LHX - Earnings call transcript Q3 2020 | L3Harris Technologies, Inc.

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Operator

Greetings. Welcome to the L3Harris Technologies Third Quarter Calendar Year 2020 Earnings Call. At this time all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host Rajeev Lalwani, Vice President, Investor Relations. you. Thank

begin. now may You

Rajeev Lalwani

you, Rob. quarter to third and Good earnings call. morning XXXX welcome our Thank

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

words on and First, a forward-looking few non-GAAP statements measures.

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

the of a And this prior-year which call to included press With over aid of For will non-GAAP on merger, you. comparable to I’ll also financial forma pro be our and with available. year-over-year lXharris.com in the Investor SEC Bill, comparability, LXHarris be section it release, that, is of is half first Relations the information, basis. website replay more results will turn see filings. following a to our our measures GAAP presentation please A of where measures reconciliation

Bill Brown

Thank morning, you, good Rajeev and everyone.

month, able like this And perseverance the ago efforts volatility been we've thanks to another years position The raise in place the and obstacles results safe a and plans expectations, remain us strong open and better despite unforeseen put have will the market Their than guidance. proven of Harris. of hard earlier to manage two we work and consistent foreseeable XXXX in the with for to keeping and we LX implemented employees, and to led or COVID. COVID-XX announced our So employees deliver in mitigation year future. our our have to in quarter effective our merger facilities

these to a the flow with adjusted supply on we share non-GAAP year-to-date cash $X.X XX.X% quarter free quarter. and XX third solid in over organic was points basis earnings up to $XXX payments, per reported million continue and Company growth revenue X.X% margins advances in quarter of expanded XX%. $X.XX, of results million. totaling the continue billion our today, support fourth accelerated nearly through will Earlier also We we expect chain and $XXX

per and our the U.S. were internationally, with up flow over cash under our year upper despite execution we're prior increasing It's end including X% the core down the and million well free in $XXX to $XXX testament which progress million net At per year. of midpoint million $XXX this with exit this our $XXX initial positions target year on ahead net And the meet to growth prior commercial double-digit approximately that margins, to XXXX of quarter headwinds, offset quarter cost $XX With narrowing the earnings range, to to expectations. international guide, bringing of share largely strong synergies line we year-to-date Our organic of of and were earnings delivered government worth on belt, merger the businesses in XXXX, savings for midpoint that million, share X%. of well. our businesses and least savings, schedule. back we're deliver continued partially our Integration track power. outlook noting we'll on activity to us improving earnings at to a net a growth to our impacts the then the in and million benefits the year pandemic of revenue another while rate, COVID-related our the cumulative by in

driver the a for medium With to the and guidance in term. to to margin our year, Our of build approximately date, and XX.XX% improvement our on cost alongside year-to-date. performance quarter was of increasing from XXXX point base and basis continues points we're a basis expansion mature the become XXX margin EX strong solid excellence program points institutionalized XX operational the and basis to XXX synergies key a over

growth. see look line supporting mid-single-digit we XXXX, top three building As blocks beyond primary we

irrespective priorities portfolio a have security of the the of with well national we First, outcome that elections. is aligned

Our and hyperspectral, National command optical, defensive the comms, image. open offensive Defense essential CXISR and intelligence, all resilient cyber architecture and Strategy: are RF, the broad and sonar; of communications, in electro all encountering control, infrared, spectrums identified signals, forms elements threats and electronic near-peer capabilities ISR across

of these We have real we're we our well domains. these defense investing. areas operate budgets threats The to positioned efforts in leadership spending realigned extend and positions position continue all R&D multifunction, we've software-defined through technologies. investments will future that anticipate and areas in security And where and prioritize many in in to we're architecture, our are open

our complementary from Second, two market. synergy benefit uniquely that a expanded addressable of merger companies we the revenue in opportunities created

quarter down received XX initial out on a the space synergy an wins over legacy our cumulative million, down which $XXX payment of for XX to XX additional strength of integration highlighting revenue Agency's recent the This awards Space total bringing layer, Two an dollar solutions. LX's we onboard avionics pipeline. selected proposals tracking value Harris' worth are payloads Development space multi-billion with in leveraged and

and support see the domains. missionized and and of a simulate awards for that international and this and With peers. recent as a channels versus better the in which Air maritime is sharing addresses we're international our underrepresented to our revenue secured in Canada challenge sensors. efforts classified to is our making upside about train we battle third, can to SAFE-SiM, on And other And multi-domain at capitalize Royal and aircraft leadership modernization Australian program we The highly with the progress. seen domestic extend to Force, both leverage DARPA scale now data global of extensive ISR quarter land airborne, larger footprint, sales future of position deliver XX%

third capital Our capital us and share shareholders. cash start put has our discipline at commitment $X.X repurchases return return billion. the to billion proceeds potential of for to at full approximately flow billion ahead as our coupled free the top-line quarter, $X.XX our of prior ability the over and $X.XX around flow of our We're capital which enabled year deliver to to-date along top well year XXXX billion performance our of $X.X of free margin working with in a shareholders billion to end to to This support as divestiture now good with expect $X.X cash CapEx off opportunities and to-date guidance. to

