Capital Markets Day Transcript - HON 2026-06-03

Speaker 4

Please welcome Vice President Investor Relations, Sean Mecham.

Speaker 17

Good morning. Thank you all for joining us today. Those of you in the room as well as those tuning in on the webcast for our inaugural Investor Day. Feels good to say that. We're very pleased to have so many of you here with us in Old Town Scottsdale. We're just north of our global headquarters in Phoenix as we prepare for one of the most important milestones in the history of our company, the launching of Honeywell Aerospace as an independent company. For those of you who joined us yesterday at the engine facilities tour, as well as the welcome reception at the Honeywell Aerospace Hangar, thank you for spending the afternoon with us. We hope the experience, including the dozen-plus technology demonstrations, as well as our full fleet of test aircraft, really gave you a sense of what differentiates our business, the depth of our engineering talent, the scale of our installed base, and the way our technology comes to life across commercial aircraft, defense, and space platforms every day for the customers that depend on it. So today, we're going to build on that experience, and we're going to make the investment story come into sharper focus. So just a few reminders before we start. First, the materials we have today have been posted on the Honeywell IR website. For an event like this, as you would imagine, some of the statements we're making are forward looking in nature and based on our best view of the world and our businesses as we see them today, including the anticipated separation from Honeywell at the end of the month. We'll also reference some non-GAAP metrics, and recs for those are in the back of the presentation. As described on Honeywell's IR website and in our SEC filings, including the latest Honeywell Aerospace Form 10, those elements may change as the world changes. So please refer to those materials for more detail. Okay, now let's preview the agenda and cover a few administrative items. We plan to go until about noon Phoenix time today. And we have a break scheduled a little over halfway through. For those in the room, if you need a drink or a snack, refreshments are in the hall, restrooms around the corner. In 2026, fair to say that everyone in this room has at least one device that they're working on today. So now is the moment where we ask you to kindly just double check and make sure that's on silent. We have a great lineup of speakers for you today. Honeywell Aerospace CEO Jim Currier will kick things off shortly with his vision for the future of the business and its value creation potential. You'll hear from a number of our leaders, including our segment leaders, leaders of key end markets, strategy, innovation, supply chain. You'll hear directly from some of our customers as well. And then, of course, CFO Josh Jepsen will come on to synthesize all that information into our financial expectations, both near-term and long-term, as well as our path to long-term value creation. We'll also leave a couple opportunities for Q&A. After we conclude the webcast portion, those here in the room will have the opportunity to go next door to the ballroom and spend some more time with our technology demonstrations, several of which investors have never seen before. And of course, then you also have the chance to engage directly with our leadership team after today's discussion. All right, that's enough of the perfunctory. Let's get started.

Operator

Flight begins with trust. Every day, millions of passengers, crews, and operators depend on systems they'll never see. Before anything moves, everything must work. Across aircraft, across fleets, across the world. Only then is it time. From a new horizon, the full picture comes into view. Honeywell Aerospace connects what matters most. Guiding flight, powering it, protecting it. Mission-critical systems delivered to our customers at speed and at global scale. Technology developed once, deployed everywhere. Leveraged across platforms, programs and markets. Advancing autonomy, electrification and safety. Proven in service, expanded through innovation. Core capabilities applied again and again creating more value with every generation of flight from commercial air transport to business jets defense and space one portfolio spanning the aerospace industry trusted across decades of flight our systems fly today on aircraft around the world while shaping the aircraft of tomorrow. Designed to evolve, built to extend platform life cycles, engineered to deliver value long after launch. The future of flight is built on systems that work as one. From nose to tail, we deliver the highest value mission-critical systems in aerospace and defense. No silos, no compromises. Pure integrated capability at global scale. Leading today, shaping what comes next.

Speaker 4

This is Honeywell Aerospace. Please welcome Chief Executive Officer Jim Currier.

Jim Currier, CEO

Hey, I'm super excited about that video and being able to tell our story today about Honeywell Aerospace. So good morning everyone. Welcome to Phoenix. We are very pleased to have you here for our inaugural investor day. This city has long been the home of Honeywell Aerospace. It is where we build, test, service, and innovate new technologies that support the future of aviation. It is also home to about a quarter of our workforce as well. So it is the right place to truly launch our story as an independent company and explain how we create substantial long-term value for our stakeholders. We've invited you here to bring the value creation strategy to life, and we want you to experience our technologies firsthand, meet our deep bench of first-class leaders, and share in our excitement and passion for what we do every single day. It will start with the presentation by highlighting the unique strength and quality of our portfolio, explain a little bit about our strategy and how that will translate into durable, profitable growth and cash generation. Honeywell Aerospace has built a powerful franchise by designing highly complex systems that deliver tremendous value to our customers in the most critical aspects of their business. We supply our innovative solutions around the world and across aerospace and defense end markets, from the commercial aircraft that carry millions of passengers each day to the fighter jets and munitions that enable national security. As these markets with durable positive secular trends, long platform lives, and demanding customer requirements, we are well positioned to deliver profitable long-term growth. Our technology development model drives a differentiated impact for our business. We don't create bespoke solutions. Rather, we develop once and we deploy everywhere. You will hear that a lot today throughout the presentation material, as it explains the ubiquity of our systems throughout an aircraft and across platforms. We build technologies that can move across commercial air transport, business aviation, defense in space, and emerging sectors. This approach accelerates the time to get our innovations to market, improves the returns we generate on our R&D spending, and it grows the size of the market that we can address. We have continuously invested in the areas necessary to shape both today's fleet and the future fleet that is forging the path to more electrification, autonomy, and safety. These initiatives are tied to very specific customer priorities, product roadmaps, and growth opportunities. As a result, we have strong visibility into the future demand of our solutions. Seeing clearly what's ahead, we are investing in the transformation of our entire supply chain, seeking to increase output to levels to efficiently convert unprecedented demand into deliveries. We will support our path forward with a fit-for-purpose aerospace operating system built from a strong Honeywell legacy. And it will be executed by an experienced and motivated leadership team, many of whom you will hear from today. Taken together, this combination of innovation-led growth, best-in-class execution, serves the foundation for a portfolio that is constructed to compound value. Backed by an investment-grade balance sheet, we will accelerate the value creation over time by deploying the capital generated by our businesses to the highest-returned strategic opportunities. Now, let me take a step back just for one moment here and talk a little bit about our heritage and our legacy. What many people may not fully appreciate is that Honeywell Aerospace has been operating at the forefront of aviation for more than 100 years. Throughout our history, we have delivered some of the industry's most groundbreaking technologies, and along the way, we've been part of many firsts, from the first autopilot in 1914 to the first auxiliary power units in the 1950s to the first humans in space in the 1960s. As you can see, many other milestones that have shaped the future of flight and modern flight today. That heritage carries a significant weight because aerospace and defense companies put a lot of faith in their partners. They demand reliability, certification expertise, safety, execution, and most importantly, trust. We have earned that trust over generations and we do not take it lightly and we will continue to build upon that. Today, Honeywell Aerospace is a well-recognized leader in the industry with 36,000 employees, including 12,000 engineers at 120 facilities around the world. In 2025, we generated more than $17 billion in sales, growing at a double-digit rate, and translated those sales dollars into more than $4 billion of adjusted EBIT. Our portfolio is balanced across three segments organized by our core technologies, electronic solutions, engines and power systems, and control systems, each representing between 30 to 40 percent of sales. We also have a very diversified portfolio by end market application, with roughly 60 percent of our business being commercial original equipment and commercial aftermarket, and 40 percent of our business being defense and space. Commercial OE gives us the access to new platform growth. The aftermarket provides recurring high-value lifecycle revenue, and defense and space gives us the exposure to fleet modernization, rearmament, and advanced mission profiles. The size and diversity of our portfolio creates a highly visible, profitable, resilient sales stream. In the past four years, we have won over $90 billion in new business, which supports a backlog of greater than one year of sales. You'll find our solutions on almost all active aircraft as our history of innovation and dependability makes us a supplier of choice. Our results are powered by leading strategic business units, each with attractive market positions and clear growth opportunities. Electronic Solutions, our largest segment by sales with a presence on almost all global aircraft, sits at the intersection of safety, navigation, connectivity, and mission excellence. It provides high-value electronic systems ranging from integrated cockpits to precision inertial navigational units to electronic warfare and to space components that operate in the most extreme and harsh environments. Engines and power systems, our next largest segment by sales, leads the industry in producing engines for super mid-sized business jets. It is also the global leader in all end markets for auxiliary power units, which supply that critical engine power and electrical power without reliance on an aircraft engine our massive global install base provides a long runway of aftermarket support and upgrade potential last but not least control systems it builds upon the honeywell legacy for designing complex integrated distributed controls its offerings were at the intersection of electronics software mechanical hardware and it manages the climate and pressurization of the cabin as well as ensuring precise movement across the aircraft from the engines to the brakes. Our technological presence throughout the aircraft provides a deeper relationship with our customers as we work together to create system-based solutions far beyond single components. Honeywell Aerospace's current portfolio, which is poised for significant growth, is the result of deliberate effort over many years. In the 2010s, as the industry grew at a modest pace in the face of U.S. budget sequestration and the hangover from the global financial crisis, we optimized the business to be more focused and more profitable. We sold or we spun off structurally challenged units while also turning down contracts that did not meet our financial return hurdles, even if that meant sacrificing potential top-line growth. We also made our operations during that period of time more efficient, reducing our footprint and the complexity of our IT systems. And over that period, our profit grew at a high single-digit annual rate and margin expanded by nearly 50%. With a more focused and profitable portfolio now laying the foundation and in place, we have shifted from optimization to building a stronger base for future growth. We've increased our capabilities to sell retrofit, mods, and upgrades of what we call RMUs, which add growth that is completely uncorrelated to build schedules and flight hours. We have selectively partnered with well-funded developers of all-electric aircraft, which sparked a wave of innovation for products and technologies in applications for our traditional customer base. We also deployed capital for strategic growth and creative technology acquisitions for which we believe we are the best owner. And finally, the recovery from the pandemic and increased focus on national security around the world has put the wind at our back. Net sales grew at a 9% annualized rate during that time period while profit grew faster still more recently during the time that i've had the pleasure of leading this business we have sought to improve in three critical areas to promote above market profitable growth over time first customer focus we have strengthened our relationships with the leading equipment manufacturers defense primes and airlines by improving reliability and partnering together to deliver the next generation of aircraft. We've also increased our ability to serve through the acquisition of CASE and Civitanavi in 2024, truly our first sizable deals in quite some time for Honeywell Aerospace. As a result, we've seen signature wins and material backlog grow. And that backlog enhances the visibility to reinforce the relevance of our portfolio. Second, innovation. We have grown our company-funded investment in research and development in absolute terms and relative to peers. This has been done to support recent wins and position us for future wins, as well as creating a portfolio of attractive upgrade options for operators. While we continue to spend more to spur high-return future growth, a majority of our innovation efforts are funded by our customers. demonstrating clear and precise alignment with their future roadmaps and allowing us to invest at scale. Third, operational excellence. Supply chain output grew at 17% CAGR from 2023 to 2025 as we invested over $1 billion to meet customer demand and improve delivery. This investment has taken on many forms, insourcing, talent support, multi-sourcing, and even select capital investments that we have made in our suppliers as well as in our own operations. Overall, we are building momentum in this business, growing sales at double-digit rate over the past two years. But we also know we have more work to do to ensure we continue to meet the future needs of our customers. As a standalone aerospace and defense company, we believe Honeywell Aerospace will be even better positioned to thrive. Strategically, we see incredible power in having a dedicated industry focus rather than competing for the attention against unrelated opportunities and threats. Across the entire organization, we will have 100% alignment in our purpose, one sole purpose, and will be compensated based on achieving those goals that are fit for that purpose. For instance, we know that over the coming years, we must stay dedicated to reinventing our supply chain to support the buoyant lifecycle demand for our technologies. Operationally, the separation removes layers between key stakeholders and leadership, which creates improved and expedient decision-making as the world quickly changes. Improved responsiveness will allow even greater customer focus. We have formed a world-class board of directors with expertise that is specifically designed to support the needs of Honeywell Aerospace. Financially, we will have the ability to allocate capital for our top strategic priorities and target returns that are competitive versus our relevant peers. Our spending will go to the most attractive opportunities both internally and externally. We also expect to more effectively compete for shareholder capital as a