LHX - Earnings call transcript Q1 2018 | L3Harris Technologies, Inc.

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Operator

Good day, ladies and gentlemen. And welcome to the Harris Corporation’s First Quarter 2018 Fiscal Year Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be given at that time. [Operator Instructions] I would now like to turn the conference over to our host for today, Anurag Maheshwari, Vice President of Investor Relations.

begin. may You

Anurag Maheshwari

Good quarter Sonia. And to welcome Thank XXXX morning, earnings first fiscal call. our you, everyone.

On the Vice call and with me today is Officer; Financial Rahul Chief Chief Bill and Ghai, and Senior President Officer. Executive Brown, Chairman

a statements. words forward-looking First few on

assumptions, today from cause materially and uncertainties statements. Forward-looking actual involve that to results statements risks made differ those could

press and Harris’ presentation more and information the related For filings. discussion, release, please see the SEC

discussed Relations of today will today non-GAAP measures it the include of is non-GAAP be also to reconciliation in is on measures our this comparable In quarterly addition, discussions turn will replay over you. which available. included to and financial where measures section GAAP materials the that, a With website, I’ll call www.harris.com, the the of Investor Bill,

Bill Brown

and Earnings Earlier a up orders record cash off share share are we a you, XX.X%, this and through returned XX% ‘XX of to million of points we year. good to X% fiscal expanded $X.XX Thank flat everyone. the morning per results to morning, revenue, QX posted $XXX margins $XX The on XX we XXth basis quarter to was and good a with X.X. annual start million shareholders highlight the was by dividend, to increase. and to consecutive $X.X increase repurchases billion improved our increasing book-to-bill free Anurag,

billion. program these potential wins million with of the of Phase across $XXX with multiyear key of modernization, Australia’s three on few much a $X We Systems. value first Communication starting X highlight finally slide for total stage over indicated me four, let secured a So order the anticipated segments the

we received expect mission to modernization operations and missions. and Overall, for radios excluding last X Kenya. greater mentioned test was radios defined Air geographies. security $XXX earnings a initiative In growing addressable technology the are other and DoD with including the standardized we than with building communications has replicating integrated As strategy upgrades manpack over developing radios XX% from we we shipped received network. market a from an later you emerging orders incumbency the assistance as in A is order orders in Ukraine meet were this and notable capability Marine saw $XX we more legacy anticipate modernize in networking and to order of Australian multi to we from increased include radios have in still doubled equipment recovery to an HMS expeditionary region, then expand order enable broader I on QX of couple Corps of international Army call Harris support book-to-bill million of $XX to readiness. $XX important to and tactical million know, $XX ‘XX well $XXX awards and million Middle and the quality demand for performance On million orders very a are last million at of into the focused to-date This in Eastern part in and and the on from initiative about leveraging high Iraq from on million Europe building the MUOS satellite the than the was we their communication further X on that start from a Africa, strong omni $XX on the we Force Australia. communications MoD about than beginning million Ukraine our to the deliveries as In year quarter. $XXX for more In year. also East quarter prior part software with threats

in sequentially. is reduction XX% of communications as $XXX Army accomplished, selected tactical the backlog working vendors field-based in overall With also a the and X two we are the risk year tactical with book-to-bill XXXX. quarter now spring down prepared and the up above well million, DoD was now prior from the for XX%

is Safety sequentially order X. Public and of and backlog also and year-on-year. Systems book-to-bill had $XXX record strong XX% Vision up Australia, Night Communication having about million XX% resulting Excluding orders of in

see double warfare Following in relationship radios, the budget In to award and request completely the aligned contract Marine up $XXX a and to contract Electronic and April. with value Navy received years. from replacing to the the close U.S. strength enabling This was and for a electronic III quarter, million the more and more exhausted Corps for a next that few we our of continuing year received Navy we was platforms million sole-sourced missions. the IDIQ Falcon contract than ramp Navy’s previous legacy advanced Australian Systems, business perform modernization continue XX in F-XXs, over efforts $XXX next-generation

$XX also international funding million in their upgrade the additional quarter fleet. received provide the system complete to from We entire in EW the Morocco we of F-XXs for and

the We the additional have ramp a systems. international continue in order the production several to XX with $XX In business, release F-XX, for we million pipeline. opportunities Avionics for LRIP

racks direct global robotic our up £XX expanded we international of feedback in robotics of classified the up delivers EOD were of with each range aircraft release can £X,XXX carry and the innovative and real-time from Ministry U.K. a explosive worth footprint between we key control. and The U.K. our product to payload. expertise provide in our communication ordnance to and unparalleled disposal is and carriage a Singapore million systems precision on enabling F-XXs. wins electronics smart haptic leverage In missions. international for to state-of-the-art These and to the support two Defense patent addition, and and contract In Turkey have systems smart payloads CXISR, awarded a leader MoD

electronic driving expect warfare both about and of X.X, Intel, book-to-bill with capabilities. And excited we as the above in with number significant Space wins Overall, in strength segment in a continued and business. -- avionics of Classified to domain book-to-bill was X. are upgrade finally, and a a reflector countries a they our offering lead commercial and had about We Systems U.K.’s follow offering other X.X, EOD Electronic