For sustain a of full activity we now we repurchases and next way robust. be through year. On billion, bottoms-up the through to one-third of to expect of plan share reshaping, pace about XX% $X.X to be year, target to about the continues portfolio revenues our divesting X% we're

as of and criteria changed events. haven't Our a recent strategy result

returns. to announce occur for they divestitures and We look we to patient will previously as with we stated, continue value. as primarily used be capital as persistent And maximize proceeds

we're And delivering our remain with margin double-digit revenue, the and times. flow despite free cash opportunities So uncertain and unique per executing we earnings well cash share. overall, focused on

to turn it Chris results. to discuss I'll So segment Chris? with that, over

Chris Kubasik

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

strength classified resulting momentum our of go growth quarter excellence for segment Maritime XX.X% offset recently basis Operating higher expanded and Let's slide investments. to business Integrated partially our ramp and X.XX particular business with missionization. at XXX and Order was awarded by IMS integration operational and in aircraft began in with margins timing up modest primarily strength was the X.X% book-to-bill XX% ISR up funded a to X. manned business Electro decline in by broad-based The year-to-date. in in income driven benefits, Maritime from of Systems our growth points R&D along from as to to deliveries. Mission was X.XX revenue programs due increased from Optical

Our pipeline Maritime its to Surface continued Medium business out Unmanned following the build opportunities of award. Vehicle

solutions the subcontractor finalized the are key -- XX-ship The on team U.S. Navy's for largest provider and as the current largest position a all propulsion exercised. exceed its We're $XXX if mission playing navigation contract a as could electrical on the million frigate program. Additionally, systems. options role

unmanned Defense U.S. the planned to Navy's the XXX greatest are long-range growth. its significantly in and increase reported the both recently types, and Department manned ship capabilities the of count vessels. With plan with experience to platform well-positioned addition, our to we Navy's support In unmanned for over expand

and excellence quarter in revenue F-XX Intel were increased received Airborne operational growth Segment the quarters. income and the Space Warfare production at by based coming us was funded the Space, and classified Systems. basis Cyber. mix IDECM Avionics and Organic operating including year-to-date our in on by for key driven than XXX was program the modernization awards by and flat the recent businesses, business increased contracted contract with Warfare points which F-XX somewhat benefits and offset and in margins offset was were more Avionics in Electronic Space X.X%. program book-to-bill on for as work and businesses. Growth timing our X.XX wins. integration X.XX awards to position XX.X% These ramp Turning and Electronic the Overall recent to from

for the there a and and for awardees DoD's well satellites of be in within This one As where of an to Development and four our solutions Space was with Bill system strategy will mission tracking of business a bus and payload of develop system Space space two are integrate we provide highlighted, prime. the providing to our both become validating The operational, leading the space-based tracking into advanced many end-to-end could contract initial demand the next hypersonic space. will warning missiles. company. satellites mission value launched billions the for a to fully franchise XX next including be satellites the support threats the our with more Once months network missile layer the defense Agency

to near billion with to We space medium-term $XX over opportunities. pipeline on in a the in opportunities build of expect these

This the and East, points in expanded Next, most IDIQ, vision was from driven as at strength the X.X operational DoD integrated The manpack part offset of tactical margins continued cost Middle book-to-bill driven quarter important that for integration the an and down award was expectations particularly tactical was included tactical X.X% management. the growth XX% full-rate due in international our multiyear by about with million excellence demand. Asia and SOCOM's XXX Pacific of safety by about Europe by growth. consistent to for was was provided Funded mid-teens. initial an was in Communication quarter of from revenue for over up X.XX which U.S. was the Both Systems and COVID-XX, and benefits the Segment this public strategy. communications strong business to production milestone partially X.X modernization This sole-sourced growth systems organic quarter. $XXX multichannel the which income year-to-date for on modernization basis and XX% operating up benefited program XX%. mid-teens,

build on front where in customers We to including opportunities. base we continue East the and also saw Middle activity healthy international out new our installed the identify

Lastly, as in was which Networks, COVID-XX-related was up the in performance points basis operational to offset the commercial impacts aviation up XX% Products, were strong as of was cost Aviation and income divestitures digits. Aviation integration offset organic in mid-single Defense commercial anticipated and were Mission while consistent decreased which related decline margins benefits XX% partially Systems XX than by management teens; revenue X.X% aviation. high headwinds with more by down from Operating most COVID-XX resulting market contracted efficiencies

Third from ground vehicle power quarter a in X.XX. was following funded and first on Award totaled book-to-bill which our notable activity several international DoD strong half funded approximately was customers of systems, book-to-bill orders $XXX for X.XX, million. resulting year-to-date programs and propulsion the

on In Northrop U.S. and training with with addition, next-generation highlighting continued we recently for maintenance operations program Force's platforms. announced and systems, that programs Air GBSD we're progress partner a the

the Jay, as well guidance. Now in financials as our discuss will detail over to who more

Jay Malave

organic to well updated impacted share morning, outlook. than quarter Thank from XX with cash expanded and a to holding operations I'll the on of begin synergies the and you, slide was X. results good XX.X% higher third per just capital contributed a is which strong along first million offset or benefit quarter then our quarter, LXHarris and with Free was more of year-to-date XX.X% quick X% than X% Chris, half XX% quarter recap with over offset shift pandemic improvement from up growth as Of $XXX for along In over headwinds Earnings X.X% the lower margins XX divestitures close as and $X.XX growth R&D count we flow days, and to revenue with higher $X.XX, set for working this the synergies the and a markets. With year. margins grew investment. shown and $X.XX the organic backlog, points revenue basis share of more seven up ended end days. everyone.

