looks roughly similar to the first quarter.

Noah: Do you have the framework next year for a decent amount of expansion.

Noah: Thought you would've sort of ramped through this year into that 25 expansion.

Noah: How do we how do we kind of flip in 'twenty five or do I just have the numbers off there.

Neil G. Mitchill: No, let me start with the defense, and I'll hand it off to Chris to answer your first question. But you know, listen, I think we had a number of headwinds last year. I think you're all well aware of that. And so as we put together our outlook for this year, you know, we essentially assumed no productivity for the year. Now, as Chris said, and I talked about earlier, that's a significant step up from what we experienced last year.

Speaker Change: No. Let me, let me start with defense and I'll hand, it off to Chris to hit your first question, but listen I think we had a number of headwinds last year.

Speaker Change: I think you are all well aware of that and so as we put together our outlook for this year.

Speaker Change: We essentially assumed no productivity for the year now as Chris said and I talked about earlier, that's a significant step up from what we experienced last year and largely last year was driven by a handful of fixed.

Neil G. Mitchill: Last year was largely driven by a handful of fixed price development programs, but we're not out of the woods there. So what I would say is, you know, we took an approach that is not assuming a huge uptick.

Speaker Change: Fixed price development programs, but we're not out of the woods. There. So what I would say is we took an approach that is not assuming a huge uptick and remember this is a business that several years ago was kicking off three four and $500 million of positive productivity. There is still positive productivity in the Raytheon business each <unk>.

Neil G. Mitchill: Remember, this is a business that, you know, several years ago was kicking off three, four, and $500 million of positive productivity. There is still positive productivity in the Raytheon business each quarter, but it's been overtaken by the negatives. And so at this point, I think we're really pleased to see a quarter like this to start the year. There's work to do, obviously, to get multiple quarters together that look like this one.

Speaker Change: <unk>, but it's been over overwhelmed by the negatives and so at this point I think we're really pleased to see a quarter like this to start the year.

Speaker Change: There is work to do obviously to get.

Speaker Change: Multiple quarters together that looked like this one going forward and that's what we're focused on we're really focused on improving the health of the supply chain.

Neil G. Mitchill: Going forward. And that's what we're focused on. We're really focused on improving the health of the supply chain and moving the material through that, you know, you can see has come in, and now we got to get it through the entire manufacturing process to meet these important needs of our customers. And that's where our focus is. I do think it will step up in 25.

Speaker Change: And moving the material through that you could see us come in and now we got to get it through the entire manufacturing process to meet these important needs of our customers and that's where really where our focus is I do think it will step up in 'twenty five.

Neil G. Mitchill: One encouraging thing is we had significant orders during the quarter, and the margins in that new backlog, you know, are very healthy. The mix of that, those new orders, about 60 percent, you know, foreign sales. So it's a good, good start. But, you know, one quarter at a time. Chris, maybe a couple.

Speaker Change: One encouraging thing is we had significant orders during the quarter and the margins in that new backlog.

Speaker Change: Our very healthy the.

Speaker Change: The mix of that those new orders about 60%.

Speaker Change: Foreign sales so it's a good good start but one quarter at a time, Chris maybe a couple of years sure.

Christopher T. Calio: Yeah, sure. So I'm not going to get into the specific numbers on where things stand in terms of those engines waiting to be inducted. But again, you look at the turnaround times, the extended turnaround times that we've talked about, engines coming off today are going to, you know, have to wait a bit before they actually do, you know, get inducted and enter gate one in the MRO process.

Chris: I'm not going to get into the specific numbers on on where things stand in terms of those.

Chris: Of those engines waiting to be in <unk>, but again when you look at the turnaround times the extended turnaround times that we've talked about engines coming off today are going to.

Chris: Have to wait a bit before they actually do get inducted and enter into gateway <unk>.

Chris: In the MRO process suffice it to say and we kind of alluded to this upfront big step up this year in GTS shop visits.

Christopher T. Calio: Suffice it to say, and we kind of alluded to this up front, a big step up this year in GTF, you know, shop visits. And that's why we've played a little bit of the allocation game, you know, in the last year, early this year to get off to a strong start there. But again, we've got a big ramp on GTF MRO throughout the year in order to support this fleet. Again, we think we've got the capacity to do it, the labor to do it, and the partners in our MRO shops who are incredibly adept at this. It's about material flow.

Chris: And that's why we've played a little bit of the the allocation game.

Chris: And the last year early this year to get off to a strong start there, but again, we've got a big ramp on GTS MRO.

