LHX - Earnings call transcript Q1 2021 | L3Harris Technologies, Inc.

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Operator

Greetings, and welcome to the L3Harris Technologies First Quarter Calendar Year 2021 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rajeev Lalwani, Vice President, Investor Relations. you. Thank

begin. may You

Rajeev Lalwani

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

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

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 assumptions risks, results

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

Bill Brown

expectations. with from and targets. ahead. of including [ph] Free incredibly program March. $XXX in million million with million, installing in cash XXX internal from you, we last to of stability X first in repurchases which businesses, our $XXX consistent growth all financial businesses, solid we balance of and managed Rajeev, effective up increase everyone. our dividends our core of recently morning, flow our supported metrics. share the in reported more of returns Organic businesses per thank earnings government our revenue quarter about $X well Earlier has should points X% the to shareholder digit offset on strong building from $XXX XX% single authorized by was impacts comparables our billion the and excess with team XX% mid today due commercial Margins of progress of related tough execution ahead in robust Well, a results, This COVID-XX approximately resulting be expanded points across good pandemic anticipate partially basis XX.X% year's with quarter a last $X.XX, up

CEO. earlier small this company the It and hard today am of over June $XX final work proud The post billion. our really Before years most who handing for a for is niche created critical as mission planned defense day we've with with leading occurring the merger missions at special nearly work the rewarding and every and LXHarris Fortune were employees, XX the then and our to dedication of leading earnings prime, XXX by has call LX with performance Harris and as Chris, of a in to my environment value to XXXX revenue Exelis especially XX, of recently single defense this over with deliver it I to and a to as from customers' people work hard and we the acquisition transition grew year, marks Harris LXHarris quarter culture the recognized best company on world's support the company. as and shareholders. it admired been work XXth solutions

next today for built forward. optimistic foundation strong am what excited the lead future. its to and confident I company As Executor another speak under occurring endorsed you The and this can phase as company with the the mind the know, year agreement merger Chris's momentum independent the week, of unanimously results LXHarris of going the Board in their for as in he the have becomes we I'll in in and continue Last the accomplish ability as And closely we Board to about planned transition leadership. Directors indicating CEO. the Chris working Chris's

Chris that, over with you. to it So turn me let

Chris Kubasik

word and your new Bill, the and Okay, forward role. our well appreciate and thank Board's I to look your confidence continued partnership of you in

growth, and where creation and steady on us. the in we develop topline Slide X, The potential first priorities month, in last robust with the for as heard at value shown the we strategic capital deliver together you've all we're of As briefing cash quarter. opportunities about flow free are company our front progress investor the margin the foundations great industry-leading areas will expansion showed sustainable on returns, which excited

QX that to the grow the the FY In Biden coupled topline, will results points 'XX continue announcement 'XX our budget administration's optimism our defense with in X.X about reinforces for terms growth. of versus FY

contested encouraged backdrop continued to our believe advanced with within us are We by and and opportunities the provides return that in well all to focus solutions budget on our peer aligned security and national for operations the domains. priorities and is emphasize the military environments. increasingly This support affordable across offer competition LXHarris

coming and in and quarter international investments. first aircraft through businesses, core we consistently and up solid closely portfolio, we as in which expansion strong ISR X.X% watching traction driven radios. more by details months We grow stem DoD expect In the our our in government growth gained to for grew from R&D international double-digits with the synergies are revenue tactical our

rate win that total revenue XX% momentum across opportunities. approximately million. we to with anticipate multibillion-dollar X awards Turning of awards represent date to notable of maintaining We sustaining new our synergies, domains awards all given our $XXX level about healthy prime received

Space [indiscernible] design with down weather initiatives satellite decade. by leader LXHarris the HBTSS focused initial images. a to on future payload for as Defense satellite an to led experience we the our XX% concept set systems, responsive generation for and the for supported administration reinforces budget side, The in opportunity Missile climate in has whether billion the and creating space-based recapitalization. $X supports of is are award FY Agency, opportunity award increase of system ground next systems NOAA, nearly 'XX over select On of next addition our our highlighted imaging building five This recently decades the

for suite providing both expertise systems warfare electronic On contract legacy international such we the countries, East, a Asia a footprint platforms, electronic Middle can Growler. with survivability. aircraft. band In and on expand and new more F-XX a platforms, our dozen adds the We're with and systems the This warfare in the the experience our we aircraft defined with F-XX and and quickly have the EA-XXG architecture F-XX. software Europe. success to next-generation develop as jammer than orders our ourselves recent global side, establishing air as award We our further strong global in on leader to including in open leveraged Navy's low to F-XX in next-generation secure US particularly, opportunities

with customers, demonstrates next the ability opportunities which for potential of when international over billion years. on expand other aircraft And over We GXXXs X quarter. a NATO our pending also the parliamentary NATO our continue series the closed similar was represents on to approval to customer footprint contract of ISR still missionize value with to and award combined several last a we work that

under side, both the $XXX Manpack make Moving the land to and including follow-on modernization over international supporting to continue contract. IDIQ progress production multichannel we order efforts a domestic million SOCOM's on fronts,

