Honeywell Aerospace Inc. Common Stock Jefferies Global Industrials Conference 2026

Thank you so much. I figured to take an opportunity here in the first couple of minutes of our fireside chat just to give a little bit of background and context, particularly of what has transpired here over the last month or so as we have been transitioning and obviously becoming an independent publicly traded company as of June 29. With that a little bit, I think a little bit of context, again, to kind of level set about Honeywell Aerospace for a moment. As we have noted here, we are a critical mission system provider of high-value content across the entire aerospace and defense ecosystem, both in commercial and defense applications, whether that is commercial or transport, business aviation, and/or defense, both domestically and internationally. Last year, over $17.5 billion in sales.

We have secured over $105 billion worth of lifetime contract wins over the last couple of years. Backlog is sitting at over $18 billion. 90% of all the aircraft flying in the free world today have Honeywell content on board. The point being is that with the demand that we are seeing and the framework that is set up here, it really does create, in combination with being a standalone, independent, totally focused on the A&D industry and what we do to support that going forward, a really compelling value proposition long term for all of our stakeholders. The landscape and the framework is set up to be able to enable that to happen for us on a go forward.

If you think a little bit about the demand aspect and where we're sitting here today, one of the things that we look at in terms of the value of a business and what brings a lot of intrinsic value is your demand that you are seeing across the industry. We are seeing unprecedented demand for our products and our services and our technologies. What I would make mention of is that we kind of look at this in terms of short cycle, long cycle orders, the order book itself. Backlog is up over 9% year-on-year. Our book-to-bill is over 1.1 across the portfolio. We're not seeing any erosion to our demand going forward. Essentially, fundamentally, the issue that we are experiencing, and we've been very vocal about this, is our ability to execute out of the supply base to deliver on said demand.

Essentially, it's just deferring the sales revenue for us because we're not seeing any erosion in terms of our products and our portfolios and the order book itself specifically. You have to kind of ask yourself, "Well, how did you end up in this position that you're in right now?" I tend to look at how Honeywell Aerospace was operated in as part of the conglomerate from 2010 to 2019. We really maximized the supply base to be running at a highly efficient type of an operation going forward. What does that mean? We moved away from multiple sources to single sources of supply. We got into a move where we were outsourcing a lot of the core competencies, therefore, the setup was such that we were very, very single-sourced, in many regards, across the supply base.

In an environment that really demand was not very strong within the A&D community over that period of time. If you pivot to 2020 and above, you can see where the demand has increased substantially within the A&D industry, that's not just across commercial or transport. It's across business aviation, defense and space. Again, the three end markets that we serve that are all growing exceptionally well. You think about where are we as part of that? We were obviously very single-sourced, lacked vertical integration because of the outsourcing that we were doing, also there was limited investments that were made in terms of tooling and CapEx over that period of time.

We were a little late, I'll be very honest with you, in pivoting the organization as part of the conglomerate to be able to capture that demand that we were seeing coming out of the pandemic. The point there being is that when I came in in August of 2023, we pivoted back. We started investing very heavily back into the supply base. We had put in over $1 billion into the supply base. Our situation at the time was constraints across the electronics portfolio, the mechanical portfolio, and what we see now is that our electronics portions of our business, which represents 40% of the portfolio, has recovered. We're doing fine relative to that. The mechanical side, we fixed a lot of issues that existed there, and now we're focusing on the critical few that remain to go get addressed.

That sort of translates into this sort of a pseudo scorecard that we would share with you. Over 3,000 of our suppliers are actually performing exceptionally well. They're meeting our plan. They're growing year on year. We have no issues with them whatsoever. Out of that 3,000, we're down to about 70 that we would categorize as either being critical and/or constrained. The definition between the two being as follows: critical are those suppliers that are not performing in terms of consistency in terms of their output and their deliveries to us. They have the capability to hit the output demand that is necessary, but they're just not doing it consistently. So they're on a watchlist for us and have a lot of senior management engagement with them directly as a result. Of that 70, there's about 10 that we would call constrained suppliers within the supply base.

These are the 10 that are not delivering to our plan, not growing year on year to the levels that are necessary, and hence, become the bottleneck in the organization to be able to unlock fully our supply base. They really fall under four specific commodity categories that we would look at. It's going to be either complex machining, castings, forgings, and bearings. You can see the pie chart on the right-hand side. What that represents is the amount of spend that we have within those commodities and the proportionate impact that those four commodity categories therefore then have within the portfolio.

This is where I personally am spending most of my time working directly with those most critically constrained suppliers, visiting them face-to-face at their sites, going through the issues, going through the problems, going through the action plans that are necessary to resolve what they're incurring and what they're exhibiting in terms of not demonstrating the performance that is required for the business. That includes a follow-up every single week, sitting with them as we're trying to unlock that portion of the supply base. When you double-click a little bit into that and kind of get a better view of those four commodities and how they are performing relative to are they delivering to our plan and/or are they delivering to a growth algorithm associated with their particular business.

You'll see that the most constrained area is in the bearings at the moment, not delivering to plan, not delivering to the growth that is expected. We're seeing growth in castings and forgings, just not to the plan that is necessitated to drive the output that we are desiring across Honeywell Aerospace on a go-forward basis, and similarly in complex machining. What I will tell you is that you can look at that as you double-clicked into it, we really truly understand what are the critical root causes of the issues that these individual companies are experiencing, whether it's skilled labor, tooling, CapEx, just constrained supply as it may be, and we've got the action plans in place to go address those on an individual basis, and we'll talk a little bit about what we're doing relative to that as a point.

When we look at this particular chart, the point that I would make on this one here is that we truly now, with the plans in place and the execution that we are seeing across these constrained providers, we are very confident in our ability to demonstrate improved output growth in 2027 and beyond going forward for us. We are building off the foundation of what we have done in terms of our investments from 2023 to 2025. We are doing additional investments in 2026. We are accelerating CapEx into 2026 for improvements on tooling and the like, which drives significant improvements on quality and yield for the products that are going through these particular factories, and those continued investments that we will make in the coming years as well in driving the output growth of the business, which gives us that level of confidence that we have across the portfolio.

Ultimately, at the end, what matters are the proof points from all of the efforts that we are embarking upon here. Again, this has been a journey that we have been on for some time. I would give you three proof points around this, specifically around the four commodity categories that we are specifically referring to, bearings being one of those as an example. What we have seen over the last three months in particular is that 35% of the total yearly output that is necessitated for us across our bearing portfolio for high volume bearings that are proliferated across most of our products within Honeywell Aerospace, we have seen 35% of the yearly demand actually delivered in the last three months, and primarily in the last six weeks, to be very honest with you.