RTX Corporation

Good day and welcome to the RTX first quarter 2026 earnings conference call. My name is Lateef and I will be your operator for today. As a reminder, this conference is being recorded for replay purposes. On the call today are Chris Kellio, Chairman and Chief Executive Officer, Neil 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 SCC 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 11 on your telephone. You may ask further questions by reinserting yourself. Enter the queue as time permits. With that, I will turn the call over to Mr. Caglio.

Thank you. Good morning, everyone. Before I get into our results, I want to acknowledge the ongoing situation in the Middle East and express our hope for a sustained resolution. Let me now shift to the quarter. We delivered very strong performance to start the year, driven by continued execution enabled by our core operating system and a consistent focus on productivity across RTX. Starting with the top line, adjusted sales were $22.1 billion, up 10% organically with growth across all three channels. Adjusted EPS of $1.78 was up 21% year-over-year, driven by 14% growth in segment operating profit. And free cash flow of 1.3 billion was a solid start to the year, and up 500 million from Q1 last year. On the orders front, demand for our commercial and defense products and services remains robust. Our book to bill in the quarter was 1.14, and our backlog is a record 271 billion, up 25% year-over-year, with strong commercial and defense awards in the quarter. On commercial, our backlog is up 30% year-over-year, with strength across both OE and aftermarket. This includes some notable GTF wins, including ViaJet Air, which selected the GTF engine to power an additional 44 aircraft. And recently, Finnair announced their intention to purchase up to 46 GTF-powered Embraer E-2 aircraft. On the defense side of the business, we saw significant awards across all three segments, highlighting the strength of our product offerings. At Pratt, the military business was awarded over $3 billion for F-135 Lot 19 production. Collins booked close to $3 billion of awards, including $1.7 billion for mission systems capabilities and $400 million for avionics equipment supporting multiple platforms. And Raytheon booked $6.6 billion of awards in the quarter, including over $600 million to supply the Netherlands with Patriot equipment and over $400 million from the U.S. Army for our lower-tier air and missile defense sensors. In addition, we're working closely with the Department of War to accelerate munitions production and are pleased with the progress to date. As we previously announced, Raytheon signed five landmark framework agreements with the Department for critical munitions, including Tomahawk, AMRAAM, and the Standard Missile family. These agreements are a significant step forward in the Department's transformation initiative, and they're vitally important for national security. Once finalized, These agreements would provide firm demand signals for our tx and our suppliers to invest in ramp production well above existing rates over the next decade. This increased production will primarily occur at sites in tucson Arizona huntsville Alabama and and over Massachusetts we've already invested nearly 900 million in CAP X over the last three years to expand capacity at these locations. We will continue to make significant additional investments going forward to advance production capabilities and add new manufacturing lines to support these agreements. And as we said, the agreements incorporate a collaborative funding approach to preserve upfront free cashflow, and they represent good long-term business for us. So a very strong start to the year. I know everyone is looking to understand how we're thinking about the end markets as we look ahead. So let me provide an update on the operating environment as we see it today. I'll start with commercial aerospace. Like all of you, we're closely monitoring global events. While the environment is dynamic right now, the underlying demand for our OE products and aftermarket services remains durable. Commercial OE in the first quarter was in line with our expectations. We expect continued production ramps across multiple platforms throughout the remainder of the year. In Q1, we saw solid RPK growth despite the disruption in the Middle East. And aircraft retirement rates also remain below historical levels, with V2500 retirements in line with our expectations. Of course, regardless of any near-term volatility, this is a long cycle business. We assume RPK growth will continue and the demand for new aircraft to remain strong. So based on what we see today, we're not making any changes to our commercial outlook for the year. We'll of course be actively monitoring the situation. On the defense side, the current landscape clearly underscores the need for munitions depth, integrated air and missile defense technology, and more advanced capabilities to counter evolving threats, such as our Coyote counter UAS system. As seen in the President's budget request, we expect these priority areas to see significant funding increases in the 2027 U.S. defense budget and other supplemental funding packages. Our products across RTX are well positioned to support these needs with our battle tested systems and munitions serving as the backbone of many U.S. and allied defense architectures, including franchise programs like Patriot, GMT, NASAMS, AMRAAM, Tomahawk, and the F-135. So given our first quarter results and the strength we're seeing in our defense business, we're raising our full year outlook for adjusted sales and EPS and maintaining our free cash flow outlook. Neil will take you through the details in a few minutes. Operationally, our focus will remain on executing our backlog, driving increased output, and innovating to bring new capabilities to market. Let me highlight on slide four some of the progress we're making across RTX on these fronts. starting with our focus on operational execution. On the GTF program, the fleet management plan, including our financial and technical outlook, remains on track. PW1100 AOGs were down around 15% compared to the end of last year. We expect this downward trend to continue. As we've said before, the key enabler of this reduction is MRO output, which was up 23% year-over-year for the PW1100, on top of the 35% growth we saw in Q1 of last year. Consistent with our prior comments, we will continue to optimize the allocation of material between OE and aftermarket to ensure the health of the overall fleet and balance all of our customers' needs. On the OE front, GTF shipments were in line with our expectations for Q1, and we continue to expect mid to high single-digit delivery growth for the year. During the quarter, GTF-powered aircraft surpassed 2,700 deliveries, with Pratt powering about 45% of the A320 deliveries to date ahead of our roughly 40% sold program share. Also of note, the GTF program achieved 10 years in service in the quarter. The engine now has over 50 million flight hours with a backlog of about 8,000 engines. And we recently received aircraft certification with the GTF Advantage, keeping us on track for entry into service later this year. The Advantage incorporates a decade of learning that will deliver a step change in performance and time on wing for our customers. We also continue to leverage our core operating system, digital solutions, and investments in automation to drive productivity and deliver on our commitments. For example, we saw further progress on munitions output at Raytheon in Q1, with total deliveries up over 40% year over year, building on the increased production we drove in 2025. With respect to our automation efforts, Pratt's MRO facility in Singapore has developed industry leading robotics that assemble high pressure compressor rotors, delivering 100% first pass yield and reducing assembly time by 50%. And the team is implementing further automation of assembly and engine core stacking for the low pressure compressor. This type of investment has supported an 80% increase in output at the facility over the last two years. And we're actively deploying these capabilities across our MRO sites. We also remain on track to connect 60% of our annual manufacturing hours to our proprietary data and analytics platform by the end of this year. We're harnessing this data from our connected products and factories to improve the speed of decision-making and operations. We've integrated our commercial installed base into this platform to enhance predictive fleet maintenance. For example, the wheels and brakes team at Collins is using real-time data to better understand service life and improve inventory management. resulting in cost reduction across its large portfolio of long-term pay-by-the-landing service agreements. Moving now to innovation and future growth, we're making focused investments to meet the growing end market demand. Specific to capacity, we made progress on expansion efforts across all three segments in the quarter. Pratt announced a $200 million investment to expand capabilities at our Columbus, Georgia facility that supports both commercial and military engine programs, including the GTF and F-135. This investment will increase output of critical parts, including rotating compressor and turbine disks, to support growing OE and MRO demand. Raytheon completed a $115 million expansion of our Redstone Missile Integration Facility in Huntsville. This investment will increase the facility's munitions capacity by over 50% and support multiple systems, including the standard missile family and associated framework agreements. And Collins launched a capacity expansion effort that will support the recently awarded FAA contract for radar systems and other air traffic modernization opportunities. We also achieved significant milestones within our cross-company technology roadmaps in the quarter. Raytheon successfully demonstrated a non-kinetic variant of the Coyote Effector during a U.S. Army test event. This is a lower-cost, counter-unmanned aircraft system that can be recalled after completing its mission and redeployed for additional engagements. This innovation addresses a growing need for our customers and builds upon the battle-tested kinetic variant of Coyote in use today to defeat drone threats. In AI and Autonomy, Collins completed a successful flight test of its mission autonomy software for the U.S. Air Force's Collaborative Combat Aircraft Program. This demonstration highlights the strength of Collins' open architecture autonomous software to deliver enhanced capability across various platforms. And in propulsion, our cross-company team consisting of Pratt, Collins, the RTX Research Center, and RTX Ventures is making significant progress in hybrid electric solutions. In the quarter, the team successfully operated the propulsion system and battery pack for a turboprop demonstrator at full power. This technology is expected to drive a 30% improvement in fuel efficiency for regional aircraft. It combines a thermal engine from Pratt, a one megawatt electric motor from Collins, and a 200 kilowatt battery system supported by RTX Ventures. So overall, I'm pleased with the progress we're making on the innovation front. With that, let me turn it over to Neil to take you through the first quarter results, and the outlook in some more detail.