million Let of this last were where position We knew $XXX noted in further -- a contract a an color several successful contract I in $XX program call new first franchise quarter, Classified we year, On in I to emerging as ground-based a and follow-on million awarded solidifying adjacency. can $XX me a startup, area. million had grow after into potential provide our the $XX described new couple the we this them. million a group as that from on little franchise our a -- a QX

than business, two for has to grow million we next four orders quarter more successful innovating and win customer more pathfinder award years. largest of years. noted this satellite disaggregated, potential enable over received eight a our In the move our towards the last investing to sat responsive that we solutions, quarter have to two proven a total received reflectors, need finally single that an commercial two addition, small R&D in past order affordable Commercial then and covering $XXX missions customers as These I And over Classified and our Space in programs. ahead to us space bringing

through expansion Our trends continue commercial and we robust reflector these pipeline remains ‘XX. recapitalization fiscal to and expect

strong growth are the R&D multiyear This past our driven our investments the at -- So, guidance a across seeing us orders gives that years. full by confidence growth in momentum strong several beginning are internal and inflection. with to the our of reinforces overall, we the over our view positive sustained pleased year company year start I’m and we

Let me now over on turn Rahul call for details the Rahul? financial. the

Rahul Ghai

morning, everyone. good you, and Thank Bill,

grew quick $XX about Systems X%. year revenue in ‘XX X% five. flat, Total by EPS Just in with growth costs. and reminder non-GAAP lower which results Intelligence was are a offset was that Space Electronic company compared with Systems. excluded cash the fiscal figures, income Revenue acquisition-related Operating Free on $XX million slide results to Communication up and million. and was by up flow prior

margin were points and Vision provided material. though, slightly and expected was Battle America Turning digits. radios Communication but in by expected revenue ADS-B Strong of Systems income Benefit Systems in backlog fiscal a as Segment more Middle delivered by income in by from Europe slide Avionics, detail Segment operating growth and EPS as X%, X%. grew seven, offset The integration revenue accretion Eastern strong Central to lower slide Systems $X.XX on remained of substantial the down expanded in offset orders, Classified savings, down volume incremental lower performance Iraq ‘XX. Public partially down Tactical execution, the revenue impact tactical Latin million, efficiencies $X.XX. and was mid-single higher from information bridge lower tactical Communication airborne Safety compare, segment disciplined declines volume. both Communication solid down on East by was six. the tough offset from XXX and DoD now and than in $XXX quarter down is flat Night lower program first Environmental from operational Space deployment cost capital basis year-over-year and primarily was costs. was to higher lower from Europe. headwind to the due million, revenue Management with Historical transition the Asia volume. and volume. $X.XX EPS offset for was in supplementary $XXX central pension X%, was XX.X%, and driven at X% down International the

Moving eight, was million, year. Electronic to up slide Systems versus $XXX prior X% revenue the

Avionics System offset F-XX, by was margin on operating XX.X%, transition, Systems to million, growth line Excluding $XX basis $XX ongoing XX.X%, driven by This income. business in X% up XX was as some programs revenue as performance Segment Segment with X%. higher expanded and F-XX. revenue income in driven to basis program margin Battle operating $XXX excellence F-XX the decline across to the points focus revenue expectations in Classified was Slide the the down ADS-B impact million solid to digits, was trended of and was across operational segment was double income and platforms, points XXX million ADS-B several and pension and such program and headwind up was performance nine, X%, Intelligence Environmental strong and up slightly down Management up and XX% UAE transition. as from a program million down. program ramp $XXX

and to still up. avionics, up systems. modernization for with remains tactical with Systems first guidance to in $XXX down for EPS of Moving strong battle completed Classified guidance, the $X.XX fiscal of Intelligence to flat to modernization XX X% in from expected area digits, the year XX% range double for back company program up up growth to to $X.XX, be half guidance to increased in guidance expected $X.XX the to Electronic ‘XX to Communication range billion billion, programs. repurchases year partially to including range be with X% XX.X%. is full ramps benefit and incremental unchanged grow XX is to company million to on expected tactical growth offset from the the to is a the year, be flat Environmental to a slightly in X%, with million unchanged, growth Australia and be of share and $XX X% remains as $X.XX from in slides the Systems the will margin is X% Space focus in X% revenue up unchanged up warfare International X%. electronic X% headwind management Total expected X% in DoD as of of is revenue Total operating a quarter. with volume. readiness by

to continue the in million $XXX free for flow $XXX to also We full year. million expect cash

adopted of that, XX.X% of quarter stock-based remaining quarters differences. within the we the specific first quarter-to-quarter from of to still the The that full benefited fiscal first would compensation open ask in to expect The tax rate line accounting a on tax rate average timing with like expected ‘XX. tax quarter I are operator for year XX.X%. We about to questions. XX.X% depending three And the standard

Operator

comes question of of line [Operator Pete you. first from Skibitski Hamilton. Instructions] Drexel Our Thank the

is Your open. line now

Pete Skibitski

morning, guys. Good quarter. Nice

Bill Brown

Pete. morning, Hey. Good

Pete Skibitski

or of timing maybe just kind it little it or revenue your is line was bit light with Bill -- related? Hey. was expectations a CR or

