Earnings call transcript: Textron Inc’s Q2 2025 innovation focus amid market challenges

Textron Inc (TXT) held its Q2 2025 earnings call, highlighting the launch of its new product, TextApp, amid a challenging market environment. The company, which boasts a market capitalization of $15.45 billion and maintains a "GOOD" financial health rating according to InvestingPro, reported stable monthly recurring revenue (MRR) over the past year and a half, despite a recent decline. The stock saw a modest increase of 0.2% to $86.35, with pre-market trading showing a slight dip of 1.12% to $85.38. The company’s strong liquidity position is evidenced by its current ratio of 1.84, indicating robust operational efficiency.

Key Takeaways

• Textron launched TextApp, integrating AI capabilities across customer interaction tools.
• MRR stability was maintained, but a decline was noted compared to the previous quarter.
• Over 50% of the company’s business now comes from customers with MRR of $500 or more.
• The company completed a cloud infrastructure migration and expanded its U.S. sales team.

Company Performance

Textron reported a stable performance in its MRR, although there was a decline compared to the previous quarter. The company, which generated revenue of $14.06 billion with a 1.19% growth rate, has been focusing on transitioning from a single-product provider to a multi-product suite, with a significant increase in customers using multiple products. This strategic shift is aimed at enhancing its competitive position in the market. InvestingPro analysis reveals that management has been actively buying back shares, demonstrating confidence in the company’s direction. Additionally, Textron has maintained dividend payments for an impressive 55 consecutive years, showcasing its commitment to shareholder returns.

Financial Highlights

• MRR remained stable over the past 1.5 years.
• Customers with MRR of $500+ now account for over 50% of business.
• Increased average revenue per license across all products.

Outlook & Guidance

Textron did not provide specific financial forecasts during the call but emphasized a careful promotion of TextApp and plans to migrate existing customers to the new platform. While 12 analysts have recently revised their earnings expectations downward for the upcoming period, according to InvestingPro, the company is still expected to remain profitable this year. The focus remains on improving the sales funnel and conversion rates, with the U.S. sales team generating promising leads. Trading at a P/E ratio of 19.49, current analysis suggests the stock may be undervalued compared to its Fair Value. For more detailed valuation insights, check out the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Executive Commentary

Lucja Kaseja, Investor Relations, highlighted the integration capabilities of TextApp: "TextApp brings together in one place and one experience the functionalities of live chat, help desk, and ChatBot." She also emphasized the ongoing development of TextApp: "We know TextApp works and works well, although we will keep developing and refining it."

Risks and Challenges

• The company faces challenging market conditions, including changes in Google search results that could impact visibility.
• As Textron transitions to a multi-product solution strategy, it must manage the risks associated with integrating new technologies.
• The ongoing SOC 2 certification process indicates a focus on security and compliance, but delays could pose risks.

Textron’s Q2 2025 earnings call showcased its strategic initiatives and resilience in maintaining MRR stability. The launch of TextApp and a focus on multi-product solutions highlight the company’s commitment to innovation, despite facing market challenges.

Full transcript - Textron (TXT) Q2 2026:

Conference Call Moderator: Ladies and gentlemen, thank you for standing by, and I would like to welcome you to the discussion on Text S.A. Q2 2025-2026 KPI Conference Call. The call today will be hosted by Marcin Droba and Lucja Kaseja from the Investor Relations Department. At the end of the presentation, we’ll have an opportunity to ask questions. Without further ado, I would now like to pass the line to Lucja. Please go ahead, ma’am.

Lucja Kaseja, Investor Relations Representative, Text S.A.: Good afternoon. Thank you for participating and for your interest in our company. Today, we will mainly focus on discussing the operational data presented in our current report, but we will also say a few words about our new product, TextApp, which had its official premiere on September 30 at the Context Event dedicated to our clients. We warmly invite you to watch the recording available on YouTube. Until recently, we did not actively promote TextApp on text.com, yet we already secured our first paying customer, a key internal milestone to validate the process. We know the product works. We use it ourselves, and it already supports more than 700 organizations in their daily operations. The past quarter was challenging, as summer is seasonally weaker for acquisition. In addition, we concentrated our efforts on TextApp amid persistently difficult market conditions.

