Rob Stallard: Okay, thanks, Chris.
Operator: Thank you. Our next question comes from the line of Noah Poponak of Goldman Sachs. Please go ahead, Noah.
Noah Poponak: Hey, good morning, everyone.
Chris Calio: Hi, Noah.
Noah Poponak: Two follow-ups on topics already asked about, but on the powdered metal process, can you quantify even if roughly how many engines that are off wing are actually in an MRO facility now versus waiting in line to get into one? And then, Neil, on the defense margins, the guidance implies that each quarter, the rest of the year looks roughly similar to the first quarter. You have the framework next year for a decent amount of expansion. I would have thought you would have sort of ramped through this year into that ‘25 expansion. How do we kind of flip in ‘25 or do I just have the numbers off there?
Neil Mitchill: No, let me start with defense and I’ll hand it off to Chris to hit your first question. But, listen, I think we had a number of headwinds last year. I think you’re all well aware of that. And so as we put together our outlook for this year, we essentially assumed no productivity for the year. Now, as Chris said, and I talked about earlier, that’s a significant step-up from what we experienced last year, and largely last year was driven by a handful of fixed price development programs, but we’re not out of the woods there. So what I would say is, we took an approach that is not assuming a huge uptick. Remember, this is a business that several years ago was kicking off $300 million, $400 million, and $500 million of positive productivity.
There is still positive productivity in the Raytheon business each quarter, but it’s been overwhelmed by the negatives. And so at this point, I think we’re really pleased to see a quarter like this to start the year. There’s work to do, obviously, to get multiple quarters together that look like this one going forward. And that’s what we’re focused on. We’re really focused on improving the health of the supply chain and moving the material through that you could see has come in, and now we got to get it through the entire manufacturing process to meet these important needs of our customers. And that’s really where our focus is. I do think it will step up in ‘25. One encouraging thing is we had significant orders during the quarter and the margins in that new backlog are very healthy.
The mix of those new orders, about 60% foreign sales. So it’s a good start, but one quarter at a time. Chris, maybe a couple of comments?
Chris Calio: Yeah, sure. So I’m not going to get into the specific numbers on where things stand in terms of those engines waiting to be inducted. But again, you look at the turnaround times, the extended turnaround times that we’ve talked about, engines coming off today are going to have to wait a bit before they actually do get inducted and enter into gate one in the MRO process. Suffice it to say, and we kind of alluded to this up front, big step up this year in GTF shop visits. And that’s why we’ve played a little bit of the allocation game, in the last year, early this year, to get off to a strong start there. Again we’ve got a big ramp on GTF MRO throughout the year in order to support this fleet. Again we think we’ve got the capacity to do it, the labor to do it, the partners in our MRO shops who are incredibly adept at this, it’s about material flow.
Noah Poponak: Neil, the fixed price development programs that have been a challenge in Raytheon Defense, when do those end? When do those move out of development?
Neil Mitchill: Yeah, so here’s a couple ways to look at it. About 1% of our existing Raytheon backlog today constitutes those programs. And I’d say it’s about 12 to 18 months. There’s a few of them. So we still have a little ways to go. We are making progress, critical milestones on each program. In the first quarter, we had net unfavorable productivity of about $28 million. Nearly all of that was associated with these programs. So there’s still some headwinds that we’re encountering as we get additional technical learning and going through testing. But that’s the timeframe and that’s the magnitude I would put on it.
Noah Poponak: Okay, thanks for taking my questions. And, Greg and Jennifer, thanks for all the help over the years.
Greg Hayes: Thanks, Noah.
Operator: Thank you. Our next question comes from the line of Peter Arment of Baird. Peter, please go ahead.
Peter Arment: Thanks. Good morning, everyone, and Greg and Jennifer, best of luck. I’ve enjoyed it over the years. Chris, on Raytheon, Europe continues to be a really strong region for bookings. Maybe you could talk about the outlook there and how should we think about, I guess Neil just touched upon it, the FMS mix kind of ramping and going to benefit margins. Is this — should we expect the FMS mix to kind of be a multi-year process as it plays out where that shows up favorably on margins, but also just maybe just talk about the outlook on bookings? Thanks.