order winning international level also team Asia, orders to East two our on strategic new systems We further customers due nature, continue Middle to opportunities customers. cyber strengthening prime say, most follow-on to the provide in we maritime and and These with adjacency Cyber radio long-term mission And billion classified for limited dollar imaging the can to submarines its our our solutions deliver the our franchise ability what and our received customers' for These new international vision in advanced Central our within cyber wins come. sea provide was end-to-end requirements. quarter. Europe, to support And of in visibility global ground-based wins finally, as we for against a challenging programs & funded business Western additional night X.XX Intel its from our book-to-bill provide in and solutions leadership. products while follow-on to domains, our maritime successful expand highlight received

remains for up billion, $XX year-over-year Our total when backlog adjusted above X% divestitures.

the going a the cumulative deliver puts proposal up sustainable quarter to a Cost us net the three-year well results XXXX, attributable $XX synergies supply-chain $XXX primarily recent activity growth. end and deliver we're merger at saw considerable with full a facilities XX%, track billion over year in position guidance. topline to million, of after ahead to put of to nearly healthiest to addition, in meet of $XXX we consolidation, benefits on to since margins, aggressively schedule. In strong us biding million Shifting which of upper our this year pipeline

also to LXHarris. enable year program and a believe supply through savings. program of to strong beyond factory phase we potential traction productivity And performance, opportunities eX this continue expansion considerable another chain to for gained that margin Our cost there is sustain

holding we’re plan. Lastly, and And based driving the cash our still see on considerable working $X.X updating up-side we divestitures, potential CapEx the target announced capital on shareholder maximizing off capital for flow discipline, billion to and repurchase friendly we’re share while year, our through deployment. continued

Military waiting are to Combat Training second the recently cleared divestiture update an half both shaping, As Systems we’ve the the announced the period on antitrust on on previously Propulsion year. and U.S. closing track of portfolio and

more we’ll on $X progressing We’re coming XXXX divestitures, double-digit to a along on on provide track billion share months. tax And deliver details growth policy impacts. remain with of potential basis cash and to cash reiterate, on portfolio free we per inclusive commitment our in over other shaping flow opportunities the excluding

made the bottom year, against So, start priorities to of we’re which at raise execution pleased EPS and the progress end our the us our the we’ve with gives strategic confidence guidance. of

with to will Jay. over that, I hand it So,

Jay Malave

and you, morning Thank good everyone. Chris

solid of of income XX% points. was led with offset result $X.XX cash on well which Slide operations and returns in capital totaling of XX. were pandemic flow growth comprised growth commercial earnings shareholder the as Of share $XXX of in the of and $X.XX, growth, timing better prevent as our $XXX and repurchase points as XX to Organic contributed We into Margins mix and quarter $X.XX earnings revenue eX Free impact up shown begin basis cost million of share And $X.XX primarily approximately roughly through divested lower all quarter partially this me from and dividends. along synergies get million count, from markets. excellence, expansion recap and X% pandemic. related let integration as well segments, AS points the than R&D and by to businesses. First, was COVID results. did about our from XX.X% and expanded basis in by management. in reduced businesses in synergies IMS, expected roughly due decline up points cost core SAS X CapEx benefits stronger interest steady drop This, to government in days program with four to million brief million were discipline net along with some of $XXX basis the about of X.X% as $XXX X. with of was benefits pension at with share per the and share working CS offset impacts expected activity end XX operational the repurchases as a headwinds, a before segment of lower I XXX to or Overall,

Systems award over businesses. XX% growth basis and margins from U.S. Now X.X% & Space pension by SDA and from X growth timing, the strength a double-digit platforms, program Integrated turrets ISR in Airborne Operating This high deliveries from and electro-optical was was with X.X% operational to electronic Electronic in from up increased to in was well was book-to-bill for the timing excellence, partially in Class programs benefits Cyber. up in integration digit growth income. all growth quarter warfare Constellation year including let’s growth Mission the WESCAM points book-to-bill income XX.X% ramp management, Funded and income in NATO impressive Space Army. and expanded from Slide growth from solid excellence. platform from by quarterly single cost our at operational XXX & to and complemented including X.XX airborne up In maritime frigate, Double-digit to a discuss results. from last Operating unmanned Columbia Intel strong submarine revenue quarter. is points bookings classified higher XX Funded the in Space, turn cost carryover X.X was management, and and of X.X% our was Systems expanded our the driving in basis Mission tracking Class and from warfare. three segment XX.X% as responsive margins Avionics R&D offset businesses. organic revenue and in HBTSS, as the including F-XX in

double digit legacy primarily the DoD on income Communication Systems are Funded tactical to from permissive It was modernization. basis high environments volume in ramp Next, cost up was stabilization. unmanned XX.X% quarter. impacts for to Solutions the book-to-bill U.S. was and digits. continued public was single expanded X.XX COVID Communication integrated Vision and with drove platforms up signs XXX and points within management Operating organic also communications, revenue operational broadband that from excellence, of in Conversely, Global related Solutions operating to integration from due safety benefits. X.X% within transition XX% the to growth up contested now margins and due showing anticipated and lower