Chris: Throughout the year in order to support this fleet again, we think we've got the capacity to do it the labor to do it the partners and our MRO shops, who are incredibly adept at this it's about material flow.

Neil G. Mitchill: Neil, the fixed price development programs that have been a challenge in Raytheon's defense, when do those end? When do those move out of development?

Chris: The fixed price development programs that have been a challenge and Raytheon defense when do those and one of those move out of development.

Neil G. Mitchill: Yeah, so here's a couple ways to look at it. About 1% of our existing Raytheon backlog today constitutes those programs, and I'd say it's about 12 to 18 months. There are a few of them. So we still have a little ways to go. But we are making progress, and critical milestones on each program. In the first quarter, we had net unfavorable productivity of about $28 million, and nearly all of that was associated with these programs. So there's still some headwinds that we're encountering as we get additional technical learning and go through testing, but that's the timeframe and that's the magnitude I would put on it. Okay, thanks for taking my question.

Speaker Change: Yes, so here's a couple of ways to look at it about 1% of our existing Raytheon backlog today constitutes those programs and I'd say, it's about 12 to 18 months. There is a few of them. So we're still we still have a little ways to go we are making progress critical milestones on each program in the first quarter.

Speaker Change: We had net.

Speaker Change: Unfavorable productivity of about $28 million nearly all of that was associated with these programs. So theres still some.

Speaker Change: Some headwinds that were encountering as we get additional technical learning and going through testing, but.

That's the timeframe and Thats the magnitude I would put on it.

Unknown Attendee: Okay, thanks for taking my questions, and Greg and Jennifer, thanks for all the help over the years.

Speaker Change: Okay. Thanks for taking my questions and Greg and Jennifer Thanks for all the help over the years.

Speaker Change: Thanks Bill.

Speaker Change: Thank you.

Operator: Our next question comes from the line of Peter Arment, Upbeard.

Speaker Change: Our next question comes from the line of Peter Arment.

Speaker Change: Baird.

Unknown Attendee: Yeah, thanks. Good morning, everyone.

Peter J. Arment: Peter Please go ahead.

Peter J. Arment: Yeah. Thanks, good morning, everyone and Greg and Jennifer.

Unknown Attendee: And Greg and Jennifer have enjoyed it over the years. Chris on Raytheon, you know, Europe continues to be a really strong region for bookings. Maybe you could talk about the outlook there. And you know, how should we think about, I guess Neil just touched upon it, you know, the FMS mix, kind of ramping up and [inaudible].

Peter J. Arment: Yeah.

Peter J. Arment: Tried it over the years.

Peter J. Arment: Chris on Raytheon.

Peter J. Arment: Europe continues to be a really.

Peter J. Arment: Strong region for bookings, maybe you could talk about the outlook there and how should we think about I guess, Neil just touched upon it the Fms mix and ramping and going to benefit margins is this should we expect the fms mix to kind of be a multiyear process as it plays out where that shows up.

Christopher T. Calio: Yeah, I think that I think that's right, Peter. I think it is it is a multi-year process to your point. You know, if you just think about what's going on out there today, the integrated air missile defense, the demand there is exceptionally strong, obviously, Patriot, NASAMS, and of course, Gen T, and the like. You saw a huge order from NATO at the end of last year, you know, for us, and the demand continues to be really strong. To your point, when we look at our margins throughout the year, our margin progression story at Ray And so that it's provided us with a nice tailwind, and we expect that to continue.

Peter J. Arment: Favorably on margins, but also just maybe just talk about the outlook on bookings.

Speaker Change: Yes, I think that I think that's right Peter I think it is it is a multiyear process to your point.

Speaker Change: <unk>.

Speaker Change: If you just think about what's going on out there today, the integrated air and missile defense is the demand there is exceptionally strong obviously patriot ne sans and of course, <unk> and the like you saw a huge order.

Speaker Change: From NATO at the end of last year for us and the demand continues to be really strong to your point when we look at our margins throughout the year our margin progression story at Raytheon, we're expecting a tailwind from mix as we increase the international backlog about 60% of Raytheon's Q1 bookings were international and so.

Speaker Change: That's provided us a nice tailwind and we expect that to continue.

Speaker Change: I appreciate the color thanks, guys.

Speaker Change: Thank you.

Unknown Attendee: Appreciate the call, and thanks, Chris. Thank you. Our next question comes from the line of Matt Akers of Wells Fargo. Please go ahead, Matt. Yeah, good morning, everybody. Good luck.

Speaker Change: Our next question comes from the line of Matt Akers of Wells Fargo. Please go ahead, Matt.

Matthew Carl Akers: Yes, good morning.

