LHX - Earnings call transcript Q2 2019 | L3Harris Technologies, Inc.

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Operator

Greetings, and welcome to the Harris Corporation Second Quarter Fiscal Year 2019 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. pleasure your my Mr. now is to host, introduce It Investor Anurag President, Maheshwari, Vice Relations. you. Thank

You may begin.

Anurag Maheshwari

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

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

statements. words include today forward-looking statements a few Discussions measures. First, and on forward-looking will non-GAAP financial

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

and see will GAAP our the the filings. press be in For Harris more a With presentation, financial comparable SEC section website, Bill, reconciliation the to you. the it information, where also www.harris.com, measures available. that, replay non-GAAP of of turn please to is Investor Relations on A over this release, of will included I which quarterly measures materials is call

Bill Brown

our But let The margin, XX% up growth in XX% per per funded favorable Anurag, investments quarter high-single-digit flow. planning XX% results overall in growth. everyone. strong merger. second customer earnings a well, to good expanded with for X.XX remarks on earnings first the in growth, mid-calendar up $X.XX, me first sustained a quarter earnings Okay, and revenue by quarter free margin with all for before we're and were and segments on XXX with our up raising margin the of share operating today prepared book-to-bill this flow. And today, and innovation, year with strong revenue per a well. results, multi-year XX% and half all you over record non-GAAP The color growth. and few some Order revenue, and is over share, the quarter was quarter Orders, extend XXXX points highlight of non-GAAP strong our X% is on XX% on we again integration higher the cash performance quarter close of positions, strong reported XX.X%. year, These driven free cash basis revenue, providing company thank morning up for X% share Earlier guidance consecutive and top-line win was merger comments momentum environment. last on rates, on progressing backlog high resulting remained performance budget up our the a LX track closing start the third and

Night a X Tactical, was up three Slide another to turning in all in Systems with XX% XX% Northern the Harris for driven equipment in customer businesses: the So refresh Tactical Communications border Vision up countries and Communications, quarter security in Public in webcast, solid programs programs and Safety. revenue the Europe, Europe Africa. third of of standardization technology strong ramp growth Australia, Western continued quarter NATO Eastern modernization In delivered in in the international in by longstanding

$X.X low-to-mid second and half. greater international first the in billion For That book-to-bill in combined will of reaffirms solid a than was fiscal Asia-Pacific in half, single with recovery X. growth and expectations X% Europe sequential driven international strong by a second principally digits XXXX was pipeline our that with the up grow quarter revenue

complete despite deliver we the that readiness to a On on from by We the shifting HMS the track across LRIP up to Manpack Tactical booked summer. for and of in year; QX to we Army side, was remain million DoD a X% delivery this growth services $XX revenue quarter compare on the modernization. last tough started

production fiscal to second ramp the delivered half two-channel and handheld For program, assessment, the the successfully of we initial units, completed SOCOM operational year. user through expect

with $XX million a Corps, software our balance for radios its the revenue quarter to upgrades MUOS hardware. $XX Falcon orders in This MUOS by million and revenue on ability software Marine III about since XXXX For Manpack to shift we award additional launch order $XXX sold previously for to highlighting fiscal recognized year-end. the in booked brings million of generate

year. be growth up half, we year The sustained which billion. revenue F-XX, XX%. give F-XX, Safety we readiness guidance in now In modernization the XX% international XX% mid strong expect XX% Pipeline driven and range for long-term teens in guidance modernization X.X, of Systems, XX% coupled Communication Tactical, the was increase Public Night at double-digits up programs Vision half the first up the book-to-bill ramp book-to-bill production, growth start Electronic growth to DoD our was and of revenue by in with first backlog versus XX% consecutive orders revenue increased with with us year the to to Tactical DoD the revenue and and F-XX, increased growth. sixth collectively up strong upgrades, performance over revenue Overall platforms anticipated and up and demand by $X.X at in a X%, driven growth quarter to will XX% This leverage revenue for the prior footprint. revenue XX%, as Tactical low second X% of increased was technology $X.X in For solid remained to for were strong expanded ramp X.X. QX Systems half the billion versus up confidence order and grew

in warfare requirements. rotary of business. our the warfare, opportunities continuing the international platforms in systems growth contracts continue we the program. to source IDIQ Iraq of growing warfare confident franchises. SOCOM of We strong book-to-bill and several $XXX electronic from address straight XX% the $XXX EW and announced and the of as for threats be funding F-XX adding remaining With to saw and awards, previously booked we trajectory also quarter EW their million X pipeline, expansion announced EW in capabilities avionics we on modernize upgrade than began aircraft, to and Order Poland $XXX our to to international and electronic million million our F-XX was previously Turkey remain greater momentum sixth we growth In expand Morocco and new contract on the electronic the additional legacy sole as

addition, Northrop with announced electronic features, content the Growler. airborne the on us products capabilities is of and EW increase Jammer to multi-year which strategy functionality, the program This In attack significantly win a aircraft. will open win recently invest capability and provide adding combination a EA-XXG strategic F-XX processor Band partnered on Next-Gen to system enable our opportunities. Low to multi-year large in the increase to we're In wins on build platforms to platforms, leveraging award technology win significant two existing trainer on success and a the architecture F-XX new our on pursuits. UAV, recent and and content on new avionics, follow-on mission These new we've