simpler, pure-play company. We will create value for our stakeholders across three pillars. And you will hear a lot from the team today about how we are activating these efforts across the businesses. First, expanding leadership and attractive end markets. We want to grow in spaces where we have the right to compete and with deeply embedded competitive advantages and a significant profit opportunity. We have entrenched positions in commercial OE, commercial aftermarket and defense in space. Each of those markets have durable secular growth drivers and we will ensure our portfolios positioned in the most attractive areas of demand. Second, we will invest in differentiated technology platforms. We are an innovation-driven systems leader. Through our develop-once, deploy-everywhere approach, our technologies are scalable across platforms, across end markets, and that allows us to generate strong R&D returns and address customer needs with speed and efficiency. These new offerings will further expand our installed base. And third, continue to strengthen our operation capabilities to unlock future growth. Demand in our markets is strong. By converting that demand into revenue, however, requires supply resiliency, factory throughput, planning discipline, and service capacity. The Honeywell Aerospace Operating System and our supply chain transformation are critical for increasing sales and profits. We operate in markets that are expected to grow significantly over the coming five years with a high degree of visibility given the long cycle nature of our business. We expect the commercial OE market to grow at mid to high single-digit rate annually between 2025 and 2030, and the drivers are quite clear. It's multi-year backlogs across all commercial air transport and business aviation customers. Aircraft deliveries are increasing to pre-pandemic levels and beyond as supply chains recover. And new business jet platforms are entering into service. Nearly half of our OE wins over the last four years have come from business aviation, which reinforces the breadth of our opportunity beyond large commercial aircraft. Commercial aftermarket, again, expected to grow at mid- to high single-digit annual rate. That growth is supported by an aging fleet, as OE production has not been able to keep up with the demand from an increasingly mobile global middle class and the delay of aircraft retirements. Older aircraft have higher demand for routine maintenance as well as upgrades. Strong demographic tailwinds have supported above GDP growth in air travel over almost all historical time periods, and that is expected to continue going forward. Defense in space should grow at mid-single-digit rate. Global budgets and spending are expected to increase as governments look to bolster national defense efforts in a more volatile geopolitical climate. Internationally, multiple decades of underinvestment in defense needs have pushed the requirements to modernize, rearm, and rebuild. At the same time, the nature of combat has shifted, driving the need for advanced space systems to defend against new threats. Honeywell Aerospace delivers systems spanning, again, commercial air transport, defense in space, business aviation from nose to tail on more than 250 in-production platforms. In commercial air transport, we provide systems such as flight management, precision navigation, APUs, and engine controls among many additional flight-ready capabilities. Similarly, in business aviation, we have high-value content that we have established on generations of leading aircraft platforms, including integrated flight decks, cockpit and flight data recorders, propulsion engines, cabin pressure and cooling, among many others. And in defense and space, we supply those critical systems to customers, including the U.S. government, Lockheed Martin, RTX, and many other defense primes. You'll find these systems across fighter jets, helicopters, missiles, satellites, and mission-ready content, including navigation, connectivity, electronic warfare componentry, propulsion engines, power and thermal management systems, and many others. I gave a few examples, but as this slide shows, we are everywhere on aerospace and defense platforms and embedded in the ecosystem of the aerospace and defense industry. That breadth creates two very distinct advantages. It gives customers integrated system capability from a trusted supplier, and it gives Honeywell Aerospace recurring sales opportunities across long platform lives, from OE content to spares to repair and overhaul to RMUs, software upgrades, and future platform enhancements. multiple opportunities across multiple revenue streams. With that context, let me tell you why we are well positioned to drive meaningful growth across three priority vectors. First, new platform wins. As I mentioned earlier, we have more than $90 billion in commercial and defense wins from 2022 to 2025. These wins expand platform content and support in-service fleet for the future. At the same time, we're strengthening our supply chain capabilities so we can accelerate aftermarket and OE output to meet that demand. We have more than 40 new major RMU programs in process, and that is a very mature part of our innovation and operating rhythm. These are tied to existing products and newer technologies aligned to increased demand for autonomy, electrification, safety, efficiency, platform life extension. RMUs are an attractive business. They create growth that is not solely dependent on aircraft production and usage. And third, international defense. We expect to grow international defense business at a high single-digit rate from 2025 to 2030. As our global footprint and technology leadership positions us to capitalize relies on higher budgets, particularly in countries where modernization and local defense capabilities are needed. A standalone structure should help us execute more sharply across these three vectors, OE, aftermarket, and international defense. Our OE momentum is very visible on this chart in recent wins across commercial or transport and business aviation. just let me touch briefly on a few of them. At Airbus, multi-platform work includes flight management systems, radar, surveillance, safety systems, and air systems on the A350 freighter and an upgraded APU on the A320neo. While most of our platform content comes standard on new aircraft, there are some important commercial air transport systems that are selectable by the airline carrier. As an indication of the strength of the demand for our leading technologies, we've won roughly 60% of the value of selectable content chosen on more than 4,000 Boeing and Airbus narrowbody aircraft over the last four years. In business aviation, the Gulfstream G300 includes our Epic-based Harmony avionics, environmental control systems, and our HTF 7250G engines. It's a strong example of how we bring multiple Honeywell Aerospace capabilities onto a single platform. And with Bombardier, we signed a landmark $17 billion lifetime value agreement, and we are pursuing multi-platform collaboration R&D centered on Anthem Avionics and the HTF7K engine. This reflects the type of relationship we want to build with our customers, not just supplying components but partnering on future platform capability. This next slide really highlights the depth of our content on key commercial OE platforms. You can see the significant content we have on large commercial narrow body and wide body platforms across Boeing and Airbus. And in business aviation, we have high valued positions on leading midsize and super mid-sized aircraft. These are representative examples, but they illustrate the breadth of our role. The significance is not simply the number of products. It is the role that these products play on these aircraft platforms. They are central to performance, safety, reliability, passenger experience, and operating efficiency. And because these are certified into long-lived to platforms. They support recurring life cycle revenue. As I mentioned before, a core part of our strategy is to develop once and deploy everywhere. The R&D model I introduced a little earlier. In fiscal year 2025, we invested approximately $1.8 billion in research and development. And that investment supports disruptive innovation that is deployed at scale across our business. The model is straightforward, but make no mistake, it is not easy to execute with consistency, but it has become a meaningful competitive advantage for Honeywell Aerospace. We develop common technologies that we can then apply broadly. We continuously invest to adapt those solutions for customers across platforms, verticals, and end markets. We design with commonality in mind across our manufacturing and supply chain, which helps maximize the return on that investment. And we are committing consistent resources to company-funded research and development, with more than 4% of sales planned in 2026, and over 10% of sales overall when you include the customer funding. The right side of the slide illustrates this particular point. Precision navigation, auxiliary power units, air and thermal management technologies that serve commercial air transport, business aviation, defense and space, all with common core technology. And that commonality creates scale and speed. It lets us use learnings from one market to improve performance in another. It also gives customers access to mature, proven technologies that can be adapted to new requirements. This is core to how Honeywell Aerospace generates a high return on innovation. In looking ahead, our technology roadmap is organized around three powerful themes, electrification, autonomy, and safety, all rooted in creating value for our customers. In electrification, we are developing technologies such as the one-megawatt turbo generator power system, attuned vapor cycle cooling, assure mechanical actuation systems, and next-generation engine starters. As aircraft become more electric, they require more advanced power generation, thermal management, and actuation. We are investing directly in those needs. In autonomy, we are advancing our Anthem integrated flight deck. counter UAS solutions, Darwin digital co-pilot aides, and multimodal alternative navigation solutions. These technologies support the movement towards smarter, more automated, and more resilient aircraft operations. And in safety, we are developing AI-driven predictive maintenance, pilot state monitoring, quantum key protective communications, and increasing pilot situational awareness with our SURF-A surface alert technology. Safety has always been a defining theme for Honeywell Aerospace, and we continue to bring new tools to help pilots, operators, and defense customers manage complexity and reduce risk. But technology leadership alone is not enough. Execution is what turns opportunity into results. That is why the Honeywell Aerospace operating system is central to our strategy. We are evolving from a Honeywell Accelerator framework, which has been a proven world-class management and operating system for more than 20 years, into one that is purpose-built, purpose-built for Honeywell Aerospace, the Honeywell Aerospace operating system. We are starting with a strong foundation that's rooted in a culture of continuous improvement, operational excellence, disciplined execution, but really focusing this now around efficiency, manufacturing, productivity, value-based pricing, customer problem-solving, and innovation. As a standalone company, we are building a single enterprise-wide operating system that drives standardized planning, decision-making, execution, and performance. We will embed the continuous improvement mindset across supply chain, planning, and manufacturing, supporting predictable outcomes that are focused on delivery, quality, cost, and cash generation. Our Honeywell Aerospace operating system will underpin our supply chain transformation, which is one of the most important enablers of growth. Our objective is to build an end-to-end supply chain that can cover the future of Honeywell Aerospace. That starts with aligning capacity with planning to reduce volatility, to improve delivery and execution. It also means strengthening supply to increase control, output, and resiliency. We are advancing AI tools to integrate and standardize operations, driving visibility, speed, and most importantly, accountability. These tools help us see constraints earlier, improve decision-making, and operate with greater consistency across the enterprise. The four enablers are very clear, each tied directly to a customer outcome and our mantra of being customer obsessed. Stabilize the planning to improve delivery. Drive factory throughput that supports growth. Control and expand supply to increase resiliency and operate as one system to improve accountability. Our strategy translates into an attractive outlook through 2030. We are targeting 6% to 8% organic sales CAGR with an adjusted EBIT that's growing faster than top line and free cash flow growing faster still. Josh will go into much more detail later on regarding our long-term financial framework. We view these targets as achievable and grounded in the fundamentals of the business. We have a large installed base and a very meaningful backlog. We have differentiated technologies that are generating customer-funded and company-funded innovation at scale. And finally, we have the operating system that is designed to drive predictable performance. We are committed to creating value for shareholders while maintaining a strong investment-grade credit rating and financial flexibility. Capital allocation will be disciplined and dynamic, supported by robust and consistent free cash flow. Our framework has three priorities. First, invest to boost organic growth. We will support innovation, our supply base, a growing manufacturing footprint with associated competencies, global commercialization, and enhancing service capabilities. These are the investments that expand our install base, improve customer outcomes, and strengthen the lifecycle revenue. Second, complement organic growth with select acquisitions that accelerate our strategic roadmap. We have an inorganic playbook that includes opportunistic bolt-ons, technology tuck-ins, and partnerships, all with proven execution and integration capabilities. Recent acquisitions like Case and Civitanavi show how we targeted M&A that can add technology, expand platforms and attractive markets, and strengthen our global footprint. Third, return capital to shareholders. We expect to deliver a competitive dividend while opportunistically repurchasing shares. We will remain disciplined and balanced. We want to invest in the business, preserve financial flexibility, and return capital in a way that supports durable value creation. We also have an experienced team with a strong track record of execution. This team combines deep aerospace expertise with functional leadership. You will hear from several of these leaders today, and I'm excited for you to see the depth of our bench within Honeywell aerospace. This is a group that understands the products, the customers, the supply chain, the aftermarket model, and the mission requirements that define aerospace and defense. This team is aligned around a high-performance culture and a shared objective, advancing the future of aviation while delivering for customers and shareholders. As we move towards operating as a standalone entity, that alignment matters. It gives us the leadership capacity to execute our plan, make faster decisions, and most importantly, again, hold ourselves accountable. One of the benefits of becoming an independent company is a board of directors that is fit for purpose. It brings a compelling mix of aerospace and defense capabilities, leadership expertise, and financial and capital markets backgrounds. That range of perspectives is important for a company like Honeywell Aerospace because we operate at the intersection of advanced technology, manufacturing, services, global customers, public markets, and national security priorities. But I want to close with our mission. We protect and advance the promise of flight to create a safer, more connected world. That is a powerful purpose that captures the important role that Honeywell Aerospace plays. Our technologies help aircraft fly safely, efficiently, reliably, and they help navigate, communicate, and make better decisions. They help airlines and operators maintain fleets and improve performance. They help defest customers, protect national security. They help support space missions and emerging platforms that will define the next era of flight. And with that, thank you for joining us. I am excited for you to hear from the rest of the leadership team as we go deeper into the businesses. We'll show you why we are confident that Honeywell Aerospace is positioned to deliver durable, profitable growth and create substantial long-term value. Thank you.