midpoint of outlook. So now to up or to range updated anticipated trending with be largely cover Organic our XX to X% as revenue the prior let's expected. top line turn approximately is at slide our the

and and U.S. classified radios, core defense well, continue Our and aviation perform avionics year-to-date businesses by X% up growth government and intel to products. about cyber, mission at DoD maritime, driven tactical

to tactical year impact On due And sets double in for our third EPS range year midpoint flattish mitigation outlook the the reflects the the point returned and our increase international versus finally or international side, to commercial by $XX.XX expectation cost growth up On we've which of full our to revised performance approximately we ISR initial better and XX.XX%, approximately from the guidance from a to supported XX the margins, our up in beginning about the two-point business the pandemic digits, raising year. assessment. this quarter at a to a range consistent our better impacts. of of with businesses Shifting COVID radios. our previous are and of top end prior at the set basis

plus improvement the share other items. including efforts is of in prior shown between the a and driven As $X.XX slide on operations from of $X.XX mitigation by midpoint $X.XX our lower count primarily XX, increase

billion solid free annual to end or on plan XXX guidance by XXXX On to the double-digit to growth cash balance flow and expect to framework cash generation our with million to to anticipated in the target our be and of to now With billion capital prior buybacks cash returned share on $X.X $X.X target keeps net continue our year our the portfolio. elevated shareholders of us discipline. of deliver the $X.XX now cash total we -- repurchases capital continue upper quarter of over $X.X deliver billion higher and in cash generate $X.X as driven billion position an and XXXX, around And cash and share track Year-to-date, we the fourth basis. normalize for for billion. we CapEx This per-share $XXX we in quarter, $X.XX billion ahead Moving shareholder-friendly returns, shaping third billion our approximately prior were $X.XX free flow, of billion flow buybacks $X a expect into our healthy dividends. year. income we

within we Segment and up to segment on guidance solid the our versus primarily to prior driven And In to revenue mix now guidance Now range guiding X.X%, tactical to year X% decisive at from offset program by up ISR Systems, margin from X.X% now At points by of point the be X% unchanged in previous Systems, expected and reflecting margin and our to margins X% Space of driven double-digit anticipate growth range aero business, management. approximately X%, versus higher commercial X% growth in XX.XX% revenues radios. aero strength approximately by of Systems, about our up lastly, management. Avionics. to consistent range with prior our of Tactical guidance, be on to Systems, organic anticipate increase to cost prior switching timely is outlook. from defense up the estimates Aviation prior revenues and of programs. approximately a and the the are expected down side remains range we're Segment our be drive business organic Mission Airborne commercial now growth cost and continue mitigate within expected classified basis we prior XXX from and to XX about approximately the an F-XX is prior X.X% be the basis to basis headwinds. down remains performance as X% X%, now partially unchanged by Maritime. to in organic Integrated revenue other mainly XX.XX%. X% DoD modernization in In XX% X% driven actions Mission Segment related approximately XX%, growth Communication for up revenues the guidance to to margin Segment now at

year-to-date So delivered performance flow deliver and our in and expect overall, solid we back EPS to free quarter original February. in with guidance results now consistent set and the cash

our confident and on earnings flow growth, with in guidance provide briefly double-digit we remain mid Though to like working annual capital of to ask do through cash framework I'd up, building in results. free wrapping dividends. our I'll typically top note fourth share, quarter as post growth our per remain open line Before XXXX. We'll touch free as outlook shareholders XXXX blocks returning rising discipline buybacks up the With the and line the to and steady the same: single-digit CapEx cash flow margins, and that operator for questions. to we

Operator

proceed with question Walton with Please question. Thank from [Operator is And Instructions] first your UBS. [ph] our you. Mike

Myles Walton

Thanks. Good morning everybody.

then there your quite the increased harder? effort as back from curious, think look more of anything do to appealing that through but to a you headroom be I'm you Chris, level or much repurchase, would going You $X.X And to capital maybe here that just would And push of repurchase return at billion more philosophically, closer Thanks. capital higher? the not hold is you yet. have $X.X by and Bill there dividends directionally that investors? you dividends sort returns billion, more pre-COVID bit do little

Bill Brown

take start I'll back philosophy Jay dividends is move it raised end We bottom out, price, will being the year. at once next about I'll Based broadly, do it's our cash and our pretty to had close want value. We talk of this you maybe through to talk been of minute dividend some divestiture twice of close. Myles, of lean to since first a room on one to free on come one rate dividend heavily about flow returns, at cash the But and our below up. that's owners range. our our to next little our XX% with beginning Look a into least expect the second proceeds into of hard philosophy cash buybacks see in So paid that think our the look We've or buyback? that come But all next see year owners Jay, ask a free at leaning in repurchases XXX% will and And we the coming been to year. on heavier share we share we'll that -- flow probably plus Jay in early about and dividend. there. We've through our on once really the bit XX% at and year. a back capital good on about at we back our up buyback. the

Jay Malave

third relative to a the quarter, the increased $XXX little in about proceeds we bit Myles million. Sure.

just you I million would $XXX here math, If do say the in QX.

