Good day, ladies and gentlemen, and welcome to the RTX First Quarter 2025 Earnings Conference Call. My name is Latif, and I will be your operator for today. As a reminder, this conference is being recorded for replay purposes. On the call today are Chris Calio, President and Chief Executive Officer; Neil Mitchill, Chief Financial Officer; and Nathan Ware, Vice President of Investor Relations. This call is being webcast live on the Internet, and there is a presentation available for download from RTX website at www.rtx.com. Please note, except where otherwise noted, the company will speak to results from continuing operations, excluding acquisition accounting adjustments and net non-recurring and/or significant items often referred to by management as other significant items. The company also reminds listeners that the earnings and cash flow expectations and any other forward-looking statements provided in this call are subject to risk and uncertainties. RTX SEC filings, including its forms 8-K, 10-Q and 10-K provide details on important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements. Once the call becomes open for questions, we ask that you limit your first round to one question per caller to give everyone the opportunity to participate. With that, I will turn the call over to Mr. Calio.

Thank you, and good morning, everyone. We're clearly in the middle of a highly dynamic operating environment right now, and we'll, of course, talk about that today. But first, I want to highlight the strong financial and operational performance we delivered in the first quarter. Starting with the top-line, we generated 8% organic sales growth. We also drove 120 basis points of segment margin expansion, which included strong contributions from each business segment. And we generated strong free cash flow, an improvement of more than $900 million versus the prior year. On an organic basis, commercial aftermarket sales were up 21%, commercial OE sales were up 3% on a difficult prior-year compare, and defense sales were up 4%. Underlying these results is our continued focus on execution and the deployment of our core operating system. Starting with the GTF program, PW1100 MRO output was up 35% year-over-year and 14% sequentially, and we remain on track for over a 30% improvement for the full year. This output is a key enabler for reducing AOGs, which we continue to expect to trend down in the back half of the year. Isothermal forging output also continued to be strong in the quarter after record output last year, up over 10% versus prior year. And our outlook for the fleet management plans remains consistent with our prior comments. Our focus on supply chain also continues to yield results. At Collins, overdue line items across all suppliers were down over 20% versus the prior year. And at Raytheon, material receipts were up again, marking eight consecutive quarters of year-over-year growth. Also in the quarter, we made significant progress on two future franchises in our innovation pipeline. Pratt received FAA certification for the GTF Advantage, an important milestone for the program. The Advantage incorporates all of the learnings from the first 10 years of the GTF engine and service. We expect it to provide up to 2 times the time on wing compared to the current engine, and it will enter service with full life LLPs. We remain on track for initial deliveries to Airbus later this year. We're also certifying an upgrade package to incorporate roughly 90% to 95% of the GTF Advantage durability improvements into the existing fleet during MRO visits. We're targeting next year to have this package available for customers. And at Raytheon, we have completed the prototyping and development phase of the lower-tier air and missile defense sensor, or LTAMDS program. LTAMDS brings advanced 360-degree performance to the market and more than twice the tracking range compared to the existing Patriot radar system, enhancing protection against complex threat scenarios, including large quantities of unmanned aircraft systems and hypersonic weapons. LTAMDS can be integrated with battle-tested industry-leading capabilities of Patriot, which is the backbone of air and missile defense for 19 partner countries around the world. LTAMDS will now transition into the production and deployment phase with continued deliveries to the US this year and next, followed by deliveries to European customers. So, overall, we've made good progress in the quarter on multiple fronts, and we're pleased with our performance. Okay. Let me turn to the operating environment and our current thinking on tariffs, which we have outlined in terms of potential direct impacts.

Okay. Thanks, Chris. Let me take you through the various categories of incremental direct tariff exposure and the level of pre-tax operating profit impacts, net of available mitigations we have currently assessed for each category. Starting with Canada and Mexico, assuming the USMCA agreement continues, we estimate there would be a cost impact of around $250 million, assuming current tariff rates remain in place for the rest of the year. With respect to China, at current US and China tariff rates, we estimate there would also be a cost impact of around $250 million. Again, assuming the tariffs remain in place through year end. Keep in mind, our business in China primarily serves local customers and China accounts for only about 2% of our global imports. As it relates to the rest of the world, we estimate there would be a cost impact of around $300 million at the 10% tariff rate currently in place. And finally, on steel and aluminum, we estimate the cost will be around $50 million for the year. For all of these scenarios, we would expect to see most of the impact in the back half of the year as inventory is liquidated. And from a cash perspective, we assume there would be a bit larger drag due to the timing of inventory consumption and duty drawback recovery, and this impact would be evenly spread over the rest of the year. Going forward, we expect the landscape to continue to evolve and we'll update our assessment accordingly. Now, let me turn it back over to Chris.