Matthew Carl Akers: Everybody the luck, Greg I'm Jennifer.

Matthew Carl Akers: Couple of questions one.

Matthew Carl Akers: What's the current wing to wing turnaround time for GTS.

Matthew Carl Akers: Post the close to that 200 5300 days are in the shorter and of sort.

Operator: Our next question comes from the line of Matt Akers of Wells Fargo. Please go ahead, Matt. Yeah, good morning, everybody.

Matthew Carl Akers: To build the pipeline of claims awaiting it.

Speaker Change: I think you might've said.

Speaker Change: Pratt aftermarket mid single digit the rest of the quarter that net here, how does that actually mid teen.

Operator: Yeah, let me start with the now with the wingoing, you know, turnaround time. Yeah, it's in it's in that range that we've provided in that 250 300. Again, a lot of that will continue to be dependent on the mix of work scopes; we're still believing that it's going to be more of a 90%, you know, heavy 10%, you know, lighter, you know, shop visit. And with that, we'll stay within that range. If we can find a way to come up with, you know, medium work scopes and other things that can, you know, alleviate the need for But we're in there today, given the shop visit, you know, the mix that we see in the material flow that we Great. Thank you, Indy. I get the app.

Speaker Change: Yeah.

Speaker Change: So let me start with the windowing turnaround time, yes, it's in that range.

Speaker Change: That we've provided in that $2 5300, again, a lot of that will continue to be dependent on the mix of work scopes, we're still believing that it's going to be more of a 90% heavy 10%.

Speaker Change: Lighter shop visit and with that we will stay within that range. If we can find a way to come up with medium work scopes and other things that can that can.

Speaker Change: Alleviate the need for new we'll call it non powdered metal material repair development and alike.

Speaker Change: Perhaps we'll be closer to the lower end of that range, but we're in there today given the shop visit mix that we see in the material flow that we see.

Speaker Change: Thanks, Chris Matt Great. Thanks, Andy I guess, the aftermarket yes, sorry.

Neil G. Mitchill: Aftermarket? Yep, sorry, I didn't put my mic on.

Chris: Put my Mic on.

Neil G. Mitchill: Just a couple clarifications. So when I said mid-single digits, I was referring to military growth. We had really strong growth, obviously, in the first quarter. On the aftermarket, think about that as, you know, low to mid-teens for the rest of the year.

Matthew Carl Akers: Just a couple of clarification, so what I said mid single digits.

Matthew Carl Akers: Referring to the military growth, we had really strong growth obviously in the first quarter on the aftermarket think about that as you know low to mid teens for the rest of the year.

Speaker Change: Great. Thank you.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: Our next question.

Operator: comes from the line of Jason Gursky of City. Please go ahead, Jason.

Speaker Change: Come from the line of Jason Gursky of Citigroup. Please go ahead Jason.

Unknown Attendee: Good morning, everyone. Jennifer, Greg, best of luck with your new roles and ventures, and Nathan, welcome back. Chris, just a quick question for you on Raytheon in the defense side of the business, solid book to build here in the first quarter. So I'm wondering if you can talk about the pipeline that you see here for the next, you know, 12 to 24 months, and and what you think the book to bill is going to look like over that time period. Do we have a prolonged period here of book to bills, Above one that forecasts or, you Thanks.

Jason Michael Gursky: Yes, good morning, everyone.

Speaker Change: Jennifer Greg.

Jason Michael Gursky: Best of luck with your new roles and ventures and Nathan welcome back.

Jason Michael Gursky: Chris just a quick question for you on.

Jason Michael Gursky: Raytheon and the defense side of the business solid book to Bill here in the first quarter. So.

Jason Michael Gursky: So I'm wondering if you could talk about the pipeline that you see here for the next 12 to 24 months.

Jason Michael Gursky: And in what you think the book to Bill is.

Jason Michael Gursky: Going to look like.

Speaker Change: Over that time period, we have.

Speaker Change: Prolonged period here of book to bills.

Speaker Change: Above one that forecast or shadow.

Speaker Change: Yes forecast growth here for multiple years.

Christopher T. Calio: Yeah, Jason, look, I think, you know, given the threat environment we described and kind of laid out in the question on the supplemental, we're going to continue to see, you know, strong top line, growth at Raytheon, and strength in bookings. And, again, if you just kind of go region by region, it's, you know, replenishment in the US, it's integrated air and missile defense in Europe, it's naval munitions in Asia.

Speaker Change: Yeah, Hey, Jason look I.

Speaker Change: I think given the threat environment. We described and then we kind of laid out in the question on the on the supplemental we're going to continue to see strong top line growth at Raytheon and strength.