Neil? All right. Thanks, Chris. I'm on slide five. As Chris already mentioned, we had strong financial performance to start the year. In the first quarter, adjusted sales of $22.1 billion were up 9% on an adjusted basis and up 10% organically. This top-line organic growth was driven by strength across all three channels, with commercial OE up 6%, commercial aftermarket up 14%, and defense up 9%. Adjusted segment operating profit of $2.9 billion was up 14% year-over-year, driven by drop-through on higher volume, favorable defense mix, and improved productivity. Specifically on productivity in the quarter, we saw continued progress across the company on cost reduction and efficiency improvement, growing organic sales and segment profit double digits with only a 1% increase in headcount. We also drove 70 basis points of consolidated segment margin expansion in the quarter, with contributions from all three segments, more than offsetting the year-over-year headwind from tariffs. Adjusted earnings per share of $1.78 was up 21% from the prior year, driven by strong segment operating profit growth and lower interest expense. Adjusted earnings per share also benefited by about $0.08 year-over-year from a lower effective tax rate, which was principally driven by higher stock-based compensation deductions. On a GAAP basis, earnings per share from continuing operations was $1.51 and included $0.27 of acquisition accounting adjustments. And free cash flow of $1.3 billion was a solid start to the year and included approximately $170 million of powder metal-related compensation. Lastly, we paid down 500 million of debt in the quarter and are tracking to our full year D leveraging expectations as we further strengthen our balance sheet. Okay let's turn to slide six and i'll provide a few details on our updated outlook for the full year. As Chris mentioned, based on our strong first quarter performance and expectations around continued Defense strength we're updating our full year outlook on the top line. We're raising our full year adjusted sales outlook by $500 million to a new range of $92.5 billion to $93.5 billion, up from our prior range of $92 billion to $93 billion, driven by the performance we saw at Raytheon in the first quarter, as well as slightly lower sales eliminations for the year. We continue to expect this to translate to between 5% and 6% organic sales growth for the full year at the RTX level. Breaking this down further, we continue to expect commercial OE sales to grow mid single digits and commercial aftermarket sales to grow high single digits for the full year. And given the increase at Raytheon, we now expect defense sales to grow mid to high single digits for the full year, up from our prior expectation of mid single digits. On the bottom line, we are increasing our adjusted earnings per share outlook 10 cents of both the low and high end of the range. This increase is driven by approximately $0.05 of drop through on the higher sales at Raytheon, with the rest coming from a couple of below the line items, including lower interest expense. We now see adjusted EPS of between $6.70 and $6.90 for the full year, up from our prior range of $6.60 to $6.80. On free cash flow, we remain on track to our outlook of between $8.25 billion and $8.75 billion for the full year. Okay, with that, let me hand it over to Nathan to take you through the segment results for the quarter. Nathan?