L3Harris (LHX) 30 Oct 192019 Q3 Earnings call transcript

Company Profile

Participants

Anurag Maheshwari	VP, IR
William Brown	CEO
Chris Kubasik	COO
Jay Malave	CFO
Sheila Kahyaoglu	Jefferies
Carter Copeland	Melius Research
Noah Poponak	Goldman Sachs
David Strauss	Barclays
Richard Safran	Buckingham Research Group
Gautam Khanna	Cowen and Company
Robert Spingarn	Credit Suisse
Jon Raviv	Citi
Seth Seifman	JPMorgan
Michael Ciarmoli	SunTrust
George Shapiro	Shapiro Research
Peter Arment	Baird
Josh Sullivan	Seaport Global
Rajeev Lalwani	Morgan Stanley

Call transcript

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Operator

Greetings and welcome to the L3Harris Technologies Third Quarter Calendar Year 2019 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Anurag Maheshwari, Vice President, Investor Relations. Thank you.

You may begin.

Anurag Maheshwari

Michelle. you, Thank and XXXX everyone, our quarter third Good call. welcome year earnings calendar morning, to

On me call COO; the with and Chris Brown, Jay Kubasik, CEO; Malave, CFO. today is Bill

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

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

the financial replay more quarterly website is filings. A SEC information, and presentation, our measures Investor the please For on call where GAAP of materials see will measures non-GAAP Relations the included our comparable the available. be in of press release, of also to reconciliation section this a

and the on combined reflecting half and aid prior year-over-year with been XXXX Harris as basis LX To the as results during historical together had discussions period year-to-date also segment results businesses LX-Harris under a comparability if four first combined operating will the be following result prior with operating as merger, structure. well

over I will With you. to turn that, Bill, it

William Brown

Great. and good everyone. Thank you, Anurag, morning,

flow today, non-GAAP and $X.XX than earnings quarter XX% XXX per results cash margin results These XX% of basis last XX.X% cash calendar the with more over XXXX to performance earnings we our free QX year. $X.X per with points revenue increased flow three of XX% on to up up up third doubled share reported Earlier Overall extend growth. company growth strong XX% free revenue and strong quarters non-GAAP billion. first with share on XX%

for finish the the last and funded growth versus backlog was strong year, X.XX driving to for up us of Funded and quarter year-to-date, X.XX book-to-bill year. setting XX% a

and we're well progress priorities. our with strategic update segment I'll combined Chris X, start Jay company our great So we're against will provide a on off as guidance. results Slide then details on executing and an and begin and on a to new

savings higher previous and on savings in exit $XX remain run gross of $XXX cost in giving year rate integration XXXX, and synergies, us achieving million toward as and million than we're both gross expectations tracking million we confidence well $XXX in in XXXX. capturing laser-focused we target First, calendar our and exceeding calendar

to margin of addition developing working near-term the and a operational productivity new muscle benefits set three-year driving EX. second program Building to period, institutionalizing on also in to the our excellence synergy progress good making organic will of be including In expansion and program sustain cost management. well up beyond and R&D enterprise-wide priority integration execution, us we're called efficiency, capital projects, this essential

calling an Third, a we're through model, new what pivot shared the practices. as we're shared of culture best performance and towards enterprise leveraging we resources, building power services, shared operating the company

first the our in ideas, to our at and and portfolio stage rigor development accountability end cadence out review decision-making. of metrics convening process engineering investments a a summit gate basis. At roll held begun technology on top also instilling cross-pollinate our to institute business September, aimed leaders enterprise-wide and our XXX detail greater to plan We've than more R&D we company-wide manage

technology adjacencies. in in success and increase content, it potential revenue it's expand aggressively and And synergies. capturing to share smartly Fourth, revenue to progress recent we're I'm grow early, and investing our by still and encouraged while add

fleet-wide potential and XX-year billion. proposal merger, proposals the warfare XXX cycle for we've $X domains, One supporting about value a In electronic in sensing XX Force Air electronic space warfare just lifetime days since modernization the synergy-type upgrade is . U.S. a submitted revenue primarily program, of F-XX already with

solution the offering that performing, separately. EW LX have Our legacy low with not from Harris from signal could provide high customer risk proven an we capabilities created combines digital receiver innovative a to

double would market and phase of we the position. one domestic for prevail, selected are if two the development down we international our initial and to F-XX fleet addressable established September, our we add companies In ultimately

From we grow combines early to space million technologies in study over an $XXX from optics space to that project and with sensing value. for were legacy awarded companies, potential another the bid, electronic solutions

So early of of growth merged pipeline wins opportunities, growing potential encouraging a validating a few strategic and company. newly the the

fifth friendly maximize free is cash Our priority deployment. flow to shareholder with capital

In sequential the through tight a XXX% flow million improvement generated quarter, prior $XXX in and cash of we in working year spending, two-day over management earnings, up capital capital. free higher

free XX% generation of last cash for with quarters flow period first also the to year. in less improved year same We've of the than delivered guidance cash about linearity three of XX% the the compared

we And in share third shares the $X.X repurchases calendar on of shareholders which track half us keep in million including buyback to $XXX billion of second return quarter, the in XXXX. $XXX million to

And finally, technology portfolio margin, generate high our to win businesses on we reshaping high focus where growth attractive differentiated and returns. can

transactions proceeds begun net the ongoing While occur several we've as businesses is offset assessed this plan use our And process, to shares is to dilution. announce and marketing an as we've they to non-core. repurchase that

billion, So the successful quarter per free previous back against we're guidance flow earnings share $X.XX with XX% to and solid strong higher second strategic the growth priorities, a for of performance in cash increasing third of execution range. revenue non-GAAP summary backlog, approximately our the and on of of our half end $X.XX guidance

to anticipated growth with into the double in than and line digit XXXX we in we budget assuming driving margins digit cash XXXX and base mid-single expanding Now higher per and a share as earnings continue growth. are off agreement, plus go enacted SX, expect we recent appropriations revenue

financial operational provide an with turn on Chris and let me So Chris. that, to to it over segment you, performance. Over to update

