L3Harris (LHX) 29 Apr 222022 Q1 Earnings call transcript

Company Profile

Participants

Rajeev Lalwani	VP of IR
Chris Kubasik	VC and CEO
Michelle Turner	CFO
Robert Spingarn	Melius Research
Sheila Kahyaoglu	Jefferies
Robert Stallard	Vertical Research Partners
Gautam Khanna	Cowen and Company
Peter Arment	Baird
Doug Harned	Bernstein
Richard Safran	Seaport Research Partners
David Strauss	Barclays Bank
Michael Ciarmoli	Truist Securities

Call transcript

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Operator

Greetings. Welcome to the L3Harris Technologies First Quarter Calendar Year 2022 Earnings Call. At this time, all participants are in listen-only mode. Today’s call will be focused on questions-and-answers following brief opening remarks. [Operator Instructions] As a reminder, this conference call is being recorded. pleasure Investor your Relations. my Vice Rajeev now of President is to host, introduce Lalwani, It

You now may begin.

Rajeev Lalwani

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

and are On Kubasik, the me our today call our with CEO; Michelle Turner, CFO. Chris

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

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

the be that, of more available. please results see GAAP the filings. website, in non-GAAP reminder, turn of reconciliation to Chris to I'll the lXharris.com, shifts few the information, our replay our comparable year, three-segment realigned SEC where section For start of will financial to is measures structure Investor that which is it over in And of this as included A a a our pension our also for investor reporting With we comments. letter level. Relations measures a began and items at corporate call

Chris Kubasik

you, Okay. Rajeev, thank Well, morning, and everyone. good

after yesterday status quo. released looking improve the we challenge saw, format. new and at ways market always in the our you We're streamlined our to As results closed

focus new questions and that and time with talk were we on to out putting So We and And one going release thought your and what remarks, added read depiction with what's come our in and on this and all allows are a at were which document. to something instead say press just which I the we're the the mind. similar then about graphic very of to try prepared you investor maybe and have everything calling we'd with today issuing follow along of what release us a morning, press some our having letter anyway. Michelle color, X:XX web charts,

with our pandemic commentary cash from with plan. threats reiterating and our be Eastern continue strategy the So as year, quickly, guide a consistent as it's we will half XXXX across our results the full well. a to revenue This Europe flow case our the the first the of we're global free margin advance weighted back or prior whether just for And also in are environment, elsewhere. board and real in quarter dynamic the

line So support express of to to our the I'd steadfast opening Ukraine. the questions, like people before

think our strength resilience agree all I we and LXHarris. a their are force here unwavering motivating at mission behind

open with the lines questions. that, let's Rob, for So

Operator

We’ll your proceed Spingarn you. conducting Robert Please be question-and-answer Instructions] first Research. with now [Operator Our question. Thank with a question is Melius session. from

Robert Spingarn

to elaborate Good status Development test to Capital. integrated just morning. I wanted the revenue really on specific processor fiscal about Agile behind partnership the between your the how for TRX on Group out something and and your ask the the and Nut and flight F-XX TRX? that Block general delays question, strategy the core Shield that a you Tech previously more then 'XX for possibility push to might up back X X TRX impacts this all you on Refresh talked with

Chris Kubasik

I'll and Okay. to some come the on back I'll of numbers Michelle don't F-XX then you do give take Shield. financial first, F-XX, I Why and and ADG then ask

any the F-XX integration had we've in through begin development core each And in progressing last integrated we the we is March. safety a processor the We're quarter yeah, And challenging about testing so. quarter most best test, part is So did program. say talk the flight probably quarter I'll know all which of while. this earlier appropriately and of

Memory then full highlight, do I completed its sign want So also that safety System the Cockpit is well. and test. And the of progressing to Panoramic do have completed its good Display, which we qualification a Aircraft just flight.

flight of is So this just to think XXXX and the Lockheed, aircraft. provide going in We first flight. the I first everything well tracking is to to the be

all to be well. seems So going

contractual XX. for and and Lot AMS secured the PCD XX and we for On on XX contract Lot a for ICP side,

to going we ready we're as production So ground tests. we're contracts, to getting and be to these the complete hit running

investing support efficient ways we're and want the capital expect, team you'd three commitments. weekends. find we're because recognize I as more of effectively had working the they've are progress and to that continue to program these And and priority to This shifts visits is the very R&D making. And to highest the So everyone. do complementary we workforce and meet customer the we've and for been

Michelle? So

Michelle Turner

Good morning, Rob. Yeah.