Beyond macroeconomic headwinds, changes in content search and the way Google presents search results have impacted not only our acquisition channels but also our customers. We are adapting to these changes, acquiring, for example, clients coming from LLMs, but we are still in a period of continuous transitions in this area. At the same time, we note improvement in payment volumes and in increasing the share of larger customers with MRR above $500 in our business. The group already accounts for more than half of our business, a trend that should have a positive impact on our future metrics. As you can see on slide 6, for the past one and a half years, our key metric, MRR, has remained relatively stable. The trends we observe in this regard also remain unchanged.

Significant declines in the number of smaller customers are being offset by increases in ARPL, average revenue per license, while declines in live chat MRR are offset by growth in newer products. The past quarter, July to September, was relatively weaker compared to several previous ones, although it was expected that the summer quarter would be more difficult. During this period, we recorded a decline in MRR compared to the previous quarter. This result should not come as a surprise since, in the quarterly report, we stated that MRR was decreasing after the first two months of the quarter, although it still remains higher than a year ago. All products recorded an increase in ARPL, which did not fully compensate for the decline in the number of live chat customers. For this product, however, September was positive, with customer churn falling below 4% for the first time since November 2024.

At the same time, acquisition of smaller clients still has not improved. A small technical note here. We have not changed the definition of MRR compared to previous quarters. However, we want to emphasize that MRR does not include per-usage payments, whose role in our business will grow. We will include them only if they are prepaid. Currently, such payments do not exist, but customers will gain this option in the future. In terms of payments received, we see improvement compared to the previous quarter, which raised concerns among some of you. We achieved $22.24 in payments. Quarterly fluctuations continue to reflect varying levels of annual payments within the mix. Once again, slide 8 shows you the growing share of larger customers in our business. We reached an important milestone here. Customers with MRR of $500 or more already account for more than half of our MRR. Excuse me.

Another positive trend is the growing share of customers paying for more than one Text product in total MRR. For many months, we have been seeing strong and steady growth in organizations using two or three or four of our products. Year over year, this increases as much as 11 percentage points. This demonstrates our transition from a single-product company to a multi-product suite provider. Looking ahead, many of these organizations will migrate to TextApp, which integrates live chat ChatBot helpers with additional AI-driven automation. That is all we have to show today in terms of KPIs, but we would also like to briefly discuss TextApp. The vision for SuiteClass Solutions has been years in the making.

After purchasing text.com in late 2022 and rebranding the company in 2023, since September of this year, text.com has finally become a new customer acquisition channel for us, and we have a suite-class solution. To make this happen, however, we had to do enormous work, both in terms of development and in implementing very difficult structural changes. The migration process to a new cloud infrastructure took a year, and preparations lasted even longer. In our reports, you now see higher costs related to this area, but for us, it is a key investment, ensuring stability, reliability, allowing us to offer better products while removing the technical limits that previously restricted us. Naturally, we ourselves became the first user of TextApp. Since June, we also started inviting selected customers to use this solution. It is worth mentioning that TextApp is evolving and will continue to develop.

At the end of August, we conducted a soft launch. Without marketing, spending, or communication campaigns, we simply placed our solution online for trials. The first organically acquired trials were meant to confirm whether the onboarding system works, whether we are communicating with the body well, and whether the first user understands it. Although we achieved our internal goal by acquiring our first organic paying customer by the end of September, we see a lot of room for improvement. The sales funnel requires optimization, conversion improvement, and nurturing. This is not a negative thing. It is a normal part of the business, and we launched TextApp precisely to gather such insights. We are already introducing changes based on the experience and will start promoting TextApp. Initially, very carefully and with controlled spending. Already, however, we see the number of trials growing. On one hand, we are satisfied and optimistic.

On the other hand, we want to state clearly we need time before text.com becomes a major customer acquisition channel. This is not a task for one or two quarters. The most important thing for us is that we know TextApp works and works well, although, as I said, we will keep developing and refining it. We know this because we use it ourselves, and currently, over 700 of our customers also use it. The feedback is very positive. We do not want to take up too much of your time, and you will surely have questions. If someone has not watched Context yet, we warmly invite you to spend 12 minutes watching the keynote. Here is an approximate preview of the new app. As you can see, very modern and, importantly, for our clients, a neat one. Let’s recap.

TextApp brings together in one place and one experience the functionalities of live chat, help desk, and ChatBot, but it is also a solution built with native AI in mind, the text intelligence, and a major role of AI agents who can handle customer interactions but also effectively act as members of our clients’ teams. They help find information, can chat, assist in using our product features. Also, workflows are now part of the experience. Another very important part of our offering is the MCP server, which allows TextApp to be connected with an external AI assistant. We also offer outbound campaigns, enabling clients to take initiative and actively communicate with their customers. One of the clients testing TextApp from the very beginning has actually multiplied their chat volume, and chats from many of our clients directly translate into revenue.