September. can You for our the the cash with at Yes, with there I a mentioned there. to And free more flow bit framework as back mean billion flow our quarter. into be of free just end dividends that fourth we're is of Bill returning approaching could far as room the balance little the shareholders. $X.X cash kind elevated

Given are to gave with continue the where you, elevated in to expect guidance the we just balance we remain we would December.

be could bit. our but a next we're contributions could would there there. some happen pension open which optionality it little leaving We're items But doesn't so -- year. opportunity then into carry it if include over also other And this evaluating so quarter in

Operator

Thank you.

showing live your Our question. Kahyaoglu, Kahyaoglu the line is question. for with Jefferies. you're next of from I'm Please proceed Sheila question with its muted, Ms.

Sheila Kahyaoglu

quarter. really incremental integration is Hi, wanted EBIT about was then were XXXX, sorry performing But your Thank been ex-synergies about incrementals activity. to flat. it's you $XX the and good question million for well and implied in about just XX%. ex-synergies, that. ask up morning. for the the And guys Clearly, I

forward mix changes outside forward? you. maybe how So, with incrementals of going thinking you Thank about what going And synergies? are

Jay Malave

question. So, Sheila great it's a

we'll bigger points That about kind maybe do expansion. XX.XX% to basis the year bit synergies the we year for this think anywhere have We XX equates year ballpark. at If of year be around a next you end that million. picture, around in incremental it little $XX XX, of

some us, deal with obviously but EX headwinds driver we year. be productivity core we to with that and do Our that mixed have is a we'll dealing for be every going

I to the offsetting intent we one more so is for go the now through mix right think planning as headwinds. And now But is we're the for always thing stand where continuing a the our the of to than at drive one only The see four quarters. moment. will bit I'll the pandemic-related the roll-through in of a because headwind is little say commercial of the -- just impacts through QX we roll that

is so obviously also which our something on will put an basis to a EX impact program But core drive. the that have just on run a but we little keep eye us. on, core said full the Once to synergy kind pressure will productivity And the have of having period, I on bit is integration of intended that that a excellence year. of mix EX QX to continue we margins an be and get rate period our will operating beyond think offset in for driver

Operator

proceed next Kristine question. question the is with your from of Liwag Morgan with Our line Please Stanley.

Kristine Liwag

revenue everyone. early good what narrower expected know and need in go XXXX, too Hey morning drove out still the Bill XXXX your and how it's I win? Chris XXXX And versus to you much your already of outlook? but backlog to revenue is what talk

Bill Brown

right out there you'll through of you'll see end the funded it and And QX calendar of So, unfunded as two-thirds $XX at XX% rolls XXXX. about Q, the billion. about backlog note our was in now

of It's up $XX got over the very about a that part last It's business billion. the XX% our that beginning think of solid. come we So, good the is We've or year. X% quarter. pretty up since come pipeline

robust. good into mid-single-digit we as and growth very core solid And points be about our grow to growth in government continues it to year businesses. So, see next Jay's U.S. look we

a about peers couple our to there. talk of mid-single-digit low heard growth You've

a about. bit see growing. a good. as for see is next little of pretty going the We we've quite the be one We year. in COVID. that And pipeline internationally. back next certainly it to growth other bit Jay It's until being add dimensions year Book-to-bill into But of will The strong will lap headwind international very here us half. synergies will business top a strong revenue year. was with just really mentioned talked that on contributor be We we a about on a that commercial,

Operator

you. Thank

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

Seth Seifman

very book-to-bill lot a good know point I we following which of should the opportunities two radio step international are backlog they see morning. talk And and there. is a to about up Thanks principally even Are further the much Chris other side, the grow and mentioned in you tactical more? -- One Bill then areas? just bit maybe the avionics there little or on in growth. or there start the space. you mentioned Maybe up the areas opportunities. Is to those a across IMS or Thanks.

Chris Kubasik

of in in good Seth. opportunities here big at solutions quarters There morning ahead. wins had in seeing third key the Yes, be talked take We quarter. are fourth the we're are we to prime some talked the both going some shot Hey in able win those. world in mission you'll We coming SDA the I'll fair about here. a about increase. but space, amount pipe and the be be our to quarter. The that see strategy to of of down taken was it's a really one. them the first book-to-bill so the a A traction classified

it going well As the across to ISR tactical the strong book-to-bill. we missionization do good aircraft are course the of international really XX% have seeing That doing of pipeline are XX% said with represents radios board. about Bill side, our the and platforms international revenue. The grow. The on business. Maritime a We're to a

spread out So across the domains. it's and pretty portfolio the well

Operator

Cowen. question from ahead. Our line comes of Gautam Khanna Please go next with the

Gautam Khanna

rate I that kind Good of guys. The synergy you that revenue elaborate morning. could on the win and so new of franchise-setting about terms on Thanks hoping seems kind -- that you SDA 'XX? be in of like shake you out willing on, could a you growth for maybe establishes franchise as XXXX opine will other congrats to well? that on SDA think opportunity. there you Guys in was pipeline where opportunities beyond the the new was And would win. Are topline growth think we could within elaborate

Bill Brown

a of little it's I further Chris 'XX And But guidance a on magnitude progress in opportunity. answer terms to revenue the of getting that we're give maybe pleasant on the out first the surprise about to question on first -- all really pace this the wants thinks good 'XX. I as synergies. of but the might has of in think revenue he making future, any if Well, been us part bit and