then, business high-teens And Systems, the in our X.X% in to we innovate was growth and revenue quarter on programs. in backlog expect the accelerated than segment year. proposals growth X.X half, Space led increase For and Systems to the customer billion and revenue a expected as book-to-bill XX% with of XX%. outstanding be The Intelligent $X first classified $XX headwinds resulting at Electronic in revenue offset which was the continue multi-year needs more robust to in this finally, billion to ahead X% environmental pipeline up to remains X% to up of investments

follow-on franchise, position of well program will continuing of new with extend on month, programs increase capabilities. the classified system see confidence XXXX than U.S. new penetrating network, We our past the mission received SATCOM XX% And and satellite end-to-end solidifying our were business Last a space. as building create produce follow-on positions as solutions for adjacencies. by several continue and in the on wideband to our providing initial second a in franchises order this based operational Harris's to we quarter our we Army since have awards million with different three over in from be a addressable ground five the opportunities. the customer's small customer. awarded of We new over develop mission pathfinder win and XX successful full this management with existing Technology fiscal In have the years as adjacency, constellation our contract tripled to $XXX satellites the $XXX market second first we in wins significant that in million we expanding the customers that quarter momentum move reflecting more nearly from new

and detect expected on of this satellites $XX order an our to Space secured to from enhance million payloads. harmful also over Technology time and additional to timing GPS We Consortium generations mission various capabilities interference. navigation, position, systems other by is knowledge and matured and mitigate program Enterprise future the leverage space-based transition providing to

finally, modernization to a earlier to provide strengthen three $XXX called launched provide including that including showcasing leadership addition, here position from our pleased to forward. In million Air for quarter counter small we systems solution first had satellites award million classified standard Florida. command franchise. payloads month, communication We validating ground long-standing the successfully sustainment continue control And in for a that our Phillis on ability and HSAT and received to also our $XXX in position we technology launch for facilities QX small a I'm a follow-on next-generation contract record and note going an a satellites. receiving Harris's smallsat hosted our in Force [exquisite] this we will be [ph] end-to-end

persistent And space Institute aircraft its well tracking launch of through the a first along witnessed for weeks and sensors. also has few one environmental payload system Japan's in checks. and reprogrammable Korean initial satellites the the XXX Harris us with providing also other Two in other GPS-X on We the now with XX Harris for just ships payloads for time a were Aerospace with completed a and with board the as launch successfully ago, navigational performing hosted satellite in leader of few international is Ministry Harris embedding the payloads, which globally of launched Environment constellation further Iridium final missions. of real satellites

total company with at X%. guidance previous flow a first about solid a opportunities, Intel, for of revenue half billion to and first expect we increase pipeline, growth For half per X% from earnings billion. revenue coverage, be to X% revenue guidance share than up a are X% XX% With segment, better up $X pipeline XX%. X% backlog backlog, half an confidence up Overall now fiscal to increasing X% cash performance XXXX wins $X.XXX now backlog previous versus strong Space X% billion second to X.X% of new $X.XX high revenue to $XX we guidance to $X in up point of free to with and X% of and two anticipated growing and and performance, and our was of a with follow-on the

few a comments now some Rahul the more over me turn before let merger. close it to on and So results financial detail with cover we to

Rahul Ghai

and Thank good are and Discussions Bill, you, prior basis well costs a today one-time excluding charges LX deal in as non-GAAP integration on year. morning everyone. as the

the Slide points XX% to second earnings and the and on total resulting up XXX year. XX taxes by margin XX.X%. was higher flow volume expansion now increased in to $XXX grew X, revenue we the as X% basis before days Turning results million to of in efficiencies, last of increased to working for quarter free reduced interest and operational company and EPS on XX% quarter XX% compared cash capital

prior XX% XX were half, XX $X was in flow increase revenue half cash points the months. up basis earnings and last first the the and at taxes Free before and a robust the first over expanding XX.X%. XX% billion over margin up with was to was approximately $XXX interest For year million, X%

relative offset million, prior R&D Slide details operations Second the included tax Slide benefit revenue Communications by higher to up reduced higher a tax and or driven on classified high XX% by on from increased versus avionics, was and reform program A volume year solid was rate. tactical performance The strong $X.XX more quarter grew than which more lower EPS investments. by than the EPS Systems radios, $XXX XX% $X.XX EPS operational catch-up execution X, from rate which X. environmental tax Segment volume increase offsetting and $X.XX. space year. quarter bridge last in second with

operational for Tactical, strong up was Night income growth strong as was in segment Public and program product XX% XX offset and orders in expanded the resulting converted revenue leverage in partially Orders to for by mix. and margins of X.X the volume book-to-bill XX% point In Operating XX% Vision to Safety the up addition a by businesses basis to and grew quarter. from efficiencies double-digits revenue.