Aviation in X.X%, from business, fusing aviation Systems from Finally, commercial growth our High [ph] volume by Networks paired offset hope to military expectations decreased growth higher driven aviation COVID primarily [ph] and in effects. with digit program timing defense organic revenue in FA in and Mission consistent impacts related training. in ordinance with these single

related from as XX.X% integration growth quarter. X.XX Operating COVID quarter, was airport move operational businesses cost our to XXX Funded continue businesses. while including book-to-bill lap we in benefits sale the first we’re automation to points As timing, more and primarily excellence, this segment we past government management, to expanded COVID the offset security a of as XX%, the and headwinds. was effects grow. our anticipating than for R&D return down Margins combined basis income

shift guidance. let’s XXXX Okay, to over

We’re guidance strong by first a of of a topline X% off and divestiture supported X.XX announced by growth X%, end this and solid performance EPS in puts operating raise as a start in book-to-bill to our full-year $X.XX and well quarter. we’re This of integration with as impacts. the our quarter expectations, confident our results to inclusive bottom to position us our

returns. strong portfolio on XX% comprehensive pieces, margins, We and In XX.X%. margins, the to upper year growth R&D capital in push and us key I’ll to is in of from and initial new the strength. moving upside provide end will expected midpoint prior Overall, year. It color some provide due the strong expect of likely normalize the will with interim, cost On XXXX year our programs for factor start more We due shaping, stronger on do our execution our the toward of will in the the program for to the a later margins. range update balance increases specifically now a earnings the performance. margins lower be to in

remaining buybacks shaping, stages year. portfolio for of $X.XX a about various divestitures, modest dilution we net which Our are process now few businesses there the proceeds. are could of announced from And from the expect incremental that have of a divesture impact in EPS

$X.X capital our have $X which in highlighted year at generation, planned repurchases proceeds. Investor by further another billion divestiture from our we share of as Lastly, will be cash significant Embedded billion net briefing, augmented for returns. guidance is over dollars in

our growth overall, in cash So, line on of and share. double-digit open earnings confident for per XXXX let’s that Rob, annual up in for delivering With the we’re free questions. commitment flow

Operator

Please Sheila our a your and [Operator Jefferies. question-and-answer We’ll the you. conducting now Kahyaoglu with first session. Thank comes question Thank be you line of Instructions] proceed from with question.

Sheila Kahyaoglu

drivers and to drivers look on just Lots overall growth in I forward? accelerating, in the I there of you you wanted could domestic about that are just of international course on in Space wanted you more Space, with thinking quantify focus on on called company or growth to was pretty and up sorry. in are then SAS, Space going things, think we there guess, programs main HBTSS? given store morning. for out Bill about to forward the so the the forward And do maybe but side there, businesses think focus quarter, of STA and us. well wins portion if how the going Good you doing Congratulations building are on front you it what you double-digits the have how in Chris I have two

Chris Kubasik

much. Okay very Shiela, thank you

Let with start International. me

with a have quarter good You're right we double-digit growth. did

of have We X.X. book-to-bill

key the the Radios As and I the Maritime aircraft ISR, Tactical mentioned, were drivers.

work our at billion ourselves we pipeline, years, really over team's impressed as with $XX have Looking about we so opportunities next three position future growth. for of the the

focusing the there systems with with know talked on all the we tandem out, the is started Working platforms strategy, one have which You our in mission with larger products. sales a that ISR it about. out strategy it's the programs force, such laid the X-part we and as really

at a our the So, when you WESCAM, compliment. nice Goggles, look Night the ELI it's turrets, Vision the Radios,

of over is geography well in with Space think question, diversity I for customers really Shifting a Space continued So, part our of growth. positions business the XXX the to and us the the countries SAS. portfolio

You it know I kind of at look buckets. in four

satellites to On but the to mid-single some important tend have some to the we've future. understand as [ph] do and where optimistic be end I and and Historically, a the think which to the responsive supplier the the some moved GPS SAPS growth, we these so products, mission telemetry subcontractor. groundwork, been digit it's constellations. the really come SAPS exquisite we're mind. in classified and is low some antennas. satellites of III year a But needle or classifieds all We support [ph]. about we've better on last or They is

So, the for [ph] growing that the of STA HBTSS AZUS are bids working amount talked the We today. year. fastest fair about Tracking, portfolio, talked growth part program. we a double-digits We've on the of that's classified about and

So, hope Space. insight a that of and gives are how you growing to granularity we as bit little

Operator

Thank you.

