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RMD had $3.6 billion of bookings in the quarter, resulting in a book-to-bill of 0.92 and a backlog of $35 billion.
rmd biokings/backlog
Transcript
2023 Q2
30 Jul 23
RMD
RMD
Transcript
2023 Q2
30 Jul 23
On the defense side across the RTX businesses, we captured $13 billion in net bookings in the quarter, driving a strong book-to-bill of 1.22, and this takes our defense backlog to $73 billion. Contributing to the backlog in the second quarter were a number of significant awards, including $2 billion at Pratt & Whitney for Lot 17 of the F-135 engines and $1.5 billion for 117 sustainment.
defense backlo at 73 billion
Transcript
2023 Q2
30 Jul 23
With respect to our full year outlook, we’re going to raise the top line to reflect the strength we’re seeing in our end markets. The new range will be $73 billion to $74 billion.
We’re also going to bring up the bottom end of our adjusted EPS range by a nickel to $4.95 to $5.05; however, we are going to reduce our 2023 cash flow expectations by $500 million to $4.3 billion, and this is primarily to reflect the developments at Pratt & Whitney that I discussed earlier.
guidance
Transcript
2023 Q2
30 Jul 23
Q2 was another strong quarter of strong demand in both the commercial and defense segments of our business with $25 billion of new orders. This brings our total backlog to a record $185 billion.
record baklog (1.34 q2 book to bill)https://investors.rtx.com/static-files/dc6b57a2-cb4d-4b83-88f4-b5c6851b4e16
Transcript
2023 Q2
30 Jul 23
we are working through an issue resulting from a rare condition in powdered metal that will require Pratt & Whitney to remove some engines from service for inspection earlier than expected. I want to make just a couple of comments here at the outset.
First of all, it’s important to know that we understand the issue and we have begun to address it through an inspection protocol that we already have in place. That said, clearly this will have an impact on Pratt & Whitney and our customers
powdered metal issue
Transcript
2023 Q2
30 Jul 23
State Department approve a large sale of advanced air defense systems for Poland as it bolsters its security amid the ongoing conflict in Ukraine. This would expand our existing partnership with Poland and make Poland the first international customer for our LTAMDS system, representing a key transition for this next-generation Raytheon franchise.
poland air defense
Transcript
2023 Q2
30 Jul 23
This dynamic is supporting strength in the aftermarket and growth across the globe with revenue passenger kilometers now tracking at about 95% of 2019 levels, and long haul international, which has lagged in the recovery is showing strong growth with passenger flight hours up 18 points year-over-year, a good indicator for increasing demand for wide body travel.
comm flight data, strong recovery
Transcript
2023 Q2
30 Jul 23
And it might get a little bit better during the course of the year. But I think, again, that wouldn't be an issue in terms of our ability to ramp production to meet that.
But right now, again, I think Boeing has got some challenges. We'll hear what they have to say here in another day or so. But we're, I would say, in constant contact with both Boeing and Airbus on OEM rates both at Pratt and at Collins.
boeing has challenges
Transcript
2023 Q1
28 Apr 23
And I would tell you that we probably didn't spend enough time testing for those harsh environments, specifically places like India.
And that's where we've seen the lower life on the combustor. We've seen some lower life the turbine blades just because of the harsh conditions there.
gtf issues in harsh environments
Transcript
2023 Q1
28 Apr 23
This is why that we are running as fast as we can to continue to insert upgrades into the fleet during shop visits. We've talked before about the sort of the block D upgrades, which are really aimed at combustor hot section, improving time on wing in those areas.
That's only about we're only about 50% of the way through the fleet in terms of those upgrades.
working hard to get upgrades in
Transcript
2023 Q1
28 Apr 23
As you know, since the GTF program went into service in 2015, we have continued to introduce upgrades and improvements to increase reliability and durability.
With respect to reliability, we have met the target level for dispatch reliability. This is now at mature engine levels. With respect to durability, we have improved time on wing since program inception. Again, time on, meaning how long engines can be operated before needing to be removed for maintenance. But we are not yet at the level we and our customers expect. This has put stress on the operations of the fleet.
We continue to develop upgrades to the current GTF configuration to improve durability.
We are also expanding our MRO capacity and working to reduce shop visit turnaround times to improve service availability. It will take some time to realize these benefits, but we are continuing to invest in time on wing improvements as we were able to do over the course of the V2500 program.