As Neil said, we're closely tracking the changes in the global trade environment. While some of the exemptions we have had in the past will continue to apply, such as the military duty-free exemption for U government and foreign military sale contracts, we are also working to implement and capture additional mitigations. These include regulatory mechanisms such as temporary imports under bond, duty drawbacks, free trade zones, contractual and pricing actions, and implementing operational changes such as leveraging different suppliers and assembly sites. Despite these near-term uncertainties, I want to remind everyone that our company remains exceptionally well positioned in all of our key end markets, given the strength of our product portfolio, which is reflected in our backlog. We exited the quarter with a backlog of $217 billion, which was up 8% year-over-year and includes $125 billion of commercial orders and $92 billion of defense awards. On the commercial side, we remain cautiously optimistic that aircraft utilization will remain strong, supporting continued aftermarket demand. But of course, we will closely monitor consumer sentiment as we approach the busy summer travel season. On the OE front, we expect production of new aircraft to remain strong, given the backlog levels at our OEM customers. On the defense side, we're encouraged that the continuing resolution passed with funding for key priorities, including next-generation adaptive propulsion, standard missile effectors, LTAMDS radars and our Coyote counter UAS system. There's also a growing commitment to increase defense budgets globally. Of note, the European Union has pushed for an additional $850 billion in defense spending over the next four years, focused on munitions and integrated air and missile defense products, which are fully aligned to our core capabilities, such as Patriot, NASAMS, Coyote and F-35. These are all battle-proven and tested systems that our partners and allies rely on each and every day for national security. Additionally, we have strong and long-standing international co-production and co-sustainment agreements with European companies, including MBDA and Kongsberg that position us well to help meet the increased demand across the region. Before I hand it back over to Neil, let me reiterate that we are very pleased with the performance in the first quarter and the progress we are making on our three strategic priorities: executing on our commitments, innovating for future growth, and leveraging our breadth and scale. And while the industry's operating environment is dynamic, our team is experienced and will remain focused on execution and the things in our control. Okay. With that, I'll turn it back over to Neil to take you through the first quarter results.

Thanks, Chris. I'm on Slide 5. As Chris said, operationally we're off to a strong start to the year. In the first quarter, adjusted sales of $20.3 billion were up 5% and up 8% organically, led by strength in commercial aftermarket. Segment operating profit of $2.5 billion was up 18% as drop through on higher volume, the benefit of cost reduction activities and improved defense mix drove 120 basis points of segment margin expansion with strong performance at all three segments and highlighting the continued momentum on our cost transformation activities across the company. We've now seen four consecutive quarters of year-over-year consolidated segment margin expansion. Adjusted earnings per share of $1.47 was up 10% from the prior year, driven by segment operating profit growth, which was partially offset by an expected higher effective tax rate and a higher share count. On a GAAP basis, EPS from continuing operations was $1.14 and included $0.27 of acquisition accounting adjustments and $0.06 of restructuring and other items. And free cash flow was $792 million in the quarter, which included approximately $200 million for powder metal related compensation. On the capital deployment front, we returned $890 million of capital to shareholders during the quarter, primarily through dividends. And on the sale of the actuation business at Collins, we continue to make good progress on key milestones and are working through the remaining items required to close. With that, let me hand it over to Nathan to take you through the segment results for the first quarter.