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

Robert Stallard

for been Thanks it's quite ride. of future, the so And much. a best but luck

Chris Kubasik

Rob. you, Thank

Robert Stallard

strong question my morning. quarter. quite in is the this But The simple margin very Communications was

first to into I I anything think of it high the the range bring quarter rest a was basically the going year? and certainly the feels pushed if there was record it's it down this wondering unusual that what's margin, for like guidance it. in

Chris Kubasik

the little a towards bit the Rob. will the that and little related of will normalize year, of factor be really we'll in of results, pressure to bit nothing programs. significant kind unusual was the a the margins see newer But balance of there. Sure more the that so timing There's R&D

As programs got know year. Army the half you in we've the back HMS of

like an will normalization We say some of this is the put Gen the quarters. you year would is, and also on will of have little in comment start, those in great I about broader maybe to future, see the Jammer pressure the think business likely programs we on subsequent the the Broadband just, margins. so indication half it's I'll three a a know, perhaps of the Next in bit a but how things here look, back

Operator

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

Richard Safran

Bill, did worth, an what morning. job. and terrific you absolutely good it's I Jay Bill, Rajeev, thought for Chris,

So, the I you've wanted been to ask pipeline talking about about. large

the capital efforts to very support a starts thinking high NOMARS support new need increase had manufacturing with all And find your the of how Warren footprint to And the Mattel or with You've mean, and these trying standpoint, this increase actually was systems bit? maybe current shift the is invested to this with then I focus and I new I'm to win Does only expanding and like where is CapEx need more transformation a term, assets? about overhead new customers? platforms? to new wondering rate. Does situation a do operations really return from expansion at large read company out R&D going reshape a doing to sized you're on less, spend of company? if looking this support to like is you [ph] one and longer your

Chris Kubasik

into great, Okay, it and thank strategy about. great a the question question, that we've that you ties talked for

as of convert No interesting accomplish. that's a interesting historically, knowing opportunity, an paper. mentioned Ship, Navy to XXXX, which one what stage clean unmanned how and pretty starting beginning? to Manning a we it'll tried variety be to to a so And that be which be early trying will. interesting be think is a of we of is recent you in How probably we that progresses. we've is unmanned it will on And where NOMARS, prototype. we see to the Because are I know Required from and three shipyard will really would team The ship with them a follow-on going this if case. be be, you design win, manned You going with program, shipbuilders, in with winners a are -- you which we we it's not investing sheet relative DARPA the have So, design one teammates probably the is ships was would that that case into team taken to would in and

generally growth and size footprint I pleased to some re-laid flow with footprints the took and talked and are think and and the facilities. We we optimize of tooling we space existing the and the such. new facilities about modified the with them our of out some

X% spend about $X IRAD. revenue. and So, a our billion a between we of is year CapEx CapEx

leading that will time. is think drift I X%. is IRAD over industry down almost and it

see meet do increase I So, billion the not factory what space, are versus strategy. again the as systems to does working us CapEx if or $X think so the take you positions most And much I well. in significant our will. we're up any not platforms, overhead of on actual

Jay Malave

-- over And you for moment, have the we we think IT when as this we're year as CapEx systems in as few well our investments years, Richard, platforms. our consolidating next the this next about

also We and as consolidating facilities. investments facilities moving we're have

that programs next as years. new invest create to trail So, few over those capacity the off will in

levels at new significant don't we are where in we the from requirements really today see So CapEx.

Operator

from proceed your question question. Melius. next of coming Copeland line the Our with Please Carter with is

Carter Copeland

morning good all Bill, last years, guys. amazing several been Hey, it's And on the the congratulations ride. echo an

Bill Brown

thanks. Hey

Carter Copeland

capture on the Gen about one then been bit I X-year thought to any Chris. you've and that embedded little a it a been rates want but base? quick accomplish to guys one planned might you how the not in increasing, that and Thanks. some if I mean, in your you have you kind Jammer you Low Chris, may goals? you expand growth And withdrawal, might headwind Band, things that? programs you that then pipeline of bit like cover track at that wondered are of or exposure if for those that capture little which a on go I as Next with as know a I of expand And and don't think makes speak out seems to have Do if speak HBTSS the won you can have and might rates Afghanistan traditional look to Just ISR like things win. just of

Chris Kubasik

haven't systems, thanks do Carter. we're with that's disruptive million in our really No question hearing a agile the change acquisition in in We we in and $XX ISR have it of not and that and been what track and is do significant. that are -- and that the Total been I amount do we we've not if what Yes, the we've our and is just necessarily, first company process. not rates, for of aggressive affordable providing. ground we they're exposure opened so innovative it level range revenue of Great and like. win high, think the suggests we aperture the fair question there looking Afghanistan. too from on you capture exposure they're you're people as They but the the customers don't rates some we've think surprised right, would and with wins really solutions pipeline and I at had, and as aligns

then were we've top on have three billion if about. to that a tracks those years, we track revenue of we segment at XXX we synergies least talked overall easily XX% and on basis targets, that in and over So, that a the an digit mid-single successful growth and

what done. with comfortable we've we're So,

results function development believe, see and I business the starting professionalized that. have from We the we're to

Operator

Thank you.

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

Ronald Epstein

looks space, Yes, about are a going good business for environment period all been, that? opportunities and mean about change. space of there guys, through anyway, you like thinking thinking there morning, has opportunities thanks. commercial are we're in the Are How you environment I LXHarris how

Chris Kubasik

thanks Yes, Ron.

provide commercial been some think primes. could I where the some of payloads, our I to opportunities there's think in we space

far As strategic us our our currently in capital not expanding plan. constellations own or is as in investing

as the align commercial as that our in have vehicles not prime does both at we opportunities commercial space you as with market we time launch being know launch far course, capabilities or and which But have support the a there satellites, Of some military so plan. strategic this exposure well.