radios with business, XX% with order order And $XX the we to programs, in Nevada, terminal our the utilities million for to momentum adjacent Tactical modernization both federal the agencies strengthened grew Air as our with from expanding state on from for than quarter the In addition platforms. into orders of and Public we and Guard. airborne execute domestic National the position segment international Safety the tactical and continued small airborne well the more in AEB, strategy orders and

adjustment double-digit of the prior operating first XX% book-to-bill the Electronics Systems this the year. segment for with supplemental of and was Segment all at expanded were book-to-bill Operating contract increased income is of absence to backlog in and on increased points second basis the growth Slide XXX half revenue, the XX%. was information XX% for and resulting X, For was first million from X.X. as network's Orders segment operational recorded XX in a point orders, $XXX XX% performance presentation. half segment of operating income quarter. basis was to in tactical up one-time three year, up million, business businesses information revenue The the up margin and end versus XXXX. X.X. a margin quarter mission Historical revenue included fiscal X% in the up XX% of $XXX strong

Slide X.X. grew higher program a was XX% record million, basis from revenue on operating and to platforms In on was margin XX business addition growth points margin Segment up first the release X%. of Operating segment led expanded revenue Space long-term XX% income increased volume segment book-to-bill Intelligent growth half in half strong X, with as XX.X%. first and execution. In systems strength XX% strong and income $XXX to to expanding weapons

First revenue in remained in programs, at X% decline by continued growth increased half a environmental strong revenue. partially classified Operating segment with margin offset XX.X%.

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

to up up X% mentioned X% As versus Bill space. Tactical the prior in guidance be X% to classified increased to the we now and Communications trend expect revenue from X.X% in

in trend segment Electronic in Total expected $X.XX Systems an This XX% XX% EPS. of as XX.X% operations with The growth year and margin to contribute versus to remaining a program than is the from XX% from to increase closing be additional by expect by to increase systems, to that, of to turn by is had Space X% up operating the now execution. from $X.XX guidance the Systems driven in previous previously of programs. for billion and to to up a margin and high about company between Space previously XX% EPS the offset be with a of improvement Electronic benefit increased XX% Systems. to Communication better growth expect operational to to better Switching guidance $X.XXX higher range Operating in unchanged. we will outlook, EPS the XX% in XX% unchanged XX.X% to X% and the an to at billion unchanged. back his higher. tax be strong count to of classified X% guidance increasing remains XX.X% driven at lower strength share up margin XX% between from up now rates and up volume interest expected Systems we versus I now previously of be in margin revenue are volume in interest margins than Communication, partially driven expected from by to X% X% Bill up range increasing guidance XX% expected to and Tactical in to expected $X. $X by and earnings. to $X.XX $X.XX it margin We XX% remains X% Communication to Systems segment like expense Systems XX% versus for be now Electronic Communications of coming lower range revenue remains XX.X% to now In will in In operating midpoint rate. X%. guidance DoD be floating to and guidance XX.X% a XX.X% to remarks. Higher XX.X% performance Intelligent And revenue We is free cash flow of would an

Bill Brown

Rahul. thanks Okay,

per we're and been Orders, the cash, on budget. discussion a around segments all margins, There metrics. of in record share, year. earnings Defense track a revenue, overall, we're and performing GFY backlog, lot So exceptionally all has well XX across for

expect with believe ago as range. that to and decided momentum security a with appropriations as outlays demands about funding in the We to continuing to budget term company. growth meet the supports this global in to leading medium national continue we matter well to lag months continue President increased that mid-to-high-single-digit lines the position we of create merge to overall Harris, budget in to LX strength, the three defense From

regulatory the Justice XXXX of the January work a into XX, we request for expect review. second continue to on DOJ calendar we Department and with well the On are received cooperatively to process close. from a We its continue mid and information

to slack As our of The filing mid-year Night closing. process, schedule impacting part the the shutdowns affected regulatory in believe the our enough have merger of proactively we but sale we team without explore Vision we're absorb to handling government to the delay moving business. the near-term possible

progress We’re leveraging in of the Harris’s cash value on full and have as good to close. developing of synergies planning flow. in that's approval We including one international March. spent best a the discussions of end and that involved of meetings running filing plans capture the with teams from XX this Commission also companies. event I have weekly team merger with Exelis deeply achieve the well each schedule skill an free planning set and hard meeting and are execute have Brexit develop who time processes both Paris Chris and model ahead with about well both the billion made cost leaders know million dedicated All getting Integration is ensure lean, we authority $XXX experience and the of should mission-focused, day LX and at $X and leverages hit are considerable the all, tracking other's the to tracking on UK and integration to ground detailed we of in in following organizational in or held of the we're European progressing we've required combination. the be transformational a informal and leadership to

the that, me operator questions. the lines ask let with to So for open

Operator

you. Thank

[Operator Instructions]. a We session. will question-and-answer now be conducting

of question. Our first line with Robert Please with your Research from proceed the Partners. question comes Vertical Stallard

Robert Stallard

start CS, occur revenues or strong in both very demand whether have all orders you performance first forward your I we'd and into expected that pulling backup in is this the thought your quarter with to Bill, if was whether DoD future? the it's adding the of perception incremental DoD is on and may wondering activity I

Bill Brown

seeing guidance think I from expected through a we happened, to mid-XXs, in trajectory couple the you high XX%, we in a teens modernization readiness business, we increased years. growth shift we're clearly ended have is just continuation year, very as modernization the the we a has in off to modernization, No, started strong of and this this spend of the ramp year, seeing significant last very, we're our over in our a if DoD investors but last the ramp similar the year communicated remember,