Bill Brown

now the orders. Yeah. think, covered the am I with were very, got very backend first at the where in be flat. about amount or It of we we I were fair high where with -- very in of probability pretty quarter on the are happy pleased we year balance and at Orders very, coming of look, happen follow-on we is backlog strong orders. or follow-on look the have year as in firm to

balance a I very, down shift the see but CS in impact the Systems we look came strong. the be When Electronic year couple actually being we so good. would but it very of X%. in the opportunity a X%, exclude though X%, just of came quite businesses, So when it’s of across in you up at QX, saw ADS-B

So drag some for substantial business. and the that’s reflects good above guidance are QX. a the see happening quarter coming will and then Space in that And at in at that we full is pretty X% year first trends the again quarter again in

So, think, pleased overall, with in quarter. to I pretty are the happen where we first we be

Pete Skibitski

stuff. Okay. market, last Fair going can seen some enough. is make buying on UTX one on And comments in that buying of kind wondering satellite the obviously, you, of Communications to you consolidation Space. OA, the I some have the then small we Collins, just for Bill impact some if was have North

it wondering feel rather maybe of just move or and guys, maybe get bigger in some comments? these curious on guys so I just big am it you competitive a you your then or see as faster more just advantage And can as put those how than disadvantage nimble like

Bill Brown

don’t to Yeah. from I at Pete, look, our any see my plan. game change Harris, perspective we think,

are businesses we the areas, amount have a franchise of think moves we number feel is and while we good pretty -- Corporation participating very in We the the the industry. where respect a space they the been successful about technology, position But our we happening for budget so for based we happens our feel of skill be have bright have and haven’t focusing on to be the and what’s watch we position in I franchise and in investing spent But in. competitors could the got we the good. feel good in we We of know Harris. we years Harris We future and the winning where that healthy going making.

Pete Skibitski

you. Okay. Thank

Operator

you. Thank question next And of JPMorgan. from comes our Seth Seifman

now is open. line Your

Seth Seifman

Thanks morning. Good very Hey. much.

Bill Brown

Seth. Hey,

Seth Seifman

lot the you capability how a kind could to Comms their basically Army sort secondly, try of broadly all think the the you end has months. if tactical suggest faster what deliver WIN-T of they to comments can see of kind the Bill, incorporate with are these and one over we And for into couple last had capabilities the more at you being Harris whether that recently upper who new area the capability of over just that if entrants of and development means to I Army you wonder two in new address in changes that start and capabilities looking and the are and or having looking of do think made entrants that and tactical Communication to any how can? Harris of them, this any of there address time?

Bill Brown

was good It very I very, think questions.

the to They the maneuverability industry came of Chief architecture, Army The talking That of the the with other it findings. of six of on future variety the of months, study. over some that the what in over The about and commissioned of on directions months the than about in. think was that referencing wants lots and eight Army last has the summer. and led concerns of Army recent I House some little resiliency, you’re conversations subcommittees move lot Committee a elaborated things. is discussions testimony that a maybe front study around out September bit longer the by Services to in gone the ways and engage the

mainly in the upper to relates all system of WIN-T. First tactical

each an for the of well ways provider radio, of as its maneuverable, radio, to provide system on are today. proceeding making that that to H&W slow as could develop. our with more networking some high-band which resilient, more look Frankly, WIN-T. and waveform we upgrade down which H&W components I that we’ve as some We are We Harris opportunities in waveform

been tactical commercial radio on you threats directly think Internet In the and is footstep wanting in a of with ways model headroom known market quickly, terms tactical I the strong for. works in technologies commercial the our quickly Harris technologies, many and changing. is to that to Army of innovate, put The more into them has curve capabilities on favor faster. Frankly, based the radios, ability embed so can on new onboard where building developing capabilities, are very ahead that new moving waveforms, investing new fielding our continuously the or the

So been at. very it’s that Harris is for very, works favor strong in that think very of I the model much known

move. So, think, a it I come, where to radio. of the the the but two in become again have I like, been channel think, months, six to as of Army support in started There’s made They support for a some radio. will They manpack eventually made become overall, support over good this They I goes clear -- leader clearly deliberation SOCOM company. is Harris. want a think, the last statement statement outcome to shall wants strong in to this of be back a strong more which

out be for I think, could Harris. overall, to this over news shake time good

Seth Seifman

Great. Thanks. Thanks much. very

Bill Brown

You sir. bet

Operator

from our And Khanna Cowen you. next Thank Gautam comes of and question Company.

is line Your now open.

Gautam Khanna

just Couple Thanks. could you I first, the orders give and RF am Yes. in us we legacy questions, tactical so have? sales the wondering,

Rahul Ghai

have going not last Exelis. Harris track tactical the I for call, are radio to think, combined we’ve we results we on going not and tracking, between we So just mentioned, provide it to business the as now that,

combined it as have the business, and we running we’re integrated one. As operationally

sales forces Our combined. now are

the for and tracking business as supplementary tracking have -- we radio even the we -- between Harris the business. details So soft it we as in overall just material are and tactical just internal the have Exelis just and

Bill Brown

very adding an changes don’t really Yeah. a much, think trend Exelis I frankly. the

Gautam Khanna

the your a you things, of there that then change wondering year, was on kind actual Australia if any permit basis, but changes puts any are net I on of net within All the million sales could of give expectation still one, -- you numbers, expecting of and takes right. are been guidance like Couple that has $XX and is any this comment consequence? the there us

Bill Brown

Yeah.

