RTX (NYSE:RTX) Q3 2025 Earnings Call October 21, 2025 08:30 AM ET Company ParticipantsNeil Mitchill - CFOSeth Seifman - Executive DirectorChris Calio - CEO and ChairmanPeter Arment - Managing DirectorDoug Harned - Managing DirectorNathan Ware - VP of Investor RelationsRob Stallard - PartnerScott Deuschle - DirectorKen Herbert - Managing DirectorMyles Walton - Managing DirectorKristine Liwag - Executive DirectorSheila Kahyaoglu - Managing DirectorGavin Parsons - Director of Aerospace and Defense Equity Resea ...

Financial Data and Key Metrics Changes - Adjusted sales for Q3 were $22.5 billion, up 12% on an adjusted basis and 13% organically year over year [14] - Adjusted segment operating profit increased by 19% year over year to $2.8 billion, with a consolidated segment margin expansion of 70 basis points [14] - Free cash flow was robust at $4 billion for the quarter, contributing to a full-year outlook of $7 to $7.5 billion [15][18] Business Line Data and Key Metrics Changes - Collins Aerospace reported sales of $7.6 billion, up 8% adjusted and 11% organically, driven by commercial OE sales up 16% and aftermarket sales up 13% [20] - Pratt & Whitney's sales reached $8.4 billion, up 16% on both an adjusted and organic basis, with commercial OE sales up 5% and military engine sales up 15% [22][24] - Raytheon achieved sales of $7 billion, up 10% on both an adjusted and organic basis, with a book to bill ratio of 2.27 and a record backlog of $72 billion [25][26] Market Data and Key Metrics Changes - Global demand for commercial aerospace products remains strong, with passenger air travel projected to grow approximately 5% this year [3] - The defense sector is experiencing increased demand, particularly for munitions and integrated air and missile defense systems [4] Company Strategy and Development Direction - The company is focused on executing commitments and driving performance improvements through its core operating system, resulting in six consecutive quarters of year-over-year adjusted segment margin expansion [7] - Investments of over $600 million in capacity expansion projects are planned to support growth, including a $300 million investment at Raytheon [10] - The company is innovating for future growth, with initiatives such as a hybrid-electric propulsion demonstrator for regional aircraft and advancements in braking systems for the A321XLR [11] Management's Comments on Operating Environment and Future Outlook - Management raised the full-year adjusted sales outlook to a range of $86.5 billion to $87 billion, reflecting strong operational performance and end market strength [16] - The company expects continued top-line growth, margin expansion, and solid free cash flow conversion beyond this year [19] - Management remains confident in meeting the growing needs of U.S. and international customers in the defense sector [4] Other Important Information - The company completed the sale of its actuation business and the Collins Simmons Precision Products business for $765 million [15] - The backlog now stands at $251 billion, up 13% year over year, indicating exceptional demand for products and technologies [5][29] Q&A Session Summary Question: Confidence in delivering LEAP engines to Airbus - Management expressed confidence in executing deliveries and supporting production ramps for Airbus, with a focus on balancing material allocation [34][39] Question: Limitations to growth in Raytheon segment - Management highlighted strong demand and a focus on capacity investments, with ongoing efforts to ensure supply chain health to meet production needs [51][52] Question: Margins in Collins and tariff impacts - Management noted that Collins faced about $90 million in headwinds from tariffs, impacting margins, but efforts are underway to mitigate these effects [96] Question: Expectations for GTF compensation payments - Management confirmed that the financial outlook for GTF compensation payments remains consistent, with no changes to the timing of expected reductions in AOG levels [93] Question: Incremental margins in Collins - Management acknowledged that incremental margins were impacted by tariffs, but the team is working to improve productivity and mitigate these headwinds [96]

