LHX - Earnings call transcript Q2 2018 | L3Harris Technologies, Inc.

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Operator

Greetings, and welcome to the Harris Corporation Second Quarter Fiscal Year 2018 Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Anurag Maheshwari, Vice President of Investor Relations. you. Thank

begin. may You

Anurag Maheshwari

Good XXXX and earnings Michelle. second to quarter fiscal call. morning, you, welcome everyone, our Thank

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

First, forward-looking a on few words statements.

assumptions, involve from cause materially and uncertainties statements. today actual made that to results statements risks Forward-looking 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 a that, a With website, I’ll call www.harris.com, the the of Investor Bill,

William Brown

you, X% morning, share an earnings growth, non-GAAP today, Well, everyone. results second on Anurag, per incremental solid tax benefit Okay. the good XX% Earlier revenue quarter up and recently reported we enacted from reform with legislation. $X.XX including of $X.XX, thank

benefit, the $XX cash was million, up $XXX to $XXX per non-GAAP repurchases. we share Free returned XX% increased share in to and shareholders, flow million million about including X%. earnings Excluding

on with We first-half. the first to to line momentum growth, build continue and XX% top orders drive in XX% the up quarter quarter in

tactical X. increased part let a start presence Systems they XX%, with forces from grew XX% the Communication radio up their Slide equip drive the million the multi-year revenue quarter plan demand. revenue little the revenue overseas. as the quarter with We of noted focus more to a segments as color booked in in from to and So and their as on on Air Army me both International. Force increase $XXX radio DoD readiness across in continued security about on growth strength drivers XX% DoD in the

Army and limited advance well revenue the continued programs of SOCOM and demand. to despite grew DoD tactical orders and the back For sustained modernization on XX% readiness modernization first-half, activity, remain nearly doubled supported.

test army the army spring towards fiscal we of and two IDIQ, work radios an with reduction award will initial while denied of delivering leader We on was our recently the as on manpack end production for radio order field-based risk the expect protest XXXX. prepares channel HMS the and expect an tests. this we year, start the for it as the The soon we prepares army in

several X.X%, resulting than of backlog XX second-half and on covered systems was performance revenues the for pipeline robotics UK Iraq, and customer Overall, and increased on in backlog, on opportunities points and to F-XX. as drove tactical warfare to international increase standardize over million. legacy funded modernization Ministry half the year, beginning Africa Systems the the revenue new from by than begin XX% the systems percentage Middle In the compared award up Orders our and are grant the Interior. billion, year-over-year complete on of and For and to two fiscal quarter, break to as is the in the this $X.X fourth orders in F-XX of in starting driven revenue and in revenue in $XXX from orders remain XX% X%, and International, East, year, content combined for Australia. the we’re up by to excluding a of a book-to-bill and tactical of first expected better XX to SOCOM In continues last impact LRIP in control revenue XX%, the more The and Middle Systems, platforms, for test forces we Overall, of product in up XX%, giving Electronic delivered than quarter, X% More of first-half grew the of track achieving the deliveries than antennas. excluding radios all of buy as up first-half quarter. block momentum across year, in volume Saudi and to Iraq, $XX in for increased electronic last Avionics the last than were from the expect Avionics and see security was as continue greater the ramp refresh XX% continue we’ve for quarter million forces fiscal to this ramp channel systems radios be doubled growth delivery SINCGARS increased on forward programs and they East strength book-to-bill as handheld, XX%, recovery command set by XX-XX for LRIP F/A-XX the Similar wins us the development we The longstanding Electronic where double-digit with to moves second primarily X% from XXXX. solid our the increased was with segment international ADS-B. and in revenue our to security revenue driven including in guidance. X% In to technology higher comfort This country in program eventually free, F-XXs. for X%, growth the more quarter. region. such strong Arabia, benefit strong ramp continues, up moving border is release counterterrorism time

fiscal what million, For F-XX, achieved of significantly $XXX all in than is orders of first-half, we in more the which received XXXX. we

for electronic F-XX, first-half orders seen $XXX systems. and In strong addition to F-XX receiving F-XX, both on warfare and million combined we’ve a Avionics

we’ve first-half the was prior XX%, Systems, advanced continue and funding competitive processing. XX% position customer strategic increased received and second-half. fully arena, fifth also commercial a Mission classified in growth We’ve GPS, well I’m we’re the And was operational three sustainment Air expect cadence us a reliable to backlog for sat strengthening programs force, large ES, dollar tracking III GPS in to a orders note our to a offset year. by proven program and order over the book-to-bill than resulting since strong follow-on and additional improve and for doubled performance, reflectors maintain our pleased on quarter payload well Orders Unit, puts On XX+ in which us position on focus Data Overall, program in which delivering executing to and we for established grew We in and of and with that tested and award the satisfaction Space compete in October on expected is Similarly, the navigation end environmental SENSOR X.X% production the down we platforms programs. Intelligence our programs. was headwinds X% the to as ground fourth across In a key on effort digital these momentum execution deliver March. and on-time payload to and GPS strong excellence be continued the small continue developed well opportunities. our by ground in for radar positioning the incumbency. the III award for Exelis, revenue strong is classified multimillion program, upcoming for more acquired improved the