see strong billion. double-digit being the again, in about DoD, see opportunities about think, right just remarks, to We still be very pipeline. that to we growth flow-through up year flat we couple in in we It’s We and region, than It’s you $X.X little East better Rahul are good are -- year. see I as going year the months we seeing the on be said than Australia thought the up prepared a flow-through good bit bit on Overall, his perhaps, incrementally still should we Africa a the international, about Middle slightly. and and significantly a Iraq. of down And better have in again thought. double-digit ago. for

We this quite is that good. bit but pretty U.S. in are over Middle see We overall, year. to The almost up East government We UAE course (XX:XX) the in support, product [ph] is good. to actually Middle be off very place a again, last Kenya there strong. seeing of going looking doubling reef year, that’s is strong. the product or year. looks come only of the Jordan, East soft know because North Africa base little flow-through is better. a The low really would pretty mainly is The the SINCGARS Saudi going from

it. is significantly are There well Asia-Pacific again, couple strong. time, just Asia digits. key part than a that of as other double last quite markets of in better bit is Australia a up a Southeast little

we thought little the pressure be Romania a months. be over had little is going last same, year. good will couple is about APAC than year-over-year pressure We Cal in some before. look little weaker we Maybe to year be weak big deal us. incrementally, better. knew the of start. the Central worse but the the for weak, Poland Ukraine But in and So some to Asia, and of Europe course maybe going a but in a booked was they both We in in probably, a is bit -- a bit bit

Gautam Khanna

effectively question a curious is am guys lot on what looking up lot sheet you following of that And and I balance an like the been the pipeline buying Okay. now Bill, and stock. guys integration better Exelis consolidation about you shape acquire completed. M&A a is and the Pete’s for has as

Bill Brown

Yeah.

Gautam Khanna

interest color still Are looking you of it’s can kind capability, terms -- types in give? any of you stuff at and property size you what of

Bill Brown

We I give color. really can’t you -- much are you right.

We have Exelis integration. completed

pay got good our Our the end how balance million if getting sheet the stronger. think company of you a -- we part $XXX year in this credit on to is debt we’ve down fiscal I will We’ve cycle. We’ve at a ‘XX. of little another proven about bought a at more

and well. are integrated in we paid what discipline We very, very

of that some need variety I which haves So successful. a is the areas. our franchise to don’t in must opportunities accelerate help are team we looking at key believe different of that of us none today But be could to acquire

are We to opportunistic. going be

on be we We core buy. will of outside are won’t little it focused Space. a again, more. we But, But that’s our to just area be where an very look starting

Gautam Khanna

that Okay. luck. Thanks guys. for Good

Operator

you. Thank

Our question Carter from Copeland Melius of Research. next comes

line open. Your now is

Carter Copeland

Good guys. Hey. morning,

Bill Brown

morning, Good Welcome Carter. back.

Carter Copeland

here. I to kind Couple Thanks. risk Bill, to the way, be want Seth’s of you, one, Good questions get just another question Hi. at ask, just to for back.

terms here, about deciding slower the at latter has in say had of some think the of the like there year customers you deliberations would look what holistically. supposed of this if the than to that bookings, risk, architectures are part network expected sort your that As in customer has I plan, moves factored the

a that Just of here there talked you’ve sense in inflection about get is trying incremental growth? the whether to risk to

Bill Brown

-- current to We conversation on we couple start the year. good monetization. selling more of readiness from about is bit the There and up. DoD, going moving thought the We of ago. the a lot into picking MUOS year We This some across have accounts. we months a the equipping had It’s see think a forces is than waveform. last very aggressively a on of in are year. new first to that the we armies, is all, the money they believe help up security of The year us little in just

$XX We year was expect to XX% about so and million booked in QX. that of be are this

So as to We out our Army radios the today test into or QX and ‘XX. expect we’ve beginning of sit just the sort largely manpack. But in to I that’s business is will of and ramp revenue going we at back see of that about see tactical pretty half as backlog strong. we and shipped. backlog do the SOCOM the back through derisk a I look based have XX% here largely, the handheld on have backlog out. But in coming flow about roll year. in It off probably of what the into just that’s XX% radio we now That’s to QX ship

at So year, than at we the of we in this backend today feel time. did looking better Carter, the year point last

think year. So the calibrated relatively are well I in what we

Carter Copeland

Space Intel, respect then, lot the for And with just quick margin reform, there given how of potentially about to note strength is, favorable then adjustments any and ES color. second EAC one great and Thanks. you in guys to thinking tax those? And two the That’s were Great. in ones, Rahul, pension? the prefunding potential net

Rahul Ghai

question, Good Yeah. Carter.

really same no overall, to last kind EAC were so of where it’s So on adjustments, time, year difference. we similar

and -- a mix price that fixed content had favorable fluctuate quarter-to-quarter think Space I of price had of fee performance operational some timing ES those some slight and close and bit Space kind things and had programs. both good out fixed on award little ES

had so we XX% on helped $XXX So million we about to those funded. question overall the margins the And where they on about pension, your had but second things happen in contributed the feel be. year, -- last quarter we good on

that’s we so are will cuts have is, as -- we points is part down about we so pension So good our be interest deficit basis second $XXX million. like move -- rates which the we by given keep XX by -- about. that which -- and to relatively feel And

to pension movement cut our rate interest going deficit of point half. So by is

going are made if what think to on contribution chose to do we monitor that So to continue and that we about so. when means pension we

ending, in feel -- about right little now funding. of more we where extra something do are terms do of, given we good fiscal bit have We But on if than we have our others year we have time in pension. terms to

Bill Brown

are I mentioned think on have occur. well, about that tax we I tax, -- hopeful think does And I think, reform Carter, might you

point one on every worth us. rate about effective for tax think I $X.XX

think that I for positive I if will that forward, So it moves think, Harris. a be

Carter Copeland

Thanks, great. guys. That’s

Rahul Ghai

Sure.