The whole idea behind TextApp is to be a tool that drives business growth for our customers. Another key area is quality, which is ensured thanks to the new infrastructure. The new solution also comes with new pricing, important in light of changes in our philosophy. Our market is evolving quickly, including in pricing standards. Live chat has a rather simple pricing model, per agent or, shall we say, per user. Its advantage is simplicity. In TextApp, we are introducing elements of per value or per usage models. This approach is actually becoming increasingly common. On one hand, the client pays for actual use and result. On the other, the provider earns more, but only if they derive real value. This system also protects against situations where significant costs generated by a client are not covered by the price of the product.

The price list is available on text.com, but please remember it will evolve and change. On slide 15, we show some fundamental differences between live chat pricing and TextApp pricing. In live chat, the use of AI features is included in the per-agent price, and there are no payments directly tied to such elements as usage or data storage, which actually generate costs on our side. These elements, of course, appear in TextApp pricing. In the near future, customers will receive communication from us regarding migration to TextApp. This will be done in groups. Plans and prices clients currently pay will remain the same as before. However, in the future, this will change, and of course, clients will be informed well in advance. We will, however, remain flexible in this regard.

This may also be a good moment to mention that at the beginning of the week, we changed live chat prices. In Starter plan, the per-agent price increased from $24 to $25, and the annual payment dropped from $20 to $19. In the Team plan, the increase was $10 from $49 to $59, and in the case of annual payment, it meant an increase from $41 to $49 per agent. In the Business plan, it was an increase from $69 to $89, and in the case of annual payment, $59 to $79. These changes actually apply to new and returning customers. That’s all from us. Thank you for listening, and let’s move on to the Q&A session.

Conference Call Moderator: Thank you. Thank you very much for the presentation, Lucja. We’ll now be moving to the Q&A part of the call. If you are dialed by the phone and would like to ask a voice question, please press star two. That’s star two on your keypad. Alternatively, you may ask a voice or a text question via the chat. We’ll give a few seconds for any questions to come through. Okay, we have our first text question from Potipor. Based on the company’s prediction for 2026-2027, what is the expected approximate number of active paying users of the TextApp?

Thank you for the question. Unfortunately, we are not sharing any forecast at this moment, any financial guidance. We are also not sharing our forecast in that area. Sorry, very good questions, of course, but it will depend not only on how we will be able to build channels of acquisition for Text S.A., but also on how fast we decide to move our current customers to the new application, which is definitely something we start to do already. Sorry, unfortunately, we are unable to share such expectations in that area.

Okay, thank you. Thank you very much. We have another text question from Francesco Bracchi. Is the cloud migration completed? When the former architecture will be dismissed, at that point, the infrastructure cost will be reduced?

Lucja Kaseja, Investor Relations Representative, Text S.A.: Thank you for the question. Let me answer it. Yes, the cloud migration has been completed during the quarter. This quarter, we’ll still see some of the costs from the previous cloud provider. However, what is important, the new infrastructure that we have now also has an addition of some of the features, functionalities that we haven’t had in place previously. Actually, although the cost of the previous provider will drop, the infrastructure cost will be at the similar level to the ones as in the past quarter.

Conference Call Moderator: Okay, thank you. Thank you very much. Just a quick reminder, if you’re dialed in by the phone and you would like to ask us a voice question, please press star two on your phone keypad. If you’re dialed in via the web, you can also ask us a voice question or send your question as a text. We’ll just give a moment or so for any additional questions to come in. Okay, we are seeing no further questions at this point. Apologies. We have one other question from Dennis Walsh. What’s the feedback from customers on the new TextApp?

Hello, Denis. Thank you for the question. Yes, of course, gathering feedback was the most important part of the last month and last few months. Generally, as a rule, the feedback is very, very positive. Definitely, when we’re showing the vision of what we want to achieve, what we’ll be able to do to offer, the answer is very, very positive, and I’m happy to say that in 100%. The trick is in the details. Obviously, we migrated only part of our customers. Also, in trying to make some tests, there were some hiccups, there were some mistakes, there were some things we had to improve. Obviously, that’s a lot of work. If we think about vision, how this new application actually is sorting things, organizing things, how it feels is great.

