RTX Corporation

As a reminder, this conference is being recorded for replay purposes. On the call today are Chris Calio, President and Chief Executive Officer, Neal Mitchell, Chief Financial Officer, and Nathan Ware, Vice President of Investor Relations. This call is being webcast live on the internet, and there is a presentation available for download from RTX website at www.rtx.com. 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. 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 uncertainties. 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. 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. To ask a question, you will need to press star 1 1 on your telephone. You may ask further questions by reinserting yourself into the queue as time permits. With that, I will turn the call over to Mr. Calhoun.

Thank you. Good morning, everyone. As you saw in our press release, our fourth quarter adjusted sales, EPS, and free cash flow capped off a year of very strong performance for RTX. In 2024, we delivered $80.8 billion in adjusted sales, up 11% organically, driven by 14% growth in commercial OE, 13% growth in commercial aftermarket, and 9% organic growth in defense sales. Adjusted EPS was up 13% year-over-year to $5.73. We delivered 90 basis points of consolidated segment margin expansion with contributions from all three business segments and $4.5 billion in free cash flow. Customer demand for our technologies and solutions remains robust, and we ended the year with a backlog of 218 billion, up 11% year over year, including 125 billion of commercial backlog and a record 93 billion of defense backlog. On the defense side, Raytheon's backlog continues its favorable mix shift and is now 44% international, up eight points year over year. We'll walk through the fourth quarter details in a few minutes, but I know everyone is interested in 2025. So let me first share a few comments on that front. A favorable demand environment and the strength of our advanced products across commercial aerospace and defense position us for sustained growth in 2025 and beyond. On the commercial side, passenger air travel remains robust and IATA estimates that global RPKs will grow approximately 8% this year. Commercial airframe or backlogs also remain at record levels. We have significant content on the fastest growing platforms. On the defense side of the business, there continues to be tremendous need for our products, such as Patriot, NASAMS, F-135, GMT, F-117, and Coyote, all critical equipment being used around the world. We also expect continued strength in international demand for many of these products with key partners and allies in NATO and the Indo-Pacific committed to increasing defense spending. And as everyone knows, it's pretty dynamic right now on the macroeconomic front, but RTX is positioned to perform in any environment. Over the last several years, we've continued to qualify new and second sources in our supply chain, and we've made substantial investments in capacity expansion and modernization of our infrastructure in the United States. We have strong partnerships around the world that support production and deliver services within the markets that we serve. All of these factors support another year of positive momentum for RTX, and we expect full-year 2025 adjusted sales to be between $83 and $84 billion. which translates to organic growth of between 4% and 6% year-over-year. For segment profit, we expect 10% to 13% growth resulting in continued segment margin expansion, with all three businesses again contributing to the year-over-year growth. From an EPS perspective, we expect adjusted EPS at between $6 and $6.15, up 5% to 7% year-over-year. And for free cash flow, we expect between $7 and $7.5 billion for the year. This growth supports capital returns to our shareholders with over 33 billion returned already since the merger, including 3.7 billion in 2024. Today, we have clear line of sight to deliver towards the high end of our 36 to 37 billion capital return commitment by the end of this year. We are committed to continuing our strong capital deployment strategy as we move forward. Our performance will continue to be underpinned by the strategic priorities we've been discussing the last few quarters, executing on our commitments, innovating for future growth, and leveraging our breadth and scale. Let's move to slide four, and I'll provide an update on each of these priorities. First, executing on our commitments. On the GTF fleet management plan, our outlook remains consistent with our prior comments. As we've discussed, we expect to gradually reduce PW1100 AOGs throughout this year, driven by continued improvement in engine throughput and our MRO facilities. Last year, MRO output was up 30% with a significant increase in forging production. And this year, we expect MRO output to grow above 30%. More broadly, we continue to leverage our core operating system, industry 4.0 improvements, and focused capacity enhancements to drive productivity across the company. Last year, enabled by core, we continued to improve productivity across the company, growing sales 11% organically with less than a 2% increase in headcount across RTX. And this year, we expect to complete a record number of core projects to drive operational performance and continued segment margin expansion with an emphasis on improving on-time delivery, reducing inventory, and reducing the cost of scrap rework and repair. Additionally, we completed our goal of connecting 40 of our top factories to our proprietary data analytics platform. We continue to harness this value to drive company-wide productivity improvements through equipment efficiency, better quality, and enhanced product flow visibility. For example, Last year we saw a 50% improvement on time delivery for Raytheon circuit card assembly production line. We also saw a 50% increase in equipment utilization in pilot cells at Pratt's module center for the F-135. This year, we plan to double the number of product families leveraging this digital infrastructure, which will allow us to expand our use of data and AI in our aftermarket operations and product development. Next, let's talk innovating for future growth. In 2024, We spent over $7.5 billion in company and customer-funded research and development to advance technologies that address the immediate and emerging needs of our customers. With our ability to rapidly bring new technology to production and meet rigorous customer requirements, we are uniquely positioned to deliver capabilities at scale. For example, Raytheon's upgraded Coyote Effector recently demonstrated enhanced capabilities against complex drone targets. Designed, produced, and fielded in less than 18 months, These enhancements showcase our ability to rapidly integrate software and hardware technology into products. And as you may have seen, the Army highlighted the effectiveness of this upgrade with over 170 threats intercepted in recent conflicts. We're leveraging the same rapid development cycle across the company, including on multiple classified programs, to meet our customers' urgent need to field improved capabilities. We continue to make good progress on the GTF advantage at Pratt with the completion of all engine testing requirements, including a test schedule with more than double the endurance testing of the original program. We're pleased with the results and are on track for engine certification in the first half of this year with deliveries to follow in the second half. This type of innovation will continue in 2025 as we plan to spend over $7.5 billion again on company and customer-funded R&D to both field new products and develop advanced capabilities that are critical for the next generation of commercial and defense platforms, such as fuel efficiency, resilient networks, directed energy, autonomy, AI, and advanced materials. We're also innovating how we do our work as we continue to implement AI applications across RTX. Last year, we saw benefits in areas including product testing, first article inspections, and RFP responses. For example, using generative AI, Collins' avionics business has seen software testing cycle times improve by 3x while maintaining our same quality standards. We have a plan this year to deploy another 40 use cases. Through our continued initiatives to leverage machine learning and generative technologies, we expect to improve operational speed, cycle times, and capital utilization, while decreasing our dependency on external labor. And lastly, leveraging the breadth and scale of RTX. As part of our broader infrastructure plan to maximize utilization of RTX facilities, Collins is building out 125,000 square feet of production space in Raytheon's Richardson, Texas facility to support new wins. including the multi-billion dollar award last year for the survivable airborne operations center program. Through leveraging an existing RTX facility, we've been able to reduce the investment for this capacity expansion by 50%. And as we continue to evaluate our footprint, we've launched a significant number of projects across the company to lean out our manufacturing floor space and increase utilization, all with the goal of reducing our fixed costs and creating additional capacity. Bringing this all together, we feel very good about the momentum we've created heading into 2025 and where our business is positioned. With that, I'll turn it over to Neal and Nathan to take you through more details on the fourth quarter and our 2025 outlook.

