Raytheon Technologies(RTX) - 2025 Q1 - Quarterly Report

Financial Performance - Net sales for the quarter ended March 31, 2025, increased by $1 billion to$20.306 billion compared to $19.305 billion in the same quarter of 2024, with an organic increase of$1.521 billion [153]. - Total net sales for Q1 2025 reached $20,306 million, a 5.2$19,305 million in Q1 2024, driven by Collins Aerospace and Pratt & Whitney segments [191]. - Operating profit for the quarter ended March 31, 2025, was $2.035 billion, with an operating profit margin of 10.0$1.870 billion and 9.7% in the same quarter of 2024 [177]. - Operating profit for Q1 2025 was $2,035 million, up from$1,870 million in Q1 2024, reflecting an 8.8% increase [192]. - Collins Aerospace reported net sales of $7,217 million in Q1 2025, an 8$6,673 million in Q1 2024, with operating profit rising 28% to 1,088 million [199]. - Pratt & Whitney's net sales increased by 14% to 7,366 million in Q1 2025, with operating profit up 41% to $580 million [207]. - Raytheon experienced a 5$6,340 million in Q1 2025, with operating profit down 32% to $678 million [213]. - Net income attributable to common shareowners for Q1 2025 was$1,535 million, down from $1,709 million in Q1 2024, with diluted earnings per share decreasing from$1.28 to $1.14 [186]. Cost and Expenses - Total cost of sales for the quarter ended March 31, 2025, was$16.190 billion, representing 79.7% of net sales, down from 81.6% in the same quarter of 2024 [160]. - Research and development expenses for the quarter ended March 31, 2025, were $1.837 billion, representing 9.0$1.448 billion for the quarter ended March 31, 2025, accounting for 7.1% of net sales, compared to 7.2% in the same quarter of 2024 [171]. - Other income, net, decreased significantly to $4 million for the quarter ended March 31, 2025, down from$372 million in the same quarter of 2024, primarily due to the absence of a $400 million gain from the sale of the CIS business [174]. Market and Economic Conditions - Inflation has negatively impacted performance, increasing material and component prices, labor rates, and supplier costs, which could lead to losses in fixed-price contracts [137]. - The U.S. government has imposed tariffs on imports, which may adversely affect profitability and cash flows if sustained [139]. - Geopolitical tensions, including sanctions related to Russia and China, could disrupt business operations and supply chains [142]. - The company continues to monitor potential impacts from geopolitical tensions in Israel and the Middle East, although current operations remain minimally affected [145]. - The company is pursuing strategic initiatives including digital transformation and operational modernization to address macroeconomic pressures [138]. Government and Regulatory Factors - The U.S. Department of Defense (DoD) budget is expected to increase by approximately$6 billion for fiscal year 2025 [140]. - The company’s defense operations are influenced by changes in U.S. government policies and budget priorities, which may impact demand and spending levels [130]. - Regulatory approvals for direct commercial sales to foreign customers are pending, which could materially affect financial results if not obtained [144]. - The company is subject to ongoing compliance obligations under deferred prosecution agreements and settlements with the DOJ and SEC [133]. Supply Chain and Operational Challenges - The company recorded charges of $175 million in Q1 2024 due to supply chain disruptions and unfavorable purchase commitments related to titanium sourcing [136]. - The company has experienced supply chain disruptions affecting the procurement of raw materials and microelectronics, driven by macroeconomic conditions [136]. - The company is actively evaluating its cost structure and implementing restructuring actions to maintain competitiveness [172]. Backlog and Bookings - Total backlog as of March 31, 2025, was$217 billion, slightly down from $218 billion at the end of 2024, with defense backlog at$92 billion [196]. - Defense bookings for Q1 2025 were approximately $9 billion, a decrease from$11 billion in Q1 2024, indicating fluctuations in customer demand [197]. - Defense backlog was $61 billion as of March 31, 2025, down from$63 billion as of December 31, 2024, with significant bookings including $529 million for Patriot systems for the Netherlands [221]. Cash Flow and Debt - Cash and cash equivalents were$5.2 billion as of March 31, 2025, a decrease from $5.6 billion as of December 31, 2024 [230]. - Net cash flows provided by operating activities increased by$1.0 billion to $1.3 billion in Q1 2025 compared to$0.3 billion in Q1 2024, driven by changes in contract assets and liabilities [239]. - Net cash flows used in investing activities were $(678) million in Q1 2025, a change of$1.4 billion compared to $693 million in Q1 2024, primarily due to the sale of the CIS business [244]. - Net cash flows used in financing activities decreased by$1.0 billion to $(1.1) billion in Q1 2025 compared to$(2.1) billion in Q1 2024, mainly due to lower long-term debt repayments [249]. - Total debt was $41.3 billion as of March 31, 2025, slightly up from$41.3 billion as of December 31, 2024 [230]. Shareholder Actions - The company had remaining authority to repurchase approximately $0.6 billion of common stock under the share repurchase program initiated on October 21, 2023 [250]. - Share repurchases for the quarter ended March 31, 2025, amounted to$50 million, with 396,000 shares repurchased, compared to $56 million and 616,000 shares in the same quarter of 2024 [251]. Tax and Interest - The effective income tax rate for Q1 2025 was 17.0$38 million in Q1 2025 compared to Q1 2024, primarily due to the reversal of interest accruals [182].