So of a color from perspective. just to bit little add a financial

shared mid-single digits So be our before a F-XX we development get perspective. from with the overall production digits, is Mission Avionics what going going into to down we The consistent be to low-double before. sector is ramp down

year next of up into going anticipate we a we'll that to be percent. flattish So couple

Chris Kubasik

Yeah.

So let the first the Agile and our Group to me Shield. go question in Development investment back about

trying new the a to and So being the contracts revenue prime of more a the you've in talk heard as embracing us disruptor are entrants disrupting our marketplace trusted and percentage of strategy about DoD. investing most R&D than that more

set previously So that an is we existed. up It Agile Group. entity had Development the

is kind the deserves. it of this branding it some of just recognition So it and giving

we're been weapon examples embraced systems, front focus in couple in the a initially give open arena, a And they've doing this with percentage on end working by of We're focused speed on air what the and of has classified because innovation. our group. which been also on Their customer. and development have And a it's doing has as to some thousand is agility interesting R&D domain. creative lot modular systems. revenue. hard new the they're of of double And digits of been the Most really engineers We is and the business.

contracts the development hand And get is front production, into they're they'll these out them. at as and end. who of So these to entity off another producing we world-class

D.C., excited and And most sense. even the facilities. good visited we're something unique in it's it. to made they're and time come a in impressed thing have thought I spent down Generally lot along. of how with So been think start our off very industry, a it's have the don't we moving the And customers but pretty I've about

contractual And a million. the way applies as was technology and get largest of compliance startup businesses new mainly firm. get We're strategic Department Now Defense. which hard contracts. find businesses. Shield process to want these have compliance a to companies raised it's great to that record. these a to technologies And service startup They -- I Capital to partner. the trying who companies, is programs for usually high-tech small differentiate of Small companies These venture thought $XXX Valley support the there are from commercial Silicon capital

embracing So we're them. and working with

through investments, secondary is affordable in goal to meet investment get these companies, war this or in fighter quicker, strategic into Shield more and to of make technology So our we will faster, which systems need. this the either making the co-invest that

excited very And we'll years about keep ahead. in the So you that. as updated that progresses

Operator

you. Thank

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

Sheila Kahyaoglu

Thanks it. Good the Michelle and bold for Chris, morning, so format. I team. much like new efficient

Page Slide my think XX I though. is favorite or XX

Chris, thought, stepping last there's came out. lot been time spoke, we we of NATO up change. more with outlook the since a than members defense It an robust coupled spending. So of was The budget

how you to be LHX? perhaps could others, the that growth seeing ability do impact intermediate And more your you incremental are opportunities? given in what think than profile terms of So nimble of

Chris Kubasik

feedback, I welcome lot investor hour. letter, hours to you positive instead feedback it think we of one new We'll on Sheila. obviously Okay. all a got of Well, but XX giving read thanks, the

billion House the for when is and the So -- was billion US White assistance hopefully, which we're breaking into Ukraine familiar Ukraine. is The Ukraine helpful. the initiative and several billion an you $XX over know And that are the vehicles yesterday decades saw time, evolve of is was Ukraine look that AI, on and the you security in just that, say And Yeah, is very details, $XX additional billion for asked defense. I in will funding. years with, FMS. news I'll those we've which or last the and region. supporting of over used processes whole And two $X Congress $X

works, course, we very of year. which, that to last I important. million is The understand So $XXX billion $X think process compares how