Robert Stallard

say, combined wondering then improve you this morning. Front, there table could this results two going the LX secondly the is of their bring you was to business on quarter put expertise process that few in together the it maybe the issues if like looks they had business I Okay. execution forward? a and some, the execution And whether

Bill Brown

I year his well later together, working this his last Chris business Chris from hear and this we're afternoon his you'll with on on think think I worked team. have year, I overall the well and performance for expectations Well

operational capture putting revenue areas we a key the integration execute excellence LXXX the on our through as execute, better, and think and them collectively continue of certainly to together and our of HPX synergy. we have find One companies combined is focus LX will to cost we way program

stuff good I in So to it's going and XXXX all both beyond. programs and Rob the from I benefit our think think company's

Operator

you. Thank

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

Sheila Kahyaoglu

Bill, to this for software opportunity about you opportunity upgrades, MUOS the way mentioned there and internationally? and any how big domestically think is is both

Bill Brown

onto Army. because made and question a on so a just it's on it's an customize DoD, a our years specifically U.S. out have waveform, will we about G, easy field with not Well, few to download will new MUOS, software good of upgraded, all we ago to be that just XX,XXX investment download be some a the particularly radio the in them XXX replaced International in

something that. think So opportunity than more a XX,XXX maybe is we radios the us around for bit

in run particularly we've and to Corps, long see the already still Marine about IRAD going development, international waveform in in company future. installed differentiator in some for DoD, that shift business moving for in we're some think in we in MUOS in to that a few Force, of and I and how the see software spending upside we development Air the the seen markets plan a XX,XXX from that's we've in specifically upside, part Canada, be so hardware think like we just the this

Sheila Kahyaoglu

just Okay. margin? have that do better you and on around ES, execution, any it And on then was driving color been reach think is sustainable XX.X% what to how just that performance

Bill Brown

first little difficult up proud back we're very very bit question they're was ES. X.X% the hear. the was the done; a So growing well It of But same think for to on I half. for about the they've half what

year, we're So F-XX avionics across really feel X% before F-XX, about we've about getting XXXX. and for three the again platforms platforms, see our the mentioned X%, optimism of back business, in the warfare the we fiscal we F-XX, into wins bright F-XX growth actually in the really of that and about we and those lot are orders end the long-term around the better we've UAE margins I a excited good over in year continued course particularly of good year, seen talked very, developments is in see in very going business, future the electronic

done business has that positioning team well managing of growing seeing and pipeline the think investments, results I well, through their the So hard exceptionally comes very fiscal their you're in work yes the XXXX. whole in

Sheila Kahyaoglu

you. Okay, thank

Rahul Ghai

we On kind to year. guided term continue that that years. a cost cost to next upside but out our We've from upside have and cost plus this we down we've some Sheila, said of price, we we’re guiding that August, to there out well is it there in that medium have coming they XX.X% to year laid continue back we of margins, the the the the reduction, should guidance is we to path had in XX% that seen was had outer even of the take guided so business margin as business expected XX%, as as that in we fixed of that in be this

Operator

Thank you.

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

Robert Spingarn

other to free more that and the that to once by and Harris seems synergies, $X you $X.X their I going does how how and question very LX on net, so obviously on billion is since do $XXX and in day to intrigued helps model I morning. get good process excited laid I costs talk on are are million lift overlaid skeptical flow that Bill, margins be follow-up showed, to be or bit the investors a with Stallard's the you one in there's where margin think lift that improvement forth. maybe regard with LX to much your assets morning gross wanted pressures that about but have Chris billion some Rob cash there of Hey, of they they to it have before that target wanted this and out

it we that So let's over if over and call coming three understand it's horizon? it the and how plays I that from wanted to see out chop where year number up and can

Bill Brown

okay. Yes,

of of million today years. the terms Harris at excellence or initially about and direct XX% before last that from headquarter either year there's a but shared three that it and from that with really look more happening path and as in goes next We So supply Exelis. about segments, from or see indirect cost efficiency the $XXX consolidation We've six been and about companies, the building change and million no rationalization. seven coming over In blocks still both the or net, functions we gross, changed the goes operational or spend haven't mainly coming leveraged in through it segment our through of our the the in headquarters XX% $XXX first some well agenda, spend the factories, we from function, we've coming rigor years indirect from our XX% so shared comes is center. consolidation, an all spent a will XX% see expectations this other administrative see from into our developing services, permeated other chain, of one extends facility service around not engineering we've functions, beyond functional across it it it's into well synergies,

across activity. our So and in service XX other shared centralized we of financial location, the in today others all a have that one IT now are company centralized processes,

front think on the that's upside simply end I of that LX themselves. some margin path see will because is were they and the you'll at that that come further journey

see rest in So basis so, synergies. they a through what company have we'll another -- grow both their or Harris we'll for XXX see out margins on plus on own that a combined points in side point laid margin the point us growth of on the not about XXX

playing this a story So is great out. itself that's

really I that cash. translates the is story think into free compelling,

keep pretty it of part $X confidence of free also the really in after-tax in a years, we lot three billion we're In got about growth. cash but $X is I've in think hitting I the billion synergies will cost starting from of back seven company combined days see organic or some that at working which mind the working capital post XX been took days. able will six Exelis, capital, out only XX days Harris we're of we assuming out performance. something about well This have of achieve we've to is