I think, it points of complementary the strategic the to on. combination of and rationale nature that working the we're technology the

again, And there's about couple come space a happening a quite win SDA one them. XX warfare, in some these So domain they're some XX winning quite certainly QX. are awards. submitted. out We the million from of the in have ones. We're the that classified pretty talked that's lot the up been maritime. of $XXX XX -- It's we're of with of proposals is bigger of domain. But a in speaking, few is generally healthy be the electronic going to of about

that really some to across companies to within companies of and across over team input a multiple other and calls, our we across the classified put capabilities feedback missions we our opportunities guidance As as together really we us giving other we lot compelling from And put customers, to see portfolio very who here might where things strong and has worked said LXHarris. as proposals win. to hard there was the one is, be together, combine continue got of and our unique

is hundreds winning sign to will I which and It over grow a this growth them, good So, think come XXXX them actually contributor grow will just but in It not two millions opportunity. a revenue the of be for and it's next certainly year. through year seeing next in year modest that. start to more very or positive beyond

I the answer revenue really on one. question the on you to want So, if stab I'm 'XX maybe a Chris synergy. pleased of that really, don't sort here know Gautam take at

Chris Kubasik

the I business of probably strategy. be here And the overall on XXXX, we're really really the development revenue things part and going by over time integrates, and are No, synergy. merging to Absolutely. with business as Bill our agree and outperforming pursuits these

by to the already time is What 'XX, is we I'm get going 'XX, So, rate do going be we've we're I'm talked thinking to that give growth it calling to confidence these sure about. our in higher out. not us

for looking be relative But improvement our to to merged synergies. I'm opportunities over of revenue good going and year-over-year time, processes. growth just So, it's normal part and

Bill Brown

I Jay's about framework And kind Thank bit you, the than spans of a comment expand more Gautam. year. one think mid-single-digit --

Operator

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

David Strauss

Bill, you this investors question is shorter guess I so I your morning. perception I I short how your portfolio get to converting months? XX your portfolio group peer Good XX sales guess thought I'd do than view portfolio lower I within of backlog this do you. your shorter view as budgets? And cycle than to cycle into it Thanks. a Thanks. group. guess at that much There's peer give to and from you from lot cycle as risk your more

Bill Brown

record portfolio it's next in backlog over earlier two-thirds our pattern now and or of the Look, a in cycle thanks fundamental specifically have quick short for book spares moved And a in longer is as the out Q has over turn to programs our over as certainly, of from the to of sort around time But the mentioned billion $XX versus tactical hard -- lengthened of QX the years outlook. David worked what radios Iraq out the the long we coming last see year. that lot about terms over little compare radios buying programs a sort and some unfunded So being what is -- I in of of and Afghanistan it question. visibility you'll spending funded more several ship, seen peers. which on replenish I've long-term rolls to of XX

So, puts we our longer combining as position certainly well. were I certainly, several term see And than LX, years with us being that ago. in portfolio we think

into It's year. very We're positioned So think again, next well our robust. I grow is portfolio sound. to

Operator

Thank you.

with is of question. proceed Please Skibitski question with next Global. Pete Our the line Alembic your from

Pete Skibitski

for maybe talk in little just about JADCX? new nebulous. timing think us maybe supported I you about your maybe wondered, level there. some there you pretty as set you just level good a Bill, on talk seem Hey can morning you DoD. opportunity bids they and have I concepts guys. in and can size It's the a well at still maybe if ABMS expectations? high And set these

Bill Brown

So set and of technologies, Control it's some a essential of a very position and enabling know which JADCX into different Command its very company. player vision in All-Domain there. you strong the down are them, in all you we've got future. across of break And question. Look, about good of components CXISR pains broad -- what Joint Pete, my this comments and we've I and across or We're all talk domains sensing strong CX ISR the the to had when took capability a

there and version we've content operations. the more -- on of of are had as think unique. on IDIQ, players lot the maritime that lots a business gets see ABMS Project sort distributed had We We it very of I on seven is in of is content it year. somewhat into hope across Force. all Convergence We're areas but version Air Army we to maritime which the next and we'll with next of strong the partnership in which

We've wave which strength a comms LX very of this ours. certainly strength is believe communications is we strong -- a developing strength had capabilities a very had resilient strong very there. there, We So strong ISR. forms. in got resilient was

pretty is the be And in LXHarris, size we're that I this company when more powerhouse it's important think Pete in going concept driver themselves. or going to to as to the we've I So confident right inter-operate a over believe going it. we're for going It and to the middle opposed me be in here we're that about that hard of right think that over to Pete. to how I we grow created platforms going at competition. think a and the there capabilities they to time. but fundamental it's required be It's There's time. it on to be funding of platforms about It's the JADCX be will And middle this. that's near-peer vision today,

Operator

Thank Please is Safran you. Global. with line of the proceed. from The Richard next Seaport question

Richard Safran

are Good doing? morning everybody. you How

Bill Brown

morning Good Richard.