Operator

Awareness starts here. the first signal of changing weather a runway hazard revealed critical information exactly when and where it's needed this is how honeywell aerospace advances autonomy and safety honeywell anthem a connected flight deck for a new era of aviation resilient navigation solutions delivering dependable

Anthony Florian, Other

positioning even in the face of disruption. Honeywell Aerospace Advanced Radio Frequency,

Operator

electronic warfare solutions for critical missions. Over land and sea, in the skies and in space, these technologies bring greater clarity to every decision. This is Electronic Solutions.

Sean Meacham, Head of Investor Relations

This is Honeywell Aerospace. Please welcome President Electronic Solutions, Bob Baricki.

Bob Butteke, Other

All right. I love that video. All right. Hello, everyone, joining us here in person and virtually. I'm Bob Budicke, president of our electronic solutions business. More than 30 years ago, I joined this company as a young engineer right out of college. Like many early in their careers, I was just hoping to find a place where I could learn and grow. But what I found was something much bigger. I've had a front row seat to decades of change across technologies, markets, and business models. But I can honestly say that this is the most exciting time of my career. And this momentum is shaping how we're thinking about the future and the opportunities ahead. Today, I have the pleasure of kicking off our in-depth look at Honeywell Aerospace's business segments with Electronic Solutions, a technology-driven portfolio that has attractive exposure across all three of our end markets. Electronic Solutions is a scaled, high-profit franchise centered on mission-critical electronics embedded across the global fleet. We have a broad portfolio of leading solutions designed to drive best-in-class performance, safety, and mission success. Our customers include a healthy mix of OEMs, airlines and operators, aftermarket service providers, governments, defense prime contractors, and space system integrators. In 2025, the business expanded sales to nearly $7 billion and delivered $2 billion in adjusted EBIT, reflecting strong market demand for increasingly connected, integrated, and software-driven capabilities. as well as clear customer recognition of the value of our content. Our installed base underscores that position. Our technology is present on most of the global fleet, much of it as a sole source provider. You can find our navigation systems and sensors on more than 60,000 in-service aircraft. That scale creates a durable foundation for long-term aftermarket growth. Let me take a moment to walk through our product portfolio, which is organized into four offerings. Avionics, navigation and sensors, electromagnetic defensive solutions, or EDS, and space. In avionics, our largest offering, we provide fully integrated cockpits, flight controls and flight management, as well as radar, radio, and surveillance capabilities. These systems span commercial air transport, business aviation, and defense platforms Our Epic cockpit has served as the benchmark in the industry for more than three decades Having gone through many upgrade cycles Anthem, our next generation platform, which I'll discuss later Is poised to set the standard as we move into the coming decade and beyond Our navigation and sensors offering includes air data modules inertial measurement units, inertial navigation systems, atmospheric sensors, and precision timing systems. Our solutions in this area are largely recognized as the most accurate in industry, providing incredibly precise direction in the air, on land, and over the seas. In EDS, which is the case business we acquired in 2024, we enable complex sensing, protection, targeting, and communication operations in the electromagnetic spectrum. Our solutions go across national security missions and warfighting domains. In a world with increasing prevalence of drones and automation, these capabilities are becoming a necessity in the marketplace. Lastly, in space, we deliver radiation-hardened, radiation-tolerant inertial systems, momentum controls, microelectronics, and payload solutions to defense and commercial customers what's clear are the broad applications for our core technologies across end markets our systems are embedded throughout the platform from the cockpit and flight controls to navigation connectivity and mission systems that level of integration is important it reflects our position not as a point solution provider but as a systems partner delivering highly integrated mission-critical capabilities. Our portfolio is built on a common technology foundation, and that foundation allows us to scale innovation efficiently across end markets. You'll see several of our system present on each of the pictures on this page guiding and securing flight. Finally, I would be remiss if I did not mention how our exquisite systems that that you can see on this slide played a significant role in the successful Artemis II launch with 14 of our different product types on board. Our value creation strategy aligned to the company as a whole is centered on three priorities. First, we are growing our share on next generation platforms with advanced, differentiated and integrated electronic solutions while also increasing value for customers on legacy platforms by improving safety, efficiency, and performance. We win because we can deploy innovation across a broader install base and end markets. Second, we are accelerating the development of autonomous, software-defined, and AI-capable technologies to enhance pilot, situational awareness, decision-making, and next-gen flight capabilities. Technological change empowers our business and creates many new opportunities to create value for our broad customer base. And third, we're expanding manufacturing capacity, accelerating production, enhancing our supply chain, and improving growth with productivity and localization initiatives. Our demand tailwinds are incredibly strong, and we will ensure that we have the supply to convert that demand. These priorities will further enable us to win new programs, expand content, presence, and deliver sustained growth. To illustrate the scale of the business, let's look at our avionics portfolio across the commercial fleet. On over 15,000 aircraft today, across commercial air transport and business aviation, We're selected for our system breadth, connectivity-based software, and integration compatibility for full flight deck solutions. We expect our avionics install base to grow at a 5% annualized rate from 2020 to 2030. Platforms like Anthem will accelerate this growth, enabling us to capture new programs and expand our position on next-generation aircraft. This large install base supports a meaningful aftermarket opportunity where software-driven upgrades and enhancements generate recurring, high-margin revenue over the life of the platform. We are also broadening our scope with Epic on thousands of aircraft and growing. We continue to extend beyond the flight deck into adjacent systems such as radios, radar, and surveillance, increasing our content per aircraft taken together we're capturing share on next-generation platforms will expanding value across the lifecycle as Jim mentioned earlier we're focused on enhancing our technology portfolio through targeted bolt-on acquisitions that strengthen our capability in high growth areas case and shiva Tanavi acquired in 2024 are examples of that strategy in action adding new international defense navigation and electronic warfare abilities case brings high reliability radio frequency technologies amplifying our presence on critical defense platforms and franchise missile systems while also providing an opportunity for international expansion. Civitanavi adds complementary gyroscope technology, improving our position in autonomous and next-generation defense applications. It also bolsters our European manufacturing footprint and advances our localization strategy. These acquisitions are aligned to markets with strong underlying growth. We see our business growing at even stronger rates as we leverage our international presence and scale to accelerate the path forward for these best-in-class solutions. We expect that both acquisitions will be accretive to our growth in the coming years while strengthening our technology portfolio in key strategic areas. As Jim mentioned earlier in our presentation, one example of our Develop-Once-Deploy-Everywhere R&D model is our precision navigation portfolio. For our inertial navigation systems, each uses a gyroscope to measure rotation and an accelerometer to track acceleration so that we can provide position, velocity, and orientation in any environment. Because of their accuracy and resiliency, these commercially developed and produced technologies have many defense applications, including positions on almost every major precision-guided munitions program. Examples include BAD, SM-3, and Tomahawk. Our GPS Inertial Navigation System, or EGGI, which is found on fighter jets, uses the same core as our Air Data Inertial Reference Unit, or ADARU, which is found on commercial jets. That standardization is a key advantage. It facilitates efficient system integration and production Optimizing supply chain operations And enhancing profitability Thirsty Okay, back at it Simultaneously, it enables us to derive the maximum benefit From our research and development dollars Sustaining our leadership in inertial sensors and navigation While enabling the introduction of new differentiated technologies A major advantage of our install base is the ability to monetize innovation rapidly through RMUs. RMUs allow us to provide customers with the most up-to-date features without the cost and weight for a new aircraft. They offer high returns on capital, adherence to the latest standards, driving very strong rates of adoption. And our broad end market exposure results in resilient, multi-cycle growth. In electronic solutions, our modular, software-driven approach creates scaled, high-margin upgrade opportunities across the install base. At the same time, our integrated hardware and software ecosystem cultivates a sticky customer relationship, reinforcing our platform positions and delivering the most value for operators. These mission-critical upgrades are also aligned with key secular trends. Safety concerns push strong upgrade demand. You've seen news stories about runway accidents and close calls. Our Surface Alerts product helps reduce these incidents by substantially increasing the time for pilots to react in response to runway incursions. It provides a direct warning without the need for communication from the air traffic control tower. In defense, the evolving nature of combat and new threats are increasing demand for anti-jamming, anti-spoofing, and electronic warfare retrofits. Recently, this technology has been used extensively by the United States military to maintain national security. Across commercial and defense, the focus on efficiency and autonomy is driving upgrades in flight management, connectivity, and alternative navigation. These dynamics support a durable, software-led, aftermarket growth engine. the same innovation the same innovation engine driving rmu adoption has built anthem our next generation flight deck it is a fully integrated cockpit designed to improve safety efficiency and operations as aviation shifts towards connected software defined platforms anthem's modular architecture makes it adaptable across aircraft and end markets it also captures real-time data on the cloud. As a result, it reduces pilot workload while increasing safety and situational awareness, a big step on the path towards greater autonomy. Lastly, it supports third-party applications, allowing for OEM-specified functionality, delivery of a customized experience, and AI readiness. For those of you in the room, I would strongly encourage you to test it out on one of the demonstrators in the neighboring ballroom. As you'll see, it is a surprisingly simple way to fly compared to the traditional cockpit. Demand continues to build for Anthem. We've secured five platform wins to date in multiple end markets, representing more than $10 billion in lifetime value. And we see more momentum underway. Our 2024 agreement with Bombardier includes collaborative R&D centered on Anthem to push forward the next generation of aircraft. And our deepening engineering collaboration with NXP, through a partnership signed in 2025, integrates their architecture to drive high computing power. This allows for larger format displays, advancing safety and efficiency, and greater value for pilots and operators. Delivering a more intuitive, connected flying experience with Anthem positions us at the center of the future of flight. To recap, our business is a clear leader in highly engineered electronic systems used throughout the aerospace and defense industry. We pair a scaled install base with our differentiated technology to capture growth opportunities while delivering safety, precision, and reliability in critical mission environments. Our recent acquisitions have strengthened our technology portfolio and expanded our geographical reach across commercial and defense markets. And as the industry moves towards connected, autonomous, and software-defined aircraft, our develop once and deploy everywhere approach, positions to guide us in that transition. Thank you for your time and attention.

Operator

Performance starts here. In the systems aircraft depend on to propel, power, and stay mission ready. This is where safety advances and electrification becomes a reality. HTF 7000. Proven turbofan technology for business aviation. T-55. Heavy lift turboshaft power for military missions. 131 Series Auxiliary Power Unit Over 100 million hours powering aircraft in all phases of flight On wing or in the tail, these technologies deliver where it matters most This is Engines and Power Systems This is Honeywell Aerospace

Speaker 4

Please welcome President, Engines and Power Systems, Dave Maranick

Dave Maranick, Other

Good morning, all. I'm Dave Marenick, President of Engines and Power Systems, or EMPS. I'm the third generation of my family in aerospace. My grandfather was born in 1898 before the advent of powered flight. And together, our family has been able to witness continuous and awe-inspiring innovations in aviation. I consider myself to be an absolute aerospace enthusiast. And I'm delighted to be with you here this morning. ENPS is a leading provider of aircraft propulsion, auxiliary power units, or APUs, and electric power solutions. These are mission-critical systems for aircraft across commercial air transport, business aviation, and defense end markets. We've built a leading franchise around delivering best-in-class reliability and efficiency across all the categories and platforms we serve. In 2025, the business produced over $5 billion of sales, growing 12% organically from the prior year and generating north of $1 billion of adjusted EBIT. Our sizable install base spans roughly 20,000 propulsion engines and approximately 47,000 APUs, with our systems placed roughly across 120 different aircraft types. That breadth gives our technology's exposure to multiple end markets and creates a very long aftermarket tail, which is responsible for the majority of our sales. These products operate for decades, and customers rely on Honeywell Aerospace to support them through parts, service, upgrades, and lifecycle solutions. Overall, it's this powerful combination of a strong install base, attractive end market exposure, and differentiated mission-critical technology that supports durable growth over time. Turning to the product portfolio, our expertise in axial centrifugal compressor technology and small engine architectures gives us enduring competitive advantages and has informed our technology development over the past several decades. Put simply, it's why we win in the markets where we choose to compete. EMPS is organized around two major offerings, propulsion engines and power systems. On the engine side, we bring proven performance, strong power to cost efficiency, and a digitally enabled maintenance ecosystem. We produce propulsion systems for both business aviation and defense. On midsize and super midsize business jets, we have a leading market position. Our flagship product is the HTF 7000, which is the super midsize business jet engine choice with industry-leading reliability, low maintenance costs, and end-to-end market support that extends the value of platforms over time. In defense, our T-55 engine has powered the military helicopters since the 1960s with more than 12 million flight hours. And the 124 has logged more than 1 million flight hours for light combat and training aircraft missions, with the highest thrust to weight ratio in its class. Moving to the power system side of the business, our exposure is balanced across commercial air transport, defense, and business aviation. We also have one of the industry's largest APU installed bases, supported by an integrated approach to the supply chain and our intellectual property. The 131 series is one of the most successful APUs in the industry, with more than 100 million hours of in-service use on commercial single-aisle aircraft. It is this APU that allowed Captain Sully Sullenberg to perform the miracle on the Hudson landing in 2009. It powered the aircraft's avionics and flight control surfaces after the aircraft had both engines subject to a bird strike, saving the lives of 155 crew members and passengers, including a Honeywell employee. In the defense and business jet markets, the 36-150 family includes more than 20 variants tailored to specific aircraft applications. We're also raising the industry bar in electric power systems, including the one megawatt generator, which sets a new standard for compact, continuous power and efficiency. Now let me walk through how EMPS will create value across the three strategic pillars we've discussed today. First, we will expand leadership in attractive end markets by continuing to power industry-leading propulsion and APU platforms. Our products are selected because of unrivaled performance and reliability in the areas where they compete. And that has created a vast install base to service across commercial air transport, business aviation, and defense platforms. We keep that install base at peak productivity with connected offerings, such as Ensemble, which I'll discuss more later. Second, we're investing substantially in the next generation of differentiated technology platforms with a focus on propulsion and power technologies that further improve fuel efficiency, power density, and life cycle economics. These investments drive enhanced aircraft performance for our customers in the near term while creating additional long-term growth opportunities for Honeywell Aerospace. Third, we're strengthening operational capabilities and increasing vertical integration in areas such as precision machining and electronic controls to unlock further growth. We benefit from a shared production footprint for engines and APUs and an operating approach focused on supply chain stability, productivity, and output growth. Supply chain is a critical focus area where we're partnering closely with our suppliers to ensure we're delivering for our customers and meeting demand in both the near-term and long-term. Together, these actions will support ramping OE build schedules, capturing aftermarket pull-through, and continuing to build a stronger, more resilient EMPS business. Turning to the next slide, you can see that we have a large and growing install base, which translates into recurring high-margin aftermarket revenue. Within business aviation, we expect the number of aircraft that have our HTF 7000 engine to grow at approximately a 9% annualized growth rate from 2020 to 2030. This engine's market leadership is reflected in roughly 13 million flight hours of life since 2004, a 99.997 dispatch reliability, and leading fuel efficiency at a lower cost of operation. That performance matters because reliability and life cycle costs are central to how customers evaluate propulsion systems. Once the engine is installed, our aftermarket opportunity extends over decades through maintenance, parts, service programs, and upgrades. A similar dynamic exists in APUs. Our commercial APU install base is expected to grow at approximately a 5% CAGR between 2020 and 2030, off a very strong base, with solid performance across both commercial air transport and business aviation. We are winning APU installations on new builds, and also replacing competitor units on the in-service fleet because of the strength of our value proposition to operators. All in, this install-based growth creates durable aftermarket pull-through and ultimately drives an increasing high-quality predictable revenue stream. RMUs are another important growth lever for EMPS because our products are high-value complex systems with operating lives that can extend more than 30 years. Across the install base, customers are looking for better fuel economy, higher reliability, improved range, and lower life cycle costs. RMUs allow us to deliver those benefits to existing customers and in production platforms with very strong returns on investment. On top of that, it often allows customers to achieve necessary performance without purchasing a new aircraft or new vehicle. The 131-9 APU high-efficiency mode, as an example, has saved narrow-body operators almost 5 million gallons of fuel since it entered service less than six years ago. It's also improved on-wing time by as much as 1,500 hours, which translates into one to two fewer shop visits over the lifespan of the APU. In defense, the AGT-1500 Total Integrated Engine Revitalization, or TIGER program for the M1 Abrams enhances reliability and fuel efficiency and improves operational range. It also increases power to weight performance, enabling the vehicle to accelerate from zero to 20 miles per hour in roughly six seconds and reach speeds above 40 miles per hour, which for a vehicle that weighs 60 tons is quite impressive. Importantly, many of these upgrades can be completed during major service center events without additional downtime, adding to an already strong value proposition for customers and attractive aftermarket growth for Honeywell Aerospace. Let me spend a moment on Ensemble because it's a great example of how we're incorporating digital capabilities to strengthen the EMPS aftermarket model. Ensemble elevates engine monitoring by using data and predictive insights to reduce cost cost, and increased aircraft uptime. The platform enables near-real-time automatic engine data downloads after every flight, supporting faster analysis, easier compliance, and better visibility into engine health. It also provides early warning through predictive AI detection, which helps enhance safety and minimize operational disruptions before they become an issue for the customer. Ensemble has been effective at predicting failures up to three months before they would have occurred in front of the customer. And Ensemble enhances record-keeping, offering one of the first searchable digital logbooks in business aviation, which creates a more efficient, transparent, and useful maintenance record for operators. Ensemble is also an important strategic lever as digital monitoring creates powerful incentive for operators to utilize our maintenance service plan. It improves outcomes, it strengthens relationships, and it positions Honeywell to capture demand for predictive maintenance, RMUs, and lifecycle support over time. Shifting to where our industry is heading, EMPS is poised to play a critical role as aircraft architectures become more electric and power demand increases across both commercial and defense applications. This is a sizable growth opportunity driven by two trends. First, customers are looking for more electric aircraft designs and more sustainably oriented products. Second, innovation is reshaping propulsion, power management, and system design across current and next generation aircraft. Honeywell Aerospace is a global leader in electric power generation and conversion. We're developing a new family of high-power-density generators that demonstrates our commitment to innovation and builds on our existing expertise in power systems. The one-megawatt turbo generator is a great example of that. It was designed as a new power source for hybrid electric aircraft with the highest power-density generator in the industry. This system is efficient, safe, and lightweight, supporting advanced performance and lower costs. This is a natural extension of EMPS capabilities, leveraging proven power generation expertise and applying it to the next generation of aircraft. Taking a step back, EMPS is a large-scale, differentiated business with strong positions in propulsion, APUs, and electric power. We have a leading and diversified install base across key end markets, which creates recurring aftermarket opportunities over the life cycle of the programs we support. We're also leveraging our history of innovation with our develop-once, deploy-everywhere approach. Whether in engines, APUs, electric power, or digital monitoring, we are focused on technologies that improve performance, reliability, and lifecycle economics. Finally, we are strengthening our supply chain and operational capabilities with efforts such as multimode manufacturing to meet robust customer demand across both OE and aftermarket. That combination of install base, technological differentiation, execution discipline positions EMPS to be a meaningful contributor to Honeywell Aerospace growth. Thank you for joining us today.