So I feel of cash coming combined very company, Rob. generating additional the out optimistic about

Operator

you. Thank

proceed with next David of the line question. from your question Barclays. Our Strauss Please with comes

David Strauss

in with you're contained terms the the Bill, medium-term about outlook, SX in could the the that forecasts SX in you like comment splits on relative doesn't talking your it seem medium-term? what were your to forecast of

Bill Brown

earlier was see Yes, We've in we what the revenue up strategic guidance the plan more our we numbers, the so little you see this generated little year, in year. more more -- the last a in in our SX tailwind budget, in are taking mid-to-high-single-digit. growth tailwind our our was still -- seen little a

five today the X%, growing. growing, the I is good than strong, bit quickly this it better four, over seeing in our is trajectories, growth around again was CAGR we're based think and that X% seeing are three, on years. now getting SX really what we're they're in next We're backlog replenished pipelines XXXX X%, a our they're little fiscal probably

So certainly have feeling beyond we today what would better and about than to I months been XX ago. six feel XXXX

David Strauss

quickly? you some flatten about cycle of think just there's more kind I talk you you exposure Could Okay. turn kind how is that given of concern market in address exposure you short your could cycle of out see could does budget your degree see how short the you're higher exposure, much your if short the cycle exposed business that of

Bill Brown

Corps their next to is business But what they and mostly backlog business. ahead or a seeing in modernization the driven another the us. of very, DoD years, see kind part we've lot XX%, by of the look tactical substantially also have over modernization four area as Marine growth strong, in line SOCOM the growing cycle the that we're A by it's is budgets opportunity last our short there's our of business up, well. four two but orders doubled in been items five next seen We three certainly essentially probably principally XX% Tactical coming The in in of to years. the relates way Army years, pretty of budgets it’s lot very

of nice and are So appropriations off great the trajectory our as think I we've mentioned well it seen When overall if in even items well and remarks, for I going does line that's just budget a provide to prepared as running a tailwind my I look bit in ahead some here. outlays little at us. flatten

short business our at tailing cycle see don't So off I all.

anything stronger. first getting if fact a we in bit In the saw half,

Operator

Thank you.

comes with with question Please line Carter next Copeland from Melius Research. the question. proceed your Our of

Carter Copeland

and PSPC we one taking a lot couple one about a but finally for as just continue are that if influenced for the influence can you by could through clarify bit R&D you, with that on the may about you on just second updated internal mindset? of share a a spending in color quick that a and were pretty how while give it any combined spend that wondered about -- being integration all I work Thanks. or how think strong, us entity is market is synergies, then, And through ones, and the that LX how revenue you you're Just at to obviously you you views and thinking transaction, talked are your on Bill, us? thinking development numbers growing haven't little is

Bill Brown

safety, good in I we're five share we've good, seen positive, very gaining or some sure growing very Okay, we've had a in four quarters love never still bookings. years series where have thanks, We we've is double-digits happened. backlog seen say good say row public questions, during first half of for revenue seven up I'd order can't momentum, strong the really some, here my Two book-to-bill was very to quarters, had two that good Carter. which good a in

are channel we're more utilities, in force, and couple better. bit where our a I team doing win Adding Nino performance, seeing job we've bit back over the think our state bit federal a it starting there great years, big reception we’re of and on new products. last a sales couple a comes contracts of to building the quality penetrated very better, on is good been to getting improving

to I be year. I've up, now it's six months love think on be we expecting back actually I'd good are we don't but the bit and thought really sitting is PSPC We've ever had just saying which I looking not from that's And a to early say we're but high-single-digits think a able we're the year, certainly fiscal market in too think stronger I to had a on a two here to XXXX up a great be but trend. to claim good success. trajectory up double-digits here good is expecting market the quarters, good

really but turning the great around say what to and a to in proud a of turned that growing good the off whether around has So growing business margins, top-line officially done too start, I'm the in team soon it's business.

So we'll see.

they've six get before another discuss the on ideas interesting see probably started hundred basis, On next IRAD think shape to of will little the our little the we the companies. some to the $XXX million a but $XXX very LX. in and will of revenue north $XXX north that would they of what where revenue a a also it spend, shaped, it's hadn't million together on process And XX independent the between something spend both opportunities just very seen look over very ones on like of based get and have in come combined what piece start to bit, looking a hit to priorities. on revenue shift that and into early will that basis imagine IRAD, synergies X% we on good will we our the probably still more we're and maybe that this two between or will we're teams one of in million is growth us and opportunities months, than I what question Collectively organic I at will spend starting like now budget IRAD up just with, we combined we that it based team shape

but that more not say the much I say in more today. I months next to So can on think six probably

Rahul Ghai

Carter. Hey,

add that's both what is radio some us So and safety, us the the going to point has want additional back to helping gain thing that only on the I Bill single we customers. technology a helping additional technology the that said, one public radio ERP to other have and just legacy

of introduction in introduction momentum the new us products, of radio helping some market. just is get that So reference

Operator

you. Thank

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

Gautam Khanna

Hey, guys. results. Great thanks

Bill Brown

Thank you.