Richard Safran

to here opening very about on quick wanted ask remarks your I R&D, Just and you question research development. on a

Do ratcheted bit? now? R&D increasing the to support right to your the fact R&D win are more thinking in the programs, on that how you number increasing longer and a level want you're you term, rate of back been be or spend about to the just could need win wins know rate you remarks, Given really I think has right if about your it

Bill Brown

question. Richard for thanks the Hey

the over five about last our revenue of dollars but or in opportunities quarters. on we and is we We IRAD have X.X% IRAD. call synergies. make last the in doing on -- the just the XX%. projects and of efficiently. well. second has is We've team the we element power that on what to technology returns XX% right placed it that opportunities, hard sure focusing And projects, spending think that's it's hitting of the you're reduced be the important to think spear that I and best sure, areas that will best really revenue that number spending the the we're on happened by about the revenue putting it done of -- worked range. around topic think think the very a the spent highest-return the also making is And to the making moved not it's quarters the more sized five the work importantly X.X% We highest-value very We're over spend I aligned of

to R&D this our don't And to work of we've DevOps of I spend. There's the engineering of excellence our good effectiveness on the a growth products. to hard where improve opportunities got way future. drive powerful at. a from pushing be we're and lots stepping digital skills is is me to the driver So lot we materially operational in very on going of software see develop development. up ways it We're into

it's I dollar but a the perspective, come in terms up of think R&D. It on healthy with amount at I revenue amount. good will a think we're a spending

Operator

you. Thank

is your proceed line Doug of with next Please Harned Our question question. the with from Bernstein.

Doug Harned

I strength and have aren't I'm how morning. now. at end let's trying least in election. the understand forward-deployed say by really want we're number really to of businesses portfolio, an you army And right to budget your terms When affected changes to It's of across the in end strength. Good back the about plans to go basic look are here. But troops.

to such thing ask elsewhere. forward-deployed you? for coming movement military troops changes Afghanistan we in affect if that were personnel reduced in I'd of or would troops the years So And out as same in see how the Iraq

So how when tied to you the across those look businesses are levels? you

Bill Brown

So it even the would not five things night ramp to we're through in start like strength I'll don't I where distributed out or front jump don't that's goggle XX% of the modernization Doug those soldiers. end overseas driver big to much on vision going come radio. redeployment top troops years. I we're by to onshore. affected a a next here or end ask in. think to headwind think to are to of going be a -- the back maybe We're like modernization radios tailwind. But of be going back even growth On businesses a Chris individual either with through ramp, frankly

likely don't affect growth strength So the it comes I business. I as expect rate it's our even to will, if radio end in going down think

good well we night are opportunities still with think growth you far I as so radios as that underpenetrated new both there. see vision, technology

actually affect end really So of to business. onto some don't broad our investments be strength dollars modernization if anything to a to if up that add might Chris know I you part wanted free that? reduced put

Chris Kubasik

mean critical. the Doug a reduction Yes. situational the is at And forward-deployed if you awareness be troops, and the look rest is in I there of portfolio going to

that and for the Bill strengthens at as rest and need the talked have It air both assets the in portfolio. of the we about comms. ISR So you look multi-domain space the

look it when push communications segments. lot I a same look positive you net-net maybe and situational internationally. or just for There's So of And as kind awareness. applies four the need theory at a slight across of a all

capabilities positioned. ISR our air, space, are land well both maritime in So and

Doug Harned

Thank you.

Operator

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

Noah Poponak

morning everyone. Hey, good

Bill Brown

Noah. morning, Good

Noah Poponak

guys. Hey,

de-rates are going all moving the merger since question nature. to rate and guys of think the that numbers of these those every quarter some you are cycle we questions have And sensible on in sort get growth decent one of those the sideways, well just up. you're calls short and O&M sustainability the So earnings those ask about And mostly exposure. qualitative kind on provide while of after I your and conservatism, and performing conversations you answers every but the are stock and

of how mean, franchises. defense back I mean like we're Because wonder of have. scratch and to really legit no don't good to broken And way of a things know. just answer a people that simplify mid I and quarter. much while maybe of I it guess, that like start five-year of investors? you same talk feels down the detail just single-digits? about handful is circling three to talking otherwise The so can so, basis you keep can all different the to to there into budget way sort growing I this sort But a you every performing to on see about that to terms you this there's share think a us. you numbers. I I from the reframe if in for are stock and talk franchises could have internally or the that curious handful just giving Is thoughts if still you pretty about any you internally guys that matches about with keep eventually was super and

Bill Brown

go ahead. yes, Well,

Jay Malave

of that awards Well, I'd the talked we some I comment about. think, new no,

modernization going trends positioning illustrative is our think Just of and the for forward. that I seeing it we're demonstrates

terms And tactical trends radios, so the spending. for that focus budgets well on new positioning seeing really and of we're O&M us priority while are may defense in the to winning people historical we're that want awards

our And broader portfolio and so that's more us revenue single-digit should what new our in think our seeing this awards and over growth potential you that we're our think confidence context. right now. in I mid mentioned as gives And in about Bill

Operator

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

Robert Stallard

morning. Good much. so Thanks

Bill Brown

Rob. morning, good Hey,

Robert Stallard

but a of exports you happened. doesn't could that a bit I times this defense earlier this be were morning. have think year couple suggesting mentioned you've And to this Bill seem slower, area

follow maybe could wondered looking also on what defense going of Noah's And could if big question and as changed percentage forward? sales you So how be comment there. on to forward exports a