Chris Calio: Yeah, I think that’s right, Peter. I think it is a multi-year process. To your point, if you just think about what’s going on out there today, the integrated air missile defense, the demand there is exceptionally strong. Obviously, Patriot, NASAMS and of course, GEM-T and the like, you saw a huge order from NATO at the end of last year for us, and the demand continues to be really strong. To your point, when we look at our margins throughout the year, our margin progression story at Raytheon, we’re expecting a tailwind from mix as we increase the international backlog. About 60% of Raytheon’s Q1 bookings were international, and so that’s provided us a nice tailwind, and we expect that to continue.
Peter Arment: Appreciate the color. Thanks, Chris.
Operator: Thank you. Our next question comes from the line of Matt Akers of Wells Fargo. Please go ahead, Matt.
Matt Akers: Yeah. Hi, good morning everybody. Good luck, Greg and Jennifer. I had a couple of questions. One, what’s the current wing-to-wing turnaround time for GTF full stop visit? Is it close to that 250, 300 days, or is it shorter and it sort of builds as the pipeline of planes waiting gets bigger than, I think you might have said, Pratt aftermarket, mid-single digits, the rest of the quarter. Did I mishear that? Is that actually mid-teens?
Chris Calio: So let me start with the, now with the wing to wing turnaround time. Yeah, it’s in that range that we’ve provided in that 250, 300. Again, a lot of that will continue to be dependent on the mix of work scopes. We’re still believing that it’s going to be more of a 90% heavy, 10% lighter shop visit. And with that, we’ll stay within that range. If we can find a way to come up with medium work scopes and other things that can alleviate the need for new, we’ll call it non-powdered metal, material repair development and the like, perhaps we’ll be closer to the lower end of that range, but we’re in there today, given the shop visit mix that we see and the material flow that we see.
Neil Mitchill: Thanks, Chris. Matt…
Matt Akers: Great. I guess the aftermarket?
Neil Mitchill: Yeah, sorry. I didn’t put my mic on. Just a couple of clarifications. So, When I said mid-single digits, I was referring to the military growth. We had really strong growth, obviously, in the first quarter. On the aftermarket, think about that as low to mid-teens for the rest of the year.
Matt Akers: Great. Thank you.
Neil Mitchill: Yep.
Operator: Thank you. Our next question comes from the line of Jason Gursky of Citigroup. Please go ahead, Jason.
Jason Gursky: Yeah, good morning, everyone. Jennifer, Greg, best of luck with your new roles and ventures, and Nathan, welcome back. Chris, just a quick question for you on Raytheon and the defense side of the business. Solid book-to-bill here in the first quarter. So I’m wondering if you can talk about the pipeline that you see here for the next 12 to 24 months and what you think the book-to-bill is going to look like over that time period. Do we have a prolonged period here of book-to-bills above 1 that forecast or shadow — yeah, forecast growth here for multiple years? Thanks.
Chris Calio: Yeah. Hey, Jason. Look, I think, given the threat environment we described and we kind of laid out in the question on the supplemental, we’re going to continue to see strong top line growth at Raytheon and strength in bookings. And again, if you just kind of go region by region, it’s replenishment in the US, it’s the integrated air and missile defense in Europe, it’s naval munitions in Asia. So, again, feel like the strength of demand is going to continue to be there. And then the other thing I’ll say, Jason, is we’re also thinking through some of the advanced capabilities that we’re trying to bring to market as well. LTAMs, which I mentioned up front, the 360-degree radar, the refresh on AMRAAM, SPY-6 radar, which has gone through its initial sea trials, counter-UAS capabilities with our Coyote system, and then things like high-power microwave as you look to sort of the drone swarm threat that continues to build.