Chris Kubasik

good everyone. Okay. and Bill, Thank morning, you,

to to driving capture of integration right pre-merger joint due we months comments, out of initiatives, by accomplished the in the We very in business work well Expanding Bill's process. performing EX common large enterprise-wide gate on are other a are team. also development and part addition

working capital effort performance. the improve and We're practices to a incorporating best company from on bottoms focusing across we're up

growth, our generation. cash profitability initiatives expected momentum of these gaining and All enterprise-wide contribute and are to to future

strength operating X, increased to quarter XX% turn On segment. by Slide Wescam missionization and now turret from year-to-date XX% in the ISR me Mission by results demand revenue Integrated calendar Systems grew systems. Let for and global for

Orders continue in our electro-optical, book-to-bill were increase as we maritime resulted quarter solidify unmanned Safari big franchise. programs, to This year-to-date. enhance on X.XX for and share position of strong a X.XX on our and the

driven mix. Segment margin and up operational XX.X% performance resulting increased margin to in This XX% the solid operating of program offset and integration a XXX excellence, income was savings, quarter, basis points pension was expanded income, volume, by year-to-date for by XX.X%. slightly

Slide wins ramp and XX% increased and up F-XX. platforms, on including year-to-date content a from Systems increased F-XX, calendar In on for long-term and was Airborne production Space X revenue and the XX% F-XX, quarter

solution mission margins was order to based, momentum a basis for a to of up year-to-date. in Segment addition sustained and resulting broad book-to-bill expand and points margin X.XX for XX.X%. of was growth XX% In resulting operating space, into a as year-to-date in we X.X expanded the XX.X% in income classified provider, full quarter, quarter XXX the

was systems robust integration partially and higher performance driven architecture investments in efficiencies, space volume, by operational technology. open advance higher This savings and by offset

with Eastern XX% multi-channel growth from Europe support the communications modernization up grew of up year for driven in in X, ongoing Europe. border to early Slide the and systems, solid tactical Moving revenue on XX% quarter by and X% growth increased in revenue and DoD the was security in XX% radios safety. international and adoption up public communications Western Tactical was

stronger again Revenue segment sector momentum each federal was quarter gain year-to-date, book-to-bill Order as to with state PSPC agencies. on business X.XX and as with double successfully once and up even was utilities strategy. in the continue X.XX digits and the of executing its for is share local and

order. Tactical utilities, Public and EMVGB is is maintaining incumbency test Integrated is share and initial in significant in a in in modernization broadband ramping international, August Vision DoD Systems up legacy increasing certification made on platforms, resulting deliveries Safety and received follow-on

the last with million week this in handheld handheld also milestone program radio we million the Not the the rate program. $XX full important the in by for achieved Additionally field August. million is only core successful a on a shared of SOCOM SOCOM of early significant source test program is step architecture a award production but an following $XXX order the SOCOM manpack sole $XXX

radio is programs. The X-channel desire in facilitates several investment common our modernization future architecture Army for the international foundational customers handheld and the SOCOM The radio capability. for also interoperability and

offset margin XX.X%. XX% income the XXX from more operational points from and volume radio XX.X% the and for was excellence program. quarter strong The resulting expanded than of up modernization impact operating and the tactical mix basis derived margin Segment to a year-to-date higher performance ramp in

Commercial and slip Aviation the full Solutions commercial months. right. X grew Slide in in flight net result to The flat on declining aviation the a continue in Lastly while commercial to in is defense orders as aviation we lower simulators quarter of in volume nine for decline for Systems, Training

XX we’re we now half. simulator We single received the of is digits awards expecting our to pipeline in lowered guidance. in and bookings, half X first for the segment our second in second award And which timing our the reflected strong, to have lower uncertain due remains expectation although half revised

operating Tubes performance performance resulting business, Traveling savings quarter, expanded primarily XXX offset the from by quarter for This X.XX mix. year-to-date. operational Aside driven and for to strength X.XX of up XX.X%. of margin improved the Segment our and was margin year-to-date simulators, order integration the basis XX.X% a income in was resulting Wave segment good, by was in partially book-to-bill XX% and in points

with at shortfall up and our I'm four first quarter pleased the LXHarris AS. of making in more very for three with than the outperforming segments

as remain our increasingly And customers internationally mission-focused, outlook. Our we encouraged mission of domestically a supportive company. both and company build merger the solution-focused by I'm

turn it Jay. I'll that, With to over

Jay Malave

and Chris, good everyone. you, morning, Thank

results $X.XX. interest. strategic results quarter XX% XX% with this and and against execution third on $X.XX headwind quarter solid intangibles, by Of for X. draw EPS and of Slide the taxes, share increasing and synergies pension or came priorities a transit Successful strong $X.XX growing growth, net LX and revenue integration offset from from our Recapping program higher from count volume, elimination execution

XX. the the top in half performance, strength are midpoint XX.X% at and tightening on line, our outlook CS the lower revising the second of from volume half we AS. we with are SAS On approximately to X.X% the to this XX% second noted be revenue as range for in back up of Slide previous offsetting Starting of

XX midpoint combined half to or interest guidance expected previous lower to the in Second XX.X% higher basis pension of tax $X.XX income. is XX.X%, a be points to $X.XX half to approximately total second up guidance EBIT prior of expense the from and expectation from cost improvement results synergies driven $X.XX. EPS company with by margin This $X.XX,

XX%. repurchase around XXX to half count And reflects to second bringing half, billion tax share guidance EPS second for of XX% million repurchases prior the rate share This also versus in our shares. expectation $X.X the effective

second cash capital earnings expect two free the range to $X.XX high end billion at day three a $X.XX working to billion, we and half, reduction to our of In by the $X.X generate of June. billion approximately from prior flow increased of driven