Operator

Thank you.

next Spingarn of come Credit from question Our Rob Suisse.

Your line open. now is

Bill Brown

Hey, Rob.

Rob Spingarn

morning. Good

Bill Brown

Good morning.

Rahul Ghai

Good morning.

Rob Spingarn

Good morning.

a have wanted you. I to clarification questions of I Rahul So ask couple

and Intelligence Classified one if being first in business, Space and what the remove the The is guidance growth the you headwind? the

Rahul Ghai

our growth in X% about digits is So year-over-year roughly around guidance. mid-single Classified our Space

Rob Spingarn

in if up a flow have radio a Bill, And million in question that just had, was around then, follow to can’t just on I of already, And Okay. you? then, cash describe what it think, I you recall the was source you wanted cash $XXX in other that? for from I ops.

Bill Brown

Sure.

Rahul Ghai

Yeah.

So start listen, on good to year. cash,

capital We are headwinds we as expected delivered up year-over-year we the and QX. over in $XX in $XX working quarter million had some as

by -- long refunds the last year. $XXX flow to that last year $XXX and on the on made feel some tax So for basis we that and are free offset cash delivering good got about some cash we we payments timing million about of tax and kind But $XXX of XX-month expected million differences.

Rob Spingarn

Okay.

with things in have Bill, number where, just back Army can JTRS, study you just that to is scaling only field? we’ve comment think, a ask to the issue, given technically and examine software are vulnerability -- that we were I XX process network and visited the wanted it’s AUSA, about One really that there to Seth to or moving just radio et examine being and get what’s your bit up the Carter are where And of radios, developing just hardware able to like to yet, driven or they cetera. mature of not where there so where this I -- there’s having program? vulnerable Okay. with enough wanted that we more the only is generally hearing I ask in the little a you, we begin a core the this issue radios, radios going, is issue an something the that, the tactical a before on are certain certain and quite

Bill Brown

relevant. rifleman XX it’s handheld to to the and change and very realized question to be think the in And specification the to radios of and adaptable in have technology the yet set nimble, business what XXX -- five It it radio, that radios first and both over radio, on trends frequently. that the DoD program flexible with XX before even be very, has to single-channel move, current you’re two you radios years several the set and it a have the nearly ago specification the within time to years procurement we feel effectively iPhone the hope the very selling asking. has develop is XXXG the JTRS able or is and a some next-generation process proven. the later midtier developing been launched it on the complicated threat agile, outside for years continues and be we’ve XX around all have Army environment take a Alpha to DoD. been is upgrade delivering Look, be field the have product standardized newer Look I are has those given cannot continues years them -- across But been radio, radio, what sold decades No. we and world, and manpack being we working channel of have

Harris, started model new MUOS exactly that the Rochester And drop hardware our be an We fielding that’s radio able that is not commercial the has XXXG’s. come download by drive such into of in contemplated this that That’s could on that MUOS hardware. I the them what you were to the of into moving. it new good we low beauty model. up in particular detection years where Army think, eight waveforms it -- APJ the on In or waveform on fact It’s ago. really distinctively waveform or our is to that can a the of customize That’s existing in where But threats did when onboard great radios headroom with waveform XXXG. simple or probability up probability waveforms SOCOM low at. XXXG. We develop existing interception engineers the was putting that’s even first software moved.

are around of moving. engineering going So The in to your we a our fragmented threat matter of the the in believe any to comments that the is been or and be this. What think question yeah, well-positioned concerns, Army investments go. technology is there’s our the adaptability we environment where other no we our products, changing, model, lot services of

one. I So, commercial I’m a model believe value complicated do is this reflects addressing that It’s hopefully, on the very good Rob. that of Harris the But question, at. back ultimately your very

Rob Spingarn

how of can ship when you and begin? quantify and a have Carter’s the total year Well, think to you it all you’ll started Bill, there is said and to we do are, very and next that figure this you is sense manpack annual question, out complex. year, you way many competition out production to With I will lot this, this radios answered

Bill Brown

In timeframe, first -- ship current operating in do of ‘XX. And contract calendar also field-based the QX quarter, the want its early the we early sort will QX’s, quarter to that’s on probably, year. the under they -- terms into April, XXX ship reduction, were risk of units this model. units in May that Again, XXX are and going multichannel of back number for manpack specific this to

Now and resonating Space, think, ready moving the to really select from common the with I two the go and Army Collins and are the competitors Army. I in us voice forwarded and aligned both down think that it’s we happen Rockwell effectively

could So procurement than encourage if rather that anything that to faster move slower.

So, of that’s we I think, see kind at the where moment.

Rob Spingarn

have -- of when you your start do sense the And production would you? work that two plan of a

Bill Brown

In terms the full production? of rate

Rob Spingarn

Yeah. Yeah.