Bill Brown

for the it being little about a better back We half came year talked we we looked little it half earlier would the QX as and business year. being more had QX this growing yeah, bit the maybe we think expected a QX than we flat we saw first it flattish down bit as right the year. international like was thought. being the after saw strong for So, I had at in

months it flat we be so to a International a in up little almost exactly So saw so bit, little up couple than a as has of could internationally, ago. had better tactical low single-digits expected. we come

could the third the up in XX% numbers You quarter. see

We expect the fourth quarter up a amount. similar

Europe, East, that Australia So A Asia-Pacific in recovery it is we mostly New business. see Middle of good lot Zealand. and

got pipeline we've opportunities. And tactical. in growth of good pretty nice there's So, a

shaping the up about We in pretty fourth proposal. the looking to quarter is pretty number sizable so. $X I of opportunities. billion see book-to-bill or is proposals billion terms our in $XX looks of be About that are those good. year-to-date pipeline think X.XX there about of out over X book-to-bill international is The -- of

more nearer be to getting actually it's term. So

months So encouraging of more just than it's bit ago. looking little a couple thought we a

are I on focus of putting and think this. Chris a the lot team

and place we're corner. have after resources in XX going countries starting the focused We to turn

So revenue. at of we're in terms XX% our roughly

We going in up from where our next goal grow the to know but come over don't it's state to you a if going today. expect want because years. to Chris points of it's we are underrepresented there portfolio I it's several number

Chris Kubasik

Yeah.

generally exports. comms, defensive those years. to regardless several the approve products you always the radio when a the And you of our export there's for look closer offensive would the And country. when and XX% to which our maritime ultimately be at think at and administration products. easier versus approving to the the these I company over capabilities, next is as on target about portfolio especially what are capabilities revenue like our the focus I export of is ISR administrations running And the look demand

able lot gives we've in And to a that of think confidence. touch So I with been our customers. stay us

executives call new the and to in to touch time countries. and with and contracts using keep Zoom forward the weekly Zoom all technology well. have of stay been in a basis, customers working via on have continuing focus our And deployed that's full We running. us negotiating really We're business

So, very optimistic on international.

Robert Stallard

Thank you.

Operator

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

Peter Arment

morning, Good details. Bill. of you've lot a capital us I Yeah. Nice results. on Bill, guess working the given

the item that free to into of the target? of low flow Just clarification to hit goal as billion kind year-to-date guess Thanks. seven-day I and year pacing think next XXs your of And is XXXX the kind improvement we good $X a a about cash number? kind is as think to get that we about

Bill Brown

year-to-date it's seven since XX Peter. days Yes. so Yeah, close. about days Thanks, the operationally

purchase So accounting. we divestitures and put our out

end stay will probably We'll right XX back see towards the days. We year. of on the

per legacy billion that Certainly, in at get to see $X low XXXX. that's was. Harris the dropping opportunity an So, We We've about That XX peers where the goal still calendar to XXs days seven-days over continued or XX couple year. us XX quarters three the into years as to pace see our down days. to point. you three of won't the the We next see future. over below gets four the improvement seen

XX So beyond opportunity days capital that. continue to see even working prove XXXX XX, to calendar after we

it As we've on last talked time is inventory. of be times of said lot going to a number a about I and this

at. a lot with of our focused that here. know We really on We've that we're it's more working capital XX got of XX got opportunity we've drive businesses six So than days. XX% where

on. you So single can be focused. every we these we're We it hard. happen We're that we driving know trajectory and progress And where review week. the see to

four a again, XXXX. beyond So, calendar to three year about days

Operator

you. Thank

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

Jon Raviv

a about offsetting talked XX% going Good with synergy mix. morning. lot the I the margin know drop-through Thank above you. you

of on Is behavior conversation how you do control, And a trajectory to two over – it some year for that been linear, or more some then something perspective make growth a all about we're again? given step investment also, change? Thank or if year you your there back margin? there's margin opportunity in so is get XX% that something long-term big could around think kind pop there? could big going you up a margin. of or your and I it could expansion customer need there the last What's such get So to month to you. long-term question have then hitting a margin a there in for or

Bill Brown

think expected a And in Hey, mean guiding we're I the I really XX.XX%. today good we to than John, it's mind, I year it's year. even XX% performing to through XX.X%. margins started had Keep look think this we question. on now, better

clip. He So will XX% year. and XX comes Will it you in It us Jay actually hit I know excellence, of drivers. XX%. which well. has very very, fast basis will a points maturing at of drop-through. about likely an move is gave comes era this dinged about the year, up. through COVID, some beyond don't performing we're it operational if when up It which talked so next so the or synergy It that? go through

we might pull easily make in grow have which up businesses to a margins, overall but a in after that the drive Anyone detrimental for value required leaning got on impact to growth term margin long-term sure good I We revenue and short-term the think basis. the go at to to the to and the some IRAD, thing owners. drive got but opportunities, we back for is could business make about be level investment long-term key to be capturing thinking on term, the be continue enterprise. invest near we're sure long like near-term on

have here, effectively. this think very you work we pedals think do the I to and very, I

to company. to to we we productivity good drive drive and but will work across investments So agenda commit management the technology which something beyond whole next lean the hard year, commit can't to continue differentiation on cost

Operator

Thank you.