Operator

Control starts here. In the systems that pilots depend on and shape how passengers experience flight, it governs how aircraft operate and respond by bringing critical systems into alignment. Through these systems, Honeywell Aerospace is advancing electrification and safety. From cabin pressure, thermal management, and life support, to engine control, lighting, friction control, and actuation, Honeywell Attune, advanced lightweight cooling for high-performance aircraft functions. Honeywell Assure, precise, speed-responsive, modular flight controls. Throughout the aircraft, these technologies work as one. This is Control Systems. This is Honeywell Aerospace.

Speaker 4

Please welcome President Control Systems, Rich DeGraff.

Rich DeGraff, Other

Hello, I'm Rich DeGraff, president of our control systems business. I'm in my 18th year at Honeywell Aerospace. Consistent with most of my life-defining moments, my wife had a lot to do with me being here today. I was first introduced to Honeywell Aerospace by my wife's uncle, a veteran engineer. He spoke glowingly about the company, how they treated their employees, the innovation, the global experiences, and the list goes on. Finding my way into Honeywell Aerospace became my top priority. My persistence paid off when I was hired in as a second shift operations supervisor in our repair and overhaul facility here in Phoenix. There, I earned my Six Sigma Green Belt and my Lean Expert certification. That was the beginning of a flywheel of opportunity to scale my leadership in different roles focused on customer engagement, P&L ownership, and business growth. To be standing here today is an improbable story at many companies, but not Honeywell Aerospace. control systems has nearly a century of pioneering innovation from the 1929 invention of the four wheel braking system to the addition of lights on an exterior of a plane to the first all aluminum aircraft intercooler system to the first cabin pressurization system allowing for high altitude flight. And the first air turbine start system capable of unlimited main engine starts. Our legacy of innovation is undeniable, which is why it's an honor for me to be leading this business given its strong legacy and the growth in front of us. As a leading provider of mission-critical thermal and motion control systems, we've established a strong and consistent financial profile by supporting our customers across all end markets. Honeywell Aerospace Control Systems generated over $5 billion in sales last year, growing organically at 10%, and it delivered $1.5 billion in adjusted EBIT. What differentiates this business is how deeply embedded our systems systems are in daily flight operations. Almost all of you boarded a flight to get here to this event. The airplane you flew began with the start of the main engines. You flew at an altitude above 30,000 feet, withstood weather, and concluded with a safe landing. Like many of you, millions of passengers every day rely on Honeywell Aerospace Control Systems to play a critical role in enabling flight, life support, and enhanced safety. And importantly, demand for our mission-critical products is well-diversified across end markets and programs. So let's take a look at how the portfolio comes together. We organize the business around two core system domains, air and thermal control and motion control. Air and thermal control systems are focused on managing the aircraft environment and energy, including temperature and pressure, which is why it feels like you're on the ground when in fact you're 40,000 feet above it. Another key domain is overall thermal efficiency, which becomes increasingly more important as platforms continue to electrify. Motion control systems are responsible for controlling movement across the aircraft, including propulsion-related functions and flight surface actuation, enabling precise and reliable operation. Across those domains, we support a broad range of mission-critical functions, including air supply, cooling, mechanical engine control, flight control actuation, and braking. Now, our complementary portfolio allows us to utilize model-based system engineering to leverage common subsystem technologies across the entire business. What independs all of this is our ability to design and deliver complex integrated control systems at the aircraft and the subsystem level. It's about bringing together hardware, software, electronics, and advanced materials into a fully certified system-level solutions. That capability allows us to be deeply embedded in the aircraft's core architecture with positions that last the full life of the platform. Now, as you can see here, we've established that integrated position across each of our end markets. Our highly engineered, high-performance systems help improve capacity, efficiency, and range and can be deployed across platforms. And importantly, we support our customers across the full lifecycle, from the initial design and certification through retrofits, upgrades, and connected services, extending value well beyond the original installation. Building on the strength of the portfolio, our strategy is focused on three clear priorities to drive substantial value creation. First, we're expanding our leadership by remaining deeply engaged with our customers to grow our mission-critical thermal and motion control systems content. This will become increasingly important as our customers demand solutions to more complex challenges across both commercial and defense aircraft. Second, we're investing in differentiated electrification technology platforms through the design of highly integrated systems that sit at the intersection of mechanical, electrical, and software. And third, we're strengthening our operational capabilities to further unlock growth. We're modernizing our supply base and our production system to ensure we can scale efficiently to capitalize on the strong demand for our current and new innovative solutions. Taken together, these priorities position us to expand our content on next-generation platforms and deliver sustained long-term growth. Now I want to take a moment to highlight our advantaged portfolio and our strategy in action with our F-35 Power and Thermal Management System, or PTMS. PTMS is a highly integrated system that brings together air and thermal control with motion-related capabilities into a single system that satisfies 14 mission and safety critical functions on the F-35. With more than a million flight hours and approximately 1,800 systems delivered to support OE production and sustainment, the PTMS is the trusted solution on the platform, delivering clear results. With a 10-year aircraft CAGR of 10%, the install-based growth drives long-term content and aftermarket sustainment opportunity. Beyond line fit, PTMS also represents a meaningful retrofit opportunity for the existing F-35 fleet to satisfy new and emerging customer needs. So, this is not just a strong OE position, but a platform that supports recurring value over time. Overall, PTMS is a great example of how our high-performance systems enable next-generation aircraft, driving growth and lifecycle value for our customers and Honeywell Aerospace. Another key lever of growth in our control systems business is RMUs. RMUs allow us to address critical customer pain points while delivering improvements in performance, reliability, and overall life cycle costs. We are concentrating our efforts on three strategic focus areas. Enhanced safety, increased cooling, and overall system efficiency. Now, on the bottom of the slide, you can see a number of key product investments where we are delivering across those three strategic areas of focus. You just heard me talk about the RME opportunity with our PTMS program. And here you can see an example of how we're investing in software and hardware modifications and upgrades to increase cooling capacity for the F-35 while lowering operating costs. Each of these solutions is designed to address a specific customer need, and importantly, they can be deployed across a large install base of various platforms. That scalability is what enables RMUs to be meaningful and predictable growth over time. Now, electrification is one of the most important drivers of growth across our end markets. Through our market-leading position, we've secured approximately $15 billion of net new wins from our next-generation electrification products, scaling to more than $1 billion in annual run rate revenue over time. The Develop Once Deploy Everywhere R&D approach allows us to move faster and leverage common technologies to deliver tangible results. These innovative advancements are integral to delivering the efficiency standards required on next-generation platforms. Before I close, I'd like to share two examples of the impact we're having through our innovative solutions. Let me start with Assure, our advanced electromechanical actuation system. This is a high-demand system with strong exposure across both defense and commercial platforms. Assures the most precise and speed-responsive system available for critical control surface application. What differentiates it is the architecture. It's modular, scalable, enabling thinner flight control surfaces, resulting in systems that are approximately 10% to 15% lighter and more compact. Translating directly into aircraft efficiency and performance. It's seeing strong momentum in high-growth applications. Azure is already being deployed in missile platforms such as the Guided Multiple Launch Rocket System, or GMLRS, where production is expected to double by 2028. And more broadly, this technology supports the shift away from traditional hydraulics towards integrated electromechanical actuation and autonomy. That shift is critical for next-generation aviation, enabling more efficient and increasingly more sustainable aircraft architectures. Assures building momentum with eight recent platform wins, a clear example of how we scale technologies to drive growth across both defense and commercial markets. Next is Attune, our premier, compact, high-density cooling solution designed to support aircraft cabins, cockpits, batteries, and onboard electronics where thermal demands are increasing rapidly. Attune stands out because of its design and efficiency. It was developed for a wide range of aircraft, but particularly optimized for no-bleed and low-bleed systems, which are becoming more common in next-generation platforms. From a performance standpoint, Attune delivers a weight reduction of up to 35% and 20% greater efficiency, contributing to overall aircraft efficiency improvement. And importantly, this solution is one that scales with applicability across civil, military, and advanced air mobility platforms, positioning it well for broad adoption. Attune has a strong start with multiple wins across defense and commercial platforms. Both assure and attune reflect how technologies, how our technologies are aligned with key industry trends and customer needs supporting both near-term growth and long-term platform opportunities. Now, stepping back, Control Systems is a leader in mission-critical thermal and motion control systems across both commercial and defense platforms. We are well-positioned to continue to expand that leadership, growing our content across platforms. When customers need solutions to more complex thermal and motion control challenges, our systems become even more critical. We are investing in differentiated technology platforms, bringing together mechanical, electrical, and software capabilities to enable more electric and more efficient aircraft. And we're continuing to invest in expanding our supply capacity through automation of our factories to support our customers current and future needs thank you please welcome vice president

Sean Meacham, Head of Investor Relations

investor relations Sean Mecham chief commercial and strategy officer Ben Driggs chief digital technology officer Krista Dixon and chief technology officer Todd Giles excited to talk about innovation here this morning we've shown

Speaker 17

some of our materials in the past that historically Honeywell Aerospace has spent more than its peers on a percentage of sales basis in the form of R&D, but it's not just how much you spend, it's how you spend it. So, Todd, maybe we'll kick over you to start, but let's just talk about our approach to innovation, how we go about allocating dollars and how we think about taking all the things we heard from our segment leaders and then bringing it to life through the

Todd Giles, CTO

engineering group. Yeah, absolutely. So from an innovation standpoint, we kind of think of innovation at the intersection of customer and market needs with cutting edge technology and how we look at that over the near term and the long term. You know, we have implemented this thought process with kind of a symbiotic relationship between the business teams and the technology teams, right? And we do this through robust strategic planning of taking that market back need to create product roadmaps, very robust, long-range product roadmaps that we then look at with the technology organization, and we apply that technology of what needs to be developed, by when, to the right technology readiness level so that we can bring those products to market. One of the other things we leverage as part of this process is co-innovation, right? We partner with our customers, we partner with suppliers, other companies, and even universities to bring this technology forward into our products. One of the best examples, for those of you that had the pleasure to be with us yesterday afternoon at the hangar, you got to see our helo inside the hangar. It's our AW139. We partnered directly with Near Earth Autonomy to take their technology, combine it with our integrated cockpit technology, and do the first ever autonomous flight of an AW139. And so this is how we leverage and try to be extremely efficient and thoughtful about what we invest in and try to bring to market. Ben, any other thoughts on the overall portfolio?

Ben Driggs, Other

Yeah, so our R&D efforts are about 10% of our overall revenue. So that equates to over $5 billion that we put in R&D over the last three years. About 60% of that is customer funded, which is, of course, a great source. We try to make sure that those sources are from a variety of places so that we can ensure IP control and we can maximize the value we get from that. And then about 40% is funded by Honeywell. And so that's well over 4% of our revenue is internally funded. With the revenue growth that we've had and will have, that's a pretty significant absolute dollar amount increase going forward. But it's not just how much you spend, it's also how you spend it. And this is the rough breakdown of how we spend our R&D. We spend about 65% on new products that have customer commitments. We have about 15% related to RMUs, these upgrades that you've talked about that bring the latest technology into the existing fleet. And then we maintain about 10% in advanced technology because it's critical to make sure you're doing enough in technology to be there on next generation, on things that are horizon two or three. And then we have about 10% that's on strategic initiatives that maybe is ahead of a customer commitment. And we feel really good about that sort of breakdown and that's giving us a robust pipeline of innovation going forward. Chris, maybe you can talk about, we also want to spend that efficiently and our digital tools help us to do that.

Krista Dixon, Other

Well, I think of IT as being the digital background that brings all of this together and enables Todd's organization to execute on the innovation. We stand up the technologies that digitize the engineering processes. We implement high-performance computing so that we can promote engineering efficiency. And then we are scaling AI across the entirety of the engineering design life cycle. And we do this not only to be able to design faster, but to eliminate rework and then improve our ability to get to first-pass certification rates. It's our mission to make sure our responsibility, really, to ensure engineering organization has the right data, tool, system capability to execute on their product strategy.

Speaker 17

Now let's maybe shift to develop once, deploy everywhere. We've heard it throughout the presentations this morning. It's a key way in which we go about developing new technology. Let's maybe just talk about how we start with our core capabilities and then how we build out from there, just taking not a singular platform approach but more of a horizontal lens across these end markets. Maybe you guys can give us some more detail there.

Ben Driggs, Other

To really execute this approach, there's two fundamental things that you need to do. One, you have to be solving the complex challenges that exist across the end markets and across platforms. And that's something that Honeywell Aerospace does very well. We're on the complex, challenging things that need solutions across the entire industry. And then the second thing you need is you need the credibility, experience, and capability to do certification, installation, and have trust of customers across all end markets. And that's another thing Honeywell Aerospace has in a very significant way. Great experience in defense, great experience in business aviation, great experience in commercial air transport, and understanding how to get those things certified. And when you think about some just examples of that, the navigation is a great example. The core innovation was in the navigation sensors. And all aircraft need precision navigation. What that enabled us to do is take that core sensor technology, do different packaging, different installations, different certifications. And now there's 900,000 of those sensors throughout the fleet in all three end markets. APUs, another great example. Every aircraft needs reliable power generation. Every aircraft needs reliable backup power. So we took one innovation in those small turbine engines, and it's on well over 100 platforms. There's 45,000 aircraft flying with our APUs. Air Turbine Start, Rich mentioned this. This is another great example. We figured out how to do that reliably, how to do that with durability. Now 75% of commercial flights use our air turbine starter. Over 20 military platforms use our air turbine starter. So those are the things you really need to be able to execute this. And maybe you can talk about how the engineering organization puts that into practice.

Todd Giles, CTO

Yeah, and so I would say we are kind of purpose-built to do this, right? We are structured from a technology organization by products and systems. So this allows us, as we kind of talked about strategically, to look at all of the needs across different end markets, synthesize those needs, and come up with either a core technology that goes into a core product that we can then reapply in many, many different areas. So it allows us to be extremely efficient here in the deployment of capital. One of the things you just heard Rich talk about are Attune product, right, our vapor cycle system, the cooling product. The one thing between the business and the technology organizations is we developed a strategy on how can we go after all these markets? How do we do development differently? And so we broke this product down into a modular building block sort of system where we can develop technologies, components, subsystems that can be glued together or kind of Lego brick together to solve different needs across different markets. When Rich was talking, there's applications now in advanced air mobility, the defense market, and we're poised well for next-gen single aisle, and a number of other applications. So it's this thought process and strategic alignment that allows us to do this appropriately.