Gautam Khanna

Couple of questions.

least and is what fiscal are potentially mentioned you level Vision? Night Harris in the sales you expected that Vision First again Night you for could business, guidance XXXX’s Vision Night exploring exiting Harris quantify at

Bill Brown

there this for $XXX us Night range, about. will be it's year in the to Vision probably million $XXX Yes, mid-teens margin million

Gautam Khanna

Just Tactical you. up ago be an it's air going business we're pocket in a what and air the are just much -- you we what when backlog there were years two broader the to Comps more the have Backlogs the what's looked growth, similar while ever sort see pocket backlog context a up now any be next back in it and what I'm a way at for wasn't things -- for? we prepared the a curious going over we're to just think because $X.X not was than and years the we is way do pop is risk next DoD frenzy see order of of tracking pipeline two any erosion should is XX. the curious in pipeline DoD, or and the of you year we'll you in and the been if and should billion. I'm over backlog there see mentioned that just Where international couple were

Bill Brown

good so it's question. So

to we this it's to We It's a shipping one end range. DoD the from is the continued the lot probably the into LRIP at about now of up year modernization year. army $X.X substantially million the end the we're of really modernization operations. So in of first down X-channel think back at modernization own to third second on XX% down another this modernization, see or front will trend, on momentum shipping is revenue A see LRIP so SOCOM, the coming summer, see out half we're in special year of the long we're the we it, $XXX heading radio path on we're be delivering their side, path position support, pipeline for for We're XX%, the is about continued next this radio, Manpack year. Corps X-channel the starting million $XXX of coming OT for now a next it's last the by. year-over-year. of Marine will up starting we're billion awaited Manpack,

ramp, important year believe around on $XXX the years billion. still ago front really to we're about is billion, $X.X peak they FDAP year's a So to of million, $X.X budgets were what couple end last million $XXX this the I according

look happened business. uptick two-thirds So a business, in we see the as of in be the I of our the be in what got last substantial even could more three that of in that side, just billion I next momentum just headroom business over about in in we've the what's three at business lot that $XXX to and of front us revenue in expectations the There three think the and in a range another grown gain see the DoD DoD based bit budget, years. years our years could some on million in little in with share in $X a we've

see and right to now hiccups no whatsoever but the continue DoD business, very momentum we So in Gautam. good

Gautam Khanna

on us And from tracking some could just you the should update to the related one me, last Okay. merger. be if a of we milestones

be give new of with in we advance you the when anything member the announced close? can in can the is going that XX us to terms So board board, track

Bill Brown

when getting tent, that's after HSR from won't really that's the the I tell probably new be the SEC, approved we is about the once thing next structure shareowners the probably a meeting. announce issue you DoD, going will shareowners SX to we anything proxy will pole on talking not exactly can't and be the the think in you there that we U.S. be, is board approval long the it's I meeting, by until a

be should other probably be investors seen any will see communicate announcing believe we'll in able timeframe, based to and mid events close from not that'll what we still or year we we've but we'll with be I'm again on what the So that appropriately. milestones that, calendar we sure spring by change

Operator

Thank you.

next Our Please proceed line UBS. Myles question Walton with your comes with question. the of from

Myles Walton

commentary of in are LX and hoping savings could more I'm a curious company because kind you combined outperform capital working constraining working mid-single-digit and environment is six pretty being to current if the for in you organic to pretty, days when of that's it, curious capital it’s the you flat just I synergy a difficult, yourselves seven for you go growth was baseline your back juxtapose just achieve growth think the to of mid-to-high-single-digit if was or growth what against? reduction environment versus impressive particular I'm number as synergy

Bill Brown

days or XX to about of out I on apples-to-apples sitting at was that I hearing six working capital, basis I at so XXXX, the most a Well, are about XX, We're way I LX XX at look go only I $XX the ended Exelis, we're do with there's of we about out around comparable of to day more we look days that is XX took combined million think calendar Myles end had think think less, opportunities but beyond per at days assuming we or about seven XX. was XX, that. opportunity

a cash opportunity lot of we on for see is our really have think specific other higher team there why three to do over unbilled, on I simply on might have of years, opportunity than course a a growth there's at of that of working and to capital locked that we down. But there's get be got believe a lot three down. trending confidence growth. coming where specific there do opportunity side on to billion consultant to years the facilities certainly look Chris a seven of say that able the are we the side take in better we talk that we'll is much inventory rate, capital about the of than that some do where see just opportunities of both do through XX% of of lot on in cash top of from anything team kind side, probably, spending some the do organic and normal our day I sort -- look tax growth don't we've at We LX And action bit business we those is that. the clean And on to normal and capital organic that's drop to to bringing I improvement little we've tailwinds I Harris a $X we capital probably us assigned so us probably six payables, be things it a time as entities little taxes, and spending, inventory, items, a an conservative achieve gives working probably be is think

Myles Walton

then XX% of And does what in capital cost you terms do quickly think your working that synergy one, synergy come target that your how year your is in of one, in for percentage this off?