So again, strong demand for the existing pipeline of products. We continue to invest in that next generation product, which we think meets the emerging threats.
Jason Gursky: And to be clear [indiscernible] you think that leads to a book-to-bill above 1 here for this year and maybe going into ‘25?
Neil Mitchill: I was just going to comment on the book-to-bill. I mean, certainly, really strong first quarter With top line sales projected to where we see them, it’s obviously going to change the math a little bit on the book-to-bill calculation, but we still expect a book to bill over 1.1 for this year. And I think it’s going to be strong next year. But obviously as sales go up too, that’ll level off a little bit. But the backlog is going to continue to grow. To put a finer point on some of the awards for this year, we see AMRAAM, we’ve talked about LTAMDS, both with the US Army and Poland, certainly Patriot, SPY-6, and SM-3. So a good list of potential things. The large international ones can be lumpy. They can come in this year. They could fall into next year. But, we see a lot of demand signals that are really strong there.
Jason Gursky: Great. And thanks [for cutting you out] (ph) before you could get to it, Neil. Appreciate it.
Neil Mitchill: No problem. Thank you.
Operator: Thank you. Our next question — our final question comes from the line of Gavin Parson of UBS. Your question please, Gavin.
Gavin Parson: Thanks. Good morning.
Chris Calio: Good morning, Gavin.
Gavin Parson: First, I was wondering if you guys could just give an update on what ratio of GTF customer compensation agreements have actually been completed. And then second, if you could just give a little more detail on the OE rate uncertainty you talked about. I know we’re waiting for Boeing tomorrow, but if you’re actually already seeing a lower pull on any of those programs and if that’s considered in Collins guidance? Thank you.
Chris Calio: Yep, sure, Gavin, This is Chris. So again, on the GTF customer piece, we’ve set up front, we got about nine done. We’re in the final throes of a few more and those nine that we’ve got under our belt represent about a third of the GTF fleet total. And then on the rates again, Boeing will provide the guidance tomorrow. I just think we’re very much embedded with them 737, 787. What do we need to do to support a ramp on 787? And then what do we need to do to help them go wherever they need to on 737? And so we won’t get out ahead of them, but just know that we’re working a number of scenarios and we’ll take whatever action is necessary based upon what they need.
Gavin Parson: Thank you.
Operator: Thank you. I would now like to turn the conference back to Greg Hayes for closing remarks.
Greg Hayes: Okay, thank you, Latif. I’ll keep these comments brief, but as I step back from the day-to-day responsibility as CEO of RTX, I want to take this opportunity to thank our team for their trust and support over this past decade. Any success we have had is the result of the hard work and dedication of the entire team, the senior leadership team, but also the whole 185,000 people that make RTX a great company that it is. I also want to thank our investors. It’s been an interesting decade or so in the role. And thank you for your patience as we’ve transitioned and transformed what was United Technologies, a multi-industry company, into RTX, which is, I believe, the best positioned A&D company in the world today. We’ve got great products, great portfolio of people and technologies, and a great backlog that I think is going to serve us well into the future.
There is, of course, always more to do. We can talk a lot about that. I think Chris is absolutely on the right track, that is focusing on execution, focusing on technology and making sure we have the best team possible. And I can’t think of a better leader than Chris to lead RTX for the next decade or so. You should all know that Chris has the full support of the Board, but not just the Board, the entire senior leadership team and the entire organization. And I look forward to working with Chris in the near term and watching from the sidelines beyond that as he is successful. I also want to thank Jennifer. Jennifer and I have worked together for a decade from Sikorsky’s disposition to the integration of Raytheon and UTC and lately for the last three years as Head of Investor Relations, she’s been a great resource for the company and a great friend.
So, Jennifer, thank you. With that I think that’s all. Thanks for listening today. Jennifer, Nathan and team will be available all day to answer whatever questions you have. But thanks for listening and take care.
Operator: This now concludes today’s conference. You may now disconnect.