by X%, X. and revenue Intel, orders and book-to-bill X%, first-half Space greater was up For grew was than

a order encouraging CR capped with strong prior XX% three of revenues take to performance despite for X% XX% growth the X.X%, give up with high XX%, and X% increase This X% the quarter tighten confidence follow-on compared growth back-half pipeline backlog billion a book-to-bill us probability across up revenue first-half to nearly of and of from to an company to or previously. of outstanding year. second of results and lengthened a backlog segments; Solid all and opportunities, revenue and $X to our guidance X% growing proposals combined X%

electronic system market margin we’re success affordability several customers. position But range, and to innovation within pool, guidance systems, incremental an Avionics software-defined of and to XX.X%. sats, to of But drive strengthen areas operating IRAD to as in due XX% capture that our $XX these small our years. we’re and approximately for opportunities in our These company such customer maintaining investment planning been areas, million increasing in robotics. recent have for and investment warfare new focused initiatives open We’re

of making all to in grant We’re also shares investing stock one-time human employees. a capital non-executive and XX

asset customer anticipate long-term during shareholder prefunding and pension million And value. finally, by Our we plan then most driving $XXX the in our important fiscal QX.

recently economy making the additional in of positive inactive which We’re legislation, is a as for the U.S. a net tax the context these investments and for whole. Harris

about to share XXXX guidance fiscal We expect rate about and confidence impacting earnings $XXX strong operational performance offsetting XXXX to reduce million. to improved next to percentage and of investment about cash $X.XX combined $X.XX benefit effective with per revenue increase half and net year, reduction that this to XX income. adding million an reform This to flow gives share per $XX tax fiscal about with outlook year free us incremental points by our

So let to to me the we over detail questions. open it call Rahul? to before cover financial results turn in now Rahul more

Rahul Ghai

Thank you, morning, and Bill, good everyone.

prior EPS offset impact on of in quarters Slide a total by was in benefit revenue a the the tax acquisition-related down $XX four charges. XX%, from contract $X or income quarter and was tax reform as a efficiencies deferred incremental $XX excluding rate, non-cash $X.XX, from a across and today XX non-GAAP well Discussions Networks as the are operational million Turning must the a than volume since Exelis included our fiscal $X.XX million, the X% quarter, in year operating up reduction resulting be spread tax and now to write-down The in as second benefit Mission XXXX. results company business. the compensation, were quarter one-time for higher basis, catch-up QX all on up a assets adjustment charges including of X. deferred adjustments reform. million first was This from tax during more point

flow increase ADS-B year. a For Operating a operating adjusted the was million, cash unfavorable XX.X%. was first-half cash up from over income prior basis, the margin in X%, $XXX the up first-half, was million a On impact at and the $XX million. X% flow was was robust XX% last $XXX free Free program. revenue despite XX-month

to X. Communication XX% details segment million, quarter up $XXX prior now the Systems revenue versus Slide second on Turning year. was

up strong double business to continues prior Operating improve for the volume, revenue in million, was the million and was at Night the digits driven a the book-to-bill compared Orders excellence of $XXX segment up approximately In also addition year, execution. as for quarter. XX%, income to by resulting in $XXX grew in growth tactical, XX% by savings. operational integration with higher X Vision

three the the income For in segment; book-to-bill XX.X% was Night basis the segment in points Segment each first-half was XX was up book-to-bill operating businesses Operating was XX% up year. and year, up was above versus the XX%. first-half Communications, and the PSPC for Vision. X.X. X% orders of revenue of X and prior margin the the Tactical of increased Notably,

driven We as including income benefit include continue business, for segment Electronic X. X% million Slide program. of contract in the information this a Increased expense the backlog, $XXX Networks to end the for on by and from decline in warfare operating million unfavorable up was supplemental $XX by historical Mission information volume ADS-B performance On partially Systems the quarter. the $XX million, strong revenue R&D orders, and was of and revenue offset higher Avionics. The adjustments tactical electronic in presentation. headwind programs mix, at

R&D. down First-half in offset Operating segment was on operating and by million, as increase X. income was Systems remained operating X% while at income revenue ADS-B strong X%, of segment up the was $XX XX.X%. or volume decline up margin Intelligence headwind revenue X%. an and in Space On was Slide increase XX%,

segment income XXX and revenue basis of first-half, X% operating and the margin increased income. in was up the resulting incremental For pension expansion X%, from points productivity for

guidance. Moving to XX full-year for and Slides X

due As to guidance, expect X% the and to in Tactical Avionics. Bill increased up up indicated, Communications X% in strength be versus to in X% X% now we revenue to prior