Bill Brown

million on question I to more see couple I a -- think still to guess, XXXX, but will we'll XX% probably be basically I of it's see more of $XXX about that's know the all we'll wasn’t heard this in will So think I of next days XXXX, I XX%, going see six gross $XXX suggesting the segment so the the sure once we're happen synergy million we'll seven really year something, we in and the that's indirects. come than working of think consolidations don't from. I where we're first CHQ terms don't and seeing be days really But calendar XXXX, some we'll And to I anything more over really in going guided that, that in three see it year capital in years. improvements we'll is something see year.

Operator

Thank you.

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

Jon Raviv

and readiness modernization, driver so readiness everyone. and pipeline morning you've being bit budgets expect about of what abroad? the can kind on backlog, seen your year talk of and your call, going here versus of this on more you buckets big you those Bill the just prepared good both both about remarks, now you your and business what CS Hey, two out forward terms this a little not across talked modernization, for broadly last demand in a year

Bill Brown

Actually, part front sorry. question, of I'm Jon, I your the missed

Jon Raviv

down give how mentioned between of would which and and I’m of modernization shift there's stick readiness now one more kind sorry, parsed flex readiness piece towards as business you modernization, you than a up your rapidly? could would which real think

Bill Brown

great that's Jon, thank a so, you, question. Yes,

opportunities piece bit year there Air Army, good well the systems we brigade more base we readiness a in that a last had we year remember of on saw their was year, as security fielded of the this this a one we last demand, little see that year saw So year, terms support. lot a with was Force really TAC their forces, may another we with couple as of

So to the to programs more specific readiness budget discrete think SOCOM year Corps, HMS the a the you're SOCOM now items. Marine in to a into specific Manpack I budget that's the starting are that we they modernization, shift over stickiness handheld are program there's on this there's right lot exactly

more of IDIQ So there's both all IDIQ I vehicles. are stickiness buying there that, think lot off services a the vehicles those is to

in coming buy, the into very year. So to as year-end are based more clear they predictability how good what's they on in test, expectation saw budgets going we out what radios next really seems feel want have than so this SOCOM have when those to Army how feel that's want laid that very the a all plan continue we want about off to they that to to lot happening of the readiness. of that to and a There's

more your predictability to I stickiness So a that's little right, on point exactly and modernization. we'll see think

Jon Raviv

what this have is and conversations budget the to in want the to the plan? as how money in case light five-year what supposed think to months you some as reflect XXXX on changes getting been and they how for And in characterize in I to customer saving always which do FY DoD approaching the an business they weeks some, over focuses focus is able will both for less deficits, of you customer as would seems your recent more on be prepare

Bill Brown

have which drive affordability but spending way. that still live want is right, not that, have think makes significant contract Well, on is the to up continue the to capabilities, we the also background LX sort the conversation invest, affordability of still they to There innovation; a that all of but that's according our at less money They the coming wire end DoD up innovation, we field conversation around key. to own conversations every these our step are in last sense, been develop around industry done these might including faster you're I the new those financing on should but had things to a perform, the is done innovation, has so look a has they ago than are recently switch industry opportunities -- or is live two a with year Strategy, are day, want for to in do different that a National of lot war they some more to going feel a budgets capabilities, it's Defense capabilities week. it are lot fighter, the are been parts of conversation incentivizing the speed meetings basic there's

Operator

Thank you.

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

Seth Seifman

of on space have bit possible and about future talk been about morning. talk much degree good Bill, space area the little budget exquisite? pointed meaning performance that, that's and of very maybe you important you if kind extent visibility I growth, extent an you that the platform very HSAT wonder And in more which obviously the to of which you of strong that the could last a quarter the has and to meaning versus small the Thanks the driven -- business, maybe see the the sort maybe the to first point where by and going? of out

Bill Brown

DoD. we've our the of This years business it's orders within to growing very four or done good for had we've in is with towards but we space smallsat business, multiple or paying space longer. hosted in work very, good very that domains both last start, get ground strong five on just not space curve strong investing have is had the very ahead participate parts that been been this on that it the one now good. Certainly in dividends, and in IC as at, the the good, of initial We as customer, something different smallsat call our we've the well are classified success it's customers has in is look are investment it's very, in franchise. trends Well an general, been is other pipeline the payloads a really

demonstrate We with of So and couple it's ago, all mission. The HSAT of performing ability very to purpose manage investment news. that to Harris months launched an was simply it's good end-to-end well. drive

facilities credibility end components, provide So year all to all are is be do were proven itself two launched also and secure the and of as from classified that now they to the smallsat and able some agreement ground build well. launch downlink performing at all satellite there. command-and-control that of There our a well sort another last

that's are on still momentum space, That XXXX So being being on built see architecture. in recapitalize to we've growth that investments again and will drive XXXX seen in of great XXXX. XXXX our also into there towards that's space and I particular growth this in exquisite side, this domain, our continue more and growth is it's exquisite from a big said continued a all resiliency driver good

a the providing from mission. tripled it's in and now moving mission good component has the ground-based full solution on quite again a years also that's So adjacency to two last that a on program whole different over size,

much that which last on that sometimes the takes piece of the full And we So solutions, overall lot well. that's in budget really it five is as go building components moving and IRAD, but classified us investment after over it from to allows to the or working direction are been sub-systems a smallsat to from this of way four down. bigger is mission sometimes your years we've by trend takes this own moving end-to-end a growing launching

across successful, that of Gattle the there very and the is team direction his this team really Bill in we're dimensions. these been all and moving So right have