Thanks, Neil. Starting with Collins on Slide 6. Sales were $7.2 billion in the quarter, up 8% on an adjusted basis and 9% organically, driven by strength in commercial aftermarket and defense. Adjusting for divestitures, by channel, commercial aftermarket sales were up 13%, driven by a 15% increase in parts and repair, an 18% increase in mods and upgrades, and a 1% increase in provisioning. Defense sales were up 10%, primarily due to higher volume across multiple programs and platforms, including multiple C4I programs, the Survivable Airborne Operations Center program and F-35. And commercial OE sales were up 2% versus the prior year as higher A220, regional and 787 volume was partially offset by lower 737 MAX volume. Adjusted operating profit of $1.2 billion was up $179 million versus the prior year, driven by drop through on higher commercial aftermarket and defense volume. The resulting margins at Collins expanded 130 basis points in the quarter versus prior year. Turning to Collins' full year outlook. Excluding the potential impact of the tariffs that Neil discussed, we continue to expect sales to grow low-single-digits on an adjusted basis and mid-single-digits organically, with operating profit growth between $500 million and $600 million versus 2024. Shifting to Pratt & Whitney on Slide 7. Sales of $7.4 billion were up 14% on both an adjusted and organic basis, with sales growth across all three channels. Commercial aftermarket sales were up 28% in the quarter, driven by higher volume and favorable mix across both large commercial engines and Pratt Canada. In military engines, sales were up 4%, driven by increased engine deliveries on the tanker program and higher volume on the F135 Engine Core Upgrade program. Commercial OE sales were up 3% in the quarter, primarily driven by increased deliveries. As a reminder, commercial OE sales were up 64% in Q1 of 2024. Adjusted operating profit of $590 million was up $160 million versus the prior year as increased deliveries in large commercial engines was more than offset by drop-through on higher commercial aftermarket volume and favorable commercial aftermarket mix. Lower R&D expense more than offset higher SG&A expense. All of this resulted in margin expansion of 130 basis points in the quarter versus prior year. Turning to Pratt's full year outlook. Excluding the potential impact of tariffs, we continue to expect sales to grow high-single-digits on an adjusted and organic basis with operating profit growth between $325 million and $400 million versus 2024. Now turning to Raytheon on Slide 8. Sales of $6.3 billion in the quarter were down 5% on an adjusted basis as a result of the cybersecurity divestiture completed at the end of the first quarter of last year. As expected, on an organic basis, sales were up 2%, driven by higher volume on land and air defense systems, including International Patriot and LTAMDS, which was partially offset by lower development program volume within air and space defense systems. Adjusted operating profit of $678 million was up $48 million versus the prior year, driven primarily by favorable mix and $15 million of improved net productivity. This was partially offset by the absence of the cybersecurity business. The resulting margins at Raytheon expanded 120 basis points in the quarter versus the prior year. Bookings in the quarter were $4.4 billion, resulting in a book-to-bill of 0.7. And on a rolling 12-month basis, Raytheon's book-to-bill is 1.35. Key awards in the quarter included over $750 million for Netherlands air and missile defense capabilities, about $650 million of classified awards, and about $250 million of Evolved SeaSparrow Missile orders for Japan. Turning to Raytheon's full year outlook. Excluding the potential impact of tariffs, we continue to expect sales to grow low-single-digits on an adjusted basis and mid-single-digits organically, with operating profit growth between $150 million and $225 million versus 2024.

Okay. Thanks, Nathan. I'm on Slide 9. Before we open up to questions, I want to emphasize that RTX is built to perform in any environment. The fundamentals of our business remain intact and our continued focus on execution has delivered a strong start to the year. With industry-leading products on the highest-growth platforms in commercial aerospace and defense and our commitment to innovation over the long-term, continues to pay off. With next-generation products such as the GTF Advantage and LTAMDS demonstrating our leadership and future growth opportunities. The long-term structural demand for our products and technologies all remain in place today. Additionally, the need for our defense solutions that provide critical security to the US and our allies has never been stronger. And so, I'm confident that these trends will drive significant growth for us over the coming years. With that, let's open it up for questions.

Yeah. Thanks. Good morning, Chris and Neil. Nice results.

Good morning, Peter.

Hey, Chris, thanks for the details on tariffs. It's very helpful. Obviously, things are very dynamic. So, I guess, I'll ask a question related to kind of the current defense environment. Are we seeing the ReArm Europe effort as a big opportunity for Raytheon or does it change any of the timing of awards that you were looking at? And then, I guess, just overall, do you expect still the Raytheon business to have a book-to-bill above 1 this year? Thanks.

Yeah, thanks, Peter. I would say that the focus of the EU on ramping up presents an opportunity for Raytheon clearly. I mean, just think of the countries there, Poland is up close to 5%, the UK has talked about taking spending up, Germany obviously. There was obviously the EU announcement for support for the $850 billion of additional defense spending over the next four to five years. And I think, again, as I said upfront, clear opportunity for Raytheon given its core competency in integrated air and missile defense systems. These are proven battle-tested products, think Patriot GEM-T, NASAMS, Coyote. And we've got a very strong European installed base, got eight Patriot users and we've got strong co-production and co-sustainment relationships, as I said in my remarks. I mean, we've got nine suppliers in Poland alone on Patriot, MBDA partnership on the GEM-T ramp up. So, again, strong demand in the region and strong partnerships overall. I will tell you, overall, on Raytheon's demand signal, that hasn't changed. I think there are some timing issues that will recover in the year, which we expected, but the global demand remains strong. We expect a book-to-bill of 1.0 or more.

Appreciate the color. Thanks, Chris.

Thanks so much. Good morning.