Neal? Thanks, Chris. I'm on slide five. As Chris said, we had strong financial performance to finish the year. In the fourth quarter, adjusted sales of $21.6 billion were up 9% and up 11% organically. ahead of our prior expectations, primarily driven by commercial OE at Pratt. By sales channel, growth was led by commercial aftermarket, which was up 15%, and defense, which was up 10% organically. Commercial OE sales grew 10% as higher deliveries at Pratt more than offset the lower narrow body volume we expected at Collins. Segment operating profit of $2.7 billion was up 29% with segment operating margin expansion of 180 basis points versus the prior year. Adjusted earnings per share of $1.54 was up 19% from the prior year, driven by segment operating profit growth, which was partially offset by expected higher taxes and lower pension income. On a GAAP basis, EPS from continuing operations was $1.10 and included $0.30 of acquisition accounting adjustments, $0.05 of restructuring, and $0.09 of other non-recurring items. Free cash flow for the quarter was $492 million, bringing the full year total to $4.5 billion, which included approximately $1.1 billion of powder metal compensation and slightly higher year-end disbursements, including capital expenditures. In total, the full year included approximately $2.6 billion of impacts from powder metal, legal matters, and the Raytheon contract matter that we previously discussed. Also in the fourth quarter, we completed the sale of the Collins Hoist and Winch business as we continue to prioritize investments in our core. Lastly, we returned $852 million of capital to shareholders, primarily through dividends, and we paid down $800 million of debt in the quarter bringing our total debt pay down for 2024 to $2.5 billion. With that, I'll hand it over to Nathan to take you through the segment results, and then I'll come back and share some additional details on our 2025 outlook.