Speaker 17

Okay, so now we've talked about strategically how we go about spending the dollars. We're in a room full of investors and analysts, and so, of course, they want that money spent well, and they want proof points. So maybe let's talk a little bit about how all that effort is translating into commercial momentum. Jim certainly touched on this in his opening comments. Let's talk about commercial momentum and how we are now seeing that flywheel really work for us.

Ben Driggs, Other

So there's been $90 billion of lifetime wins over the last four years. And about over a third of that are actually new positions. And so we feel really good about the momentum that we're seeing across all the end markets. We just sort of go through those. Think of business aviation, the collaborative agreement with Bombardier and avionics and engines. That's a great growth driver. The G300 having avionics as well as engines from Honeywell is a great growth driver. You think of Cessna and Embraer jets powered by Honeywell where the previous versions either didn't exist or they were not powered by Honeywell. So great commercial momentum there. You think of commercial air transport on the narrow body fleet on 4,000 aircraft, 60% of the possible value that they could have selected from Honeywell. They chose Honeywell. That's great momentum. We have the next generation flight management system on Airbus platforms and upgraded APU. Again, great progress there. And then when you think about defense, on almost every major new platform in defense, there's excellent Honeywell aerospace positions and maybe missiles is one example to talk about. You think of the major drivers and missiles, AMRAAM, GMLRS, Standard Missile 3, Tomahawk, you think of Andro Barracuda, all of the latest versions of these missiles have expanded Honeywell content across several of our different product areas. So really exciting commercial momentum, I think, that we're seeing in adoption of our technologies. Maybe, Todd, you can add a little bit more of some of the examples in the areas.

Todd Giles, CTO

Yeah, and I would say, you know, if we just kind of double-click down into the safety side of what we're looking at and what we're looking at kind of going forward. You know, a number of years ago, between the teams and the organization, we noticed increasing runway incidents, right? You guys are hearing about these kind of all too often, I guess I'll say. And so we recognized an impending need in the marketplace, and we quickly jumped in to develop what Bob talked about as our Surface Alerts product, right? We're currently going through certification on this product, and it's a software-only product that brings much greater situational awareness to the flight crew on very critical phases of operations, including taxi, takeoff, and landing. In doing so, we were able to develop this product. We can take it to the current market, and we can drive it forward into current production, and even stage it for next-gen platforms and applications that are coming down the road. So we continue to develop this, and one of the ways that I'd like to highlight is kind of our unique capability that Honeywell Aerospace has is our flight test organization, right? We have nine aircraft ranging from general aviation to biz aviation to, you know, air transport, regional, and even the Hilo that I mentioned earlier, right? This capability allows us to take existing technology and products, demonstrate it to customers, demonstrate it to regulators, do iterations of design and development on our own, and then eventually take it through to certification. So it allows us to look into any areas of the market where we have our products and technology under development and want to move with speed and agility. We can leverage this capability just like we're doing with our Surface Alerts products and a number of other products

Speaker 17

across the organization. So we're talking about innovation and we haven't spent much time on AI. So, Krista, maybe this is a chance to go a little bit deeper there. I thought maybe we could talk about the global aftermarket business as a good case study for what your org is doing inside of Honeywell Aerospace. Maybe talk about actions that are underway where we're already doing the things, you know, say like 12 to 24 months where we're seeing real traction. And then also as you talk through that, let's also go a bit further out on the horizon and what could be as we think like 36 months and beyond.

Krista Dixon, Other

Yeah, so first and foremost, we are deploying AI and AI agents everywhere across the company. You know, we're using it to automate processes and get to greater productivity. We use it to get to faster data insights where we can be predicting and optimizing our decisions. In our aftermarket space, we're utilizing AI to be able to look for white space opportunity and where we could have potential new revenue streams. We look at it across the entirety of our maintenance, repair, and overhaul business and how we can utilize data that's coming off of our products, out of our systems, and analyze that to predict where we could have either repairs or maintenance and then in turn how we use that to minimize aircraft on ground. We'll also use it within our contract space and how we accelerate our ability to move faster on requests for proposals you know and then looking 12 to 24 months down the road will continue to mature all of the AI solutions we have in place today to be able to further optimize but I'll be partnering with Ben's commercial organization We'll be looking at how we accelerate the sales processes, and we'll be looking to optimize and use AI in our pricing optimization. We'll be looking at how we can extract data from static documents like text and emails and voicemails and automate putting that into our sales system to get faster data insights, but also to eliminate manual work for your sales team. You know, and then going back to engineering and even thinking beyond just the design process, we'll be utilizing many, many forms of engineering data so that we can move faster on engineering requirement documents and engineering knowledge articles. So we have a very accelerated AI roadmap, and we're very excited about the value that it's not only going to bring to Honeywell Aerospace, but also to our customers.

Ben Driggs, Other

Given the volume of transactions and information in the aftermarket, it's just a great application that our teams are working on together to really optimize that.

Speaker 17

Let's talk about decoupled growth for a minute. So the official term is retrofits, modifications, and upgrades, RMUs. We've heard it again. It's been a theme throughout the presentation so far. It seems like a relatively unique capability for Honeywell, at least in terms of the maturity, the scale, the intention to which we prosecute that. Maybe you guys could just tell us a little bit more from each of your perspectives how RMUs not only help solve customer challenges in the aftermarket, in the installed base, but also how that is a different form of innovation that helps us think ahead to future platforms.

Ben Driggs, Other

When you think about the life cycle of any aircraft, it's really long, right? It's years to develop. It's built for 20 years. Each aircraft flies for 20 to 30 years, sometimes 40 years in the military. So these are very long life cycle products. And you don't want to wait for the new aircraft to get the latest technology. Just think about safety. You don't want to wait for a brand new aircraft to get the latest safety technology on the existing fleet. So the real objective that Honeywell has here is work with operators, identify what they can do to actually improve their existing fleet, and then given our engineering expertise, our installed base, go and make those things happen and bring them in. And they generally fall into three categories. One is safety. Think of our Epic Cockpit. So in business jets, there's 6,000 Epic Cockpits out there. We've now gone from CERT Bravo and now we're working on CERT India. So you can see all of these sort of seven different upgrade cycles where there's software-only upgrades offering things like synthetic vision, advanced approaches, other safety improvements. And we're actually getting a very high penetration for every wave of these upgrades. And having that existing sort of cockpit enables you to do that. Another category is efficiency. Think of improved reliability for starters, high efficiency APU, big desire for that. And then performance, fundamentally changing the performance is kind of the last category. Dave talked about the Chinook helicopter. That same engine envelope and size, the current engine is three times as powerful as the original engine. We've gone through waves of upgrade cycles that have enabled the warfighter and the soldier to actually do brand-new things with the Chinook that they couldn't before because of these power upgrades. So it's really across the board that's what you try to do, given the long life cycle of these platforms. Krista, I know you've been helping us a ton on the RMU business in identifying those.

Krista Dixon, Other

Well, I think the way that I think of IT helping RMU business is how we utilize the data that we're getting from our operators. And then how we take that data and analyze it to see where we could have upgrade potential, and then what the resulting value would be for our customers. You know, additionally, much of our RMU work is around software-only upgrades. And so it's very important for my organization to enable the right digital infrastructure back to that high-performance computing to make sure that that is a very efficient process. And Todd, you and I have no shortage of conversations on high-performance computing and what it does for the engineering organization, so maybe you want to expand a little more.

Todd Giles, CTO

Yeah, from a, you know, Ben hit a bunch on the retrofits, mods, upgrades equation here and how we really look at that. From an engineering standpoint, our install base allows us to continuously innovate, right? We can think of new things. We react to the market, we look at the market, and we understand what's going on in the market. And we can be proactive and develop new technologies, new features, new functions, whether they're software only or some hardware upgrades as we can go to market. One of the great things that Bob brought up is our resilient navigation portfolio, right? We all have heard about GPS denied and GNSS denied from jamming, spoofing, a number of issues. This affects anyone flying anywhere at any point in time across advanced air mobility, commercial aerospace, defense, right? And so we proactively have been investing for a number of years on different modalities of sensing, and then we figure out how to bring those to market through various install-based applications, as Ben mentioned. And so that's just one area to highlight. I love the Chinook example. It's always a super good one, especially even with Epic and everything else. And so we do all this activity, and it just allows us to continually iterate and invest in new technology, new value-added features and functions.

Speaker 17

I think that transition is pretty nice to talk about advanced technology and going further out on the time horizon. We've been making the case today that Honeywell Aerospace is going to push the industry forward in terms of greater forms of electrification, further pathway towards autonomy, lots of new forms of safety. as we think about those vectors what are we seeing in terms of the customer demand for those types of opportunities and future you know next generation platforms

Krista Dixon, Other

krista maybe do you want to sure well our ai strategy it you know it truly goes beyond just productivity and we fundamentally see it as customer facing and i think a great example of this is what we do with engineering on new product development and the implementation of digital twins. And a digital twin is a high fidelity replica of our product in an aircraft operating environment. And we can use the data coming off of the digital twins to analyze against real world conditions and then predict the performance of our product, which in turn, you know, helps us with our product strategy. You know, we can also use Digital Twin within our autonomy product, and we do that by utilizing it for the see, think, act, communicate processes, which in turn drives greater innovation and product strategy for us. And, Todd, that is near and dear to your heart, so maybe you want to talk a little bit more about our path to autonomy.

Todd Giles, CTO

Yeah, how much time we got left? We could talk about this all day. From the standpoint, you know, Krista hit on it, pretty much hit the nail on the head, right? So we look at autonomy, speaking about autonomy, right, through the principles of robotics, right? See, think, act, communicate. And if you know aviation and you think about the golden rule of aviation, aviate, navigate, communicate, all of those things really overlay very nicely with a lot of our products. We leverage the tools and capability infrastructure developed in partnership with Krista and her team to be able to simulate these environments and stitch these products together to create much greater automation potential across our integrated cockpits, whether it's Epic or the new Anthem cockpit that Bob talked about, or whether it's just developing pilot aids to assist from an AI standpoint, developing digital co-pilot that we talked about, And any number of other points of automation to really reduce crew workload and create a much safer experience for the warfighter and commercial air transport passengers, right? Additionally, this plays down into the safety side of the equation. And if we look at, you know, autonomy, safety, and electrification, you know, on the safety front, we've talked a lot about SURF-A and a number of other products, resilient navigation. But we have advances in weather radar to detect numerous other forms of weather conditions in the flight path and be able to react accordingly. We can talk about flight data recorder advancements that we're investing in and bringing out, and a number of other areas. You can also talk about different autonomous operations as we go into the advanced air mobility market and even into the defense space for collaborative combat aircraft. So we take all of our install base, we take the technology we have, we leverage our IT infrastructure, stitch that together, and create value-added features and functions and offerings for the marketplace as we move forward in the future. Ben, what are your thoughts on electrification?

Ben Driggs, Other

You know, the heart of what electrification is trying to get at is next-generation platforms want to be 15% plus more efficient, you know, lower cost. And so one of the things that you really need in that is you go to a lower bleed or a no-bleed engine, really enabling more efficiency. And the question is, how does the rest of the aircraft function and what's the electrification needed there? But what Honeywell Aerospace has is really a lot of the key building blocks for that. One, we're the leaders in power generation with our APU business. You heard Dave talk about the turbo generators. That's a space where you've got to generate the electricity. And then once you generate this electricity, you've got to cool it and manage the thermal loads in a really efficient manner, and that's what Attune does. Attune is a step change in more efficient cooling, high-density cooling in a smaller footprint and using less energy itself. And that's already winning and already being proven on certain platforms that's going to enable it to continue to larger platforms and other things going forward. And then when you think about what do you do with all this electricity, one of the things you need to do is have better actuation systems, control all the flying surfaces of whatever platform it is more precisely, better, and more efficiently. And that's what the Assure product line does. You know, it's had eight wins already. It's proving this in the missile environment, proving this in other environments. And that kind of gives you all these building blocks. And you're not just betting on something that hasn't been fielded. You're actually doing things that have been fielded, that have proven, and then you can build that electrification story, which is sort of unlocking this 15% plus improvements going forward. So I think overall, we feel really good about the positioning we have against these long-term trends.

Speaker 17

It's been all the time we have. Great discussion. Thank you.

Sean Meacham, Head of Investor Relations

Please welcome Chief Integrated Supply Chain Officer, Kathy Worthen, and Chief Financial Officer, Josh Jepson.

Josh Jepsen, CFO

Good morning. I'm Josh Jepson, Chief Financial Officer. I joined Honeywell Aerospace in February, and I could not be more excited. What stood out to me about Honeywell Aerospace is the breadth and quality of the portfolio, Jim, the culture, and the caliber of the leadership team assembled, and the opportunity to help scale a business with incredible momentum and long-term growth potential. Today, I'll focus on how our comprehensive operating system is a differentiator for Honeywell Aerospace, enabling consistent, profitable growth and strong cash generation. I'm joined on stage by Kathy Worthen, our Chief Integrated Supply Chain Officer. She comes with a ton of experience in leading supply chain transformations across multiple industries, and we are very lucky to have her on the team. I'm excited to partner with her as we move on this journey to fully unlock our growth potential.

Kathy Worthen, Other

Thanks, Josh. I'm Kathy Worthen, Chief Integrated Supply Chain Officer. I joined Honeywell Aerospace in September 2025 with over 25 years of supply chain experience cross-industry with companies such as General Motors, GE, and Magna International. And like Josh, I couldn't be more excited to be in this industry as a leader as part of this transformational moment and everything in all of the significant opportunity we have ahead. So what attracted me to this business was not only that scale of that opportunity, but the ability to build a more integrated, resilient, and scalable operating model to support our long-term growth. Josh?