Operator

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

Seth Seifman

mix yes, some Thanks congratulations around Bill of sales morning to there ramps you if ask and in Army this from two?. the you very At Tactical mentioned in And to sales what of terms much. Tactical just and year international rough due Good some HMS the how kind expect typically Radios of wanted roughly the and domestic the to over up. next point, of you disclosure Chris. provide HMS very then or do shift DoD the come portion and terms and I as backlog? could that evolve that's maybe the

Chris Kubasik

to specific Jay Radios XXXX you Okay are and over good very a release. Seth, ball mean, you as the of numbers. saw to off start let me the Tactical then press in to give I'll hand first start with the some the in accomplishments we had I in we've

The recently. just we the process the the of received in DoD is, side, in Test IoT through the DOT&E, know completed for RFP on the year the the full and And news Evaluation Manpack here. You Army highlights couple recently last rate was of going an good production. HMS

I So for should HMS its the moving Army production. that's Leader RFP, think Radio be sign so, a issuing month a or In modernization rate that forward. full is the great again

SOCOM has Held So, prepared and the Manpack. I the meeting growing. recently Hand released an been milestones. their again an comments sign. And for Radio for in an there business my Marines positive additional Multichannel order been We've RFP think that The mentioned is I've

radio. side. visibility for on this Internationally, we forces out year we and you DoD through doing the with revenue we'll and that's how process. UK gives million had just some National growth. flavors we're XXXX $XXX program the on Saudi that BOWMAN in going business good the working booked have So, so to UK year the Ministry Software for is the Radio have Saudi. land run about replace and to Defined is MORPHEUS Europe so Last [ph] the closely the the through Guard, good initially, we going order

to hoping hear year. something later are we So, this

I feel we've Australia, is new So, about that what of last New customer are also And we opportunities again year done. Standard pretty Delphic and course Crypto the upgrade we talked there. confident And in closely Zealand Australia. a with. for working There's follow-on radios

operationally some of wise business kind will to numbers what's development you you to I requested. and provide on wanted or give you going Jay the So, insight

Jay Malave

Sure, Seth.

the provided. was Orders in So, numbers on Army the DoD production your of I the question and XXX. in to were sales and modernization as of you the the was XXX, backlog Army the about DoD will format half Army modernization we will is on to going this to back rate International we've Related know of full funded was $XXX our continue historically XXX, grow HMS that modernization sales year. particularly XXX, give are you million, third

Operator

Thank you.

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

Myles Walton

Thanks, and good morning. Chris Bill yours. and go And your in good luck transition

there could the of better LXHarris last the the memories back progress sources question. F-XX of X plan was always It seems week. The potentially being recovery making brought way Tier was terms on relationship? you're one to the old Chris, and an bring some In delays F-XX there, and you and comment what subcontractor of hearing up as

Chris Kubasik

and of right, But some many involved then like, I'll of years I'll senior execs. as financial our implications. Myles. Jay around be think I've the to to ask you some maybe I going give but it's answer you're to as than some it's important twenty well Absolutely been give F-XX for longer everything, calibrate maybe background, you personally you'd of kind

committed world. platform, that's the which the are to this So, is in one of an think we and absolutely I point all think best that aircraft I important

a So, for years. been supplier we've legacy LXHarris and twenty companies, over

We have ago few delivery. good a we record. track we're on XX.X% X really time and A like part months delivered millionth our

Tech new a lot weapons TRX, has meet been X, that your a the specific So, the to is the some Tech questions but nation TRX, release of our displays, Refresh historically of complicated very challenges work X, faces. program Refresh to with developmental which

referenced that we had there directed risk two when And thought the drivers, the government identified it the of So, we've secondly, could realized program. and you're was as main numerous have occur some right, been we in realized testimony, changes. bid risks, we've

developmental unfortunate, when not are a program. you're but those in unexpected So,

on and main Panoramic is Core is which We ICP, the Integrated Cockpit Processor. System, Memory the the the PCD, Advanced Display which are working products, the the three AMS,

the behind we've PCD hardware our and and relative stable to is So, for just starting been last estimates that. are ICP schedule. and qualification six AMS our months The cost

into it's and So, It's how it's cost the look half a affordability change capability. it TRX gets TRX the been for once at easier designed important sustainment. step is, the and of production in when you

We ready we're about current performance. these anticipate I So, we're our off technology strategically, our capabilities that products, say to programs. kick to in other any to just going financials guidance developing us reflect past the don't this are our and platforms there. phase. a leverage then and will production that on And put changes future position

and revenue the more can excited comment about So, on maybe Jay specifically that, implications. the margin but we're

Jay Malave

TRX over next million is million the the Yes, Lot $X forward maybe set. little around with will around ship with set XX, today ship content over production few our $X.X that just a go years, X.X, to bit going per

program. as modernization as be probably in modernization keep there will to that other volumes this starting start as content. growth program will that mind So, of course programs XX, through sustainment will aircraft Lot see be again just be It's and it higher also part important flatten the in will we out involved and to of that

see continuing growth. we so, to drive as And this

think is bit but expect year as This that little growth we'll a a as mentioned perspective up I update to pick softer we year next year. progresses. each it from Chris

Operator

Thank you.