Capital to expenditures or X% expected revenue. are be $XXX unchanged million and of

around for or up million revenue approximately margin As $XX noted is expected of full combined XX% expected share. year XX, than and be be on cash with billion to EPS is for about EBIT Slide the flow $X.XX company. higher per Full-year last about year, $XXX the free to XX.X% approximately of

pension LX interest share EPS $X.XX net on as and intangibles bridge $X.XX improvements, $X.XX well in reflects and full-year and of as higher net expected from per operational EPS $XX of synergies, to the $X.XX of volume, a - and increase Slide total $X.XX from cost of the taxes. approximately Turning income, elimination XX,

and growth Switching XX.X% revenue aircraft by strength driven missionization. to is second guidance the now approximately versus XX.X% Segment for the margin imaging ISR unchanged of in approximately and income. up in XX.X% cost by is synergies higher In airborne systems previous half guidance IMS, segment to driven expected be outlook. operating at pension

is segment year up approximately previously XX.X% in margin on aircraft expected SAS to revenue, operating growth space. in versus operating be XX.X% by be Segment platforms full expected XX.X% now driven up approximately of revenue to with the approximately implies This half classified margin long-term XX.X%. stronger approximately up XX.X%. is second

tactical. half approximately margin operating XX.X%. orders guidance with This versus than from revenue year revenue modernization DoD previous is expected implies growth resulting approximately to expected of be better and second CS approximately X.X% now up XX% the of XX% full segment of in

segment Operating to margin driven guidance volume, be XX.X% of synergies, full approximately previous XX.X% margin of approximately is year This operating with higher operational cost by of approximately versus and expected excellence. growth now XX.X%. implies revenue XX.X%

by versus Finally previous believe be sufficiently with this slower for lowering AS, uncertainty X% simulator guidance XX de-risk guidance, to second we now related with the we guidance the are half simulator up revenue sales. sales. business driven we approximately of expected up revenue that have to At

year growth XX%. of unchanged operating implies is with approximately segment full at margin X% XX.X%. of This operating Segment about margin revenue

an strong a summary, in combined outlook the improved So reflecting start for company.

ask that, open to the line I'll up for With operator the questions.

Operator

And Please Jefferies. comes Kahyaoglu [Operator from proceed our first the Instructions] with question your of Sheila question. line with

Sheila Kahyaoglu

remarks, prepared in your synergy XX about that $X in you Bill, total revenue billion lifetime value. proposals mentioned

two wins? growth do have and profile about the How or portfolios, business opportunity? seeing As the how maybe in change you the the year combined think the potential you most of guys you two, they the over coming where are do

William Brown

given selected have in. It's XX encouraged, on proposals we So we've of but pretty fact very are days two them. we're especially, down that been early the that

this good So I is, think, news.

the value, over next in lifetime billion So so that that's a we about read XX-years. value, talked $X

a work, bigger the awards I that eventually small an upfront to think will receive these the over time. of or way into lead there's the incubation bit period, things studies opportunities

So XXXX, bit little I maybe beyond getting bit that. impact, think to minimal in XXXX and probably ramp should a think a it I more

went tracking we're that here. but through XX the I there's So total ideas about XX,

right we to of But sensing start number will the an see mostly mostly of complimentary They months. broadly coming technologies. now to it's good more news hopefully relative come and So space next the leveraging time. hope and really we over domains, electronic over some encouraging warfare see into

Operator

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

Carter Copeland

and just behavior I the give strange there bit that's couple if seems about sales? the that? out in some training color particular for of maybe commercial I just pilot I given could wondered you talk just if One, another talk ones. wondered a customer a the wondered reason one realm, the about quick you simulator on us if in slippage or little It Just all

secondary set each that differ from to what think just unique kind to a one, the were what's EX. on have of LXXX, on I'm And or as you together? opportunity efforts curious and trying accomplish HBX with does that How the you individually you

William Brown

So maybe simulators. Chris the on on take the will piece

here program. Let EX on the the me or OpEx quickly

So execution. really muscle and the after HBX, go Harris across had improving EX We to to theirs LXXX. is operational the chain ours labor called combination programs. programs. a LX objective that on-time operational And best both in program savings, excellence was as is both of And mentioned supply performance, I develop excellence remarks, my after and quality reductions, go after go delivery, really,

to All of winning those time. keep things over we need do

So cost organic well really regular so we we doing integration. And we know want quality continue build we're they'll going to be make an improving is once integration integration, beyond over the beyond get separate that to what sure muscle see that we to the with that merge we side take that three there’s goes margin next on together. period. out cost expansion couple It opportunity synergies. by years, what start to from But side

really trying to we're And do. that's what

people got this. start. we're think to We've great off working core a I

us a across think have great to job. we're I a Company, start. driving We hire, doing really the a new off good And

So, simulators. comment I'll Chris the let on

Christopher Kubasik

MAX the with spend a the fourth companies we're yet I - of of and in prepared as in intent half think signed remarks, the such. three And issues is have those lot As quarter. of aircraft. the their training the a in secure year, I have slowing to said and third in we really letters while airlines result the quarter. what we only seeing We've down my probably we that had the of one first And pending are the discretionary

some and there's still pressures As financial you on that's surrounding that. the airlines know, uncertainty themselves put

- of we've We simulators. need We've cycle we've a them. sell EX, been of time able and the the on and had speaking So actually reduce progress cost just lot to go ahead to the now them. building of

a optimistic. still still So good business,

somewhat our a outside Just market trends with here little in control. dealing lumpy

William Brown

The that here. comment orders timing and difficult are lumpy another It's to is just solid. predict. pretty is the Carter, And that pipeline the just

take the we XXXX. and solid. one year is pretty out quarter right that pipeline thought push or revisit it's of But to it left, And so just the it to for prudent with the