Good morning.

Good morning, Rob.

Chris and Neil, obviously, a very fluid situation with the whole trade war thing, but in terms of the $850 million you've laid out here, is that a gross or a net number after you've applied these mitigations? And similar to that, your peers earlier this morning said that they were essentially going to pass on cost as a surcharge to customers. What sort of ability do you have there, particularly on the commercial aerospace side of things?

Yeah. Thanks, Rob. Yeah, the $850 million is inclusive of mitigations, Rob. Those mitigations, regulatory like we talked about, things like duty drawback, contractual, again, that's pricing and other mechanisms and I'll talk about that in a second, and then, operational, where are there things where we can optimize the flow of material and work to again get the best mitigation we can from the tariff regime. On pricing, look, Rob, we've been operating in a highly inflationary environment over the last several years. And so, I think, we've gotten pretty proficient at knowing where and how to pass along higher costs through pricing. Again, the situation is fluid. There are a number of variables that are out there. And so, we came into the year with a number of sort of levers we would potentially pull if we saw things change in the marketplace. We're going to let things sort of play out. And then, to the extent that we see some softening or other things, then we're going to go and execute on that playbook. But again, we know how to push pricing. I think you just got to be balanced about it given where we are with our customers.

Great. Thanks, Chris.

Thanks. Hey, Chris, you mentioned that the tariff side didn't assume changes in customer buying behavior or operational disruption. Could you maybe talk about those as elements of watch items, in particular, the China strategy, as it relates to aircraft and aircraft parts, what your assumptions are there in terms of what they may or may not do? And then, also, relative to supply chain disruptions, where are you most focused to ensure that these tariff issues don't create supply chain disruptions? Thanks.

Yeah. Thanks, Myles. Look, I'll take the supply chain piece first. Maybe just think of the first quarter, we saw, again, some steady improvements continuing in our supply base. You heard me talk about structural castings at Pratt up 16% year-over-year, hear me talk about Raytheon's material growth eight straight quarters, Collins bringing down overdue line items. Rocket motors, again, one of our key suppliers saw output up substantially in Q1 year-over-year. So, again, saw some continuing stability and improvement in the supply chain as we exited Q1. And so, obviously, we're going to stay super tight with our supply base, making sure that we're all working together on tariff mitigations and the movement of work and making sure that we don't see those disruptions. I mean, keep in mind, the industry has been used to a duty-free environment. So, all of us have had to come up with different sort of processes and protocols to avail ourselves of these mitigations that we've talked about. And so, again, we want to stay locked tight with our supply base to make sure we know how to do this and keep parts flowing. We've seen in the past what happens when you kind of are herky-jerky with your supply chain. We saw that in COVID. It takes a while to recover. We want to continue that moving forward. On China, I mean, look, it's obviously an important market for commercial aerospace, both in terms of RPK growth, fleet growth. I would say that Western companies are pretty integral to the growth in China as well. So, I don't want to get out ahead of ourselves here to see how this plays out. I think we've just got to kind of sit back and see where it stands. I mean, I'll just point back to what I said before. The US A&D industry has a large trade surplus. It is a great example of US competitiveness, advanced manufacturing and technology leadership. And then, ultimately, we hope that's recognized. On the supply chain front out of China, again, we've been on a path to develop multiple sources globally for a while now. A lot of that was hastened frankly out of COVID, and so we're going to continue to accelerate those efforts.

Thanks, Chris.

Yeah. Hey, good morning, guys.

Good morning, Ron.

So, yeah, just recently, as you all know, we had the decision on the NGAD manned aircraft. Do you have any idea on NGAP, when that could be? Because I would imagine it's going to be one of the XA engines from either you guys or your competitor. Do you have any color around that?

Well, I guess, what I would say here, Ron, is we got an award in Q1 for about $550 million to continue to progress on NGAP. And we're actually very pleased with what we're seeing on the testing side. And we're getting some great feedback from that and from the customer. And again, I think Pratt has a demonstrated record of providing leading fighter propulsion technologies at scale, and it's making significant strides on technologies that are going to improve range and stealth. So, again, we're excited that NGAD is moving forward, and that hopefully what we're doing on NGAD will yield some benefit. And again, we're pleased with how that program is moving and the funding that underpins it.

Hey, good morning. Chris, have you seen any operational impacts of the SPS fire at either Collins or Pratt? And then, for RTX, is most of that lost fastener capacity being made up by SPS itself on existing contracts, or are we needing to get that demand filled by alternative suppliers? Thank you.