Josh Jepsen, CFO

Thanks, Kathy. To start, I want to provide some historical context. Over time, our business has generated healthy profits. However, some of those strong results came at the expense of investments in certain areas of the supply chain and operations. Therefore, as demand has accelerated, it uncovered opportunities to better align supplier capacity, planning, and execution required to meet that demand. We are laser-focused on addressing this dynamic with deliberate actions to better support an integrated end-to-end supply chain and deliver stronger output growth. To help advance these efforts today, we're introducing the Honeywell Aerospace Operating System. Building on a strong foundation, this operating system is designed to drive consistency, improve execution with differentiated performance, and support profitable growth. It is anchored in four key principles. First, a single enterprise-wide system which empowers teams with standardized ways of problem-solving, decision-making, and communicating. Second, it builds a culture of continuous improvement. This will unlock efficiency by driving performance and cross-functional collaboration. Third, it enables predictable, profitable growth underpinned by our team's focus on customers as we deliver enhancements to safety, quality, delivery, cost, and cash flow. And fourth, it informs disciplined capital allocation and investment decisions, aligned with our strategic priorities. Over the past two decades, Honeywell Accelerator has been responsible for promoting a consistent growth mindset, operational excellence, and disciplined execution. As a standalone aerospace company, Honeywell Aerospace, we are evolving the legacy from the Honeywell operating system into a custom lean system designed to unlock additional gains for a long cycle business. We aim to deliver meaningful impact with the most significant enhancements from our integrated supply chain focused on bolstering capacity to meet demand and generating output growth. For instance, the Honeywell Aerospace Operating System will deliver better enterprise-wide alignment by providing increased transparency, cross-functional collaboration, which will in turn improve quality and on-time delivery. The operating system also accelerates digital and AI-enabled planning to strengthen supply, which will support end-to-end supply chain. Planner agents will be created to identify supply chain bottlenecks proactively, highlight critical part shortages, and ensure clear-to-build readiness through AI-driven prioritization and automated triage. This is a critical component, especially as we work to address the supplier constraints that we flagged earlier this year. In parallel, these efforts enhance manufacturing excellence to increase throughput, quality, and real-time performance visibility. With that, I'll hand it over to Kathy to provide some color on where the supply chain is today, where we're going, and how this operating system drives tangible impact and output growth.

Kathy Worthen, Other

Thanks, Josh. So today I'll walk through how we are improving our execution predictability, strengthening supplier and factory coordination, and converting strong aerospace demand into scalable, more reliable growth. Honeywell Aerospace operates a large and diversified global supply chain network, supported by more than 16,000 supply chain employees and over 3,000 production suppliers. Our regional footprint across the Americas, Europe, and Asia Pacific strengthened resiliency, support localization, and enabled closer alignment to customer demand. In 2025, we delivered 16% year-over-year output growth, driving high supply and throughput demands across several constrained categories, particularly mechanical components and repair flows. As a result, we identified opportunities to improve execution predictability, that planning stability, and also synchronize our supply across the network. That is where the Honeywell Aerospace Operating System becomes critical. Before outlining where we're going, it's important to frame the environment we're operating in. Externally, the aerospace industry experienced significant supply chain disruption, beginning with a post-pandemic demand recovery. Mechanical components, castings, forgings, and precision machined parts became constrained across multiple supplier tiers. At the same time, labor shortages and operational instability at certain suppliers impacted consistency, yield, and throughput. Internally, we identified opportunities to better align our planning, supplier capacity, and the factory execution across the network. As demand accelerated, variability in schedules and fragmented coordination created inefficiencies that impacted throughput and our delivery predictability. The last four years could be characterized as more brute force efforts with a focus on tactical actions to navigate that high constraint environment. However, that brute force won't get us to where we need to go. We need to meet more robust customer demands. We are now shifting towards a more strategic approach, partnering with our suppliers to improve the resiliency and predictability of our supply chain to meet the long-term growth potential. I have led similar transformations before and we're progressing well towards achieving these goals. Over the last several months, we've taken deliberate steps to improve execution. We increased direct engagement and collaboration with critical suppliers. We are confirming supplier capacity and introduced more stable planning windows. These actions are improving our supplier commitment reliability, strengthening material input trends, and creating more predictable delivery conversions across constrained areas of the network. Importantly, this is not about the entire supply base. We have identified a focused subset of pacing suppliers in constrained categories where targeted actions can have the greatest impact. to support that effort the honeywell aerospace operating system is focused on four strategic priorities designed to improve the visibility reduce the variability and increase throughput first we're stabilizing planning by strengthening execution through that tighter alignment between demand signals supplier capacity inventory positioning and factory schedules to sustain execution we have implemented more disciplined planning governance including stabilizing those planning windows with our critical suppliers. This provides suppliers with clear demand signals, improving their commitment reliability, and reducing disruption across the network. Second, we're strengthening and expanding supply focused on those constrained categories with the highest impact of throughput conversion. That includes increasing supplier capacity agreements, improving dual sourcing, expanding strategic insourcing where appropriate, and strengthening engagement with critical pacing suppliers. Third, we're driving factory throughput by improving execution discipline, improving factory flow, reducing work in process inventory, and increasing throughput conversion across constrained platforms. And fourth, we are operating as one integrated system, creating enterprise-wide visibility, faster decision-making, and stronger accountability across procurement, planning, manufacturing, and supplier management. Together, these actions are improving transparency, accountability, and throughput predictability across the network. As those disciplines have been implemented, we are beginning to see measurable operational improvements across several portions of the portfolio. The progress we are seeing today is not just isolated to a single site or supplier recovery. It reflects a broader improvement in pacing visibility, supplier coordination, throughput management, and execution discipline across that network. Trying to see if I need water or not. A lot of words. I want to make sure everybody understands those pieces. For example, material input trends across our constrained categories improved during the quarter. while several pacing suppliers demonstrated sequential improvement in throughput and shipment conversion. While recovery across the aerospace supply chains remains a multi-quarter journey, the operational indicators are moving in the right direction, and they provide greater confidence in our ability to scale output more predictably over time. This slide outlines how we're executing those priorities through an integrated operating model. We start by improving execution predictability through better alignment between demand, supplier capacity, and factory schedules. The focus today is reducing variability, improving commitment reliability, and increasing throughput across constrained portions of the supply chain. I'm going to grab water. Thank you. We are strengthening coordination across suppliers, procurement, planning, and manufacturing to improve speed, accountability, and visibility across the network. As we continue to scale, we are also leveraging digital capabilities to support faster decision-making and better operational visibility. This phased approach moves us from tactical recovery toward a more scalable and resilient execution across capable, supporting suppliers and supporting our long-term growth. Compared to earlier in the year, we now operate with greater visibility in executing that supply within the quarter, including supply-confirmed pacing, shipping conversion tracking, and platform level throughput governance as execution discipline and supplier coordination improves we will start to see stabilization across several constrained portions of the network including our stronger throughput improved shipment pacing and more predictable operational conversion those indicators are important because they demonstrate better execution consistency not simply short-term recovery actions while aerospace supply chains remain constrained in certain categories, we believe these operational improvements position us to scale output more predictably over time. To illustrate how we are stabilizing performance and converting demand into output, I want to share a few examples across the portfolio. These examples reflect how we are applying our operating system to remove constraints, to improve the flow, and also increase throughput across our portfolio. In electronic systems, circuit card assembly is a critical input into avionics systems. To improve testing efficiency and reduce dependency on external repair loops, we invested in advanced diagnostic testing and machine learning capabilities that allow repairs to occur prior to installation. This improved testing productivity by approximately 30% while increasing throughput and reducing reliance on outside suppliers. This increased conversion efficiency while also reducing dependency on those external repair loops. Similarly, within engines and power systems, we implemented automated welding technology to transform the impeller repair process. The result was meaningful, had productivity improvements, and it included reductions in manual welding and finishing time while improving our quality consistency. These investments improve throughput consistency while increasing scalable repair capacity. And within control systems, we invested in automation capabilities supporting air turbine start repair processes. These improvements streamline multiple activities into a simplified process flow, increasing uptime and supporting approximately $95 million in incremental revenue over two and a half years. While improving uptime, reducing process variability, and accelerating flow through constrained repair operations, we'll continue to see the optimization and the production throughput. These are examples of how we are applying disciplined operational improvements to convert our strong demand into executable output across the network. In parallel, we have also deployed targeted operational recovery and supplier operational improvements across our network, our supply network, especially where we see constraints in our global integrated supply chain network. These efforts have been focusing on improving execution visibility, standardizing workflows, stabilizing our schedule practices in alignment with our supply base, and removing bottlenecks that were limiting throughput and what were driving some of our extended lead times. In practice, that means moving from manual and reactive execution processes to a more disciplined, data-driven operational management. It also improves our material flow, increases our decision speed, and creating more predictable execution across both our sites and our critical suppliers. We are already seeing measurable improvements in operational performance across several constrained areas of our business. Supplier commit rates have improved. Schedule stability is stabilizing. Supplier delivery pacing is becoming more consistent. and we're seeing open execution aging of our WIP have all improved. To sum it up, we are encouraged by the momentum we are seeing at the beginning of this new phase in our supply chain transformation. We have a clear, achievable plan in place to capture the significant financial opportunity from growing output and ramping efficiency in the years ahead. With that, I will turn it back to Josh.

Josh Jepsen, CFO

Thanks, Kathy. Our operating system will help advance outcome-based results with consistency, repeatability, and scalability. We measure our success across four key indicators. Delivery, quality, cost, and cash. On delivery, we're improving lead times, including engines and APUs, as examples. On quality, we're reducing defect rates. On cost, we're optimizing repair and overhaul to shorten turnaround times. And on cash, we're focusing on inventory turns. This focus is delivering early progress, but we know there is much work to be done to continue driving each of these measures to where we want them to be. With that in mind, I want to highlight how faster inventory turns will support cash flow growth. As shown here on the slide, inventory turns have trended lower since 2018, below three turns since 2018, as we came through the pandemic due to supply chain constraints that Kathy mentioned earlier, combined with robust demand that required us to carry more inventory compared to historical standards. We see a path to return to pre-COVID levels through disciplined planning and execution. First, enhancing end-to-end demand visibility and AI-enabled planning to better line supply, reducing excess and obsolete inventory. Next, improving supplier coordination and reducing lead times to lower safety stock requirements and increased throughput velocity. We have planned and are executing over 1,000 discrete actions to drive supply improvements. This includes supplier staffing, yield enhancements, supplier transitions, increased dual sourcing, and AI-enabled planning. As executed, these efforts will allow for consumption of inventory, which is built up over time. And third, driving disciplined new product introduction and lifecycle management processes to avoid inventory build during these phases. With a return to our pre-pandemic level of inventory turns representing approximately $1 billion in cash flow, it's clear that consistent execution across these milestones will drive meaningful impact. To bring this all to life, I'd like to share an example of how we are applying the Honeywell Aerospace Operating System to remove constraints and unlock capacity within our supply chain. We recently partnered with a key supplier conducting a Kaizen event across their multi-site footprint focused on eliminating waste through continuous improvement. This helped identify issues in flow, quality, and inspection. In particular, limited overall process visibility, machining bottlenecks, and planning variability were driving rework and extended cycle times. By applying our operating system tools, we streamlined data capture, stabilized execution, and optimized existing inspection capacity. The impact was immediate. First pass yield improved by roughly 25%, and we reduced non-value-added work by about 50%. This is just one example of how we're removing waste with continuous improvement and converting constraints into capacity to drive output growth. In summary, the Honeywell Aerospace operating system is integral to how we translate demand into output. We're taking a back-to-basics approach to leverage the best of Honeywell Accelerator and tailoring it to meet the unique needs as a standalone aerospace company. We are embedding a culture of continuous improvement with supplier capacity aligned to demand, enhancing predictability and resilience. We are strengthening alignment across R&D, supply chain and manufacturing, operating as one system to increase output, delivery, and quality for our customers. And we're driving measurable results with backlog conversion and inventory reduction, supporting higher sales, profit, and cash flow through disciplined investments. Together, this positions us to accelerate growth with consistent, scalable execution. Kath and I both thank you for joining us today. Now, I'd like to ask Jim and Sean to join me here for Q&A.

Speaker 17

All right. I think this is the part where we get some audience participation typically at this point in the show.

Christine Lewag, Analyst — Morgan Stanley

Okay, great. Standing up, too. Hi, Christine Lewak, Morgan Stanley. Thank you for the presentation this morning. So maybe just, you know, with the last session, Josh, you talked about the Honeywell operating system. Just want to understand a little bit better, how much of that was already part of the Honeywell operating system? what's new and you know where is that incremental change coming from and how do we think about measuring results for from that change because it seems like you know you guys have been around for over 100 years and you know profitable so just understanding where that rate of change

Speaker 17

could be would be really helpful jim maybe you could start given you've been through the transition

Jim Currier, CEO

yeah so a couple things i would add relative to that and so um yes the existing honeywall accelerator system that's been in place which is something that was foundational does provide a substantial amount of benefit that has been realized over the years the one thing i would say specific to that plan though is we think about where we were pre-covered and now coming out of covid that plan was really more centered around driving productivity and efficiency rooftop consolidation and the output metric from that that was driving honeywell aerospace was about expanding margins at the end of the day and now we talked about that a little bit earlier during my portion of the opening comments about how our profits grew by 50 percent that operating system however was not built and or structured as part of honeywell aerospace pre-covid to be around a growth-minded culture and a growth-minded organization that is the major unlock when we're making this system to be very purpose-built for honeywell aerospace in the direction that we're taking the company which is to have a growth-minded culture meeting the demand that our customers are providing for or requesting for our products and services and therefore making that purpose-built operating system to be very very specific around driving growth profitable growth but that's the focus to drive the value for the company and drive value for our shareholders

Josh Jepsen, CFO

yeah and maybe just to add the only thing i say on top of that christine is you think about the metrics i mean we talked about some of them so what are we seeing from an output growth perspective are we converting backlog into into deliveries and that that's that's obvious i think over time what are we doing from a margin perspective you know we're driving ebit but but also very specifically what are we doing to drive inventory when we talk about the cash unlock potential in driving increased efficiency as we drive that throughput uh that that is significant

Speaker 9

uh in terms of what we can deliver there peter thanks uh peter baird um you talked about the blockchain unlock a lot of us we've heard a lot about that um is it more do you view it more of a external or internal uh you know heavy lift effort and if you are successful outside of kind of the baseline assumptions that you have for your top line is it going to lead to more a faster growth top line or should we think of this more of a margin opportunity thanks yeah i'll take it

Jim Currier, CEO

and add on to that um if i were to just to bifurcate a little bit between your comment about external and internal i would say probably about 70 of it is external 30 is internal we went through as i was describing earlier massive transformation of a supply chain strategy pre-covid which was again built around productivity efficiency reducing rooftops and the like with that constraint that exists in terms of reducing rooftops obviously now in a high growth environment that we're operating in the growth trajectory that we are planning going forward we need to look internally so that is by again that is definitely part of the calculus but it's also it's externally as well right within the supply base we have an exceptionally complex integrated supply chain as described by by kathy it's an electronic supply chain it's a mechanical supply chain 3 000 suppliers across the board and the like many of them are smaller family-owned operations 100 person 200 person you know 300 person shops that don't necessarily have been structured and built for a growth environment that we are experiencing right now and so we spend a significant amount of time with them how do you get more capacity out of your factory how do you increase productivity and efficiency to drive more output how do you address yield issues how do you address quality issues and then what capex do you need to grow with us and to grow as part of honeywell aerospace And then we will inject, in many cases, we will inject capital into those facilities of those companies, again, as an enabler for growth. So it is both elements. It's both an external view and an internal view. But I would say the focus on a percentage basis is a little bit higher on the external. But we are definitely investing internally as well.