Operator

Goldman next of proceed with Noah question Poponak Our with comes line Sachs. question. the from your Please

Noah Poponak

synergies, get to kind at you of still achieve more XX incremental of than or operating to thoughts think the kind cost you're if updated the was yet than total better your where this take margin a you of get just XX. hoping alone, business And you, XXX you exit I least, not higher the basis that. long-term, points then because on to can have year at the going little

continuing And of, had beyond improve. to the then, temporarily And a operational the couple, spoke synergies. Bill, improvement each business you that they pieces going depressed were looked legacy to drumbeat of just like sort

starting sustainable mean, a is years So, out, operating to I XX% business? five four this then sustainable but margin

William Brown

what optimistic very thought. in the half. our year we second on half back as It's far here raised about of guidance better the in we're margins seen Look, the we we've so than

this Some the very of is reality from good news. is is, some coming But together pension the team well. coming

Chris and we knew from here we working than I number of We're getting gates can and quickly. out months had we back thought. bit faster This been to integration. get time of goes a we the the the of out gates on signed a for little

a some the of ideas been little So bit. have pull forward

run put rate, gross the at least, savings us million year. Exiting million next north $XX something in year at $XXX of

next expansion see So we year. will margin

We will from integration still the savings. it in certainly, have continue tank, grow. think to I gas more

the bit there. suggesting? be far out a little numbers it That's Could you're

again expansion simply margin because job tailwind probably integration next driving into to keep and the year. We'll is see on us of year. every savings. day and just it behind see XXXX We'll Our going every XXXX, it

of and mix customers from of and programs. the lot growth it A development new comes

need track business keep fund of we investment a our some keep the So on as well IRAD, in to in that. BNP We'll close to in ideas. as activity, growth watching revenue

we'll more Noah, expansion, think today updating So, out. margin we are started think, you I keep over encouraged about I But time. we

Noah Poponak

next really could somewhat segment quickly have - follow-up rates people I just to on some If I systems aviation the the level I growth modeled think situation, just want year.

just to help order with right that CXX the for on shake comparisons in be level And would change next And piece? ahead can will everyone then of an provide have any coming effort of out you training magnitude you the how also, get the in out, year simulation the setting so kind business helpful. of piece in

William Brown

So, away. yes, go we comments, I But CXX overall, my about drag - mid-single digit will talked plus.

on based just the at where we with LX X%, SX, are X.X%. we're at in the So

it's coming So and XXXX, SX. in range above much it's in base a that $X.X of the about higher billion off so

So into next good going still expecting we're year. growth

think sort both see cycle into the I talked pretty communication more And with in we'll of CIMS part other next pretty business we'll Aviation see that a and of systems about continue trends be short three little the Chris will some well. than as the less probably systems bit space to good of middle, doing being year.

I don't major segment. pretty drivers those into macro across are within a think reality, the detail the segments. I'll more level the four go the any at But

Operator

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

David Strauss

question. Two-part

is of despite on the through. in Can than way going there? all, having the of in did quarter exactly just are what margins, explain synergies in coming what QX the on you you fourth they First implied more lower

update quarter. just days then on in XX about down how us XX and to this I you side. the of in working reduce overall working from capital capital to capital target flat to working were out the longer-term Jay, like have thinking XX maybe terms it relatively you you days? you're target, Can think And there looks

William Brown

first Jay. So get I'll one to and let pass the it me on

BNP. It So, to sequentially cost additional investment from some as yes, QX. really R&D of QX both really offset QX, big good see year-over-year. coming supplier from synergies investment. QX, we in it's steps And higher QX do in still in by as well in chunk in performance a Quite down going up coming

QX. just see investment little So sloppiness good ideas in really of there's busy additional to And that but in out. a are step of measure our some really up activity. here we QX We're of in in it's opportunities investing invest, bit from a coming QX, on the BNP

So working hit let Jay the capital.

Jay Malave

David. almost basis Just XXX a did points on in XXX We're in We quick margins, points QX. basis QX.

similar. the fairly expansion is So

QX. of a just We’re in little starting up lower a bit base

As far capital, couple got in working as of that we days achieved we’ve quarter. a third the

at be we’ll quarter day a the flat mentioned, the I maybe over to term. longer fourth As in

of us seven, of kind the still $X days holding in billion to XXXX. We’re to the reduction eight on get six, to

has than across nothing continue our really Obviously, our our to to communication what we that changed objective working our is were it do sectors. now, So capital from better and where But that's do holding just in there. prior internal right we're we and initiatives businesses the to drive before.

David Strauss

Okay.

William Brown

the and chime just with the general the down managers to management in have and and improvement working at we level, through I'll And ends program education goals organization. the addition X,XXX and the program capital operations and and in specific finance we're say really managers begins pushing

down, So of a effort on and part improve bottom capital. up working focus to it's top

David Strauss

follow is in like the it? IMS right guidance, talking And these up. mostly are margin and think it Bill, - about would quick a look SAS, way from The investments the about that just to you're

William Brown

places, Yes. A bit the That in - but little yes, two right. the mostly two, be primarily other CS, at correct. would the that's

Operator

Group. Please proceed with your Our Richard next of with question comes Safran Research Buckingham question. the from line

Richard Safran

philosophical performance building up you Slide X. Another elaborate grow culture your to here, strategic and new remarks or revenue open on question could a on

I and are innovate. you're less less the word the nimble of there's the its innovation to using gets rule able a bigger a aware company clear innovation. think But constantly been that thumb benefit of that substantial is and works you're from what they against and all Now size the

on innovation. incentivize at bigger So invest in going bit more how and But a you're LXHarris? going innovation a you you're you're to I much say thought foster to discuss might