Yeah. Hey, Scott. Our team separate and apart from tariffs and all the analysis there, was working really hard on understanding the impacts from that fire. We're working closely with not only SPS, but others where we could potentially pick up the slack there. I'll tell you that as we continue to sort of move forward here, work through with some alternate suppliers, work through with SPS, we're feeling more optimistic in our ability to avoid any notable impacts given the fire.

Good morning, Chris and Neil.

Good morning, Sheila.

I wanted to go back to tariffs, and I appreciate you guys have a pretty tough job in the trade surplus that aerospace has. So, Neil, maybe in your comments you mentioned the $850 million. I just want to clarify that the net impact and how do we think about that across the rest of the Q2 to Q4 and across the segments? Is there any timing mismatch where it hits Collins first and Pratt in '26? Any detail you could provide?

Sure. Thanks, Sheila. There are many estimates involved in assessing the impact here, but to clarify, the $850 million mentioned is an approximation and is after considering mitigations. As Chris mentioned, there are various mitigations available, many of which are new to us since we used to import most of our goods without duty. We will continue to refine our mitigation strategies, and part of the figure reflects the time it takes to develop those. If we consider the current rates staying the same for the rest of the year, which is about a nine-month period, the impact from Raytheon is very minimal, around $0.01 per share. The remaining impact is fairly evenly divided between Collins and Pratt, each taking a little over $400 million. If this situation continues as it is now, expect to see the effects more in the latter half of the year since some of this will go into inventory and then flow through the profit and loss statement as inventory is sold. Additionally, the cash flow impact will be slightly larger due to the timing lag in receiving the duty drawback cash, estimated to be about 15% to 20% more than the rough estimate we've provided today. Overall, there is still a lot of variability to consider. What we aimed to do today was establish a framework and breakdown by type of tariffs and countries so that as conditions change, it will be easier for both you and us to adapt our models. When things become more certain, we'll adjust our outlook accordingly.

Great. Thank you.

Thanks very much. Good morning.

Good morning, Seth.

I wanted to ask about this, sorry if you've already addressed it, but you mentioned not assuming changes in customer behavior. What are the latest indications you're seeing regarding order activity, especially in the shorter cycle areas of Collins aftermarket? Which areas might be most at risk if we experience a significant slowdown in air traffic for the remainder of the year?

Thank you, Seth. That's a great question. I'll start by reflecting on the first quarter, which was solid. Although circumstances have changed since then, we experienced strong order activity and a robust aftermarket. In the initial weeks of April, customer behaviors have remained stable, albeit in a short window of time considering the market dynamics. Looking forward, demand on the original equipment side continues to be strong, even in a constrained environment with high demand for new aircraft, which we expect to persist. Focusing on Pratt and Whitney, there is significant demand for GTF aftermarket services. We had a strong output in the first quarter and anticipate continued growth throughout the year. Regarding the V2500 engines, I previously mentioned an outlook of 800 shop visits for the year, and we are on target with about a quarter of that in the first quarter. The same trends apply to our legacy PW2000 and 4000 engines, indicating consistent demand. We have a solid understanding of customer demand and have considered the feedback we receive from clients. On the Collins side, the outlook for original equipment remains similarly positive, and the aftermarket also showed strong performance in the first quarter. Although comparisons may become more challenging, April's order levels indicate stability. There is a range in our outlooks for a reason, and I believe our operational ranges can accommodate potential impacts from any softening later this year. We're approaching a critical travel season, and with increased aircraft activity, the demand for parts and maintenance will rise, all while shop capacities are limited. I anticipate our customers will aim to keep their positions in the queue.

Yeah. I think the only thing that I would add, Seth, is building on something Neil said, which is really kind of the process that we go through. We've got people embedded with our airline customers, service reps. Our customer-facing teams do bottoms-up analysis with our customers and have a really, really solid understanding of their assumptions on traffic, on capacity, and of their plans and the levers they're thinking about sort of pulling. And so, as we see how this sort of plays out, we'll take action as necessary as we're watching those buying patterns. We watch them on a daily basis and we react quickly when we see shifts.

Hey. Good morning, everybody.

Hey, Jason.

Neil, could you clarify the gross impacts of tariffs? You've mentioned the net impact, but I'm interested in the broader effects. And Chris, what are your initial thoughts on the recent executive orders from the White House? It seems they are looking to engage in procurement reform and possibly revise federal acquisition regulations. What should we be paying attention to? Is procurement reform and reducing red tape a positive development that will expedite acquisition processes, or should we be cautious about potential unintended negative impacts on the industrial base? Thank you.

