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]

Financial Data and Key Metrics Changes - In Q2, adjusted sales reached $21.6 billion, reflecting a 9% increase on both an adjusted and organic basis, driven by growth across all channels [18] - Segment operating profit was $2.7 billion, up 12% year over year, with a consolidated segment margin expansion of 30 basis points [18] - Adjusted earnings per share (EPS) increased by 11% to $1.56, influenced by segment operating profit growth and a lower effective tax rate [18] - Free cash flow for the quarter was an outflow of $72 million, impacted by $250 million in powder metal-related compensation and $175 million from tariff impacts [19] Business Line Data and Key Metrics Changes - Collins reported sales of $7.6 billion, up 9%, with commercial aftermarket sales increasing by 13% and defense sales up 11% [24] - Pratt and Whitney's sales also reached $7.6 billion, up 12%, with commercial aftermarket sales rising by 19% and commercial OE sales by 15% [26] - Raytheon achieved sales of $7 billion, a 6% increase, driven by higher volume in land and air defense systems [28] Market Data and Key Metrics Changes - The company reported a book-to-bill ratio of 1.86, with a backlog now at $236 billion, up 15% year over year [6][30] - Global Revenue Passenger Kilometers (RPKs) are expected to grow over 5% for the year, supporting strong commercial aftermarket demand [8] - The U.S. defense budget reconciliation includes over $150 billion for additional defense spending, indicating strong demand for defense products [9] Company Strategy and Development Direction - The company is focused on executing its backlog, driving cost discipline, and investing in innovation [30] - Strategic partnerships are being formed in Europe to support production ramp-ups, particularly for defense systems [9][13] - The company is leveraging data analytics and AI to enhance productivity and operational efficiency across its operations [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the strong demand across end markets, with expectations for continued top-line growth [10] - The outlook for adjusted sales for the full year has been increased to a range of $84.75 billion to $85.5 billion, reflecting strong first-half performance [20] - The effective tax rate is expected to remain at 19.5% for the full year, with improvements in operating performance contributing to EPS growth [21] Other Important Information - The company raised its dividend by 8%, reflecting confidence in long-term cash generation capabilities [16] - The company is maintaining its full-year free cash flow outlook at $7 billion to $7.5 billion, with expected recovery from the work stoppage at Pratt [22] Q&A Session Summary Question: Can you discuss Raytheon's multiyear outlook and the potential for awards flowing from the backlog? - Management highlighted strong demand with a book-to-bill of 1.35 and a 25% increase in backlog since the end of 2023, indicating a robust multiyear growth outlook [35][36] Question: What are the updates on the tariff situation and its impact on demand? - The company has reduced its tariff outlook from $850 million to $500 million, with no current negative developments seen in demand, particularly in the commercial aftermarket [46][48] Question: Can you clarify the impact of the reconciliation bill on R&D capitalization? - The recent legislation restores full expensing of R&D costs, which is expected to provide a moderate cash benefit this year and continue to benefit in the following years [56][59] Question: What is the outlook for free cash flow in the coming years? - Management expressed confidence in achieving significant free cash flow growth, with expectations of $10 billion minimum in 2027 and beyond due to strong market conditions and operational improvements [98][102]

Financial Data and Key Metrics Changes - RTX Corporation reported approximately $80 billion in sales for 2024, with a backlog of about $217 billion, of which $125 billion is commercial and the remainder is defense [3][4] - The company anticipates breakeven to negative cash flow in the second quarter due to a four-week work stoppage at Pratt and Whitney, but expects to recover throughout the year [6][7] - The operational outlook for the year remains unchanged, excluding tariffs, with a focus on execution and innovation [10][11] Business Line Data and Key Metrics Changes - Pratt and Whitney's GTF MRO output increased by 35% year-over-year, indicating improvements in operational efficiency [53] - Collins Aerospace has a significant installed base worth approximately $170 billion, with over $100 billion generating aftermarket revenue [94] - Raytheon's international backlog increased to 46%, up two points sequentially and ten points from the end of 2023, indicating a shift towards higher-margin international contracts [48] Market Data and Key Metrics Changes - The defense spending in the MENA region is expected to grow, with countries like Israel, UAE, and Qatar spending over 4% of their GDP on defense [23][42] - European defense budgets are increasing, with countries like Poland approaching 5% of GDP in defense spending, creating opportunities for RTX [41][44] - The U.S. defense budget is projected to approach a trillion dollars when combining the skinny 2026 budget and the reconciliation bill [28] Company Strategy and Development Direction - RTX's strategy focuses on executing commitments to customers, innovating for future growth, and leveraging the breadth and scale of its business units [14][19] - The company plans to invest $7.5 billion in company and customer-funded R&D to drive innovation and product upgrades [12][15] - The management emphasizes the importance of productivity and cost competitiveness, targeting 11% organic sales growth for 2024 [20] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the demand for RTX's products, citing a strong backlog and the successful resolution of the Pratt and Whitney work stoppage [5][6] - The geopolitical landscape is seen as dynamic, with management focusing on execution and innovation to navigate challenges [11][19] - The company is well-positioned to capitalize on defense opportunities in both the U.S. and international markets, particularly in missile defense and integrated air defense systems [30][42] Other Important Information - The GTF Advantage engine certification was achieved, which is expected to enhance performance and durability [15][66] - The company is actively working on improving its supply chain and MRO capabilities to reduce turnaround times and enhance service delivery [58][59] - RTX is committed to maintaining a strong free cash flow, targeting $7 billion to $7.5 billion for the year, which will support dividends and potential buybacks [103] Q&A Session Summary Question: What opportunities are there for Raytheon coming out of the Middle East trip? - Management noted a positive shift in the U.S. administration's posture towards defense contractors, leading to increased opportunities in the region, including a significant international order for the Coyote system in Qatar [22][24] Question: How should we see Raytheon's margin trajectory going forward? - Management indicated that Raytheon is on a path to achieve a 12% plus margin, driven by a healthier supply chain, an increasing share of international contracts, and a focus on core competencies [47][48] Question: Can you provide an update on the GTF engine and the powdered metal issue? - The technical and financial outlook for the GTF fleet management plan remains consistent, with improvements in MRO output and a focus on reducing AOGs [52][53]

Core Insights - Raytheon has transitioned its Lower Tier Air and Missile Defense Sensor (LTAMDS) from prototype to production after achieving Milestone C designation from the U.S. Army [1][2][3] - The LTAMDS program has successfully completed eight flight tests, validating its capabilities against real-world threats and confirming its readiness for production and deployment [2][3] - The U.S. Army has officially designated LTAMDS as a program of record, indicating its importance for both homeland defense and expeditionary missions [2][3] Production and Delivery - Raytheon has delivered the first six LTAMDS units to the U.S. Army under a contract awarded in 2019 and is currently manufacturing eight additional units per year, with plans to ramp up production to 12 units annually [4] - The company is set to deliver the seventh and eighth radars later this year and is also producing units for Poland, contracted in August 2024 [4] International Demand - Poland is the first international customer to integrate LTAMDS into its air and missile defense architecture, with a dozen additional countries expressing interest and requesting pricing and availability estimates [5] Company Overview - Raytheon, as part of RTX, is a leading provider of defense solutions, focusing on integrated air and missile defense, advanced sensors, and other defense technologies [6] - RTX is the largest aerospace and defense company globally, with over 185,000 employees and projected sales exceeding $80 billion in 2024 [7]