$X.XX a performance better We’re increasing operational and strong reform, expected to partially is a to to of the and Systems. a than program into volume of guidance driven $X.XX $X.XX partially benefits EPS of offset range range an $X.XX, by franchisees. mix in higher Electronic management, additional from by certain by deliver tax unfavorable key expected $X.XX execution EPS reinvestment to of offset on Strong

combined Tax $X.XX that will the a approximately drive affordability effective activity the $X.XX proposal changes tax corporation. reinvest This EPS results XXXX still will with other and We in fiscal and XX.X%. down rate remain increase. of across tax innovation and bid to company robust XX% efficiencies operational and to XX%. at is margin Total reform to expected into in

$XXX of guidance from to the million approximately flow a cash from tax cash million free tightening We’re $XXX to $XXX range reform. million, benefit reflecting

unchanged to be at between Operating XX% and and level. revenue and margin guidance up margin XX.X% Space operating range expect to now Operating and proposal Communication due versus businesses. to to be is X% Systems, to XX% sorry, the be between to tax we in revenue in previously, from segment X% of bid by by and driven to to expect XX, Electronic previously, mix expected versus XX% up higher to purchases. to productivity X% XX.X from strength range at and investments X% unchanged. program partially XX% be increased Turning now X%. Slide guidance X% Intelligence XX% In share XX% to XX.X% Night now outlook program – for driven offset remains up to flat to range, to up to in Operating expected Vision. the Communications the R&D. and shift previous execution, now X% In previously, reinvestments remains by outlook Avionics we’re revenue Tactical are at unfavorable the products updating and XX.X% Warfare. margins better versus of Electronic versus to guidance XX.X% X% Systems, previously, top-end X% expected On we to than of margin now guidance R&D up strong

year. We million that, for completed an open now the And the that million buyback had have additional expect would line purchases to the to $XXX a of of total with the $XX in $XXX for fiscal ask like share share initially million questions. to for I we and second-half in operator planned the repurchase

Operator

you. Thank

be question Stallard conducting Instructions] proceed will Robert now Our comes [Operator with Research Partners. We a your session. of question-and-answer question. first Please the from Vertical with line

Robert Stallard

Thanks so much. Good morning.

William Brown

Rob. morning, Good

Robert Stallard

order strong wondering think year. is, you’re when Bill, roll in as I the placed order this when intake a ship seeing you is first-half change was any you and expect intake whether of the between forward into time lead sustainable of obviously, do very how future, we in product? the order sort the to the the and

William Brown

out good very into start so in very recall led in booked good very a first which book-to-bill because we Well, we good QX, a – strong Australia, with a quarter, QX, first-half first-half. really

into we healthy the hope For beyond we defense a healthy to in And fiscal said do spending XXXX CR a XXXX, my book-to-bill year, we’ll and see XXXX. time, hopefully very into a of last budget X. see expect is, we as we into expectation as turn line continue greater than a to XXXX what beyond growth be orders

– a So start. we’re got we’ve good

building momentum. We’re good some

timeline, We’re seeing in well as on know, – same. about opportunity the an there’s acquisition on FMS lead order the time effort I in focused in the order to both DoD, as shortening important side. FM U.S. conversion,

purchase, accelerating than urgent well in as yet, before. on anything We is have requirements. more were done haven’t seen faster quick readiness turn couple But of that FMS DoD contracts focused lot been know, for a both for department – getting the except a investments pretty I that as

Robert Stallard

Just follow-up. a quick

Middle other in the What some second East maybe you’d better of how fair? did about quarter. expecting regions, that are they mentioned than You the becoming been

William Brown

certainly, bit the in had we news, was – had year up little little now all we’re that probably hopefully, the pipeline I back-half. Middle Well, expected was East. We expect and think trend is which the in the bit in into a good. a East faster good to see East the velocity than than stronger continuing seeing we’ll Middle we is anticipated very Middle that the XX%-ish QX It be

off it’s low of strong. So the keep base. relatively a very Again, Middle in East coming has mind, been

very broad-based. good has Iraq is well be So Middle Saudi the a in We as Northern as important been East. to and pretty that’s opportunities it’s in opportunity. good well, good, see Africa pretty going as Sub-Saharan.

in the So East. overall, good trajectory pretty Middle

other Asia. because We countries region will of aggressively about Pacific see the also by Australia, some due grow year, Southeast same principally but Asia to probably XX%, in the this pretty

and in double significantly in will record Eastern second-half this as and a year. this America, record will down a last Europe. again, be pretty as in Central, be see tick-down well Central digits probably We’ll then So year in Latin It in good Asia, momentum off year year Europe, Asia. down in likely

international will did where overall, down it So a business see flat we year. the be still stronger slightly, we basis, to revenue on DoD before, although this

Robert Stallard

That’s great. much. Thanks so

William Brown

Rob. bet, You

Operator

Thank you.

Our next question Raviv comes with Citigroup. your from the with line of Please Jon proceed question.

Jon Raviv

good morning. guys, Hey,

William Brown

Good morning, Jon.