Bill Brown

the the move, at it always right has September, of to see six, fiscal wants us what it’s ‘XX. But are as of to order like we fiscal manpack. forward the fiscal know Well, it opposed we to exactly of event HMS best at Look, in testimony the have that of look happen moving cases of to in that’s end probably Army don’t the happen in they field, backend ‘XX. ‘XX for budget recent happen, up probably where where and our That’s still now. the of could four, revenue backend and and But two the all you we BCT’s the even going really more kind could your ‘XX, in I wants doing. maybe right XX the out towards favor ‘XX, significant Army quantities of early gate, the into think could when fiscal fiscal

we it’s in think, encouraging the months. of I are couple So, last seeing very what

Rob Spingarn

you. Thank Okay.

Bill Brown

bet. You

Operator

you. Thank

Our next line question of Gursky comes Jason Citi. from the of

Your line open. is now

Jason Gursky

me Can you hear okay.

Bill Brown

morning. good Jason, Sure.

Jason Gursky

moment business morning. and the going we both to back the of Good to and the you Space go I a dynamics then Great. Bill, little on bit if about Okay. side are wanted Commercial things. a that some talk for of Classified can on in there, the

towards in was and satellite commercial growth of term give On where the potentially us a Harris scope moving few in on things. to of of side, play means has then, trends the discussing And speaking over is what that side you going the of DoD on those year? that the the I a sense procurement growth just longer Classified more the industry. trends been dynamic going how are generally Communication for just particularly kind Commercial next here maybe Thanks. wondering model, seeing

Bill Brown

Sure. Yeah.

of Classified of far continuing see budgets anything We digits. business up two-thirds hit sort maybe visibility has a and that are topline, as is get up the see that to of we feel capabilities. coming it can little is within we money spent I it. faster We in have do being that a Space growing color of the see as years over me and the in. add Rahul, developed points bit single key see as and The Let if of jump Harris Classified the areas number couple in the a you budgets About next we the is domain. where can

exquisite well bit stronger be solutions, the will up up small -- as So sensors, said, QX. so digits in the feel our I sat pretty than innovative mid-single for as good. a that. Classified business our year was type very Rahul creative high-end It and

The also order awards commercial global be and up we Commercial pretty the have We some double-digit. last no It’s very, to share. GPS, business strong which In about -- pipeline continue business driven we offering. commercial invest R&D that got of almost again, It we’ve the strong marketplace. talked business a about into model where on seen. performed the We and mostly reflector own orbit, our business develop high with reflectors years very this to failures we And well year over running it over a sell exceptionally is of have year we Intel margins. at been reflectors good. that that see the years per and commercial about the six four we at were trends a about and solid two last And business Space good two here quite year. will

‘XX. So double so and were another or opportunities it’s kind bidding see fiscal that five of our in we

satellite that of the the the well are as in transition systems, the budgetary that to last And a that business. onboard environmental business Trump continue GOES-R really commercial moving ramp. seeing as of couple some from we place year the just program pressure The ground we over some quarters, go of from Solutions scientist. reflector system the sustainment. about an so see it where part in in we’re Environmental the optics is is build talked where is We’ve to seeing processing So moving -- softness wants we Administration the are there

or So to about our $XXX $XXX million year. the size guidance. in we is down business, the for into see factored million which We more that less Environmental being mid-teens

and little the that the a saw of QX. of So balance in year bit. over kind we beyond We see stabilizing that

we So pretty for sit kind robust. where It’s and pipeline business year-over-year, today. up to about Intel overall $XX.X The X% Space billion X%, of is that billion. that’s $XX

Classified of to and the solutions. we moving is position good -- again last from see year, places business, it a our Space in five that are Classified based that where disaggregated response in frankly, IRAD some on lot that, us health continue of the years Intel it’s of -- six resilient and So customers of that towards and with investments in lot

answer there question, So Jason want your anything to you there let that and have me part is else see of clarify. if stop

Jason Gursky

was me. great. it color. That That’s I No. for the appreciate

Bill Brown

you. Thank

Operator

Thank you.

comes Noah of from Poponak Our next Goldman question Sachs.

Your line is now open.

Noah Poponak

morning, Hey. everyone. Good

Bill Brown

Noah. Hey,

Noah Poponak

the start the Space so programs remind you declining what does going you? me, Intel, against that are Can in Environmental and quarter

Bill Brown

They started in QX.

same of that XX% and QX in for XX% year. saw to down balance about see business we that XX% the -- Environmental about we about the and So the the rolled

Rahul Ghai

same for year. then the back half bit the about and maybe worse, bit of little the little That’s in QX worse

Bill Brown

pressure name -X. and they around the it. But is got been had some They we of Follow-On, Lot which the sensors polar have developing for the got and we’ve on the Polar we call these JPSS-X roll-off sensors think, of on they JPSS, last NASA call a mission, it’s, some the Polar GOES-R is couple and was I joint NOAA funding the then there plus program and so change X year, system which Noah, that of satellites. that are satellite X, the Follow-On

Noah Poponak

half was of in back GOES-R last declining the year?

Bill Brown

and declined of flat, it ‘XX ‘XX to GOES-R year. substantially was Noah, overall this was kind then of flat kind

Rahul Ghai

little ‘XX, we have bit back the launched remember year November XXXX, fiscal I end in this calendar of Historically, Yeah. of satellite the ‘XX.

