RTX Corporation

Good day ladies and gentlemen and welcome to the RTX second quarter 2026 earnings conference call. My name is Livia and I'll be your operator for today. As a reminder, this conference is being recorded for replay purposes. On the call today are Chris Calio, Chairman and Chief Executive Officer, Neil Mitchill, Chief Financial Officer, and Nathan Ware, Vice President of Investillations. 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 course subject to risk and incentives. 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 one one on your telephone. You may ask for the questions by reinserting yourself into the queue as time permits. With that, I will turn the call over to Mr. Calio.

Thank you and good morning, everyone. We delivered another strong quarter of performance and financial results across RTX, driven by our continued focus on execution. Starting with the top line, adjusted sales were $24.7 billion, up 16% organically, including double-digit commercial aftermarket and defense growth. Adjusted EPS of $1.89 was up 21% year-over-year, driven by 18% growth in segment operating profit. And free cash flow was strong at $2.9 billion. Across RTX, we continue to see exceptional demand for our products and services. Our backlog stands at yet another record of $289 billion, up 22% year-over-year and 6% sequentially. Raytheon booked nearly $20 billion of awards, resulting in a book-to-bill in Q2 of 2.4. These bookings included over $5 billion of GemT Patriot Effectors, driven by international customers, and our first domestic GEMT production order in over 30 years. Raytheon's bookings also included over $4 billion of classified and confidential awards, as well as $1.8 billion for AMRAAM. On the commercial side of the business, demand also remained strong as evidenced by our continued growth. In Q2, we received over $20 billion of OE and aftermarket orders. Notably at Pratt, AirAsia placed an order for 150 A220 aircraft, which are exclusively powered by GTF engines, adding a new GTF operator and further expanding our installed base in a key growth region. And Collins signed a new five-year agreement with Air New Zealand to provide MRO services for engine nacelles on their full fleet of 787 aircraft. So overall, a very strong quarter that builds on our momentum from Q1. Okay, let me turn to the current operating environment as we look ahead to the back half of the year. Across commercial aerospace, aftermarket continues to be strong and passenger air travel remains resilient. For the year, global RPKs are expected to grow in all regions outside of the Middle East, and engine retirements have remained relatively low, both factors that support our outlook for strong commercial aftermarket growth this year. Airframers also continue to cite strong demand with further rate growth expected in the second half of the year, driving the need for our OE products across narrowbody, widebody, and business jet platforms. On the defense side, our significant awards in the quarter reinforce the global needs for our proven capabilities. Domestically, we're encouraged to see bipartisan support for a significant increase in 2027 defense spending. The base budget request of $1.1 trillion represents a roughly 25% increase year over year, along with meaningful increases in funding for RTX priority programs, including Tomahawk, LTAMs, and Standard Missile. And of course, we continue to work closely with the Department of War to advance the framework agreements we signed earlier this year into contracts to increase critical munitions output for our customers. On the international front, the need for integrated air and missile defense systems remains very strong. In the first half of the year, Raytheon booked over 10 billion of international awards, which is up more than 2x year over year, including over 7 billion from our European customers. So based on our first half execution and the demand strength we're seeing across our commercial and defense markets, we're raising our full year outlook for adjusted sales, EPS, and free cash flow. Neil will take you through the details of the second quarter and our updated outlook in a few minutes. But first, let me provide an update on our strategic priorities across RTX on slide four. The first is operational execution. We continue to use our core operating system and digital solutions to increase output and deliver our backlog. On the GTF fleet management plan, our financial and technical outlook remains on track. PW1100 AOGs are down again sequentially and down 25% year to date. and we expect AOGs to keep trending lower throughout the second half of the year. The improvement is driven by MRO output, which was up over 40% year over year, supported by a 23% reduction in turnaround time. At Raytheon, we've more than doubled year over year output across our critical munitions through the first half of the year. Additionally, our Coyote counter UIS effector, which has been deployed by both the US Army and Navy has been incredibly effective in the field and is in high demand. As a result, we have more than doubled output on this important program. And across RTX, our connected factory network now includes over 30 million annual manufacturing hours in our proprietary data and AI platform, up 30% since the end of 2025. This platform is strengthening our operational performance by enabling faster cycle times, better quality, and improved decision-making. Next is innovation for future growth. We continue to make focused investments to meet long-term global demand faster, including increasing capacity across RTX. For example, Raytheon is investing an additional $100 million domestically to increase GemT component production and accelerate LTAM's test capabilities to meet the growing global need for this 360-degree sensor. We're also coordinating with the U.S. and our allies to expand global production capacity. Just this month, Raytheon announced a collaboration with multiple NATO nations to identify additional European suppliers for AMRAAM components to accelerate deliveries of this critical munition. On the commercial side, Pratt announced additional investments of more than 100 million in the U.S. to expand GTF MRO capacity across multiple sites in Texas, Florida, and Arkansas. These investments will support new automation repair capabilities to increase shop throughput. And at Collins, We continue to expand our footprint and growth regions. In the quarter, we completed a commercial MRO expansion in Malaysia that will significantly expand capacity and bring more advanced and automated MRO capabilities. On the technology front, we achieved several key milestones in the quarter. Collins was down selected to deliver their mission autonomy software for the US Air Force's Collaborative Combat Aircraft Program. This type of autonomy will be critical in next generation fighter development to maximize manned and unmanned teaming. Pratt received aircraft certification for the GTF Advantage engine and started its deliveries to Airbus. As a reminder, the Advantage will double the time on wing performance and it's fully interchangeable with the current GTF fleet. We expect entry into service later this year and full production cut over in 2028. And at Raytheon, The team is utilizing a modified TJ-150 engine from Pratt to develop a new longer-range variant of our precision-guided, air-launched Stormbreaker Effector. This cross-company initiative has moved from concept to an upcoming flight test in less than 12 months to support delivering this new capability. So overall, we continue to make good progress across our strategic priorities as we execute and innovate for our customers. Okay, with that, let me turn it over to Neil to take you through the second quarter results and our updated outlook in more detail.