Jon Raviv

free us Could some – the goals something on update you of post of provide could flow just tax you act. your provide reform an cash an

billion, any where few I over that, next might years? go lot think, approaching a on are talked previously the thoughts $X about that we’ve you

William Brown

But Well, we $XX $XX year. about of the million by to now a center we to means million. revenue will $XXX up some pressure we of from Tax will this of the at resolution, is at on up have guiding reform we’re $XXX point our year elongated because so between continuing is, What year million million, collection. as price little see might the million. that this went $XXX back-end

So our about to boosted $XXX which why is free conservatively guidance cash million. we

year we on $XX free just itself. next tax see million reform, of with to an cash into Going incremental $XX tax million

million. with healthy a did we’re as our million overall, of see So to in remain path our growth get increase sure, to on and capital earnings this performance. share to near-term, capital overall see we maintain that, change and making a we $XXX continue $XXX that repurchases the million we to and $X into year We We’ll balance to Rahul million that, a mention going think philosophy balanced into a shareholder-friendly deployment. much to in puts from sheet. XXXX. how billion And $XXX could about don’t $XXX working we us range fiscal deploy

$X.X billion it’s pay April. a will about debt in We that’s due,

doing of We overall in in third internally that. And in R&D the and continue do prefund XXXX our here have spending. We’ll all we investments longer-term, change to beyond, the as quarter. fund priorities. to great We’ll anticipate that into going capital much of our and our We’re borrow we a pension. not complete to go

free both lot you a share to remaining gives potential probably very pay think be XXXX more. paying the if couple continue as balance a firepower of be buyback. for over numbers, billion to deployed good of or a going as we’ve dollars and last And We’re M&A will or buyback, generating And the which dividend, on aggressively well any between that’s M&A. we’ll decade been pretty to XXXX about pretty, share cash

Jon Raviv

for And Okay, question, great. on CapEx that. Thanks not mentioned the allocation then priorities change too you also the that much. might

anticipate through some I greater seeing terms your thinking get other companies We’re CapEx. growth in ramp you are of in problem? investment what guys to really ahead be capital How of

William Brown

think company. that, difference over Jon, I six invested Harris capital five – the the with Well, last have we is yes, or years, in in the

If we back $XXX $X.XX. go six of over you a years, were million, share

we’ve investments of so upgrade were XX% our relatively radio new tactical So brand upgrade at a facility lot Rochester, or the that to utilization. up capacity. a running it’s infrastructure, We’ve made in got our

up internal years running even about investments doing have R&D over in – we and relative constraints the increasing we’ll So on we term up revenue, But of further, any we’re take more that than and or relative in again Harris spends six relative capacity X.X%, R&D. is, internal X% to X.X%. our don’t this what step taking to or to it a at satisfying been segment five revenue on demand. than in we’ve done it last have basis anyone the year,

both in of R&D spending. very continue time we in and to invest So period capital a over heavily

of year good we pretty X.X% Our about of revenue, capital that. this feel about is $XXX

Jon Raviv

much. so Thanks

William Brown

Jon. bet, You

Operator

you. Thank

Suisse. proceed Our Rob Credit next Please of comes question. line from Spingarn with with your question the

Robert Spingarn

Hey, good morning.

William Brown

Rob. Good morning,

Robert Spingarn

just wanted your go the Slide Tactical see I we to if history. to XX on Com could

You talked intake. about, Bill, your strong first quarter

backdrop is – quarterly revenues how record in that Comms Tactical up DoD given the going got readiness, about at revenue we backlog talked that And you levels? on madness do combining still second now quarter. you record from You’ve your move the see with in just revenues push forward? think Do and to here, the

William Brown

lot increasing orders. DoD. orders start, growth strong again, had very in by quarter, revenue in a here back-half. readiness, the do it We see quick second We see driven turn a quarterly continued We of in very good good the

strong As we back-half, mid-teens we be growth. guiding up quarter. into continued We see look to double-digit the last were

be few see over couple keep than longer currently mind, the a side, spot in that’s in got up in low We’re revenue backlog the that we to of that like We’ll of backlog good the DoD, there more have feels, international second-half are half back-half. back-half. of out and out a orders feels be flowing on our good years. now that on duration moving in in XXs But for Australia, next overall tactical to in three probably the it’ll in be. pretty rolling And we’ve moving the part tactical

Eastern in a on because So will good last little off sequential a year in we’re coming we back-half be down a see performance it international will growth in the the pretty bit, strong basis. Year-over-year, Europe. with compare

I back-end us how this over think, I overall, the tracking year. that’s of see

Robert Spingarn

Okay.

don’t question we your in I Comms soon, where that’s long-term a a on kind on see So was outlook. going. of Tactical F-XX I anytime similar Then have peak

So…

William Brown

on at peak the tactical peak by any business. we’re we a – Yes, stretch don’t not a see

eventually view, I the in Corps the think, hope of front-end in be just side, in on steep And curve a what we years. Marine couple that’s coming. happening certainly the of DoD see of my we Army, out to what based at DoD, modernization, on we’re we’re both the in

at you by changing the has the look and way that If much. five-year very not been budget

ramp good DoD. see You’ll in a

a We piece a to capture good – of that. chunk expect

we’re and ramping in On on and the F-XX, up. and we’re production, low-rate XX we’re still XX still a

continue next that to over grow think couple going years. the of that’s we to So

Robert Spingarn

would peak timing-wise, get what the per you year, I mature is idea rate? believe as going say, do up when XXX was I ship the to is to which have Lockheed sets an you targeting

William Brown

two a about probably Yes, now. from or year

front… fore We’re probably at the

Robert Spingarn

Okay.