Josh Jepsen, CFO

What I'd add, Peter, is I think there's a component on the external piece that Jim mentioned, which is approach of partnering, like taking a very strategic relationship approach with with the supply base and i think that's been an important pivot that we've made here you know um over the last you know six months or so and really working i was just on a supplier call with 150 suppliers and that's what we were talking about like how are we partnering to grow together this isn't just we want to grow at their expense how do we grow together we're only successful we work together so i think strategically that's critical and on the internal side and we i think we may have had some of this conversation last night what are the things that we should potentially be doing in-house like how do we think about what are our what are our core competencies where do we have the ability to do that things that are strategic that are important uh you know mission critical to the system and also drive you know margin for us uh so i think there will be more and more opportunities that we'll continue

Speaker 1

to to look at there as well sheila sheila kayalu with jeffries maybe on the six to eight percent revenue growth guidance can you give us a bottoms up how you think about the different end markets i think aftermarket you're expecting an improvement there how you think about pricing and new content

Josh Jepsen, CFO

ones adding to that you want to take that one yeah i mean across the end market segments and we did jim laid out you know what we think those segments look like um you know if you look at commercial oe and aftermarket you know mid-single high single digits defense and space we think are more like mid-single as we as you get out to 2030 so those are kind of the big how do we see end markets uh coming together um as we as we move here now clearly you know we've got the unique opportunity on the backlog so as we talk about how do we unlock that you know that for us has been the thing that's metered or tempered our ability to grow so that the improvement there you know allows us to not only grow we already think we can outpace the market but that gives us

David Strass, Analyst — Wells Fargo

more more upside on top of that thanks david strass from wells fargo um so you highlighted one of the keys for outgrowing new platform wins can can you just highlight what you view i'm sure there's something you can't talk about yet but can you just highlight what you see is the key new platform wins that will come through and when do you think that those really manifest you know that time frame from 26 to 30 when do they really manifest in the number and maybe accelerate your

Jim Currier, CEO

growth relative to peers so so many of them i can't speak about specifically they are undisclosed in in many regards but they apply whether we're talking business aviation and defense as well as applications that we're putting on newer oe platforms as well or introducing technologies that are displacing other competitors on oe platforms in the commercial or transport market in terms of entry into service relative to these opportunities it can be anywhere from the late 20s time frame. So think of 28, 29, and then moving into the early 30s. But most importantly is ensuring that we're positioning where we are investing in electrification, autonomy, and safety, developing those innovative technologies in other end markets, certifying them, introducing them for low risk in anticipation for what's going to be necessary for next-gen single aisle and that competitive landscape that's in the future going forward.

Josh Jepsen, CFO

Maybe one thing to add, David, is if you think about defense in space, a lot of conversation about multi-year framework agreements and the like, missiles and munitions, you know, some of that we would expect maybe late 27, but those are seven-year agreements. So those have a long, long tail. But, you know, earliest end is probably in the latter half of 27. But, again, that then extends into the mid-2030s.

Rich DeGraff, Other

Seth?

Seth Seifman, Analyst — JPMorgan

Hey, thanks. Seth Seifman from JPMorgan. I just wanted to dig in with an additional question on the end market outlooks. I guess if we look at a year ago-ish in Paris, I think the outlook for commercial OE has come down somewhat. Outlook for the aftermarket has gotten a little better, and the outlook for defense is kind of the same. I guess if I thought about it, I might have thought that defense had gotten better over the past year, and so maybe is there a reason why that hasn't improved? And then with regard to the OE and aftermarket, I think when, you know, people think we're kind of in the midst of a very long OE cycle here and kind of why that growth rate came down. And then for the aftermarket, what kind of retirements you expect to underlie that growth rate that you have?

Jim Currier, CEO

Yeah, so I think as we've indicated, you know, mid to high singles for commercial OE, I think it is in line with what we see in terms of the ability of the commercial OE customers to be able to ramp as they look across the entire supply chain that is required to be able to produce and ramp those aircraft accordingly. So it's pretty more mathematical and formulaic in terms of being able to determine that. And it's really going to be dependent upon how they grow accordingly. And we are aligned because we have the visibility into their production plans on a go forward basis. Not just for current year, next year, but on a five-year horizon for sure relative to that. We still see strong growth in the aftermarket, commercial aftermarket. And the element behind that that is important for us, and we talk about this all the time, is our retrofit mods and upgrades. Some capitalizing on the fact that we can go in and introduce new technologies, new innovation, increase the reliability and efficiency and add safety, you know, into those existing platforms, I think is also an element that's an added, you know, kicker into our ability to be able to grow in the commercial aftermarket side. The defense in space, I mean, it is an element. There is substantial funding that is going into that realm, both in the domestic and on the international front. What I would say is that we've taken a little bit more of a conservative view. We do recognize that there are substantial hurdles that still need to be overcome in terms of budgetary requirements and the like, congressionally speaking. And so we've actually taken a little bit of a conservative view. But then again, we also fully understand exactly where we are positioned, how those budgets are aligning what does it represent in terms of our content on said platforms similarly on missiles and munition programs that josh was mentioning a moment ago all of it is done with a view because we've gotten to be so integrated with our oe customers in terms of what their plans are and it's similarly now the visibility that we're getting out of the department of war that allows it to be able to frame those type of growth rates for the business

Josh Jepsen, CFO

so maybe one thing just to add on the aftermarket side is business aviation has been really resilient like we're you know even in a year like this with some everything going on in the world we're actually seeing flight hours move up and we see you know strong strong aftermarket activity from business aviation so that that exposure for us is is different uh than many and that also helps from from to remain or keep that buoyancy and aftermarket no hey thanks guys um you've

Ken Herbert, Analyst — RBC

talked about the challenge of being able to, inside of a conglomerate, invest as much as you want and with the efficacy that you want. I guess if we look at the last kind of decade or just current gen versus prior gen, was Honeywell a share gainer or share loser? And in the places where there was a minus, are there a handful you could highlight that you really want to attack

Jim Currier, CEO

now? I mean, so for us, you know, the unlock that really happens is really around a singular strategy and a singular mission for a pure play company as part of a conglomerate and if you look about the various divisions within Honeywell today you know our strategy was differentiated from the other strategies of the other businesses our root cause of issues where we needed to capitalize the organization was very different than the other parts of the organization so ultimately then as Honeywell as Honeywell is making decisions around capital deployment you end up a little bit in a sub-optimized realm in terms of how you want to allocate that capital to meet the needs of the various businesses going forward. So for us, that big unlock is that we're going to have one mission, one strategy, one focus, one purpose-built management team. Every single one of my leaders, with the exception of one that runs our commercial aftermarket business, who you'll hear from later today, they all sit within 150 feet of me. We are all centralized in our ability to be mise-en-centric and focused in executing the strategy and driving shareholder value, ultimately. And that unlock around how do we want to deploy capital is not then going to be subpar across the businesses because all the strategies are single-minded and single-focused on one desired outcome.

Speaker 17

Ken?

Ken Herbert, Analyst — RBC

Yeah, hi, Ken Herbert with RBC. I wanted to see if I could just follow up on the question earlier. If we look within commercial OE versus aftermarket, Can you talk about the growth and the assumptions on pricing between those two markets if they're the same or where you're seeing differences? And then maybe, Jim, just to drill down on the RMU opportunity, can you give us any data maybe around how many new products or opportunities you're bringing to market maybe this year or expect to next year? Maybe how that changed from a few years ago to just help frame that sort of opportunity for us?

Speaker 12

You'll handle price.

Ken Herbert, Analyst — RBC

I'll take RMU.

Jim Currier, CEO

Yeah, you want to start? Yeah, I'll hit on the RMUs, and Josh will address the pricing aspect of the commercial OE and the commercial aftermarket. What I would say is 10% of all of our organic investments that we do are centered around the development of retrofit mods and upgrades. Now, that number has increased as of late versus what we had seen in prior years. On any given day, there can be up to 30 to 40 different products that are out there that our sales team is developing and or selling and demonstrating value prop to customers for incorporation onto their aircraft and into their fleets. That is a cycle, however, to be very clear, that is a cycle that's about a three-year cycle. You introduce a product, you have about a three-year window upon which that product will be introduced onto an aircraft, and then you've got to be into your next product going forward. So that is like an innovation fly machine for us, where we're constantly innovating, constantly developing new technologies, addressing the needs of our customers and driving tremendous value for them going forward. On any given day, we're developing 20 to 30 new ones and 40 in the flywheel of that innovation machine going forward, and whether that's going to be commercial or transport applications, business aviation, and or defense applications as well. And so what we have to do, though, is we identify an issue, we identify a concern, we identify a problem statement, work intimately with the customers to understand what is the value that can be created and what is the ROI for you as a customer that makes sense. In the commercial or transport market, that ROI has to be 18 months or less. So when we look at the value of what we can bring, ultimately then that drives the adoption rate across the board. and we don't look forward we don't anticipate and we don't define success as a hundred percent adoption of an rmu onto a particular platform for a particular group of customers if we can get to two-thirds adoption we're happy with that across the board right and so as we continue that again that's that innovation flywheel that we have to constantly be innovating and the nice element around that that adds value into the organization is that culturally you have to innovate to create this rmu engine and culturally within the engineering organization as part of todd's group and a part of the business leaders group that culture of innovation and speed ends up driving itself into the rest of the businesses as well in terms of new product development

Josh Jepsen, CFO

even if it's not for an rmu yeah can maybe just follow up in your question uh certainly we've come through a period of high inflation right and that's that's put pressure on on margin for us over the last few years. As we think about price, you know, certainly we've, the teams have been working and we want to recouple, go forward. How do we get closer? How do we close some of that gap that we've seen over time? Now, where does it come from? Which is kind of the root of your question. Where do you get that? You know, it's a little bit different OE versus aftermarket, contractually, what can we do? So we've probably seen a little more of that come through after market. But as we have those opportunities, we're going to continue to work to try to close Some of the gap that's that's occurred over the last few years as it relates to to the inflationary pressure Whether that's pure inflation, you know, just coming through post-pandemic or things like tariffs tariffs are other things that have driven You know higher input cost

Myles Walton, Analyst — Wolfe Research

Thanks, Myles Walton will free search. Can you talk about the margin opportunity by segment? You talked about even growing faster than the top line, but you didn't talk about it Opportunistically by each of the segments and then just based on the end market buildup are you suggesting es is the slowest of the three growths just because it has the highest proportion to

Josh Jepsen, CFO

defense as an end market thanks from from a margin perspective i think we see margin potential and increase in across the businesses so i wouldn't say it's necessarily skewed to one one individual business i think a lot of the things we're talking about that drive margin for us benefit all all of our all of our businesses you know es you know has a little bit less aftermarket, just given kind of their, their mix. Um, but we see tremendous growth in that portfolio. Uh, you know, Navin sense, Bob talked about Navin sense, you know, where we see tremendous growth and that's, that's been, been very good business for us. You know, strong margin as well. So miles, I wouldn't, I wouldn't say it's outsized to any one of the three. I think we expect improvements across, across them and particularly just driven by what, what unlocks it is, is not unique or ubiquitous it's more ubiquitous across all three of the businesses and in terms of growth

Jim Currier, CEO

across the three businesses you know we don't anticipate one business outgrowing another business you know proportionally at some level that looks a little odd I mean they're all all these products are on the same platforms going forward a lot of synergies across the technologies that we're developing across those same platforms it may ebb and flow quarter to quarter you know within the year but if you look at it on a long cycle horizon which this business is it's a long cycle business you would expect all three businesses over the horizon of a long cycle to be growing within a percent or two of one another on that horizon regardless of whether they're primarily a commercial business or have more defense content versus another portion of the

Speaker 17

portfolio I think that's a good place to leave it for now but as a reminder we'll have more Q&A at the end of the session this is now time we're gonna take a 15-minute break. Before we do that, I want to make one comment to folks on the webcast. We're aware of some of the challenges our webcast partners having with the performance. We're continuing to work on that. Thanks for your patience as we work towards getting a great outcome for those not in the room. But 15 minutes here, and then we'll start back up. Thank you very

Speaker 4

much. Please welcome back Chief Executive Officer Jim Currier. All right. Welcome back, everyone,

Jim Currier, CEO

from the break. Before we get started with the regular programming, which we're going to bring up Anthony Florian to talk a little bit as he runs our commercial aftermarket, that portion of Honeywell Aerospace, I think all of you know since I came into the role back in August of 2023 that I am absolutely obsessed with customer partnerships and customer trust. And so part of that has been spending a significant amount of my time since coming into role with customers, hearing directly from my peers their sentiments about Honeywell, what we can do together to build partnerships, stronger, longer-lasting partnerships, and of course, that element of trust, which is of most important concern. So what you're going to hear today, I'm going to have two videos to show you. One of them is an engagement that I had with Eric Martel, who's the CEO of Bombardier. Then we'll have Anthony come up and do his portion on the commercial aftermarket. And the second video you're going to hear is a conversation that I had with Florent Masseau, who's the Chief Operating Officer with Airbus. It kind of gives you a flavor of how we are building, how I am personally building relationships with customers, because that is, again, as I've mentioned, core to what I believe in terms of success, not only for Honeywell Aerospace, but success for our customers as well. So if we can roll that video, I'd appreciate it. Thank you.

Speaker 17

Gentlemen, maybe let's talk about the relationship between the two of you.

Eric Martel, CEO

I'll let you start. It's been amazing. Jim and I have, for all kinds of reasons, connected. I would say day one, trust is important in that business. It's a big world, aerospace, but it's a small world. We all know each other. And having a partner that you can rely on is very important.

Jim Currier, CEO

There's no better way to start establishing trust than spending time together. And I think about the criticality of a CEO-to-CEO relationship is the message that it sends to our collective organizations. And that gets reflected down into an organization. And that just creates a win-win across the board for the partnership. So it's very, very important, that CEO-to-CEO relationship.

Speaker 17

I think it'd be great for you just to share with us your vision for Bombardier.

Eric Martel, CEO

It's been a unique moment in time in business aviation over the last probably five, six years. You know, our customers are people that are flying all around the world. So they need that capability of being able to move around faster. So people are expecting to have the same performance on their computer or doing a video call that they have in the office on the plane. So they would really engage with us, you know, to make sure that they have the last technology. What is the fastest, most reliable technology? So those have become very important points. And we make those technology innovation available as soon as possible. So there will be improvement on a yearly basis, as an example, those days. It's a more global business. It was very much concentrated in North America before, but Europe has become significant. Middle East is growing despite everything happening today. We've seen the hours of flying increasing by 60% over the last five, six years for every platform, which makes our business also very attractive also for the in-service support that we have to provide all these airplanes.