Speaker Change: In bookings and again, if you've just kind of go region by region. It's replenishment.

Speaker Change: In the U S. It's the integrated air and missile defense in Europe, its naval munitions in in Asia. So again feel like the the strength of demand is going to continue to be there and then the other thing I'll say Jason is we're also thinking through some of the advanced capabilities that were.

Christopher T. Calio: So, again, feel like the strength of demand is going to, you know, continue to be there. And then the other thing I'll say, Jason, is we're also thinking through some of the advanced, you know, capabilities that we're trying to bring to market as well, LTAMs, which I mentioned up front, the 360-degree radar, the refresh on AMRAM, SPY-6 radar, which has gone through its initial sea trials, counter UAS capabilities with our Coyote system, and then things like high-power microwave as you So again, there is strong demand for the existing pipeline of products, and we continue to invest in that next generation product, which we think you know meets the emerging threats.

Trying to bring to market as well <unk>, which I mentioned upfront. The 360 degree Rota radar the refresh on Amiram spy six radar, which has gone through its initial sea trials.

Speaker Change: Counter UAS capabilities with our Coyote system.

Speaker Change: And then things like high power microwave as you look to sort of the drone swarm threat that continues to build so again strong demand for the existing pipeline of products and we continue to invest in that that next generation product, which we think meets the emerging threats.

Unknown Attendee: And to be clear, do you think that that will lead to a book to bill ratio above one here this year and maybe going into 2025?

Speaker Change: And as.

Speaker Change: As I said to be clear you think that that leads to a book to bill above one here for this year and maybe going into 'twenty five.

Neil G. Mitchill: I was just going to comment on the book to bill. I mean, certainly, a really strong first quarter with top line sales projected to where we see them, it's obviously going to change the math a little bit on the book to bill calculation, but we still expect a book to bill over 1.1 for this year. And I think it's going to be strong, you know, next year. But obviously, as sales go up, that'll level off a little bit, but the backlog is going to continue to grow. To put a finer point on some of the awards for this year, you know, we see AMRAM, we've talked about LTAMS, both of the US Army and Poland, certainly Patriot, SPY-6, and SM-3.

Speaker Change: I was just going to comment on the book to Bill I mean, certainly really strong first quarter with topline sales projected to where we see them. It's obviously going to change the math a little bit on the book to Bill calculation, but we still expect a book to bill over one one for this year.

Speaker Change: And I think it's going to be strong next year, but obviously as sales go up too that will that will level off a little bit but the backlog is going to continue to grow to put a finer point on some of the awards for this year, we see Amiram, we've talked about <unk> both of the U S Army and in Poland.

Speaker Change: Certainly Patriot spy six and SM three so.

Neil G. Mitchill: So, you know, a good list of potential things, the large international ones, can be lumpy, you know, they can come in this year, they could fall into next year. But, you know, we see a lot of demand signals that are really strong there.

Speaker Change: Good list of potential things the large international ones can be lumpy that can come in this year that could fall into next year, but.

Speaker Change: We see a lot of demand signals that are really strong there.

Speaker Change: Great and thanks for getting out before you can get to and I appreciate it.

Unknown Attendee: Great, and thanks for cutting me off before you could get to it Neil. I appreciate it. No problem, thank you.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: Our next question. Our final question comes from the line of Gavin Patterson of UBS. Your question. Please Gavin.

Unknown Attendee: No problem. Thank you, Thank you. Our next question, and final question comes from the line of Gavin Pearson of UBS. Question, please, Gavin.

Gavin Patterson: Thanks, Good morning.

Gavin Patterson: Good morning, Kevin.

Gavin Patterson: First I was wondering if you guys could just give an update on what ratio of GTS customer compensation agreements have actually been completed.

Operator: Our next question, our final question comes from the line of Gavin Pearson of UBS. Question, please, Gavin.

Gavin Patterson: And then second if you could just give a little more detail on the OE rate uncertainty you talked about I know, we're waiting for Boeing tomorrow, but if you're actually already seeing lower pull on any of those programs and if that's considered in Collins guidance. Thank you Yep Yep.

Operator: Thanks. Good morning. Morning, Kevin.

Christopher T. Calio: Yeah, sure, again, this is Chris. So again, on the GTF customer piece, we've set up front, we've got about nine done, and we're in the final stages of a few more. And those nine that we've got under our belt represent about a third of the GTF fleet total. And then on the rates, again, Boeing will provide the guidance tomorrow. I just think we're very much embedded with them, 737, 787. What do we need to do to support a ramp on a 787?