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

David Strauss

much luck and of Bill. best Thanks very

Bill Brown

Thanks Dave.

David Strauss

on the I ask question to want just it have guidance, a so I straight.

does So, like the to I guide that Slide guess basis the of offset share on forward profile do the margin out EPS AS, divestitures, AS? the XX that the what divestitures one. you that's for pending [ph]? just all number it doesn't question And you with go a looks think as can of then coming but dilution reflect now repurchase through from the

Jay Malave

about announced Okay. it's expected dilutive. the the far just XX.XX the in divestitures, anticipate include on clear margins, as impact XX.XX.As forward announced $X.XX that so does points divestitures' David, be dilution of the that's XXX to AS going the on from basis or

That average I but is bit going So, of see the the forward. points. divestiture margins baseline higher we'll a composite on the improvements, these impact changes organic than two downstream, again businesses with guess basis little XXX just about

Operator

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

Doug hartnett

to it companies of lot said, Jay, have you. management of They I we interesting Thank Bill, program Lay mean, Chris, I names often has have and cost to the them. out. morning. cannot I seen number reduction begin situations mean, in you've count a place. where a Good

integration. the done have all You

You see costs reduction to have and cost competed we're the But I the improvement the times happen eX seeing the say mix away, arise. in of you these get other program, savings programs have most and really changes, margins.

can improvement? So confidence doing you're of when see progression how can really about that the things can you talk look you forward, and have a margin we that you continued

Chris Kubasik

you. thank Doug,

First of all, it's Chris.

great cost You're right, the integration I has and a success. synergies, think, the been

continue these year And really ahead and a after to the As capture we integration to in had cost before office I ahead in plan Bill, meet that back a our we investing synergies. something review of we're to to the I detail relative mentioned, consolidating new systems, progress. and out been ERP and laid IT, applications, the infrastructure really time, go dedicated announced Jay schedule. have it been that it And team, we closed, a management goes that's meeting it. every with we've as and takes Monday like something and going And especially to

here, process. projects, this entirely them just of year and eX basis. the identify And we the by up really review year of take and X% others. $X salaries increase organizations million and each out X% $XXX,XXX costs go over couple singles doubles, in we continually their to of world the lots segment-by-segment. are weekly on and And a focus the and and we on there. wrap becoming then of above should that these we'll sector-by-sector, part every culture, It's end And So class

good So momentum. we're having

forward. my visibility. go see strong good we if for absorbed have We to And it this came headwinds, is the you that out year. We expectation we continue and the quarter,

So has know anyone further. anything don't if I

Jay Malave

it's paths are it's, merger. both of Operational you from through say, you the know, separate as the And eX reviews go Excellence had management just and attention, the and We've synergy Programs day program, as monthly. parallel expect I'll and these went reviews would one those. all of

management of day we to we our monthly continue XX, Operational top top Chris mentioned, segments reviews the programs expect the on with the Excellence the So that through And make go to system, we sure had merger. that of one each as have started we XX track. eX Program and from they're

continuing as each it's management and the focus, day. and performing so simple operational foundational to better attention, And of basics drive every

Operator

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

Kristine Liwag

congratulations, good Hey, and Bill morning, everyone.

future? ends question hampering following on programs provide you you too cutting, Just bit performance a also not can in know up on up on it on how much the you more margin, what eX Doug's you're And cutting you're the know, initiatives do are, what that top cost color pursuing? little

Chris Kubasik

said we're give the then And cutting end look Yes, specific give that investing industry Jay I and I R&D it at in back on the and March I'll One, numbers. them the said business what think not and thanks the for you start the again, meeting. I've question, front to you to out. this Kristine. and of over line have cut we approach. further, of we're end direct the business. cut and of we submitting of as we We're we to increased aren't. which R&D R&D, were in R&D The proposals. on the have we investments The proposal try not term bid and but lots expenditures the have a before, and did focus sale taking generally margins could long increase front leading

synergies, is of the started synergies talked the actually and engaged we workforce was we and day make part fully negative the and of revenue about our costs increased the important one with the sure You workforce know, to supported. benefits we merger success as our

that we're to I contrary, confidence an the we're again, approach. and we're look that's, me not And headwinds term, items quite enterprise taking longer looking at the give this at term. the looking short So that wide

had companies individual So talked of as that payrolls. or services we processing, own payables sectors, or out there shared it's example, doing segments about there's their an lots whether

not Some of out strategy. sectors segments say process, of overly stuff the individual for of a isn't to is I easy the the a it's systems, optimizing do, lot those eX do think divisions, service going concept, benefit all but gives we're And it's the more this to services, shared ahead And to do versus work and doing the and enterprise it, single so having single in want to give or of exciting, part people shared it's maybe looking it, confidence. there's what us things whether you we're an at, enterprise But that's quality, years taking Jay, at detail? inefficiencies. level, whether procurement, more and