William Brown

a is winded what and fundamentally of good bit and question time on. the on but of a team that’s rest the it, long I Chris this and be focusing won't senior are Richard, quite I So

building just organization. want It's in see the the we culture to that

Going years is ago, has moving is operating the an back company. intent been went This within company. that operating to of clear from eight path statement towards holding an on. a company organization That Harris is Chris the a

that, means of more the talent centralized about of I resources, coordination the of things of technology, we're that spill of with shared lots the driving change a leverage that's things I the lot where culture off we're create. my the That And the talked remarks, trying And in organization. organization speaks That's that to enterprise. there’s to heading. fundamentally think to across services, power

flows Harris doing. very each R&D where a segment into back That's LX thinking years of developing been ago, also plans siloed. development. Again and by how we're we're number to what That R&D about was has R&D

share towards of moving more to at sharing ideas. together where we're end We different of integrated ideas started We're an September, model company. our across technologists the the had

it really structural in embed agile, things to of capabilities So innovative how cyber dimensions. the or - all tools the is across able through it remain that how do. organization share look, ideas we comes AI us or waveforms across like to be we for that with up in we multiple Part enterprise on set

the organization. programs, and business process a it on making is a investments stage across of Part for gate common things cases, sure going managing good developing in portfolio there's so trading processes to off

and need. culturally. Jay, being on of that from I is, - of of invest going part lot ahead is and Chris, And just ahead it to willing come to of innovation being curve the a then step And just forward

mentioned quickly different of we're them. we're Richard, long-winded It's that that's to how been a the longer to now. We've to delivering we're think calling answer today in than incentivize fundamental little I to especially of fast-moving, world is I innovation then it’s in a and part affordable solutions course It's it agile, innovation where reality, how this or And willingness wanted geared remain not in type organization selecting affordable we we're DoD the that. toward. just with LXHarris the demonstrating do people a went Look, it's you and is of moving but innovation. a where creating I we're

Richard Safran

on sense like and the for, revenue just of here, selected a you potential down here, wondering timing. quickly pretty a that is and a this size modernization Space Airborne because because and F-XX if it Just give you sounds synergy program could large opportunity us were

William Brown

several going Look, you couple know take Yes. a of years, years. it's to

the the occurs. fact down is selected late, were mean EW in legacy the little I two In So got for F-XXs. final know, platform Harris one of we as but Harris, a international selection program. the has bit you we which, for

and the selected on market. be opens not but to are one two. cost within per months like on shipset. it's aircraft We that down opportunity. billion, something a by be could domestic over substantial how time encouraged cumulatively we're just a many F-XX that the up that We the of it few depends think $X But a pretty being at We're working pretty aggressively and

Operator

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

Gautam Khanna

A couple of questions.

identified. can you you the wondering give have I sense that divestments First, the of guys size us of was any

William Brown

encouraged think different think going and about be very do we're today. relatively the short to the would don’t the as on we’re I prepared that with you sort management in that I'll we've board What of team about period for of But a thinking and is the how No. number think to it we aligned moving We're size of on investors. forward, to a any then do, premature transactions point. give announce them quickly I a fact be We'll time, I'm across we I target portfolio. businesses. go as the

Gautam Khanna

will Secondly, again? are you targets. cost When you address the just head of wondering, guys those the running formally

William Brown

coming XXXX Yes. the give Scott. into think gross I at up and longer tracking And how run you will we're at are the time rate above and the sense this talk release, what you again that XXXX, makes if million update as $XXX to XXXX where look we're give about million an earnings gross on magnitude, as we'll a We’ll year - much. so, numbers that term were given if pretty we get a exiting and it good every opportunities and probably $XXX we seeing probably

shape more year. early a next probably we’ll So little that bit

Gautam Khanna

you what over And and could domestic, pipeline you. kind also you're just Thank walk hoping through I RF there bookings and the next XX your for months? was are the what seeing legacy Tactical of expectations international,

William Brown

Yes.

me hit on one let that pretty quickly. So

we're of It pretty, still legacy digits, side, up tactical year. growth. is RF - the the pretty front was low the on So the Tactical for second mid-teens good double half the seeing business the for in which

get Tactical So calendar that range, in business up of the will XXXX, low through be as mid-teens we overall to sort

We very, year. DoD of half. strong the mid-XXs back half. will mid-XXs growth the in been the first be They sort has started in in off percent very the this in

So year-over-year into it's very DoD as very up over in starting good relatively we seeing was revenue moving so the but was good XX%, it but fourth not to dramatically. It’s the quarter, has coming quickly. very and shift about in great Chris X.X stable. why trajectory base get into times healthy get pretty is Modernization so as numbers a we're the monetization, we're towards compares more been past, mentioned, good last QX as still up year the which is tougher here as quite is up

the readiness of saw We’re some replacing we last that spend year.

good. billion, that's So pretty solid. The pretty $X.X about is looks overall, DoD pipeline

be calendar for the digits. we’ll international side, On XXXX, low-single this up year

in versus look quite around to Chris mentioned half. the QX flat be similar dollar will fairly That be half in we’ll so up the when good. year. X%, are in X% magnitude, of size. but up we're X% first was at be a it quarter in down QX back QX the in We on you We’ll the

We last better year than calendarization year. this our just had on we linearity did

that we Europe is were all is This good half pretty Asia had we we about a also trend. as been Europe quite really It's billion. pipeline well. Middle both resilient. The but saw Western to line of bit. right has largely a Europe. good really with in the around and story It's So year $X.X where be back pretty saw year, nicely East Eastern before. This

we're international will I in that's in Canada well little expected. so very Tactical. good trends think both kind seeing good be heading. things would generally year DoD we bit generally knew down. But we're in where and hanging think We of Canada be So, I for I are think down pretty as overall a a

Operator

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

Robert Spingarn

just and pension about other to, now cash to And you be your guidance they Would us do per Jay, as flow the then material? boost line is flattering industry to in forward driver prefunding at I QX of how going all the if you cash just of ask guide? therefore be bit this the the giving items? more year plan detail that free cash little you report flow cash recoveries pension wanted the recoveries in free and a seemed