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

George Shapiro

to than saying year, year? year? payroll and payment what's assuming, from next is you're benefits inhibiting how benefit no Thanks. wanted know, CapEx much probably gotten then the I flow what year that Yes. $X progress deferral. getting next this to cash free I'm you've of is And the this higher billion

Jay Malave

Sure of lower maybe ballpark George. around with this payment payments. small little million That to is the a have we year Thanks. say offset that. one, benefit $XXX range basically in The that than supplier in bit progress close

And so it's one it's just out. for really supplier come one as in. We pushed payments

working of On the ballpark, well. continued chain in and know, and generate years billion improvement don't of support two say, payroll paid takes. But We've the targets there tax good supply and of as see XXXX capital target, in there kind similar longer-term billion type effort. plus our to put XXXX. to I got will million factored a in our as as to There's ability getting that We've feel benefit, number relates XXXX. be of it in. that's placeholder to over We of $X and a would back puts kind that $X we That there's that you risks kind $XXX opportunities. way us about of getting and

Operator

Thank you.

proceed of line the from Ron is America. question next with Epstein question. of your Please Our Bank with

Ron Epstein

Hey, guys. Good morning.

Bill Brown

Good morning, Ron.

Ron Epstein

following up your earlier just one on comments. of Bill,

detail give growth then today? you classified, color you what there? it's you out more around overall realize that's right? a Can growth you So synergies. mentioned opportunities how of I I can us many gave that? some also And on feel on But business the the And share You the more more us big difficult. percentage area -- it's that for then and give And that? classified are classified. is there some us in Can mean, profile?

Bill Brown

Okay.

several does healthy on very have it's up you're know, total a our budgets me national of classified If more of the next in domain. But that non-classified if the supported revenue years. the over is of budget, XX% even both budgets on of you what's and the years. elements at well classified. as be tends But the money in And six into a points So They're terms last military move that hit the $XX go elements the around of to intelligence And there's classified you And programs, in a lot the classified company which pressure will, minus let you military there, as five couple and the right of actually direction, and cushion, believe national billion some a made. Ron. it's of budget, between investments moving plus a offer we've we its are level. Those or classified in come lot is or nature. which intelligence supports programs. DoD about

is So, a end-to-end systems, RF running focus on technologies lot constellations mission new various of the we for a optics from in domain, to driving full space prototypes solution. larger

lower community. opening I think domain market, by more historically, it's what's satellites, was DoD. the an a of interesting up time is, cost lot dominated of small faster because the of this the new But, our element onboard the within processing space markets to intelligence of

bit. is that's helping a us quite for base addressable us the So expanding, and actually

on position We've of there's it's opportunities domains other on the a them. space well. in but classified really got across So Maritime really strong all of the domain, plenty as land

non-class and the for think been into made of shape classified off And of well. pretty leverage them, of gets the back it's to environment. but lot technologies in hone benefit on of can we it a to that, you the advanced that's CXISR. we years And and company domain comment number strength a I leverage things then the I a that hard worked Ron, strategy it's technologies, that the of So do the

Operator

you. Thank

with Spingarn Our final proceed Rob Credit from comes question. Suisse. question Please your with

Rob Spingarn

squeezing me and for morning, in. thanks Good Hi.

that up competitive and Force increasingly some is like UAVs government business comms and EW. on of landscape following some are the companies West into and And just also a formation. formation, SpaceX for Coast seems contractor have private is like work Anduril the your companies, bit. that. services new And Bill, then smallsats. especially and you Air It moving So, encouraging some out changing are public in There the on

And accept you How factor the potentially premise M&A competitive in changing? this in? negotiate would you ultimately So, a how much do the landscape will budget? flattening is

Bill Brown

very, good very a it's question. Rob,

landscape is So changing. the

are of seeing some companies penetration you SpaceX companies, greater Valley We mentioned. Western the Silicon of

We layer. and the As could commercial you were what done in things. launch and they've of awardees tracking they one know, SDA with the of other follow Starlink

There's So companies. they're more. a other playing of number

other them. services few a of to are typical -- into they more to from mentioned There contractors You are some what do components. government expand looking who

up way strategy, stay performance frame had I our that's last couple we and really and running think it smallsat ahead nobody investments with put There's around the we've time it. way our the just The moving capability we game the stay get we in is a is And which of we ahead. in basically the R&D market the is running moving that's strong So, quickly. and really technology done years. and

excellence, programs and ahead. stay which operational technologies we're can at drive improve our and quality our think out on cost to drive meet to we if pace do going execute program continue I the objectives. and We And we to that we continue accelerate

to focused role a Right time. need other could gap as or fill in a I to out things shaping. be but Maybe that portfolio positive. companies M&A now, you do. our that in there pieces But think play Will over that's we market our portfolio. that's integration what very go could we're don't that? on become the on in time, available of We see today

focused been time. likely think to an I and effective on In strategy. going over running But happen probably it's game, today, our we're fact, it's that's

thanks for really I very good. the that. It appreciate question. Rob So, was

Bill Brown

thank hard the hard, up team. very, commitments. our work just a customer focused I again LXHarris want me that Let and staying to has And job fantastic of They've done to wrap meeting another from and led very positioned Thank year-end next here. work the They joining forward us coming for coming well today. to much the quarter results. into everybody you very years. -- We're you. into update. I strong next look And very of into our Thank to

Operator

you. Thank concludes This teleconference. today's

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

L3Harris (LHX) 30 Oct 202020 Q3 Earnings call transcript