Seth Seifman

area I longer-term that speaking and were over thanks you tactical, providing potentially hasn't Great, when further as in award historically, think just opportunities you out an big mentioned very as I’m the Tactical? airborne part there are airborne see been wondering earlier about there one that or for last awards opportunities a in the an of and just franchise growth you

Bill Brown

had for last we've strategy has Yes, a three growth investors. agenda, articulating growth this just been and been, the with we've that years

we the been across one side, We a in communication saw business principally both of systems, two radios the is radios, a winning adjacencies, growing on ground and growth with ViaSat been systems, We've in Tactical been opportunities on tactical airborne it's other and have in it's successful very, radio dimensions. business systems smallsat the terminal, that's airborne and on we've business well. the on airborne been early those component very

it with acquisition for providing the got X-channel we ARC-XXX capability We well. our and embed Exelis. Exelis ground very in us take into been radio to that's opportunity a air as doing radios handheld opportunities growth radio in data an have well important the a tier as some We see from the as links, to aerial business of

think and between So move and the airborne ground with certainly growth and is this even tier sort of tier the two, this as in vector future is for continue us connecting LX. going to to merge opportunity a good growth the be we more a so they the for Harris

Operator

you. Thank

with Sullivan of proceed Josh Seaport with the from comes your question Please question. next Our Global. line

Josh Sullivan

there some within your you what space, kind classified seeing the give trends programs, little but that more related budgets of growth gets the on Just the classified just most you're what of clearly that? the budgets and is the are within mentioned budgets of top-line defense focus granularity to

Bill Brown

we category across towards be data Yes, and money increasing four like broad intelligence are budgets an things national open we tend classified, and generally money going growing growth towards so a those in area over more well are the lot funding line they the certainly last has year, can in resilient individual they get bit more MIP more on years terms intelligence That's and turning programs and we things that again the item a up our that, from a three more been it's that little seen a we're budgets putting last intelligence the these or don't of spending, we've of funded, talk the call been into last to like about have that of couple I've lot percent basically the But is NIP the superiority. it's been against not the in seen that getting of a community. benefit billion, we've of IRAD space seen program, smallsat. the total military what the $XX

over years, superiority architecture recently won brand communications. your grow, business space three some protect that we we talked I the how last So a our happen we've to and four seen about we or bit have opportunity on counter

becomes on the last where kind budgets opportunities And well perspective years the internally classified that ways there's on adjacencies, are the moving space that So information time. been company of five well. areas over well we've within as focused gathering of this capabilities things in to as as that where it's gather -- from those over are find the our to that the the a and or and is ground harder four

Josh Sullivan

like? on just topic, here, three smallsat overall going look launches you believe of orders hand, the does and pace XX did then the what And what's mentioned you I pipeline forward on launches the maybe then

Bill Brown

that probably to know determined they or on launches a still is other Yes, is based series right get be be to particular of I secures need part later some going see on that when to mission. those of be would we'll customer smallsat the this the when for there customer year, calendar so

them these going ability that's So one capabilities, and I terrific provide but probably and years prove to and will will credibility launch satellites two cadence successfully better here. our determined over to really the I build out next as be happen to think that to it we much you'll and perform for think see

So the XXs. the we're The XXs constellation in going hundreds starting in to not from and or will be hundreds. now XXs

ability slow manage So see the ability opportunity we out the again on time prove be customers starts that company our very could big a for these capabilities it we have to that and smaller do and over a to platform.

Operator

Thank you.

with Global line comes with question the Alembic Pete from of your final Our proceed Skibitski Advisors. question. Please

Pete Skibitski

in how are kind question, kind market some different curious like of Bill, options be big in like Good a morning as growth. it being getting to great to unfolding is follow-up Hey it its great the guys, you contractors quarter, of guys substantial? keeping last there seems see given it's a running the open, I'm just into the you in kind leaves all sounds keep that the smallsat or on arena going just to few competitors of fashion, you do of pretty that

Bill Brown

that the think I satellite we're our launching pushing another are your into not or not and bus to a area, it's capabilities more offering. specific going you're the provided bus a other CubeSat, Well, lot a the bus I vendor think substantial like Nanosatellite securing we're more it's lot there's of on right, up so are that the around be from antennas, in itself It's embedded two I are it, lead. it's players the commodity small there's the more really response or of sophistication, download lot how platform, capabilities satellites, information, so payloads, you the and pretty technologically probably like you a we're capability there is the it's year think manage more are these advanced how

advance at us is to end the focused the a really hard drive day down that. but cost doing has and on technology, operating, of capability few small continue team continue gives embed the are credibility team on more some satellites We have to that the that the that's so to what work to these to

Anurag Maheshwari

joining great to for the touch a Thank feel with Any Thank in you me. get please call. everyone free additional day. you. Have questions

Operator

concludes teleconference. today's Thank you. This

participation a your day. may your for Thank disconnect at You time. you lines wonderful this have and

L3Harris (LHX) 29 Jan 192019 Q2 Earnings call transcript