Thanks, Jason. Let me start by talking about the tariffs a little bit. I mean, I think it's mostly important to look at the net impact. If you were to apply the tariff rates to gross imports or gross movement across borders in the case of tariffs coming from other countries, I think that would skew that number considerably, particularly given some of the mitigations that are available to us. You think about USMCA for goods moving Canada, Mexico and United States, doesn't fully cover us. It's not the same as the commercial aircraft agreement that was in place and is no longer available, but that mitigates things in a significant way. Similarly, on the defense side, the military duty-free option that were available to, that covers a significant amount of the gross impact. It gets a little bit more difficult, because there's a lot more paperwork involved when it requires temporary import under bond or drawbacks. So, I think again, that's why we've laid out a net number here. I think that's the most important thing. And as I said before, we're continuing to operationalize the mitigation efforts. There's a fair amount of work to do to ensure our products meet the qualifications of either USMCA or are able to qualify for temporary import under bond and, of course, drawbacks because we need to track the parts on a serial number basis. So, a lot to do. I expect us to be able to mature that and improve things if this were to last multiple years.

Yeah. On your second question, Jason, I would just say, look, we applaud the administration's effort to streamline procurement. The faster we can move to awarding contracts, the better. It gets us to line up our labor more quickly, gets us to get our supply chain on contract more quickly, takes risk frankly out of some of the bids. Time is never your friend as you're trying to execute those things. So, again, we see that as net positive all around. I mean, the focus for us, Jason, when we think about the executive orders and frankly just the administration writ large is executing on our backlog. I mean, the feedback that, of course, we're getting is we need more of your product and we need it faster. And so, it's partnering with both the administration and our supply chain, identifying where we see bottlenecks, trying to eliminate those bottlenecks and keep the ramp going. We've seen progress on a number of key programs, think GEM-T, think Coyote here in the first quarter, and we still got a ramp ahead of us across a number of effectors because the demand is really strong.

Yeah, thank you. Good morning, guys.

Good morning.

Wondering if we could switch to OE. A, I was curious, are you seeing any sort of production rate expectation declines on the A350 or other products? And if you could just update us on supply chain constraints and how those have progressed? I know you made some comments in the opening, but if you could just elaborate 787 and some of the other areas that were long poles in the tent before? Thanks.

Sure. I want to echo what Neil mentioned earlier, which is that the air framers have solid backlogs and are focused on increasing production. They need to ensure a steady flow of materials from the supply chain. Therefore, we don’t anticipate any significant changes there. We also foresee an increase in production and our goal is to support them by providing whatever they need as they ramp up. Regarding the supply chain, I highlighted some key components earlier where we are making progress, such as rocket motors and structural castings. We are observing consistent improvements and our plans include further ramp-ups. We need to continue seeing that progress. For the 787, I believe we've done well in collaborating with Boeing on heat exchangers. Those are now where they should be for the 787, and we will keep monitoring the situation as Boeing increases its production.

Hey. Good morning, everyone. I mean, Chris and Neil...

Good morning.

The focus has been on the negative impact on tariff, but I would imagine that in the discussion that the administration is having with other countries on how to close the US trade deficit, the aerospace defense industry's role as a net exporter, I mean, can't really be ignored. So, I guess first, are you having any discussions about that? And are you seeing incremental demands from international orders from this? And second, $1 trillion US defense budget kind of came under the radar a few weeks ago. And taking this into consideration, I mean, how much flexibility do you have in ramping up capacity?

Yeah. Thanks, Christine. Look, we've been consistent in our advocacy through a number of channels, legislative with the administration on exactly what you just said. Again, we really believe that the US aerospace and defense industry is really well positioned to meet what the administrative's sort of North Star and trade objectives are and that this industry has just been a shining example of US competitiveness and US manufacturing prowess. And if you just think about all the investments we make here in the US, both in terms of our people, our factories and our technologies, again, those are the things that we continue to emphasize. On the 2026 sort of budget, I guess, we'll see how that ultimately shakes out. Again, focus areas will continue to be integrated air and missile defense, missile defense, counter UAS, I think all things that are in our core competency. To your point on capacity and rate increases, again, you've heard us talk about our backlog today. We are in an urgent mode in terms of increasing capacity across the board. I gave you the example of Tucson. Previously, we've done it in Huntsville. We've done it in Camden, Arkansas. We're doing it across our footprint for the very reason that you mentioned, which is the demand is strong today and we see that continuing into the future, and we've got to be ready to continue to meet that demand.

Thanks. Good morning.

Hey, David.