Jay Malave

we what sheet the recoveries in year terms pension better this little and related really before. of than cash, the for just in bit position Well, no driving just there's bit earnings looking a funding. What's a improvement were to balance this was at little

we entirely going a look can at provide take forward is. forward, I clear you’re I'm as at a us forward to and exactly recovery not there. disclosure certainly mean you. for think We it give go the take that look far another on As to going looking I what there, And could

I you so have back And Rob. get that just to on to

Robert Spingarn

you provide whole? a either the terms as this call. in On or And called then detail earlier segment any you just classified SAS growth, out Can is area percentage space versus quickly how another growing in on question. the

Jay Malave

we line segment Yes. with so strong. space, It's a Rob, with space quarters. the overall classified strong Growing meaning a space. When S, big in been been things it’s in multiple very say for it's

the meaning there's domain. So

classified. do ground be space could of what is And could it what's with lot well area as programs. that areas And really programs, as be space this we're we what growth It a really domains. both S, ground trends shift. in capital in is in driving is the So finding on good a

end and They mission from started talked to solutions. to Again, before move markets. into about to this we’ve components full various adjacent subsystems

this So of line growing it’s the sort has mid-teens. of been been segment, very The so has strong in very sort area the been trend funding good. in overall and with

Operator

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

Jon Raviv

of your year flow in high end next On the then prepared you range, of mentioned at the double-digit also this the years. growth couple finishing cash free and remarks over the

above it gets us out, Just XXXX. to piecing $X.X in billion trying

And revisit about thoughts and $X So in on maybe we what are XXXX? target talk that your upside there? that billion when could potential some

William Brown

organized. Jon, the and the talk for sheets now get XXXX. I we're down we balance question. $X year about calendar more ourselves this settle the year, saying thanks as Right billion goal. and So longer-term would close is imagine in We’ll more probably talk We'll that, out about still next

had a start. So we've good

$X the So year, to billion $X.XX is over getting next the here three we years. $XXX the another million guidance get for

a each $XX about synergies earnings It's still the we're Jay $XX capital, year, cost days this capital. million mentioned beyond Broadly and after working a working six, growth, speaking, then seven day. it's the million delivering between about tax third of

we’ll the a comfort really trajectory, growth we to real happen see generally on a happen synergies, to capital, what's more get that's with had and So little once reassess in to good where we traction start and to math as be, cost working we happening quarter. we what's going

are days year-over-year pretty about XX inventory. days, good XX capital working That's We by about work. down on is

us our on of right, accelerate to will takes exactly So some program go is out. the deep time do facilities. job accountability being take a organization in and driving the billion to some $X that's inventory mentioned really across pushed that down Chris manager, just require to metrics the do. That for about of to faster all

it's our on. we're inventory, think working going we quickly I can end what So about that's take to on lot a how

Jon Raviv

on allow profitability? the in higher perhaps that call, quarters. on more over often about all lot could instance past a and the months if you investments what talked past risk? return you calculus take lot Has for a And then investing than investing this need about if customer long and you mean more won't the of term change at talked for it you Are you today ahead

William Brown

we're we've basis. X% been overall think, of just I investors guiding what shy to on running Well, of revenue this an year. That's

we'll still next be I over the range of years. couple think that in

I portfolio. will running as we dollars from as think locally the and to likely move things more around where a happen of shift move mix go to those

see spend and between programs. shifts to start We'll

so revenue support of big You a our I those. may OTAs. be IRAD backstop been mean certainly driver towards to about of or a here. trend see to that's going is opportunities more but in shift Only XX% that's not

have able invest we're to to the do continue willing As to culturally, I and we to step up need ahead of be that. going mentioned been and

operational committed synergies, drive here we that shareholders. And Chris looking return can drive and that go and Jay Jon. other, each to make great cost and job our to And something is do, I excellence, sure programs for in invest that's in and

Operator

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

Seth Seifman

I maybe the as question a $X flow the in cash ask divestitures at being standing potentially the way We think divestiture all different XXXX, to way. the for in wanted though shouldn’t target correct? of billion

William Brown

can the from to business we That's the with some of doesn't free offset in have thinking we're that we divestitures. stand most think correct. That generating cash pull, be about way. loss levers But of we them Each able or any we'll cash.

Seth Seifman

as maybe quick then follow a radios. DoD up And the

order fiscal that needed visibility things where into How flow kind your of your shake budget. down calendar/fiscal the in of on a terms from XXXX budget? and what's and CR out the are the with of does XXXX terms based In

William Brown

No.

has XXXX, balance very unspent I XXXX. The from so talked least, business, billion December. gets of mainly this become a radios DoD in XXXX through budget backlog. impact on think $X.X year If again we've business. We've before. deeper about about $XXX some could trends we're more it short assuming or a for GFY still it's funds. it There’s good into been The got But cycle GFY is of have a up because visibility a At have some CR good. through the lot of this tactical to better. order million the

of If years, billion, number you in I think $X.X over the the the out grows range. go that billion slide $X.X five next to

momentum tactical in the there's lot here So of radio remaining a business. still

leaves in I operational calendar the the in Rochester. tactical. there's see execution That support, And still think have program us our the we way here there that we from funding business DoD XXXX momentum, of we're $X confidence end there's up by it, is team curve. in front at billion

Operator

Thank you.

Our Ciarmoli of your next the question. with question proceed Please from Michael SunTrust. with comes line

Michael Ciarmoli

in know other more I Does the couple bid Just you programs. additionally a make on know on go can a synergies, high we've already guys? or to to of areas. some of opportunities there, might you synergies. vertical little priority how maybe mentioned I the revenue - maybe out being the But of the about but a And you some stand-alone, has that got bit is program? future revenue unmanned seeing was bit there. offering LX or a subsurface some there know I Overlord that the are combination the Project lift Navy stronger program be synergies it does back surface for talk

Chris Kubasik

It's morning, Good Chris. Michael.