William Brown

the on common we’re we’re – in end that release the And aircraft, certainly, front the on side, stuff the component probably systems. the probably on goes

lot at on we’re probably the We’re back-end, XX.

they – a in the say, there’s So on rates. probably the that common bit be we’ll would pieces we’ll faster I But on at different release and come systems. little hit ramp different than components,

Rahul Ghai

generally…. And

Robert Spingarn

Okay. just… And

Rahul Ghai

this Rahul. Sorry, is

bit on Lockheed, as we’re, XX we’re So systems Avionics. and just of mentioned, release the little ahead because generally, LRIP on in we’re XX Bill the

the generally, we’re ahead we’re of normal up ramp So curve.

Robert Spingarn

Okay. ask, just And while you of CapEx then you’re times R&D here and a strengths said, big higher change there. Harris there’s to we you for plans, those Could And wanted reinvestment. have? you look that C be you have that mentioned you any you to – in money not some just you’re do review really franchises putting developing a couple the beyond Where should into? incremental already

William Brown

Look, aggressively is probably we’ve our tactical that over of number our been about investing of spend. IRAD XX% years, the last business pretty in and

it’s in as a high space little So Electronic area remain below and as and up funded, and were up it last the But they’re to we’re of Intel Systems, open is the and continue segment. tactical dramatically be In where And segments, systems that’s years. over stepping bit very well it’s quite will like has an couple – return. in both good would remained that going Avionics. they in high coming to fully very, be

next-gen well in opportunities platforms to from change newer Avionics. have we So as as Avionics platforms, out

systems, warfare also for electronic the software-defined developing We’re on to newer perhaps legacy generation onboarding platforms, but aircraft. both

opportunities continue winning been the the the we’re as international in to hosted grow for UK. we’re clear the classified those other trends in over and time beyond the think we very seeing contract EOD awards of investing the We’re well. DoD These a curve. U.S. good areas. very, we’ve win to into investing UK to small pretty ahead robotics we’re penetrating maybe good community And it’s space payloads. then markets We and been market robotics. even in invest to a We’ve in into are on satellites size And for that side, going some that and won

Robert Spingarn

you for extra That’s much color. great. Thank the so

William Brown

You bet.

Operator

Thank you.

of proceed Jefferies. the comes Please question Sheila from with with line question. Kahyaoglu your next Our

Sheila Kahyaoglu

thanks and my morning question. Good for taking

William Brown

Good Sheila. morning,

Sheila Kahyaoglu

I we business. was profile the and maybe the hoping margin Communication longer-term revisit could Systems of

ramp the the wins, you opportunities longer-term for you margin As business of on and also think profile? and new new do how takes up puts

Rahul Ghai

morning, Good Sheila.

So guided will feel the The I think remaining good the move to we of that this margin, kind around. year. in of that we’ve have couple things about range we that

will margins. a given tactical margins As segment be the there But volume too, the ramps mix incremental than little being also skewing the the towards from drop, bit benefit higher is more like currently up, have. the is, And we modernization the DoD program to stages that margins also business at that going in initial is lower, Australia. the in the in come least, than fact just

feel all So you business put that now volume now. where the we that some right to we where DoD between we and initial lower relative phases, together margin benefit and mix good in about shift are right are

I think, that’s where we expect, at least, be. XXXX to

Sheila Kahyaoglu

$X And billion I Bill, think, outstanding. of you. more, then got proposal Thank one it. you mentioned Okay, just

big on could you $XXX elaborate of Iraq. opportunities, million one big some If within the the was

could you about items? talk If other the some of

William Brown

opportunities been Well, systems. got opportunities there’s that. business are mid digits for pipeline tremendous Systems, business. better got continue happening community. we’ve in to classified side the Electronic what’s on in side, to across opportunities have it’s the areas the traffic in growing competing, When I the We’ve space in to And got our Avionics example, grow on the F-XXs on slightly The where We’ve we single they’re the side. in growing at upgrade, for air budgets management. classified strong international really EW look very a than

and penetrate to to side. good a lot have start of be classified opportunities the a seeing we’re found enter way and competitive We on that our pipeline

tactical the I it. billion, $X.X billion the billion in the at side. $X got around $X.X look the across of So tactical on DoD $X good opportunities when sitting course, it’s And side, about are company pretty billion international pipelines broad-based running side. on we’ve The

strength it’s really good we across look, where in the see pipeline. So, Sheila, company, the

Sheila Kahyaoglu

Thank you.

William Brown

Sure.

Operator

you. Thank

Our next Cowen of your comes from with line the with proceed question question. Gautam Please Khanna and Company.