Some of the customers who were from these initial testers of TextApp had some problems with migrating all the custom things they did, some additional works they actually make in order to organize their work, to make their work more smooth. That definitely was some challenge. One of the most important feedback from our point of view was the fact that some of the other testing customers were able to successfully improve chatting experience and raise the number of the chat, which is particularly important because the number of the chats is very important KPIs, obviously, for us. For some of the customers, these chats translate directly to money. That was, I would say, very important positive feedback from these tests.

Okay, thank you. Thank you very much. We have another question from Dennis. How is the sales pipeline for larger customers looking like with the U.S. sales team in particular? Any new large customer in the U.S.?

Lucja Kaseja, Investor Relations Representative, Text S.A.: We have the team in the U.S., but actually also the team from Poland. They travel quite a lot to different conferences, and they are quite satisfied with the outcome. They are getting the leads, but also that translates into new clients. Of course, the definition of large customers depends on what you exactly mean, but we had been able to convert this quarter one of the leaders in one of the industries. As we have discussed in the actually Polish part of the presentation, we were not prepared to share the names of those customers. What is important, we are looking at the effectiveness of the team and of the costs of having such a team and the deals that they are bringing. This is something that is important to us, that they are effective. What we’ve seen is that it is actually in the U.S.

quite important to be able to have this face-to-face contact with the customers, and having a person in the U.S. actually makes it much easier to meet such clients. We are basically quite happy with what the U.S. sales team is doing.

Maybe just one small note from me in that area. We are finalizing works on SOC 2 certification, which is extremely important in that area. When we look at what was important from our point of view, what we had to improve, what we had to prepare from our sides, we are finishing the work on our sides, which means we own the final part of that process. We are now looking for the final auditor for these certifications. Exact timing will depend on this auditor, also even from the tools this auditor will use, that is very important. Although this implementation of SOC 2 is also related to some cost, we actually had in pipeline deals who are actually waiting for this certification, and actually, the value of these deals already will cover that related cost.

Conference Call Moderator: Okay, thank you. Thank you very much. We have another text question from Philip Whiteland. The payments for help desk seem to decrease in the second quarter. What is the reason?

Lucja Kaseja, Investor Relations Representative, Text S.A.: They are slightly lower in Q2, but more or less on a similar level to the one from the previous quarter. Actually, for our case, it’s the usual thing that the summer months are slightly worse in terms of the new client acquisition. There is nothing in particular changing here.

MRR of help desk is definitely growing on the rise. If you think that MRR is growing and the payments are decreasing, that means that always the fault, that’s the reason, is actually in the annual payments. It means that probably the previous quarter was very strong. The share of the annual payments was higher than average. That’s all, actually. That’s happening if you look at the whole group level, not only at the help desk.

Conference Call Moderator: Okay, thank you. Thank you very much. We have one another text question from Zvonimir Galovic. What is the forecast impact of new prices on 2026 MRR?

I can see. Actually, I don’t see that question. It’s about new live chat prices, yes? Or the TextApp pricing?

What is the forecast impact of new prices on 2026 MRR?

I will assume that the question about live chat prices, and feel free to correct me and ask additional questions, it will be definitely positive. That’s what we’re doing. That’s the plan. It also will be somehow limited. Why? Because this change will actually affect only new and returning customers. This change is not addressed to the whole customer base, to the whole live chat customer base. It probably won’t be wise to now change prices for that group as we plan to migrate them to TextApp and change their pricing once again. We don’t want to really bother the customers more than we have to. There will be no jump, as you saw in our history, when we were changing prices for the whole customer group. It will be limited. It will be so month by month in our results, in our KPIs.

At the same time, please remember that turnout, when you look at our customer base, is high. Actually, that part of our business always was actually in even at the best times when we actually were acquiring a lot of new customers on that level every month. We always work on high numbers. We are losing a lot of customers each month, and we are getting still a lot of customers each month. From that point of view, it’s something positive now.

Okay, thank you. Just maybe a final reminder. If you are connected via the phone and you’d like to ask us a voice question, please press star two on your phone keypad and wait for your name to be prompted. If you are connected via the web, you can also request to ask a voice question or send us your question as a text. It looks like we have no further questions. I will pass the line back to the Text team for their concluding remarks.

Lucja Kaseja, Investor Relations Representative, Text S.A.: Thank you very much for the participation in today’s presentation and for the questions. If you did not have the chance to look into Context’s keynote speech, we will play it right now at the end of the conference call. Once again, thank you for your time and enjoy. Thank you.

Conference Call Moderator: Thank you. Thank you very much.

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