The Overlord recently a the Black on large We the program surface team the right surface We think I unmanned we're proposal renamed you're was unmanned absolutely the Pearl. First surface maritime, to with submitted opportunities. and medium on you it, the opportunities. contractor have both which is vehicle on vehicle another on on - called as going

had actually legacy demonstration. LX we made well. been investments quite to some are progressing and On able - and smaller get the undersea, those We've some awards

good the had and feeling frigate, four different than we're we're all teams relative are that pretty the in about on with investments on where the programs the more also, in opportunities not we're merger. there now arena. synergies Harris content that had to And So four and new done legacy capabilities we incorporating there's maritime shipbuilders unmanned like

FARA specifically is future vertical the which near-term in lift, the is program. And

And of and the content avionics design, able modular did legacy EW together. for focus is there the They We're we're additional X. to is be in architecture. did who's the Our the that two teamed we there down-select mainly another system to with one phase the prime. from pull open company Harris,

have the revenue the So XXX us more mentioned very that's synergies. days is we're any excited Bill XX, - I in synergy of but would again think predicted. about the than

both today. We're these excited to where competitions. ahead go execute. win are got have We We've and about very we go and to ahead

Michael Ciarmoli

And six the near-term bookings? to there'll doesn't you get on expect you the or look just think can like be if or on for of a give resolution? may, just continuing this if that Whether maybe Should it three union might revenues we this drags articulate you state do to XX any impact can envision there? I general either you then if sort guys November months, of headwinds by but here resolved any

Chris Kubasik

end should as Well, assuming calibrated this be through XXXX year-ago calendar was the of I it mentioned, year.

have don't So and bit than yet it go into next little we go I the appropriation where it bills expecting, like are size enacted to really early time that. XX will a year. because into gets January see year. to happen end that you when enacted actually But the assess that'll we’ll we when It longer or just want enough we're were hopefully as could of beyond by November go at this get

I and the budget incorporate out I But on thinking as there top Senate we of line think guide And feel agreement. look on through about as latest here, House up. they're areas. we’ll shape alignment between a and pretty budget bills good what's funding we reality that, to XXXX, encouraging two-year starting lot on And a is budget of DC timing. is as the There's

will approved, of - timely happen. that I'm pressure get basis. And of in get will overall optimistic A budget that on that the lot to approved a

right concern for XXXX. this early XXXX. a not revisit So We'll it's now,

Operator

the from with your Our comes Research. of next question Shapiro line with George question. Shapiro Please proceed

George Shapiro

wondering accounts on it. UTX I their have for that wondering comment got think you, just pretty and be you Bill, attractive I could would sell business. to was would if that GTS

William Brown

comment on George. knowledge don't can't regulatory I'm might not the detail really No, what have really to happening they on process really what's I on won't. do. that. sure following anything in that to UTX I I not any is going inside have divest. I'm so,

George Shapiro

that Jay. one-time cash the one a of that operating lowered kind just for all The then, flow of timing that guidance, And drop? of items is just caused

Jay Malave

plus. on exactly take good I at that's $XXX basis, much you million is costs, a there it, that deal-related news That’s you at if if right, And pretty were, behind look George. the The a fundamentally look think Yes. cash us. with

about have costs have forward. we'll we'll And to is forward. to to the cost going the and of And it's tune not the integration to implement track worry so, something that up going synergies, keep what

be we'll that P&L About a would in bit we’ll probably and to basis, million say - P&L and at one-third. about the left I level, again, on of is dollars there. with XXXX a slower. you about And be year the the after through we're go basis $XXX million around million tax flow, a guess, cash little On million XX/XX and $XXX a timing $XXX $XXX of XXXX know On two-thirds, terms of this million, there, $XXX-ish cash I year. between impact kind

Jay Malave

And pension flow. just operating to the is of $XXX which of add, if the million we pre-funded George, also you're part comparing cash to guide, the it

George Shapiro

benefit every lines? you - benchmark year per Can income up. DR And discount if in, those kind or from give with it going as your I you should one might us to might of any just coming one squeeze drop XX pension how quick change much rate along for down it in point something basis next the

Jay Malave

down or about of million is The impact. up million about points sheet impact P&L $XX basis balance XX liability. Yes, $XXX the on

Operator

your of with question. question next from Arment Please proceed line Baird. Our comes the with Peter

Peter Arment

guess, all on put kind Obviously, been then anything sounds A going gains out. just revenue lot proposals at? And you the questions one encouraging. looking these very then, here. be have Bill, you're highlighting, what just of the great just on asked and investing? in a that ask to of share about hearing it think, your the that customer feedback already quick terms from synergy I But are I'll here I investing of

William Brown

can jump and on I'll within jump in in this. and build well as Chris

are. on the early of first all, we mentioned being revenue look, Peter, encouraged about So we're process, in very the Chris and synergies.

to So there's more a lot do.

to have things. go win and We some

all indications. sort it's of So good

moving been seen trying in us in R&D, the be agile, offering individually, things of ahead up, or customers, being we've very invest But providing I that's invest has proactive feedback to do been step solutions, The they've and what from do need, good. think, quickly. the

think moving, indication revenue been and is synergies new So I like feedback the an overall, that that fact And very customer called puts trust of company moving the has confidence good. they're community this the in the LXHarris. these are

build let I'll that. Chris on be So may

Christopher Kubasik

that the Yes, like the We've absolutely. investments of like the customers users, as merger. They meetings the agility. I've and supportive they're had They month, in DoD. recently the significant two put we buckets, very are making. last end as the

in where it's strategies it's solutions spot our And, or mission the again, in challenges platforms new mission platforms whether very capabilities better older And plays solutions with that with are. really provider, new has. the customer prime, the the of well capabilities, with sweet the

are work we And And, to those a of capabilities. capabilities contractors. lot an and noticed. that and F-XX going provide well other again, we relationships with we prime like those collaboratively course, our are work collaboratively of appreciated And bring to

on-time feedback pleasantly So, and we the surprised products. with and just to quality continue execute have to deliver