Speaker 12

The market really has changed dramatically. The demographic has completely changed, I think, with the business traveler now flying on a business jet. I think it's become much more personal as well. And a recognition of its truly enhanced safety and capability of the aircraft. And I know that's foundational from Bombardier, that across-the-board safety of paramount importance, and it's the same for us.

Jim Currier, CEO

But I think also when you think about newer technologies that are coming around, anything around efficiency and improvements, because ultimately driving down operational cost is also a major factor. And I think that's where we've been able to partner greatly in terms of driving that capability and bringing it into the market together.

Speaker 17

So that maybe transitions us to talk about the landmark agreement between the two companies.

Eric Martel, CEO

You know technology is very important for the ultimate customer you know that are flying these planes but I understand what they need what they want and translate it into you know new technology development it gives direction also to our R&D team on both sides to say this is something

Speaker 12

important that matters to the customer. There was a clear recognition that the direction that Eric is taking Bombardier technologically speaking with his aircraft and what we have been investing in and that there was truly an opportunity to bring that together, there's something really special here that we can do together between the two companies and introducing this technology onto the transformative plans that Eric has going forward.

Speaker 17

So Eric, then maybe let's talk about performance that the customer expects in the future.

Eric Martel, CEO

I think more and more environmental footprint is going to be important. You know, we know that this is a challenge we're all working on together. We spend Bombardier quite a few, a big portion of our R&D money, you know, on reducing the footprint and everything. And, of course, this is in a relationship. You know, people look for more fuel efficiency, better safety, better enhanced safety. And I think, you know, we're working with the authorities, whatever, if it's in Europe or in the U.S. or elsewhere in the world, to make our airplane always safer. I would say on a more operational front also, fleet operators have become, you know, they need their airplane to turn faster. You know, this is how they make money. The airplane needs to be available to fly. They don't want the airplane to be in a maintenance center.

Speaker 12

It's truly a differentiator that Bombardier provides, you know, in terms of that customer service that they provide to, you know, the owners and operators of their aircraft.

Jim Currier, CEO

It's really something that you've transformed over the last few years and widely recognized in the industry as such. So combining all of those together ultimately provides that customer experience and the customer knowledge around the safety of the aircraft that becomes vitally important.

Speaker 17

That's it. Those are all my questions.

Speaker 12

Thank you so very much.

Speaker 4

Please welcome President Commercial Aftermarket, Anthony Florian.

Anthony Florian, Other

Good morning, everyone. Thank you for being here with us today. My name is Anthony Florian. I'm the president of our Commercial Aftermarket. I've spent the better half of my 15 years in commercial aerospace, leading businesses, navigating cycles, and developing a deep understanding for what operators truly need to keep their fleets performing as you have heard today honeywell aerospace has strong positions with differentiated technology across the commercial market these operators are amongst the most sophisticated in the world they manage complex global fleets they know their cost of ownership down to the component level and they choose their partners with extraordinary rigor earning that trust takes years and keeping it takes even more today i'll show you how we expand our aftermarket reach and why Honeywell has built a business that is difficult to replicate. Our commercial aftermarket portfolio stands apart through its scale and breadth. With Honeywell Aerospace content on more than 65,000 commercial aircraft and service, we have broad exposure across platforms, operators, and geographies, creating a durable foundation for recurring demand. That installed base supports aftermarket services over the full life of the aircraft and drives both growth and resilience. In 2025, our commercial aftermarket business generated nearly $8 billion in net sales and delivered 12% in organic growth, reflecting on our ability to create value for the installed base effectively. Our global service footprint further strengthens our model. With 26 repair and overhaul facilities across Americas, EMEA, and Asia Pacific, we can serve customers where they operate, improve turnaround times, and support fleets consistently across regions. Our more than 100 commercial air transport and 300 business aviation channel partner locations worldwide bolster our presence. Our install base, technical expertise, and global support network, position Honeywell Aerospace as a trusted aftermarket partner with durable, high-value growth opportunities. Our strategy to drive value is focused on three priorities. First, commercial aftermarket is an attractive end market where we're able to innovate and create value for customers with high-value offerings. As platforms stay in operation for extended periods, demand increases for traditional aftermarket support. It also drives the need for solutions and service life extensions that improve performance and reliability of an aircraft. Second, we're focused on differentiated new technology for our installed base. Our focus on product innovation creates RMUs that enhance safety, connectivity, efficiency, and lifecycle value for our customers. RMUs are an important part of our portfolio, contributing roughly 10% of net sales across all of Honeywell Aerospace when combined with our defense RMU portfolio and growing at an 18% kegger since 2021. By developing new products that are designed to be further enhanced over time, we can continuously offer solutions to improve customer outcomes and increase sales throughout the life of the aircraft. Third, we're strengthening our operational capabilities across our global network by expanding MRO capacity, broadening channel partner networks, and advancing our digital service tools. Together, these actions will improve responsiveness, reduce turnaround times, and make it easier for customers to access the support, data, and service capabilities that they need. rising aircraft utilization has driven strong demand across the commercial aftermarket two key trends highlight that momentum first global revenue passenger kilometers or rpks are growing at mid-single digits driven by rising mobility urbanization and the expansion of the global middle class which supports higher aircraft utilization whilst near-term growth has moderated due to geopolitical events in the Middle East, the long-term trend remains attractive in a market with proven resilience. In business aviation, total flight hours have grown at a 6% kegger since 2019. One of the key drivers of that growth is the expansion of fractional ownership, with operator flight hours in this sub-segment growing at a double-digit kegger are nearly doubling since 2019. Growing fractional utilization is contributing to rising demand in the super midsize category where we have a greater share of content. Our aftermarket business has balanced exposure across commercial and markets with strong positions in commercial air transport in wide body, narrow body, and regional aircraft as well as in business aviation. That breadth creates substantial opportunity to generate value over the lifetime of the fleet. What makes that opportunity especially attractive is the nature of our products. Our technologies are deeply embedded in platforms operating in one of the most rigorously certified environments in the world. Many of the aircraft platforms we support remain in service for decades, up to 50 years in some cases. Once our content is installed, our aftermarket services generate recurring demand for parts, repairs, and upgrades, and continuing ongoing support. We capture value through a few key aftermarket service models. The first is spare parts, roughly 30% of our aftermarket revenue, where replacement components are used to maintain aircraft safety, reliability, and operational availability. Next is repair and overhaul, which represents nearly half of our aftermarket revenue. This includes services at both Honeywell Aerospace-owned facilities and authorized channel partners, providing repair capacity, technical expertise, and customer choice that improves outcomes for operators. Our repair and overhaul offerings are supplemented by licensing and other services. RMUs provide an additional growth vector that is decoupled from flight hours. And finally, used serviceable material, or USM, improves parts availability through OEM-certified and reconditioned material, helping customers to reduce cost and turnaround time. Overall, we have a comprehensive aftermarket business model focused on delivering recurring high-value revenue over the decades to come. On the next slide, we'll highlight the distinct yet complementary difference between our electronic and our mechanical aftermarket models. Electronic products typically generate stronger upfront economics with aftermarket revenue driven predominantly by licenses, software, and upgrades, more so than physical maintenance. Over time, customers require ongoing updates to enhance functionality, maintain compliance, and extend product relevance. This creates an upgrade-driven aftermarket stream that develops earlier in the product life cycle. Mechanical products have a different profile, generating more recurring revenue through ongoing parts replacement, repair, and overhaul activity. Because these systems are subject to wear, servicing intervals, and replacement cycles, they naturally create predictable aftermarket demand over time. In mechanical systems, RMUs are typically focused on extending asset life, enhancing performance, maintaining compliance, and adding new capabilities over time. As a result, the revenue profile is more maintenance-driven with strong durability and predictability that complements the service cycle in electronics. Taking a closer look at RMUs, which you've heard plenty about today, we see a meaningful opportunity to create value for our customers and supplement our sales with growth that is decoupled from flight hours. Our MUs offer shorter payback periods and align well with current operator focus on platform longevity, safety, efficiency, and reliability. They also support airworthiness regulator safety mandates, such as our 25-hour cockpit voice recorder. Our develop-once, deploy-everywhere strategy enables us to expand certifications across more aircraft platforms, which broadens the addressable market for our proven offerings. In addition, we're accelerating customer-led new product introductions so that we can bring right capabilities to the market faster and support adoption more effectively. The examples here reflect that approach, whether it's enhanced cockpit capabilities through Primus Epic upgrades, improved power and greater fuel efficiency through the 131-9A APU, or upgraded longevity from the LEAP air turbine starter. Our RMU offerings position us to outpace overall aftermarket growth for years to come. Beyond RMUs, we continue to expand our aftermarket capabilities to support above market growth and are increasing services to capitalize on market expansion. As an example, we expect APU flight hours on the A320neo and the 737 MAX fleets to grow at an 18% annualized rate through 2030. At the same time, we're also expanding initiatives around supply chain improvement, provisioning, and digital capabilities that are decoupled from the growth of the fleet. Our go-to-market strategy leverages multiple service models to meet demand in a capital-efficient manner and increasing our proprietary content and data-enabled services. Lastly, we're building differentiated capabilities in USM to improve parts availability, reduce turnaround time, and give customers a cost-effective OEM-certified option. Our aftermarket strategy is deliberately built around the needs of each end market. Direct where it creates the most value, channel-led where it improves reach and responsiveness, and supported by enhanced MRO capabilities that drive long-term, high-margin growth. To summarize, Honeywell Airspace is poised to drive consistent aftermarket sales growth. We're a trusted partner across 65,000 aircraft and service with an install base that generates durable value through parts, repairs, and services over decades of aircraft operation. Looking ahead, we're focused on expanding our robust capabilities to grow faster than the market, adding to a foundation that took decades to build and cannot easily be replicated. Thank you again for joining us today. Have a great rest of the day.

Speaker 17

Today, I'm joined by Jim Currier, CEO of Honeywell Aerospace, and Florent Masseau, Chief Operating Officer at Airbus. We want to spend some time talking about the long-term relationship between our two companies, where the industry is headed, and how we're working together as partners to drive the future

Speaker 5

of flight. It works well when the relationships are trustful, being very close to each other, and understanding each other's constraints. To be able to have that trust and then just work in a

Speaker 12

very open manner, I feel incredibly honored to be able to have that kind of relationship and

Speaker 17

openness with Laurent. As you both look towards where the industry is headed, how are trends like electrification, autonomy, more integrated systems influencing that next generation of aircraft?

Speaker 5

What we need to ensure is to make a real breakthrough in terms of a platform to bring more value to our customers, more safety, and then to onboard how many innovations as we can in a very dynamic world.

Speaker 12

There really has to be a compelling case around efficiency. All of these elements, all of these different technologies will be enabled by introducing, and that efficiency, by introducing electrification, autonomy, and digital technologies of integrated systems on the aircraft. And I think these tools will be able to drive that efficiency and cost reductions. And as we've collaborated on technology, is that scenario where both companies are looking very closely at.

Speaker 17

How do you both see aerospace partnerships in the industry developing going forward as we move into this next phase of growth and technology development?

Speaker 5

When we develop an aircraft with key suppliers, key partners like Honeywell, we do it for the long run and building progressively a shared view of what will be beneficial for our bus and for our partners, for Honeywell, for the future.

Speaker 12

It's a full value chain partnership, you know, which is different than prior periods. I look at it as a completely different relationship than just being a technology partner, but now it's become industrial partnerships that have been developed between the two companies as well, particularly over the last few years.

Speaker 17

As both companies continue looking towards that next generation of aircraft, how do trends like safety and operational improvement shape those conversations?

Speaker 12

Safety is foundational, and it's the crucible of how we operate within Honeywell Aerospace. And I know how Airbus operates as well. It is foundational. It's part of every conversation.

Speaker 5

I think there is no rest on the safety points. To try and find each and every angle that can improve the safety of flights and more globally, the safety of the ecosystem.

Speaker 12

Safety is inherent across any aircraft design of today and clearly aircraft of the future and bringing those technologies and working together, you know, with a company like Airbus to drive that safety enhancements across the aircraft.

Speaker 5

And we want to generate the maximum value for our companies, but also to share the value properly between Airbus, Oniwell and our airline customers.

Speaker 17

With AI sustainability and efficiency increasingly influencing the industry, how do you see those priorities impacting next generation aircraft?

Speaker 5

The beauty of our business is that by getting more efficient aircraft, actually, they are much more sustainable as well. So the efficiency point of any new future platform is of essence. And that means lighter aircraft, more technology, more efficiency on the way they flight, less fuel consumption. And in a world where we see scarcity of materials, scarcity of many different elements, I think we need also to work the talk on the topic. and bring evolutions on our product portfolio that will really make a difference.

Speaker 17

Florant, as Honeywell Aerospace moves forward as an independent company, what gives Airbus confidence in the long-term partnership and the future opportunities we have together?

Speaker 5

I think when I look at Honeywell as a standalone company, for me, it rings different bells. The first one is that Airbus will be between 15% and 20%. we will represent 15% to 20% of the revenues of the civil market of that company. So when we talk about partnership, there is no success of Honeywell and Airbus without being strong on our foundations to drive this partnership, but also to operally drive the good value sharing between the different stakeholders. And that remains a key element, because that will be based on a trustful partnership, a strong understanding of what matters for Honeywell, for Airbus, and what will drive the future success.

Speaker 17

Jim, Thorent, thank you. What a great discussion. Really appreciate the insights and the perspective on where the industry is headed. And of course, the continued partnership between Honeywell Aerospace and Airbus.

Sean Meacham, Head of Investor Relations

Welcome back, Bob Butteke.

Bob Butteke, Other

All right, thank you. I could not be more excited to introduce this next segment. I could almost go as far as saying I'm over the moon, but you'll know in a moment what a bad pun that was. This past April, Artemis II completed its successful crude flyby around the moon, the first time humans have traveled that far in more than five decades. It was an incredible milestone for the nation and an inspiring reminder of what is possible when advanced technology and trusted partnerships come together. For us at Honeywell Aerospace, it's also deeply meaningful. Our technology has been part of every U.S. manned space mission since the dawn of the space age. And while our space portfolio is much broader today, that legacy of reliability and innovation remains at the core of who we are. The video you are about to see offers a great recap of the Artemis II mission and highlights some of the ways Honeywell Aerospace contributed. I'm proud of the role we play, and I hope you enjoy the look back. We choose to go to the moon.

Speaker 5

Not going to be...