Just a follow-up, I think, on some questions that have been asked. First of all, V2500, the shop visit assumption there this year, if that's held and how you think V2500 shop visits would hold up in a, let's say, flattish kind of flight hour environment if we go into a recession? That's the first question. And then, second of all, on GTF and powder metal, Chris, you've talked about the ramp that you saw last year and expecting this year on powder metal material and MRO capacity. I guess, how much do we ultimately or do you ultimately need to see powder metal capacity, MRO capacity increase, I guess, beyond what you're thinking about for 2025 to be able to accomplish fixing all the, I think, 3000 engines that need to have parts replaced? Thanks.

Sure. I'll start with the last part, David, and then, Neil, maybe you want to talk V2500. When we think about the GTF fleet management plan, David, again, pleased with the MRO output. I'll note here that this MRO output was also on heavier work scopes compared to Q4. So, really pleased about that. Continue to see continued improvement in in-shop turnaround time. A lot of that is taking time out of Gates 1 and Gate 3. In terms of capacity, again, I don't think it's an MRO shop issue. We've got the number of shops that we need in network. It's really just optimizing the flow within each one of those. And again, as I said before, that comes down to the Gate 2 material flow. When we see material flowing, we see turn times come down substantially. As I said, we're taking as much as we can out of Gates 1 and 3 as we continue to drive better flow with our supply chain into Gate 2. As we continue to see that improve, we feel really good about the shops we have in our network and their ability to take that material and shrink turn times substantially.

Thanks, Chris. David, on V2500, rather, 800 shop visits was our estimate coming into the year as you pointed out. We were up 7% in the first quarter of this year, year-over-year, in terms of our inductions, right on track for about a quarter of the full year output. We're also seeing the mix of those shop visits trend towards heavier overhauls given the age of that fleet. If you were to project that out, if I were to project that out in a flatter environment, I think it holds pretty solidly. We saw 11 retirements of V2500-powered aircraft in the first quarter. As you know, over the last several years, those retirements have been relatively low. It's still a relatively young fleet. And frankly, there's a tremendous amount of demand still as you all know in the narrow-body area. And so, I think for a short period of time, even in a lower demand environment, those shop visits would likely stay relatively consistent. Our customers need that lift, and as we continue to get the GTF fleet back up in the air, then I think we would see that start to tail off a little bit, but that's a little bit of a ways out.

Good morning. Thank you.

Good morning, Doug.

Chris, over the last couple of years, you've had a really big increase in backlog at Raytheon and a lot of that's been helped by international, particularly Europe. When you look forward, looking at mid-single-digit growth this year at Raytheon, it seems to be that you have an outlook that's well below what one might expect from that backlog growth. Can you comment on the timing in which we should see that backlog flow into revenues? And perhaps, also, how you're thinking about some of the Buy European movement inside Europe and how you're participating kind of on the ground in Europe as well?

Yeah. Maybe I'll start with the second part first, Doug. As I was saying upfront, we view the increased defense spending in Europe as an opportunity. And we all saw the $850 billion support over the next four to five years to continue to build up European munitions and defense overall. As I said, one of the biggest needs are integrated air and missile defense systems and effectors, which is again right in our core competency: Patriot, GEM-T, NASAMS, LTAMDS, which we just mentioned getting through Milestone C and going into production, another opportunity there. So, again, feel like that's a real opportunity for us especially on the back of the very strong partnerships that we have in terms of co-production and co-sustainment. We don't go it alone in Europe on some of our key programs. We think that's a competitive advantage. In terms of the timing of the sort of backlog, if you will, Doug, again, some of that is driven by contractual terms and the length of those contracts, how those play out, but again, you've got some very long lead material items that sit in many of these programs that take time. Again, I'll go back to the point I made before. The more streamlining we can do, especially on FMS, you saw that with one of the EOs that the government had sort of put out there. Streamlining that process, the faster that we can get our supply chain on contract, get long lead material flowing and shorten those delivery cycles.

I would like to add a couple of points. If you examine the businesses, land and air defense systems are experiencing strong double-digit growth. This is where we anticipate growth, and we are witnessing it. However, this is somewhat offset by expected challenges in lower development programs, which tend to vary and depend on timing. Overall, when we consider the larger Raytheon portfolio, we are still confident about achieving mid-single-digit sales growth this year. We anticipated the challenges we experienced in the first quarter and are facing a few similar issues in the second quarter. Nevertheless, the core aspects of the Raytheon portfolio are on track, our execution is progressing well, and we are seeing increases in capacity, which are resulting in greater output. These are some of the dynamics currently affecting the business.

Good morning.

Good morning, Scott.