Noah Poponak

guess, am programs year rest is range. grew headwind grew, the X, Environmental for flat in despite X% you I just, flat be guidance the the of be to you All the wondering, that to segment year up quarter exactly the for is basically right. Yeah. and to I in have the

goes and quarter? is first or half there the to quarter, in much even accelerate comparisons against decele later of are with first you for that in the easier? year year though quarter headwind the that year the back the the in even year-over-year in didn’t the though have else So headwinds from the you would the grew that something does you So

Bill Brown

No.

most Noah, got think, think, have I you of I it.

year. as Classified the the we does back in So growth in about of the expecting a It X% Environmental are on about little the on side the full Classified bit headwind QX, year. stronger X% half accelerate grew for the so side. not

Noah Poponak

low certainly changes in be on margin the into end the in question XXX and have first in high the of the of get mean, the much and sort similar What are above the end basis -- segment, for year would you year of Intel? the Space points lower to range. margin then, rest to And I you the Okay. quarter, range of the low the the the

Rahul Ghai

the the And was of depending couple Yeah. in where really margin QX. good -- helped -- quarter program fluctuate we or mix about the guidance quarter-to-quarter, Having feel true-ups margins, the the and said strong a where and in year you for and about margins. those margins on first that, segment lot full have the that on typically some -- margins and

Noah Poponak

Okay.

Okay. Great.

are there of a IDIQ then the of $XX that as to just and so announced business? on on I in why, if I question that sort the, I is always is last come two made programs even shrink which could itself win domestic that and maybe it guess, other of considerably tactical cannibalization of about up on base that there estimated business Harris that year, realization over like that Navy model said that just holds, the business this had one two it in next has to that month the legacy that new the some And million, maybe brought or years, reason you one And of assuming $XXX then, there million anything program that you? made there when grow years the one is that is the $XXX $XXX of sort business. year to even million, ago maybe So of then about layering before radio going in else legacy in because believe win as million just there conversion actually is is true and that remainder base that as on line? now of business, to anything $XXX we as of guess, tripling the and the all then sort came for hoping the of much be about programs I size and potential to three piece hang felt piece to $XXX new sort million, new million legacy the

Bill Brown

Yeah.

prior couple I are see last in $XXX in fiscal happen. ‘XX in, expires, Marine something ‘XX, such the and of that you years. QX. depends of We think, where the and that it’s about look reflects going it vehicle of stable some do modernization contract you been terms fully readiness what saw to happens of characterize And for it that is that in if funding million on to us that over the base for, size investment exhausted relatively has on right -- we Corps in it are replace Corps million fiscal of I order, coming largely does think was compensates you the of go years couple grow the of the start was IDIQ to the a very It large I sort sort so in into IDIQ and that in at its I quite start see timeframe sole-sourced modernize. Harris so it it allows think, to you that about mix is Of award to encouraging is out vehicle. two, right. will $XXX base Marine slide think what but of the and an upsize is, and The the deck or is about you Navy

overall fiscal think, us our to beyond will is encouraging That, ‘XX, see in ‘XX Noah, fiscal be and the it will where ‘XX. ‘XX. beyond for for we I that actually So business growing start

Noah Poponak

in $XXX anything $XXX should million a we else meaningful remaining to grow up of else ex the contract that be renewal that, coming million in forward? lot fee, there some Navy the has there for or in has Is so out the potential the anything that -- Yeah. watching going

Bill Brown

to. not in that is a all and SINCGARS and deadline upgrade. point over XXTGs No. be They the we [ph] inventory typically think which next It’s to the going big inventory. of in -- There couple is but Nothing radios number reset radios No. this is It is in spears some XXXA. flow-through I by XXXX DoD There there. in of flow-through. mod to things stable. There are replace (XX:XX) had crypto the that NSA be is do. years There to in going the the to repairs the of Cert It’s relatively be is terms some won’t timeframe. investment going

So radios investment upgrade be to cryptography sitting that legacy are there there. to the in have some on the

as that talk there point the So stable. that is we Noah, specific we it see more nothing it will time, see but over relatively and to, we really to of

Noah Poponak

Got it.

Bill Brown

Yeah.

Noah Poponak

Thank Okay. you.

Bill Brown

Noah. bet, You

Operator

Thank you.

comes from question Sheila Kahyaoglu Jefferies. of next Our

Your line open. is now

Sheila Kahyaoglu

for you Hi. Good morning. taking my question. Thank

Bill Brown

morning. God

Sheila Kahyaoglu

driving trending could, the Just is there the your the high-end balance of follow of ES year? for sort above that’s up, on -- I of if rest What also segment maybe the guidance.

Rahul Ghai

Sorry, Sheila, could you…

Bill Brown

right? that Sheila you talking Are ES, I on hear if

Sheila Kahyaoglu

Can me you better. hear

Bill Brown

Okay.

Rahul Ghai

asking are break the You I it Systems, Electronic didn’t front…

Sheila Kahyaoglu

Yeah. Exactly.

trending margins the the year? quarter the changes better Just and in what throughout

Rahul Ghai

Yeah.