Jay Malave

build in shop just the and that and well Yes, or down ISR expect, tear in should value of ergonomics, of Simple in in terms so far a aircraft benefit reduction example, you've tooling, an hours reduction chain, as you aircraft. get that specific over as as initiatives, specific a as all rebuild businesses, it be a rebuild. as of changing things like minutes the would particular in you a would engineering, whether supply heard people, things productivity, our the past, cost

processes, been we've costs tooling. top it it's so, some take funded in at customer take the tooling, them And able able cases, of out time. and we're same to improve our to On change

sticks. reductions not in just more an costs, So and have it's built slash a it continuous reductions. hopefully around sustainable type organization that improvement are we to systemic we'll These drive

Operator

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

Peter Arment

performance Space there. thinking Bill, Jay and cost continues grow impressive. Bill, just your Airborne congratulations quite And the reimbursable bit best & to a continued regarding was I good really on about to Chris, mix margin luck. the of Yes, be Chris, has Hey morning,

of year-over-year. going these there? the with XX% up a lot was just still there? any about Is it that's think sustaining kind shift there I pr do we on margins color efforts How or Thanks. eX mix of maybe think happening

Chris Kubasik

Yes, Peter. thanks,

of right. these Now portfolio lot built, we or all in we've fixed sometimes we apply to but programs long cost cost plus positioned eX that the a these domains, start life, When price that plus. the have out about and contracts, we're decades, how is not only a developmental the talk

move have fair production course, So of amount international then export. for into they and full rate potential

day have natural, you example. which success growing program week, will getting to it We're healthy portfolio is EW starting F-XX as at good then through as are of I every business, look from the portfolio have I the should example. the we good mix specific of had and rest development mature So And And headwind mentioned cycle. to through mentioned, its the the as take the the with of that programs, as lot going an we've but production. a continuing we'll TRX, now as in is a light, then a of SAS, part our legs a is and example. F-XX be of the

grow have on We the a business, and licensing business programs that a F-XX. growing. don’t about cyber lot legacy other We And again, cyber opportunities whole there's but aspect have to to our the allows talk us commercial that's to model margins.

I pretty portfolio. it. much look have And piece the at of the that's how with we again, So continue confidence, even plus cost to

Operator

with question. proceed line of with from Next Cowen. Gautam your the Khanna question comes Please

Unidentified Analyst

is Thanks question. for the on guys, this Gautam. Dan Hey,

So this asked for much already I because, actually stronger pretty was question, margins hoping for, were board, the held. But but was is across CS. this guidance

remainder to particularly why, into could kind And so of on the Thanks. come tempers throughout I SAS back range? was of the what guidance performance that IMS expand hoping the maybe and you year

Chris Kubasik

Sure.

of initial in expect drive the half margins margins is up case So lower on in in and we on of prepared new just just then well tick particular, remarks. down wins mentioned these in one. growth as my back that's to SAS in programs their year some going the R&D I to so as the And

R&D in the for us and lower in are a margin then pick those up pick up So factors, programs. new two just

Jay Malave

I we'll year. my be to in confidence high are let it's comments, still that you warranted changes because this end early suggested and Now, later the the it the if Dan of the higher is so keep in at and range, know year updated in

Bill Brown

they've other of wins mentioned, particular IMS drive is as the to maritime it's a just program programs lot half a had margin we the programs. of for lower back we the Unmanned with been little Surface up those in year them, as the mentioned similar timing, particularly that it's business. Medium in Chris Vehicle. Also things the bit again won new ramp And in before, They've well, sector. like that going

Operator

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

Jonathan Raviv

question good end about specially Doug's year. question morning, congratulations of everyone and myopic all, of margin, course, this you're Chris. the of range guidance think to from the this Hey and Bill and slightly a upper Christine's more question, about talking When version A Dan. you year's for

we at as improvement, that's this can a continue perhaps flattish. take which as off to expand should a 'XX rapid comprising base be years that such expansion, at So could we or year maybe couple of

to new times, For going opportunity that the some Jay, year year? example, programs you've up is next hold several progresses, that down the as expansion have some ramping maybe you of mentioned

Jay Malave

to up. margins Yes, for about our margins year next the but our early to to drive so I say goal guidance will a little that is each year, talk continue

year-to-year. Program Operational talked headwinds It's what and from strive You Excellence but productivity about vary is know, expansion, always in we the smaller goal that's that eX to exceeds the mix going we've our from and each a year. ramp every will for

should give we've able be to So you as but in years, last you the continue about each get next few is as our drive to grow. into from continued year average together to way seen our expectation But up. plan slow the on specifics, we what is we'll more think detail there. more it It for will we year, put obviously

Operator

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

Noah Poponak

really morning, a Bill, Hi, good thanks with you. for with and work and your on us. company with the time everybody and congratulations working success was It to pleasure

Bill Brown

Thank you, Noah.