Gautam Khanna

Yes. Good morning. guys. Thanks,

William Brown

Good morning.

Gautam Khanna

questions. Couple of

wondering, fiscal contribution on directional some First, was cash if give could pension in XXXX? us color I you

Rahul Ghai

just now XXXX. Bill any the we’re that thinking Gautam, we’re We $XXX pension expect don’t the QX. prefunding contributions not mentioned, doing of in through expecting million that with

So the next for that the we’ll prefund pension several years.

Gautam Khanna

to guidance flow the $XXX cash And year, the Okay. that guidance, just the does flow exclude – free for cash million?

Rahul Ghai

Yes, it does.

William Brown

But no pension million not sorry, $XXX the prefunding. a include does

Rahul Ghai

Right.

William Brown

perfectly Just on be clear to that.

Gautam Khanna

okay. size you’re large production initial QX? between expecting that how how color think award that And two fiscal you Got be may…? you do What – it suppliers? the How Manpack the it, JTRS in any might would

William Brown

In but it way understanding is, would it’s still we about don’t working it’s that, other Army of price expect could and We it’ll be acquisition. be its it And the Again, it’s do be in units. in working will that XX-XX through range through X,XXX us way Yes, acquisition, the – split for my the through basically still in between that of working and its X,XXX units. couple IDIQ Army BCTs. be range. still it about a player

we’ll more as know made. decision that So is

Gautam Khanna

Okay. you you going And per X,XXX in today? then or to anticipate do what year, years, that do what units subsequent Is think…? it be

William Brown

it’s it million, at – that there. from million last from, No, I at the When where just only or XXXX so up think, is is look was yes, we this going grow to we $XXX think $XXX think you budget year.

the HMS for budgets own on-and-off rifle includes swing. the and our So

the XXXX I as on army. tactical thereafter and modernization would the the front-end ramp sort within of franchise continue grow the at recapitalization the and in that of expect revenue radio manpack will of So the the to really

Gautam Khanna

think And But – is of or off you about to XXXX you didn’t it of so a price price. want a mark, should to lot estimate of or reason government’s expect XX,XXX fiscal it’s the request, see there to far can Is around that I lower? per be going unit. know we that the in talk be to

William Brown

estimates. builds what see army think I what into don’t the is you that, those cost

Sometimes it’s army just plus management could be accessories, the radio, costs could adaptors, a program of things. be plus variety vehicular it

So pure Gautam. number, a it’s not

so some with And would caution. of I it take grain

Gautam Khanna

F-XX, you your on you sitting Could question Okay. on refresh us mentioned is Last up just, at some picking it. revenue today? per what more content on the F-XX

William Brown

roughly $X.X million ship about we’re sitting set. at – today Yes, about per

release charge bomb F-XX. for systems release We the system, have One a of the number the or so pieces. is release

We liquid the supplies. antenna Display, within different of across that’s last of power do have racks of Cockpit $XXX well. unit cool a the components, that very was the common year, three variants, million, Panoramic we its for We as they’re variety And development. about a and electronic front-end the meaning, one common the recently

from valued So we aircraft about that onboard year, the million. won within a year contract last ago now. years about probably with $XXX upgrade will memory or several And system the then a

next computer, which the be do we’re So down we years. system to selected winning see one final successful three of winner, to to the that up the X.X, companies running down the if opportunities final we’re will probably mission drive couple a of today. overall, again one but in open selected But

about hopeful pretty we’re on So additional content F-XX. the

Gautam Khanna

or valuations, next do much for you mentioned, last. one any I like to think thinking cash well Bill, you I Is my digested, wanted opportunities, sneak on deployment company? now more. would I look five and What was color terms in share that pipeline, what are the And said – of priorities? say. about the you repurchase a is years acquisition Exelis what of there

William Brown

think, look, is of do part to Well, what M&A want I we longer-term.

in down pension cycle down – we’ve good a we at integrated good think, obligation. our We Exelis buying job and the at in the point cycle well. we We I – debt. part good did a paid paid

be funded. probably XX% to going at We’re

very a in done I integration we’ve believe, and sheet. managing job, balance So our good

turns Exelis, very legacy. free generating cash. in have working both we’re you’re as for through seeing as for Now our strong pretty that improved and guidance. Harris, dramatically well The capital cash come

position the We buy we year, we’ll we we we’re pay be. of we’ll it fund key the to that, have like franchise the the to capacity I more does quite have, very think to anything say. Other As high, company want The pension, leave we prices a to for look and next buybacks, evaluate way than don’t borrow carefully. need of much a is, to And place very, but to be don’t for we’re add debt we opportunities length continue to happen It to things scale. at in depends time little are of in think evaluate a upon it we’ll bolt-on or bit bit down. to but have we relatively that to the We today. M&A. into the scale get in I

Gautam Khanna

luck. Good guys. Thanks,

William Brown

You bet, Thank you. Gautam.

Operator

you. Thank

proceed of from Pete comes Our the Drexel your next Skibitski with Please line question. question with Hamilton.