So bill to it's to need this and significant going to see is this take just increase, we a get passed. how long

have As flexibility these more to appears to contracts it, a we get moving. for lot acting quickly it read

we're lots of worked discussion There's So the with as it's customer When opportunities Ukraine, customers been the would With well. a secured longtime several imagine, And you in here ours. that's think for communications. U.S. in in of pretty publicize has LXHarris. importance you I the having and of think region of been well communications, secured

that communication. read can you having the think with I and the difficulty Russians are see

positions well. So us I that think

things course, of ISR, air awareness, turrets goggles. have are of vision needed it's EO/IR just, examples the WESCAM ISR, be I ISR, We situational out and whether under even the think could of whole space night that

imagine. we're think I give well our capabilities not of a But broadly, including to these in would lot even EW many we're sweet really electronic are situated. of So able spot, warfare. And as details, you

mid-single So I right guide time. low is the to we point digits to continue this believe over in the think at midterm,

just And reprioritization, you product up to come I quarters. who backfill able more you to willing XX a responding to next specifics, but them so those demand the is a from within were give get can this to But So starting lot with nimbler, the over then products, RFIs. And give region. to tailwinds. conflict. receiving are We signals. are the know being the have in to more I I We're right? agile I get think to over say to as several obviously relative we to will I request, you well. the have And can't we we do of like or tell other customers ship help their days

know situated. got -- but Sheila, don't we're I I all to So think that's well that your if point,

Operator

you. Thank

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

Robert Stallard

Thanks so much. Good morning.

Chris Kubasik

Good morning

Robert Stallard

the reiterate format especially is very new and I'd -- timing helpful. for the this Chris, thanks

big about contracts. In fixed obviously question, how this is my across obviously a of there's been on the concern could defense, some moment. to world And flow terms the issue relation at in inflation price through

you LXHarris So that have might of to I was alleviation comment on could and sort this what wondering issue. if

Chris Kubasik

lot Okay. gets also to think I as inflation think the supply well No, for of challenge jumped all and the us, believe the immediately is inflation obviously market I attention, tighter. chain a planning we're for I but as people labor which wage and traditional Thank of industries. all materials, and job you. a gets and And

at I cost we at When more think our of XX% broadly. cost-plus look look our portfolio, are contracts reimbursable. it and our backlog So about I we have

inflationary So our increased, budget headwinds. the it's I although cost to to the one large those are believes way to the that's don't end you the I through user. think anyone see reasons And absorb of flow designed, added enough the all think

XX% about such. our have -- about, products, business model our the turrets WESCAM but only through the we've We commercial radios commercial it's of that or business talked not and whether TACOM

the take similar time, So your right increase on. at that you prices industries to to other

the if price. fixed So will, real the risk is XX% that's you firm

As backlog. you we months XX know, we over little multiyear a backlog, don't of do a but lot have have of

So in a that case, it is headwind.

lot more absorb talked to some of down The So efficient. than is of indices doubled investing in digital some efficient. we're initiatives that machinery less out really there's those in and but find We're the going more are escalation real headwind. and probably continue We've rolling to to reality EX be We're We've on clauses. more does and contracts, ways be effort, are about inflation, of a the to taking those that embracing engineering. tooling have there. to and

that's day the every like bids, new on be are Michelle reviewing do which So then I and to another And several. challenge. proposal. seems going we

obviously. the forward, costs going those We build have into to bids

to So see know, we us bit you that's as a it. if here given maybe in it? quarter. how headwind Michelle, I want it's quantify you little the address And of don't

Michelle Turner

Yeah.

say supply locked I just previous we XXXX of pricing. it's in with shared characterize most very in that perspective, consistent other guidance. our thing what would I we've And the is our So would a from

consistent put most mitigated we've the we of the what into risk So with guidance.