Gavin Patterson: Yeah sure again this is Chris so again on the GTS customer piece, we've set up front, we've got about nine done we're in the final throes of a few more in those nine that we've got under our belt represent about a third of the GTS fleet totaled.

Gavin Patterson: And then on the on the rates again.

Gavin Patterson: Boeing will provide the guidance tomorrow I just think we're very much embedded with them 730, 777, what do we need to do to support a ramp on 787, and then what do we need to do to help them go wherever they need to on 737 million. So we're not we won't get out ahead of them, but just know that we're working a number of scenarios.

Christopher T. Calio: And then what do we need to do to help them go wherever they need to go on a 737? And so we won't get out ahead of them, but just know that we're working a number of scenarios, and we'll take whatever action is necessary based upon what they need.

And we will take whatever action is necessary based upon what they need.

Operator: Thank you. I would now like to turn the conference back to Greg Hayes for his closing remarks.

Speaker Change: Thank you.

Speaker Change: Thank you I would now like to turn the conference back to Greg Hayes for closing remarks.

Gregory J. Hayes: Okay, thank you, Lateef. I'll keep these comments brief, but as I step back from the day-to-day responsibilities as CEO of RTX, I want to take this opportunity to thank our team for their trust and support over this past decade. Any success we have had is the result of the hard work and dedication of the entire team, the senior leadership team, but also the whole 185,000 people that make RTX the great company that it is. I also want to thank our investors. You know, it's been an interesting decade or so in the role.

Gregory J. Hayes: Okay. Thank you Latif.

Gregory J. Hayes: I'll keep these comments brief but as I step back from the day to day responsibility as CEO of RPX I want to take this opportunity to thank our team for their trust and support over this past decade.

Gregory J. Hayes: Any success, we have had as a result of the hard work and dedication of the entire team. The senior leadership team, but also the whole 185000 people that make <unk> a great company that it is.

Gregory J. Hayes: I also want to thank our investors.

Gregory J. Hayes: It's been interesting.

Gregory J. Hayes: The decade or so in the rule and thank you for your patience as we've transferred transition and transformed what was the nanotechnology is a multi industry company into <unk>, which is I believe the best positioned A&D company in the world today.

Gregory J. Hayes: And thank you for your patience as we've transitioned and transformed what was United Technologies, a multi-industry company, into RTX, which is, I believe, the best positioned A&D company in the world today. We've got great products, a great portfolio of people and technologies, and a great backlog that I think is going to serve us well into the future. There is, of course, always more to do. We can talk a lot about that.

Gregory J. Hayes: We've got great products, great portfolio of people and technologies and a great backlog that I think is going to serve us well into the future.

Gregory J. Hayes: There is of course always more to do we can talk a lot about it I think Chris is absolutely on the right track that is focusing on execution, focusing on technology and making sure we have the best team possible.

Gregory J. Hayes: I think Chris is absolutely on the right track. That is, focusing on execution, focusing on technology, and making sure we have the best team possible. And I can't think of a better leader than Chris to lead RTX for the next decade or so. You should all know that Chris has the full support of the board, but not just the board, the entire senior leadership team, and the entire organization. And I look forward to working with Chris in the near term and watching from the sidelines beyond that as he is successful.

Gregory J. Hayes: And I can't think of a better leader then Chris to lead our <unk> for the next decade or so.

Gregory J. Hayes: You should all know that Chris has the full support of the board, but not just the board the entire senior leadership team and the entire organization and I look forward to working with Chris.

Gregory J. Hayes: In the near term and watching from the sidelines beyond that as she is successful.

Gregory J. Hayes: I also want to thank Jennifer. Jennifer and I worked together for a decade, from Sikorsky's divestiture to the integration of Raytheon and UTC, and lately, for the last three years, as head of investor relations, she's been a great resource for the company and a great friend. So Jennifer, thank you. With that, I think that's all. Thanks for listening today. Jennifer, Nathan, and the team will be available all day to answer whatever questions you have. But thanks for listening, and take care.

Speaker Change: I also want to thank Jennifer Jennifer and I worked together for a decade.

Speaker Change: From Sikorsky as disposition to the integration of <unk>.

Speaker Change: Raytheon and UTC.

Speaker Change: And lately for the last three years as head of Investor Relations. She has been a great resource for the company and a great friends with Jennifer Thank you.

Speaker Change: With that.

Speaker Change: I think that's all thanks for listening today, Jennifer Nathan and team will be available all day to answer whatever questions you have but thanks for listening and take care.

Operator: This now concludes today's conference. You may now disconnect.

Speaker Change: This now concludes today's conference you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Sure.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Yeah.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.