So, a that program we quarter-to-quarter quarter closeout and margins of, little kind more there some margins. But toward helps as fluctuate thing price Sheila, the the also again, kind were and well. programs the on why quarterly on skewed margins we price are makes same that bit in was fact do Space, that’s margins fixed on the helped don’t provide of guidance that fixed

be we year full and guidance start happens again, where the to happens for really be feel good to good the year. about So, to year or

Sheila Kahyaoglu

means or for if the ‘XX? then, And do the what do Harris rates about how for about program you we for and content that wins size us that program, growth build you. just and F-XX think think potential rate how it for could we Thank

Bill Brown

$X shipset have things -- on over Look, It’s the like avionic for Yeah. provide that. million common component F-XX. racks, that components good content just we we liquid-cooled backplane,

the We also about systems the link. F-XX talked systems. carriage multifunction data -- And release. award with in received well, release also QX provide We metal and an we we so call as the the provide release then they associated antennas the for

$X it’s million. just overall, So, over

on XX LRIP on, LRIP the are XX think, well, on We I the… in release systems

Rahul Ghai

Avionics.

Bill Brown

and conversation components common a �� avionics buys. been of the block lot systems, there’s around

But that it and flow some working aircraft how for recent a which system, to own big adds, win panoramic content. they call the memory We course over was that of roughly the to shaped electronic We down display unit the that cockpit important in the time. year. we’ve won with they get us. are won is We and also unit, content might and shipset on our partners to XX% over in the will so head electronic X% for display flow

very we So very, well. performing are

have rates. very delivery We high

strong system and We partners with invested liability our we’ve in technologies. and have been cost taking the for improvement out open working driving

space. we compete So in have an for mission to opportunity we are to system a time new system very and competitive open over that

F-XX think we be to we -- going overall, will good is be a story good been us, to continue has for a So, Sheila. and

Sheila Kahyaoglu

And you. you program? a one, just then, Bill, radio later last mentioned Thank

Bill Brown

Yes.

Sheila Kahyaoglu

If that just provide could RFP and sizing that a of just you timeline opportunity? for

Bill Brown

in. RFP Sure. proposals is The out. are The

will of for provide sometime happening. possibility ramp calendar existing award $X.X the expect ‘XX. of And We an we in fiscal number the in was is in the to early part and the rifleman fact include in IDIQ -- at year build small contemplated originally That off radio. radios IDIQ will will two-channel of some of next ‘XX. us testing early It radio a was billion for

Operator

from And Vertical of our Research. Stallard Robert final comes question

now is open. Your line

Robert Stallard

morning. Good much. so Thanks

Bill Brown

Hey. Good morning, Rob.

Robert Stallard

pull it forward DoD quarter on orders quarter? in Bill, already, if you resolution I worth in very the QX. might the book-to-bill first I and impact was of continue commented you thing a whether into wondering any strong assuming but thought and thing you one sort the have asking, highlighted

Bill Brown

that October similar in in as as CS fiscal Intel, in that a in But so we And characterize a on good you of because normally particular had year. an big good booking are relative internationally particularly. component very the Not know trajectory Australia we the the of I again, as DOD. were, but hoped obviously, for happen right saw year out the we even of we and business, good moved nothing I end as Space years. that There important in the fiscal September again to a them track of September saw we in prior this be see we was normally month that nothing actually that to and Systems, see, book-to-bill QX. well of at mean, now to couple Electronic but end tends that had pull -- would things that would We excluding that and unusual September. as year was forward

Rahul Ghai

just So final… to put

Robert Stallard

Okay.

Rahul Ghai

even final if even sorry, a Australia put book-to-bill point X.XX. on to that was and just Rob, Sorry, and it exclude was X.X, our X.X so overall you

about that So X.XX. and last was compare it year

was So even excluding Australia the really book-to-bill good.

Bill Brown

Yeah. Yeah.

Robert Stallard

you ask, I still attempt the the book-to-bill Yeah. over down you have that will than confident year? this follow-up are a one have nail to times annually to quarterly, for

Bill Brown

Yes. We than believe it will be one. more

substantially, In segment, because fact but of much year. should I Australia and more the for it more are CS be, there wouldn’t the substantial in confident we book-to-bill

Robert Stallard

great. Thanks much. That’s go

Bill Brown

Sure.

Okay. you, everybody. Well, thank

We to strong as the Before despite operations, team like Hurricane make to which would of Harris to Irma a sure we for I we our end the impact call, the thank Florida more delivering quarter network well many that Monday remarkable this X,XXX Florida. back partially by than traffic a know to am state here restarted a on American and our we XXX% we early the The Wednesdays the nearly Tuesday morning. service, which hours employees. airspace, monitor and are on has operations FAA passed storm operations on in and very am customers first no that the XX responders Florida relies of support throughout as significant proud also of center within experienced as across disruption very, was pleased air performance. proud the and team I North of I including

very, So pleased start we and year. the we to responded I’m of team. the good Overall very and very had well proud

both our and confident are fiscal We ‘XX medium-term outlook.

geared defense are and the the towards aligned mission dedicated coming an and shareholder we a customer with are our We budgets of priorities exceeding up, very we are expectations where environment team technology customers value. importantly, solutions in that’s provide have delivering

quarter. speak everybody for thank the will call we So again and joining next

Operator

program. and thank in conference. participating conclude you for gentlemen, Ladies today’s This today’s

all You Everyone have great disconnect. day. may a

L3Harris (LHX) 31 Oct 172018 Q1 Earnings call transcript