this is that becoming say will I more Although elongated. environment

about our be going about this to thinking we're headwind as a certainly think as XXXX. strategic So is planning, we

Operator

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

Gautam Khanna

you related one of a for format thank Good night last on questions had And morning, your opening I efficient both very and comments. to couple the another. guys.

talk about of a, in fit-up open-ended if won you. So kind the night a vision, forecast? characterize how broadly you question, LHX what could could You've have if IDIQs, of An fared you just radios? number

as are So positioned? talk it like, to take and you guys the how far as us you'd but about fit-up

Chris Kubasik

just only Or question? that more? have -- you Did your Okay. is

Gautam Khanna

other questions and lives as well. Meaning We the that. can defer

Chris Kubasik

talked Okay. taken mean, 'XX budget We've to we the a a -- It's at do of budget. But get Yeah. budget. as XXX is nonetheless, a saw I finally. did days get challenges. news get we length good we

pick some starting quicker we're see a to Now contracts pace. up and activity at

think discussions of with the Congress, For seen top-line, going during just is $XXX several that my line. focused I the up In all the and billion 'XX, we've believe members I on top process. go number to conferencing customers actually

seen list. budget. into UP Priority list Relative I'll And the think ultimately on first. to $XX of just Priority the going the about billion we've the be that is XXXX I final the I list, -- to go to think Unfunded Unfunded rolled majority

hill the zeroed funding vision. our customers' to with night generally to without But You It did our the concurrence We army. in, are the zero. that of don't support. get go aggressively competitor was ourselves as out. the working in and mention the back That was hill budget

So is on the UP think a I that's that, list, the fact positive.

only in probably was bit well seemed side. to on eye one the the well the the a where lot budget went with thing ‘XX. align looked thing we of make those FAA, looking up also to also IDIQ. of a with over But we we because track weather aggressive new even work, throw positioned well XX% up about caught we talk that that is mentioned Everything some competitive, like I but what The let our X%. programs, on the DoD to bidding And we are is NOAA. our we though think funded, up of we're little The just look next-gen they're opportunities. those. opportunities. sure that Even we're Michelle side, So We're satellites. beyond NOAA the at I'll I'd at over and ‘XX current negative positive wanted. is long we aperture mean, new for opening win all the opportunities out NASA the do run, I positioned very X%.

think this good the us give color. So a NASA, position it following a the for I that we've are all look lot tailwinds positive I'll continue put But Noah, NATO just countries. DoD, when at I as future. Michelle I of a then up, and to give to in especially been international budgets in FAA, to foreseeable to maybe more trending grow little the see

Michelle Turner

I No, Yeah. agree.

radio within our I been with growth talking received But of on business handheld think our billion when first predictive $XX IDIQ growth predictive chain business. often double-digit speak that overshadowed challenges. in you recent or by discussions, the overall our really on this whether the quarter. within IDIQs at is indicator has look a supply indicators, we're the budgets we about to the

And so the term. we're about excited near

we're of this we're question Sheila's environment around immediate suggest getting would Going have opportunities back indicators conflict from that related that well, to as all the the to tailwind business. going macro the a to

do We hurdle, with supply chain however, to challenges the immediate to about get excited what's come. So need the we're through

Operator

Thank you.

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

Peter Arment

and Good else. Chris appreciate your morning, And time. Michelle. like the I new for thanks Yeah. everyone format And

efficient. I is think it's from just on Chris, I the leaving my supply Michelle just guess really off mentioned chain. what question

and budget Just carry also Thanks. and we been adjusting targeting focused your of you versus approach days take kind towards how cautious second the as that this kind capital working building of highly then relates of more kind improving have environment just it of look a of supply kind case comfort an more around your on? kind just half? things in to inventory maybe level And you

Chris Kubasik

all it conversation, that's in the about forward, feels progress. would We perspective, have two making from least one it's Every I we're It a last is maybe about to and following talking risk at longer. and months Clearly, nine number great day same. say No, step one time we different. back. like for the that's thanks. had the get been question. Yeah, steps we're But put last that a

that's in of us the behind the There's only to my this in I going a be XXXX. thing was mind think maybe belief changed length all the that recovery.