Core Insights - Raytheon and the U.S. Air Force successfully conducted the longest known AMRAAM air-to-air missile shot by a fifth-generation fighter, showcasing the missile's extended time of flight capability [1][2]. Group 1: AMRAAM Missile Performance - The tests demonstrated that AMRAAM can significantly enhance the lethality of fifth-generation aircraft, a result of the U.S. Air Force's form, fit, function refresh (F3R) development effort and Raytheon's investment in AMRAAM's research and development [2]. - AMRAAM has been a trusted air dominance weapon for over 30 years, integrated on 14 platforms across 43 countries, with more than 6,000 successful live fires and near-perfect success in active conflicts [3]. Group 2: Industry Context - Achieving air superiority in future contested battlespaces relies on the precision and lethality of air-to-air missiles, with AMRAAM recognized as the gold standard in the air dominance arena [3]. - Raytheon, as part of RTX, is a leading provider of defense solutions, focusing on integrated air and missile defense, smart weapons, and advanced sensors, among other technologies [5]. - RTX is the world's largest aerospace and defense company, with over 185,000 employees and 2024 sales exceeding $80 billion, advancing technology and integrated defense systems [6].

Summary of RTX FY Conference Call - September 10, 2025 Company Overview - **Company**: RTX (NYSE: RTX) - **Industry**: Aerospace and Defense Key Points and Arguments Company Performance and Resilience - RTX has demonstrated strong organizational resilience and adaptability in response to unexpected challenges such as tariffs, regulatory changes, supplier fires, and a four-week strike at Pratt & Whitney [3][4] - Organic sales increased by 8% in the first half of the year, supported by a robust demand signal and a backlog of $236 billion [4][5] Investment and Growth Strategy - RTX plans to invest $10 billion in research and development (E&D) and capital expenditures (CapEx) in 2025, focusing on new products and long-term technologies [5] - The company is committed to long-term growth, with a focus on executing its backlog and ensuring timely delivery to customers [4][5] Market Trends and Demand - The consumer market remains resilient, with solid household balance sheets contributing to continued growth in revenue passenger kilometers (RPKs) and aftermarket services [6][8] - The aerospace sector is expected to see demand for approximately 40,000 new aircraft over the next 20 years, indicating significant growth potential [10][11] Defense Sector Insights - RTX is well-positioned to meet the increasing demand for defense capabilities, particularly in light of global threats and the evolving defense landscape [11][15] - The U.S. defense budget is expected to grow, with a focus on munitions and homeland defense, providing a favorable environment for RTX's defense products [15][16] Backlog and Production Capacity - RTX's defense backlog stands at nearly $64 billion, with plans to double production on key programs such as GEM-T, AMRAAM, and Coyote in 2025 [19][20] - The company has invested approximately $1 billion in capacity increases since 2020, with an additional $300 million planned for 2025 [20] Commercial Aerospace Outlook - The commercial aftermarket saw an 18% year-over-year increase in the first half of 2025, with strong performance from Collins and Pratt & Whitney [28][30] - The GTF Advantage engine has received certification and is undergoing aircraft certification testing, expected to enhance performance and fuel efficiency [35] Financial Outlook and Capital Allocation - RTX anticipates free cash flow of around $8.5 billion for 2025, driven by strong demand in both commercial and defense sectors [42][44] - The company is on track to return $37 billion to shareholders by year-end 2025, with a focus on debt reduction and dividend growth [46][47] Strategic Partnerships and Innovation - RTX Ventures Fund has made approximately 20 investments, focusing on partnerships with emerging defense tech companies to enhance product offerings [26] - The company is exploring ways to apply commercial contracting principles to the defense sector to improve efficiency and output [49][50] Future Outlook - RTX is optimistic about its positioning in both commercial and defense markets, emphasizing execution and delivery on its substantial backlog of $236 billion [51] Additional Important Insights - The company is actively monitoring supply chain health and is focused on ensuring that suppliers are aligned with demand [9][10] - RTX is committed to leveraging its extensive installed base and technological advancements to maintain a competitive edge in the evolving defense landscape [24][25]