Pete Skibitski

guys. Yes, good morning,

William Brown

Good Pete. morning,

Pete Skibitski

could threat, Systems, Congress But if as the like written Russian would U.S. it concerned question. well a I we been Bill, pretty Hey, like has ground incremental are about of more about Communication the sounds military threat, a to and I lot and Bill, that. kind talk different on perspective from a of Army, the kind compound as have

sensing the going are time, threat-driven incremental of I’m And at So you more radios? demand on. wondering, kind in recently same that’s

Systems over be So Communication and We’re budget closer next single international hearing kind is if approaching err X% fiscal is the out you growth gave, on the side of attractive, you are mid incremental the now? – there visibility recently of single-digit threat average digits could high being year or between side inflecting side over the to for maybe on of the – out? international enough you would years, the the couple just outlook XXXX per prior budgets, right Comms than not really now it that outlook that

William Brown

budget. know reports year. drive you radio Comms in of radio help and some maybe around anti-jam? bandwidth? the about investments kind going hesitancy they until going it Europe it DoD again, when good the And Eastern radios the driving they XXXX rethinking what across pace and some really we is making say the big They’re even XXXX to a business do is part what’s see Europe, it seeing Well, different interoperability lot it perspective Electronic also compete around NATO they U.S. budget of It’s a the the drops, probability they size waveforms outlook forces look and investment we importantly, was communication, surge But last forces year, But in and in changing think, forward, given continues certainly, forces, and and today step if tactical long-term year and a investments and of Warfare I revenue, low communications programs. last any Are that of want? across in the to actually interception point saw Comms need? Communications, and at thinking Are of pretty the was threat. the like saw actually even even wait what maybe why in back we’ll the we’re What now change the –and we for that don’t our at and What’s Warfare. their where as about the growth of until I about in detection? looks at same fight drops more from in sort mix this with exactly Eastern but the how to and the your like all places we’re not a to for growth fundamental our forces it increased and Russian that in just driver it spills Electronic partner Europe, of

hop a made communicate anti-jam, we’re to warfare in information, and drive business. are frankly, as now lot here in that we’ve talking our to the have So and investment for but backdrop very and our as of a And LPI/LPD. capabilities the that business opportunities making that seen the we’ve of trends the the quickly, then they spectrum convey communications that is about so broadly, to enhance well lot

driving that all backdrop for our and Pete. Comms happening But important answer, that’s the an of businesses. trend long EW across really So what’s

Pete Skibitski

That’s helpful.

new last and most ancillary Let last or of quarter, The would quarter part? next be give as incremental there question to any today benefit strategy, versus WIN-T, as greater me couple an clarity a comes what of post as the same if to to that. the WIN-T ask Harris, kind for

William Brown

last same It’s about as the quarter.

have structure meaning, the like. tactical We very system. the they result the a with lower moving they closely what of architecture rethink radio radios tactical, good meaning, the network, are the WIN-T separated of It WIN-T the upper network upper and want the to network, was do forward as working the tactical they’ve the that with on the We’re purchases. from look army they components

have networking band We the high the radio, radio.

the waveform, which have We HNW. is

system, now and with there sitting I radio faster the There’s the what repository. more on upper We believe a opposed It’s that’s waveform you they to have lot decreasing. do as a transmission. that’s waveform of increasing of a network. out the no Harris think, play, fact, I the much in WIN-T. may version army mobile has had it in role for we’ve that the new the rate do been of The more solving issues a developed to be tactical gives nodes. There’s developed, that a matter

now So, position better I before. we’re Pete, probably think, on WIN-T were balance, not than if on as we good

Pete Skibitski

front, see and on last Very this great. maybe next-generation jammer, ES? low opportunities helpful. the could award Is the of sneak that. just But currently I date of Okay, in And the one, to bigger If sizing? in is early I one terms there on there for band, one competitive EW apologize. still more this out starting it

William Brown

and about terms I’ve about sometime we that for through. at a of of the looked couple talked to will don’t in that come I it. we’ve have heard likely been procurement least, to much that last, one is for This say it, when continue look years at It’s and at

opportunity and directly party at it we’ll stay another look as the we’ll So we’ve that space in or back, We with platform. before evaluate. on done prior on participate a

Pete Skibitski

Got much, it. very Thanks guys.

William Brown

bet. You

Operator

Thank you.

Our question comes with with from question. JPMorgan. Seifman Seth next the Please proceed of line your

Seth Seifman

good and much, very Thanks morning, everyone.