to and put we supply XXXX. think three I going look in have it we when it's have we labor. have buckets, And I at I materials chain, again, go inflation, into

the this depending But we're think day, visibility. -- I paying and shortage, those investments And to got within chain. projected getting But the times in quarter data question. inflation to where talked get rates, think the country how challenges across continue into The better about And of high-single on pretty the know covered But single out variety But a think are have just XXXX that processes the everything. which of mid thinking back of the even the And again, and even the I've of at. shipping materials I'm our it's we in extend, digits. I is the products industry. mainly might is to up off you're lead freight attrition fourth analytics. labor just course, come adding our prior address. tools, labor going I the to previously the digit the looking shipping significant kind people to increased labor the of something lower to supply to the components. index figure shortage we've down at in electronic And year. more we cost is as that's of much and end the complexity, are the We've

our been the lies new recruiting. We've in challenge. very successful So therein college grad

I would if I'd as I perspective. the Michelle, about there's know, little recovery I feel XX don't more? same longer it. a just would ago, way summarize think from well But working say that's I days did So is I our

Michelle Turner

Yeah.

creating of And I that living bit But disruptor the collaborative our we little win we I on and many into highlight a the group into investor like of But the the because how controller a levels. a is of this along letter, do communications complements for went with this. organization. numbers across our and effort want received we're feel add Rajeev do would IR I that lot one from being a can trusted really to a thank it's on really DNA I just the team, perspective. So legal, team,

ensure not we're it's about show each how one about products and technologies, differently So it's us just and differentiator. every of a to our up

chain front, a supply the to of on top-line is slightly quarter, in context So to first terms expect $XXX the this going we be perspective, from in some numbers just put impact. under million

We expect consistent in into be recovery the fairly XXXX. that that's with going and to in QX, the second happening half

really very elongation And The it's to the it's in so back to as note is conversation in remained into potential But think with except to do well. we important this radios. all demand within our what point, timing, think with also Chris' budget particular going where we I for tactical were a -- strong. very at consistent I products about January, XXXX that

getting it's this from through short-term perspective. supply a about lift So chain really

Operator

Thank you.

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

Doug Harned

I'd I kind you. mean, radio you've to products -- I like got you're Because sort waveforms. that where Thank think continue the of world of think morning. post-jitter's common it the Good trying when this on to have is of I of the tactical side. here,

interoperability. So you lot need a of

the you've about really the IDIQs in of you how portions out have military. of, you the when play second, sense -- the in share, time IDIQs revenues to talk can about you you then need is to that think the deployment So awards? radios the of Army, into gotten, in those that over terms a in think terms you sense, those it do of of completing my conversion outfit it of means the have means large how and your terms individual they timing how you to of expect those -- about Marines And And overtime? the

Chris Kubasik

Yes. Doug, great No, Yeah. question.

of importance part, let that show orders give revenue and quarter-by-quarter can and maybe at numbers we're So kind doing higher a we the the level, actual Michelle and relative the lot communications. you resilient phases. our can A take of these first as the you R&D no, -- of some what radios is new me to outlook in said goes still the you're on And modernization the look, absolutely waveforms. and before, So the early into right of we've

into lot a there's So the an talk That's we opportunity. dollars start a Manpack. couple to limit, about the handheld. of awards, -- radios still customer, even migrate services was other halfway halfway is these handheld. for also And which multiband are almost we of obviously both and and means the there single spend. get over utilized, little SOCOM again, a single hundred also ceiling -- our million, a that's the two-channel of million SOCOM They we internationally. the have $XXX IDIQ $XXX up which the then a That means about great It's million IDIQ. through and And

