Release Date: April 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Can you talk to the Pratt aftermarket first to start and sort of if there is risk to achieving the full year guidance, given the harder comps that play out for the rest of the year, given the 9% in the first quarter and low double digits expected for the full year?
A: Neil G. Mitchill, RTX Corporation - Executive VP & CFO: Myles, this is Neil. I'll start out and Chris can add anything here. But a couple of things on the Pratt aftermarket. I think 9% aftermarket growth in the first quarter was largely as we expected. We took the first quarter to make sure that we started off on a strong foot with respect to the GTF aftermarket overhauls. And I'm sure Chris can provide a little more color there. In doing so, there was a little bit lighter material allocation to the V2500s. We're actually down a handful of shop visits year-over-year in the first quarter, a little bit -- around 175 or so. We still feel confident though that we'll hit 800 shop visit inductions on the V2500 for the full year. And so what we expect to play out over the remainder of the year is that we will see more and more of those shop visits come in. We'll also see the content on those shop visits increase, so we'll see better drop-through on the legacy aftermarket. Back in January, we talked about the PW2000s and 4000s. There's some puts and takes there. They largely offset for the year. So it's really about seeing that legacy aftermarket continue to grow. So full year, still expect low-teens sort of growth in the aftermarket at Pratt. And we're confident that we'll see the material flowing to support that.
Q: And Greg, thank you for your leadership over the years. And Jennifer, wish you the best in your next endeavor. So maybe on GTF, Chris, thank you for providing more color on the GTF fleet management plan. And at this point, it seems like everything is progressing well. So as we look forward to understanding the risk retirement, are there other milestones you're monitoring to see if there could be potential risk reduction? Is there a number of specific completed AOGs or more customer agreements to be completed? Any sort of gauge to help us understand risk retirement would be helpful.
A: Christopher T. Calio, RTX Corporation - President, COO & Director: Sure. Thanks, Kristine. So look, the GTF fleet management plan is a multiyear process. And we're going to continue to grind through that over the next 3 years or so. And we've laid out all of the key enablers. We looked at them on the call today and we've done it historically. And that's going to be AOG levels, that's going to be turnaround times. And so again, we've given those sort of ranges on each of those key enablers, and we're going to continue to do everything we can to stay within or move to the lower end of those ranges. And again, the single biggest enabler for us is MRO output. We had a very good first quarter, but we've got a large growth plan here in 2024. And so for us, it's about material flow, including the new powdered metal parts that we're going to be putting into the engine. As we said during the last call and during our comments, we continue to add the full-life HPC and HPT in MRO, and it's going to ramp throughout the year. So that will be a key indicator for us. The more output we can get obviously, the more relief we can get the fleet, the less AOG days and then the less penalties. It's really that simple. So for us, it's all about the MRO enablers, chief among them continuing to ramp up in powdered metal part production and MRO.
Q: Maybe kind of a small-picture question here, but it is one that we get a lot. When you think about the trajectory of aircraft on ground, and it seems like we are right around the highest level we'll see here at -- in the 550-ish level, when we think about where that goes from here, do we think of that more as a plateau for the remainder of the year for a couple of quarters? Or do we start to see some progress there? And when you think about where turnaround times are kind of now and the improvement that you can make over the next few quarters, is there anything that you can kind of lay out for us to gauge that?
A: Christopher T. Calio, RTX Corporation - President, COO & Director: Seth, this is Chris. Thanks for the question. Yes, so look, we are, as we said in our comments, essentially at peak AOG. I mean, there'll be some perturbations a little bit above, a little bit below. But we see that as kind of the peak, and we're going to start to gradually chip away and move that down. So again, as I said to Kristine's question, the #1 enabler of that is our MRO output. And again, strong start to the quarter, but we've got a big plan for the year. And we're focused on turnaround times and new material. At the end of the day, in terms of our MRO output, it's not so much about capacity. We've got enough shops. We've got enough labor. It's about material flow. The faster that we can flow material, the faster we can take turnaround times down, increase output and then burn down the backlog of those engines waiting for induction.
Q: Could you speak a little bit to the supplemental that got through the House and how that plays out for your defense business? What good is there in there for you guys?
A: Christopher T. Calio, RTX Corporation - President, COO & Director: Ron, this is Chris. So as I'm sure you've seen, if you break down sort of the supplemental into it big buckets, it's about $60 billion for Ukraine, another $25 billion or so for Israel and $10 billion for INDOPACOM. So when we look at our product portfolio against those big buckets, we look at Ukraine and say about 2/3 of that is addressable with RTX products, think GEM-T, NASAMS, Patriot, AMRAAM, AIM-9X. Israel, we kind of handicap that as about 30% addressable, stockpile replenishment, Iron Dome, David's Sling procurements. And then INDOPACOM, again roughly that 30% addressable with the RTX product suite, namely SM-6, Tomahawk, AIM-9X. So again, the services will have their specific lists of what they're looking for. But again, we think our product portfolio is pretty well positioned to address the needs in each of those theaters
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