Noah Poponak

forward to And all well. going look the with Chris, best working you and as forward

Chris Kubasik

Thank I. you, do as

Noah Poponak

aircraft a smaller been those programs program There you you might think discussed? ISR update have that on slipped then quarter identified? that you Did last ones? I that there the Could And the us was was And guys had few being all they? but actually guide. not land if into didn't, or sized with do understanding by you XQ hadn't my the delay was of in that the put and when ISRX, they caused that up, the other

If handling how in the update outlook. us you could you're that just on

Chris Kubasik

quite the Yes, cross Noah, goal line booked items fact in QX. those that December were in all in didn't

the So represents for have those programs are the and guide that been year. results the quarter booked, in the

aircraft there's we've plus take optimistic. mean, lots we're this CXD ISR done program, So when legs I Australia, U.S. what business, with in of here in [ph] you ISR. the still and the in the customer, very NATO

contained of couple to over everything I And there's on the the So continue guide. mentioned, as several next dollars these in execute as is opportunity of programs. latest billion years we

Operator

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

George Shapiro

morning you, Bill again, to and Chris. good congratulations and to luck Good

Chris Kubasik

Thank you.

George Shapiro

a These for are Jay. couple questions questions

You not pretty spelled out in it Aviation than the other income but pension Space, sectors. benefit I symmetrical. as other think is a would

And rough sequential was down, commercial that at If you you Thanks. revenues numbers we're what's if basis much did and could how of just how kind then, they just and spell out they, how a the much on today? a of provide contribution and public it could how as were well? safety were

Jay Malave

Sure. George.

basis XX for benefits small and pension, XX XX basis Overall and the right. was from XX across points largest benefited were about pension. IMS portfolio. company there AS CS in. about for at but points. about So points SAS, very all basis about you're the It was

little Commercial in below was the was XX's PSPC bit businesses, and down as XX% the down far As Aviation commercial low a quarter. the

So the from quarter, Commercial same, is PSPC was XX's the slightly fourth slightly down combined in the you're and sequentially. Aviation talking down.

seasonality. think is is year-over-year. sequential Fourth not, I is a though think I It's both I in quarter higher compares the don't that think it basis on businesses. of Some seasonally that great better

Chris Kubasik

George. seeing for discretion PSPC, to And has sure to and on $XXX spend bill municipalities. about how the full $X.X state states have chime COVID billion in that billion the just I'm local you've I'll Relative and money.

us to more in going and is of that's which with municipalities. PSPC confidence local give think I So most states the recovery,

But healthcare just of going in I spend the money. So to proposals submitted. that safety, how public number to think trying education, figure first and tripled that I'm sure we we quarter be out the to they're between

we're as again confidence well. familiar back have I so on in to think of we in the what's Aviation, year loaded second and end mentioned So that's I the will half with going the that see Jay start Commercial all recovery

Operator

Thank you.

Our proceed final your of the Ciarmoli Truist. Michael question with line Please with comes from question.

Michael Ciarmoli

the were good going Bill of model where kind on congrats last sort going newer presumably and taking do in update taking tying and of a times morning space as out and there four and path deliveries. Maybe a just about seems production Space the margins. It constellations question, about of and for to this of guys, that within factory Is of you're think segment little better production to some of and many business source Chris. be thanks talked At the the kind business you How volumes eX? throughput, leverage back in there. Jon within you'd towards Hey, get a these move bit Peter with like laying I we a outside the higher big much purchasing? questions presentation kind Ron's the around margin month, on going guess, of better that on philosophy expansion and different

Chris Kubasik

Yes Michael, well said.

a be margins that's I with think absolutely, going to volumes. coupled to contributor our and

we're we down real keep lot come. We more XXs or ahead suppliers down on delivering and time and the they decades competition, going launched. then, whether go opportunity to about where of to one. we're if a wonder in kicks in, a to literally not those aircraft focus on them that's SDA. And talk So still go HPTSS select, two the for There's satellites getting

also type it the and methodology other and we and parts on operational focus of So is of a sharing do and capabilities. of the more it play that making really excellence the in those company, those will taking we're and Space volume concept the best have factory practices. part and into eX We mindset

and each contribute. will one So, every of those

final that wrap for And me you just thank let question, Michael. up. it final, So,

the we've that XX,XXX without exceptional start a day awards. I string wouldn't to and possible of healthy think had Obviously, and of the dedication you've hard that solid year employees. be work heard our the here with execution throughout

as doing. related appreciate defense contribution great clearly, enter year, everything of I tech impacts for rest I before hopefully the behind a us. and a concluding, put So the as about thank excited make pandemic to the leadership progress finally non-traditional we final integration, also and they're have and on unique his company. the of him I'm the Bill stages We run. more company to But we congratulate

So alongside LXHarris Bill, to I'm and I've last enjoyed we've years. go. you with of created proud what more two here the working together

thank So, you.

Bill Brown

you, Chris. thank Likewise,

Operator

This today's teleconference. concludes

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

L3Harris (LHX) 30 Apr 212021 Q1 Earnings call transcript