Chris, there is a labor negotiation with the vote on a contract in early May. I'm just wondering how you're approaching that and if there are any contingency plans put in place, if there is a strike to still work down the GTF AOGs.

Yeah. Well, look, I won't get into the specifics of that one, Scott. I'll just say that I think we've had a pretty good track record over the last few years in a highly inflationary market with getting large significant union negotiations to agreement without any interruption. And we're cautiously optimistic that we can do that here as well. We have a longstanding relationship with this labor union. There's a lot of demand in the system. So, obviously, feel like we can get to the right place there and continue to meet the demands of our customer.

Hey, guys. Good morning. Thanks for the question. Sorry to go back to tariffs, but I guess one question we're getting this morning is kind of why are you not able to pass-through more of this $850 million, I guess, just either whether it's contract kind of escalation or just aftermarket pricing or kind of drawbacks because a lot of your product ultimately kind of gets exported. So, is that not the right way to think about it, or is there maybe like a timing mismatch that maybe you get this back in the future, or maybe could you possibly do better than this if you are able to recover some of that?

Let me break this down into two parts, Matt. Regarding whether we can improve, you mentioned that these are relatively new processes and systems we've implemented to leverage regulatory and operational mitigations. As we gain more experience with these, I believe we will learn and identify opportunities. Concerning pricing, we've gained experience over the past few years in passing higher costs on to our customers where appropriate. It’s important to maintain balance—considering factors like contracts and market conditions. We have not hesitated to increase prices to cover higher costs, and we will continue to seek opportunities to do so, but it's not a catch-all solution for every tariff-related challenge.

Hi, good morning, everyone.

Hey, Noah.

Neil, your full year guidance for segment EBIT at Pratt and Collins, I think implies the margins are pretty flat sequentially through the year, maybe even down a little at Collins. Can you talk about that? How much of that is actual pre-tariff fundamental drivers in the business? And how much of that is leaving cushion where you could therefore absorb tariffs if they stick?

Thanks, Noah. Appreciate the question. And I think if we were sitting in an environment with maybe a little less uncertainty, I'd feel like we were well positioned within our outlook, and that's how we started the year as we talked about 90 days ago. Strong first quarter, really pleased with the margins we saw both at Collins and at Pratt. And I would comment at Pratt that was on lower spare engines and more install engines. So, I think I'm really pleased to see the kinds of margins we're seeing there with the mix of the install versus spare engine mix in the first quarter. And as we look out to the rest of the year, we'll see higher installs at Pratt. That will bring with it a little bit of headwind as it does all the time, but I remain cautiously optimistic. I think at this juncture in the year given the uncertainty we're seeing around the customer base, we're going to sit here and hold that for the rest of the year. We'll look at it again in another 90 days, and if the strength continues, then that'll be great. If not, I think we've got a little room to absorb some softening that might take place as we exit the summer months. So, I'll just leave it at that for now. And of course, 90 days, we'll be back to provide an update.

Thanks. Good morning.

Hey, Gavin.

Just following through on Raytheon margins there, I think the guide for the full year implies about 10.5%, and I think that's with $100 million of productivity. So, given you did 10.7% in the first quarter with $15 million of productivity, I guess, first, is there anything abnormal in that margin? And then, second, longer-term on Raytheon margins, anything that keeps you from achieving that 100 basis points of volume plus 100 basis points of productivity that you had been talking about a couple of years ago at the '23 Investor Day?

Sure. Thanks for the question. Listen, I think we're pleased with the Raytheon margins in the first quarter, too. Obviously, it's not where we think the full potential of the business is. We think it can get back into the 12%-plus range and will. We saw about $15 million year-over-year productivity improvement. We had said we'd see about $100 million on a full-year basis and still hold that expectation. So, again, mix contributed in a significant way in the first quarter. That mix can vary throughout the course of the year, but we're definitely seeing a trend towards more international mix in the Raytheon sales and backlog, and we expect that trend to continue. So, again, at this point in the year, just want to make sure we reserve a certain amount of contingency here, but I feel good about how we started the year, and I expect us to continue to see that play out. We have big growth in absolute dollars and profit for Raytheon as we move through the rest of the year. That's reliant upon the continued supply chain health. Again, we've seen good movement there, eight consecutive quarters of material growth. So, again, assuming all that holds, we expect that margin to hold as we go through the rest of the year as well. So, thanks for the question.

All right. Thank you, Latif. That concludes today's call. As always, the Investor Relations team and I will be available for follow-up questions. So, thank you all for joining us today and have a good day.

This now concludes today's conference. You may now disconnect.