Neil? All right, thank you. I'm on slide five. In the second quarter, adjusted sales of $24.7 billion were up 14% on an adjusted basis and 16% organically year over year. This strong organic growth was driven by all three channels, with commercial OE up 9%, commercial aftermarket up 18%, and Defense up 16%. Adjusted segment operating profit of 3.2 billion was up 18% year over year, primarily driven by the drop through on higher volume. And segment margins expanded 40 basis points in the quarter with contributions from all three segments. Adjusted earnings per share of $1.89 was up 21% from the prior year, driven by the strong segment operating profit growth I just mentioned. On a GAAP basis, earnings per share from continuing operations was $1.57 and included 27 cents of acquisition accounting adjustments and 5 cents of restructuring and all other non-recurring items. We generated $2.9 billion of free cash flow in the quarter, driven by segment profit growth, increased engine deliveries at Pratt, and advance payments from international customers at Raytheon. And powder metal related compensation was approximately $150 million. Lastly, we entered into an agreement to sell Raytheon's Blue Canyon Technologies business for $620 million as we continue to focus on our core capabilities. So overall, I'm pleased with our strong financial performance through the first half of the year and our continued execution across the business. Okay, let's turn to slide six and I'll take you to our updated outlook for the full year. As Chris said up front, we're updating our full year outlook based on our first half performance and our strong backlog position. On the top line, we're raising our full-year adjusted sales outlook by $2.5 billion to a new range of $95 billion to $96 billion, up from our prior range of $92.5 to $93.5 billion. The majority of the sales increase is driven by the performance we're seeing in our defense channel across the company, primarily at Raytheon, as well as higher GTF aftermarket volume at Pratt. We're seeing strength in commercial OE at Collins, which is also reflected in this increased top line outlook. This translates to full year RTX organic sales growth of between 8% and 9%, up from our prior range of between 5% and 6%. Breaking this down further, we now expect commercial OE sales to grow mid to high single digits, up from the prior expectation of mid single digits, primarily attributable to the production ramp at Collins. Within commercial aftermarket, We now expect sales to grow low double digits across the company this year, up from our prior expectation of high single digits, driven by the strength at Pratt that I mentioned earlier. And with respect to defense sales, we now see growth of high single digits, which is at the higher end of our prior range of mid to high single digits. This improvement is principally driven by the first half performance and continued execution at Raytheon. On the bottom line, We're increasing our outlook for adjusted earnings per share by 40 cents on the low end and 35 cents on the high end. We now see adjusted EPS of between $7.10 and $7.25 for the full year, off from our prior range of 670 to 690. At the midpoint of our updated outlook, this increase is driven by approximately 26 cents of higher segment operating profit, principally from the net drop through on the higher volume across the segments, as well as favorable defense mix and improved productivity primarily at Raytheon. We're also seeing improvement in some below the line items and we've provided an updated outlook for these items in the appendix of our webcast. Finally, we now expect free cash flow to be between $8.5 billion and $8.75 billion for the full year, up from our prior range of $8.25 to $8.75 billion, primarily driven by higher segment operating profit. With that, I'll hand it over to Nathan to take you through the segments in more detail. Nathan.