And of course, in parallel, we continue to execute on our GTF Advantage Development Program, our next-generation GTF configuration, that will incorporate all of our experiences and technical learnings since entering into service.
gtf time on wing issues
Transcript
2023 Q1
28 Apr 23
Poland recently announced plans to spend 4% of their GDP on defense this year. That's the highest level across all of the NATO countries. And we continue to support Ukraine's ongoing needs, including the Pentagon's accelerated deployment of the Patriot missile defense system, adding another RTX capability to the Ukraine mission.
poland/spending
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2023 Q1
28 Apr 23
But obviously, there's a challenge today with margins because time on wing is not what we expected it to be.
Reliability and durability are the two issues. And reliability is great. 99.98% dispatch reliability. Time on wing is the challenge. But again, I think as Chris explained, we've got some solutions to that, which we'll see over the next couple of years
time on wing not as good as expected
Transcript
2023 Q1
28 Apr 23
So that's a war we've been working on for a number of years. It's the 18th country to be a Patriot operator. But we see continuing demand that even is still not in the backlog. We know -- for instance, so far, we've only seen about $2 billion of awards related to Ukraine munitions replenishment.
We expect that we'll see more of that coming up later this year and into next year.
more orders to come from ukraine replenishment
Transcript
2023 Q1
28 Apr 23
But we are lockstep with Airbus on their demand for the year. And we are hand-to-mouth right now given some of the constraints. But again, lockstep with the demand, and that will continue to increase as we move into the back half of the year.
lockstep with airbus on gtf
Transcript
2023 Q1
28 Apr 23
We still think Pratt's aftermarket will be up 20% to 25% year-over-year.
pratt aftermarket 20%-25% in 2023
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2023 Q1
28 Apr 23
Obviously, as we look at the rest of the year, Noah, we expect the engine deliveries to increase. Think about between 35% and 40% year-over-year.
You saw 42% in the first quarter. That will obviously come with some negative engine margin headwind. I would put a number around $250 million in terms of rest of year NEM headwind that would then, coupled with the strong aftermarket that we're expecting to continue at Pratt, you'll see that margin sort of level out as the year goes on and those engine deliveries increase.
neg engine margin on GTF
Transcript
2023 Q1
28 Apr 23
RMD, obviously, this has been one where you're sort of trying to get to the bottom of the issues. And it sounded like it was a contract option exercise. It was 100 basis points. But even with that, you obviously have an implied 12.5% margin for the rest of the year in the guidance.
So I'm just curious, what's driving that? How profitable is the backlog growth you've now built up? I think that's one of the questions that everybody has. And I know after realignment, RMD won't exist, but it will still be part of the business, obviously.
Christopher Calio
Hey, Myles, this is Chris. Thanks for the question. Look, agree, we'd like to be seeing the margins improving at a bit of a faster rate. But there are some real positives in this business when you step back. Most of it will be the backlog.
If you think about the book-to-bill over the last 12 months, it's a 1.43, which is really phenomenal, with some key wins in some potential franchise areas.
As Neil noted in his remarks, we did have a contract option exercise in the first quarter. It's a good business.
Let's make no mistake about that. But because of the accounting resulted in a bit of a negative impact, about 100 basis points.
If you exclude that, it would put RMD at a bit over 10%, sort of in line with where we were in Q4.
As you sort of look ahead to the RMD margin profile, the two principal drivers of that margin improvement are going to be material flow and flow in our factory.
And of course, just absorption brought on by higher material receipts and of course, the labor that goes with it.
So if you think about the factory flow, we had a 15% increase in Q4 in terms of material sheets.
Another 5% here in Q1, and we're starting to see the results in the factory.
You heard Greg talk prior about kit fill rates being in the 50s. The material flow that we've seen lately has brought the kit fill rate up into the low 70s.
Our historical rate is in more the mid-80s. But as we continue to drive more material, you'll see more material flow in the factories, getting those kit fill rates up. And that's going to reduce the period of performance. And then again, the second one, again, is just math. With increasing material volume in labor, we're going to see better absorption of our fixed and indirect support costs.
So more productivity there.
So that's the margin sort of profile and story in RMD.
RMD profitabolity?
Transcript
2023 Q1
28 Apr 23
RMD
RMD
Transcript
2023 Q1
28 Apr 23