William Brown

Seth. morning, Good

Seth Seifman

should of the and start so, like or you feel As they, you do through reduction go what are and it be for testing that of are smooth and Army to kind through of if testing, challenges? manpack delivering any you’ve they technical radios gotten outstanding you? sort risk pretty all there And

William Brown

see they could over time and upgraded of thing beauty the the the hardware these get changed little bit the likely our are over I radios you, be the And I of with software think, won’t Seth. software-defined. that functionality are the requirements to is happen time, be XXXG. downloads. same a the that, think, fundamental But with manpack. version on of happen change. Their we’ve their on We’ll honest seen To changed features, radio

waveforms. demonstrated the for waveform. and threshold competitor the are have what tests of complicated very And requirements have What the customer time. we the functionality our demonstrated deferred capabilities of radio and testing the over in the some basic space to the radio use through the waveform, is now change they’re ability will like the MUOS So a

into in how expect the it perfected putting be manpack. that it we a XXXG. problem and I the in to Now that don’t works

shift continue happening So to just threshold over do time, to test the it’s these – the right what they’re requirements now. requirements deferred will what’s shifts. as But environment on I going is threat believe

Seth Seifman

its organization you one, Great. at in Force Air they’re the when think sort the the for area, Bill, look last acquisition implications thing that moving of for dedicated how and about into space own And then you of considering maybe the Harris?

William Brown

were look, closely an Well, space we’re very with Force we important in and player our Air colleagues. side the

think, see I the want improved. Force strong our be only results think, our drive of we investment space think, a Colorado very you creating classified good relationships positioned. will capabilities they that dramatically area, I architecture, credibility really Air if of is, on benefits, part to like a way frankly, performance a it’s think Air consider relationships I we’re I And expanded pretty separating and our the improvements some and a the think, in we function If good that. very separate and GPS, a there, has the a Exelis got from that well this domain. the have there, space and or more and improved And as would making I our of – there. of way, It’s since separate on Force because of could drive bought for us, sole it drive infrastructure, something improvements the and by look Springs. space I make We on the well in We’ve very, team set both capabilities, moving as unclassified broad-based – our at

time. would if positive that a think, be So anything for Harris I over

Seth Seifman

Great. Thanks very much.

William Brown

You bet, Seth.

Operator

Thank comes line your Sullivan you. proceed final Global. question. Please from the our Josh And Seaport of question with with

Josh Sullivan

Hey, good morning.

William Brown

Josh. morning, good Hey,

Josh Sullivan

F-XXs? there the Electronic I side for opportunity maybe that F-XXs. Warfare and size anyway mentioned the international on to there is you’d upgrades a for think, Is similar

William Brown

continue some the And the, Well, been we that. for opportunities F-XXs see U.S. for do F-XX grow international and Australia on both U.S. well as we provide healthy to do what IDECM variants that’s for to of pretty F-XX. and recently we’ve Navy very orders we system call, the receiving as

will are know it F-XXs, F-XX, through XX or and process. don’t ones. we the use There’s I domestic FMS the on eight around go provider the On legacy different F-XXs, EW countries the probably, world that international not

billion $X.X a So see over of opportunities upgrade quite to tail long to we do international well F-XXs.

Josh Sullivan

Okay. And And digits, then is a driving up double that? what’s then that on just Night been legacy technology Vision sustainable it’s going forward?

William Brown

orders, know the in think, made lot pretty played, year. Yes, we’ve refresh we decline down partners. I five and of new the marketplace. technology XXXX well investments and be refresh XXXX, the that double-digit back, a lot seven mean, wind off being A of strong that will don’t goggles. have very, new QX We’ll a think, I it’s I upgrades for there I first-half, strong. with some some, making, good around backlog is, very or existing XX% goggles traction going it’s of up XXXX of see come are In tubes are bottom technologies some are was now of that we’re fiscal long is in continue the or we’re so to But resets And the the hit there of and is as a lot international year it I a it book-to-bill, good wars. coming as of XXXX. for DoD, But up know down, years don’t through into we fiscal some double-digit, And up. think, in I last seen

Rahul Ghai

operational And seeing we where because is, we the performance. are why the growth – are reason seeing we of our part growth of improved

Exelis, you So that. the couldn’t our for the about ship throughput product year, to do don’t bought take is we able higher been because a costs When and lower. we we’ve

resolve share, issues, of large win to notice. grow. that’s We’ve the was that’s opportunities, to the I very some international helped of it hard short a under been and starting us working and some very think, operational both domestically

Josh Sullivan

for the tech to over switch just I’ll one. Okay. last

facility XX%. do of kind to You think the it is the to takes you long XX% How level? Rochester you get mentioned about

Rahul Ghai

Well, ramps determine. going on volume up the in, how it and the quickly depends the to – that’s modernization what’s kicks DoD

we the I facility. point in still volume, think with peak. made mean, a years. the going think, I to billion, even billion few off fact a earlier a $X.X – that, Bill need as see And business don’t investment at was I back incremental $X.X the we is did make we DoD that capital the

utilization still before to we go ways we reach have there. capacity XXX% So

William Brown

And things outsource the find we up we today, it we effectively in do even to fill always factory do we a in there’s can we – if as that factory always the limit, building. the that capacity increase can

any have near-term that the medium-term. see in constraints don’t So or the we we

Josh Sullivan

Good. Thank you.

William Brown

You bet.

William Brown

questions. for get great everyone, call you, hesitate in this touch with not day. please joining additional Thank me morning. any to Have the And do a for

Operator

Thank you.

L3Harris (LHX) 30 Jan 182018 Q2 Earnings call transcript