Operator

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

Josh Sullivan

the what question exposure. then you budget But the on is of space point budget? I that the maybe, know And big classified the opportunity space? there percentage coming on How an classified exposure. total Just of the from what this provided a portfolio outside about of rest some classified at of is budgets? the color

William Brown

was. we portfolio. Harris come to where legacy the the knew back you on of time the By piece We

military in communize at $XX range. is, something the the The $XX we that. or billion, intelligence definition, you think budgets, XX% the billion I it's national could look of be like it but combined reality north when

relatively of is our still assure that that So small. piece

lots that direction it. the that where are we've places line more think in the of But I budgets importantly, those shifting are into opportunities to with or grow more moved. budget

Clearly, curve with of we're benefits a of architecture. shift that the on towards some define there's ahead been bit and in space I And a that the think how enjoying little you that. resiliency of we're

piece company - it it's is definitional back overall to part of to you come our classic as of I'd want now. think so I on what is The well.

that. we'll So have maybe on a back come and different I think answer

Josh Sullivan

Are are but And or up? square there any of footage then I'm any metrics And of moving year? where mentioned, the hurdles not popping efforts, if facilities faster? the footprint on the sure number targeted consolidation maybe the on you you for just end

William Brown

million it. I feet XXX - of I square we facilities. didn't XX we space, No, we've mention that we just think over about publicly talked have mean,

So facility that a There's we've moved each a quickly turn. one of a itself quickly of facilities, number we're the couple obviously we've evaluating working through on on headquarters process, different moved others. are in few projects pretty pretty

really The think do bigger through, to time ones ideas, of the we the that against, are right to that. we're do ones move are in take and production. middle put action, going the needle to teams the some where actually Those to

the we And about knew million, good on supply making in half that we overall rationalization. chain sort of facility cost about And of $XX overall facility coming progress. we When and the and step was was savings, part talk of million, back order sort $XX we're magnitude. from

journey. a I think multiyear of it's still early will days be what

Operator

with Morgan of with Rajeev Lalwani proceed line the from Please comes question your final Stanley. Our question.

Rajeev Lalwani

Just revenues you maybe ones as you've deal a a portion of international Bill, and scale there about of any traction And the given of that on on you couple can size expanded gaining talk the couple years? color quick been could the company? look the the side. become the we think of forward post

William Brown

here. start It's a good Chris maybe question. in and can I'll jump

XX% out international. working of the of to the international. our making definition Again, we're today About of So, harmonizing question. is coming revenue the we're Rajeev, still good sure

in XX%. work around So average

Combined, provide to in six offerings. markets. or great under do different that position got markets, that up a over we've We're expect believe we strength And through time. should those We come internationally. penetrated better can in we five combined

time working a that Chris But is specific this come what what team. sort we're of be up might It's should will, in if with that his strategy something through couple DoD leading years. is over the flattening, next and there. offset to the you of

So, jump say on couple of things in Chris, maybe and international. a

Christopher Kubasik

Yes, absolutely. buckets. I've three put in

countries. three have We

actually legacy delivering We of good. synergies big those and engineers And have companies business Canada, development are some countries. both exporting very countries. country Australia, presence in those we and we've combined three from product three out building have with where looking had and U.K. And pretty those and in a

footprint and about We business products Harris of some place opportunities, course, seven the have capabilities have through mainly, our development we're then, distributors. the very more that bringing optimistic at And legacy the we those legacy countries; looking in Mid distribution we're again, about growth systems, going East LX Far in And customers. East. have the to

upward agree, good we'll trajectory give so I now XX% and couple more and And future opportunity at But years. there And far. good is you an next over we're progress of calls. in the

Rajeev Lalwani

And great. any over to there DoD maybe real side. That's of then international those for Is opportunity on quick on has catch tactical a lagged basis? incredibly The side the been part strong. up it effectively rates sort to growth time of the

William Brown

well and a see the by radios they're Well, shift by is upgrading modernization they're U.S. is driven different you very towards government. and What different markets legacy funded factors. in

So you've a few got got but different different only services you've rates, moving services. at

XXX countries. Internationally, different we're in

lot and But happening and now from see a two-channel radios, in from Falcon moving and one what's Falcon lagging market. reality different channel single what see U.S. growth Falcon IV III now a from coming operates to what really we we ways. the in right what So II the following driving upgrading were of is of modernization to really each domestic is the radios,

mentioned, on special markets. like happen, move with the It eventually operations. international we're these trickles That that developing, U.S. you trickles into way in Chris And the international from the two-channel manpack special into forces things into the in army things trickles typically, two-channel radio. what the So, the VHF U.S. operations regular regular radio,

going typically We'll That’s to and encouragement. that growth I that the sort the we've I growth see that in general here gives rates they trajectory be international. think But on in into seen that's the sort run see DoD growth different of the continued we it's do don't what future because and international. trajectory paces. backstops the future of think at this year us

William Brown

for call. has dedication. extremely the our customer delivering The joining value on we've I first here, to focused expectations really wrap for want seen and And meeting XXX-days up you the just terrific. to for them our shareholders, work to very team, So well and our much progress been thank in the executing leadership remain integration. thank while employees hard in

continue final the outperform has And our and Company in year really feel increased been enter an strong We guidance the priorities position next puts we exceptional as innings what relentless good our a about to year. to beyond. of strategic focus a on

today. joining again us So, for thank you

Operator

Thank you. teleconference. This concludes today's

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

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