take SOCOM. had LHX. was When So winner on want. just award, there. that's clearly, lots That handheld we really of that We've had million. for XXX% we of started. in $XXX all. of That radios some getting of It's single And opportunity tens the Marine, millions opportunities -- go competitive, tactical so dollars we far. a Again, the the into two-channel

more dual I are think ones you about awards. hear and read the the about

rifleman, one again, those decade, and two. recently $XX.X shy those that's same And were with So just of you billion. a recompetition. in army the But a just over look limits $X we're go one where manpack, at billion ceiling and awarded if the of

know, go one, license. the you of And as order task the to step task hunting is order So by by -- call kind year. win IDIQ, you that year the then

conflict. any in modernization are And really you position. need continue and the good situational key secured will we're comps two things awareness in So

out, in delivery. Michelle, headwinds I and still revenue. of some the our will missed a volatility We comm tactical Before not customer handing notwithstanding to point have

did sure job team in So different know, of rather great much more day, sooner about as the make months, electronic increase we come a million TACOM parts is X are times to get just out, you and deferred, challenge. XX we components I point than used more lead the $XX more as our later. they the get every in, a doing be. in will now to than But to trying are inventory

Michelle, So want to more you give color?

Michelle Turner

And to million, revenue context of terms inventory what call about some We did enterprise we put the across inventory solidifying just by smart half growth. builds. in second Yeah. the build the $XXX around inventory,

think So a But callout, radio IDIQs, substantial did I good that's quarter. we Chris. outland the within perspective from IDIQs first X on have

billion The first a IDIQ. one, $X source dual XX-year

out, to of and So reminder, backlog? until to on in we Chris' based the they're half does expect how terms as point, get how IDIQs do Our we would that a history funding plays And of terms funded. just that these in in. our not of comes assume backlog

This within upside And the anticipate funding IDIQs. is a sole-source funding as we navy out to that add added a a so of right being multiservice. couple billion did around QX the play not -- we we notes. IDIQ. five-year $X.X of then include is just book a from part book-to-bill And these on one, We what of other did saw would any as

So that XXX% coming competitive another And was final That $XXX with to award SOCOM million XX-year Corps. was award, a sole award. Marine a would one LXHarris. a then $XXX Similarly, the million source. be

all one, booked, for was X the were sole which the of dual-source. except sourced, So first

radios. of demand So in our have really indicators for terms again, continue predictive to strong

Operator

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

Richard Safran

Good Michelle. Chris, morning.

bookings. about the talking one was wanted about you've in I been So quarter. the Book-to-bill ask you, to

you're about to grow. spending seems demand, given of say to the in comments defense about global optimistic the an just understatement and It Your upward trajectory awards. increases new continuing

And as about of outlook I offer you're I driver Do bookings I you you guess improving on you now? what talking would book-to-bill look be we an might -- what book-to-bill Anything for the it bookings if maybe So mean, for think, are does how helpful. ends there, here? offer say up? comment bigger international about see like? a about how a could your now could thinking 'XX 'XX

Chris Kubasik

-- you. the good was and quarter to Yeah. from book-to-bill, it's hear first explained. Well, funded really good X.XX Okay. Michelle We book-to-bill always Richard, as that's morning.

the little book-to-bill. at it. we've of So maybe a than look conservative plan more a others got Look, about XXX way

might mid-March. over these now X a three CR at we a we're have we contracts. We tad side, conservative And but looking So into quarters. have to actual being be the next on did through of the actually each convert

So well. I the that's as international tailwind see going through. a process we're as

great for international some opportunities ISR. We have

have We have we through just turrets. EO/IR go the to process. And our

have foreign and governments and with process. dealing We approval congressional their notifications

So we to close A these we're those sourced I sole think just process. expect would in lot planned. contracting position. we're a approval that the good and through are export going and And of as

XXX So year. hopefully, over in the this range for

keep We demand haven't we that forward. a getting. win given we we're relative about just to then probably keep into positive the benchmark We everything signals as to I to of each talking move a the have as seems every lot because of that kind use -- -- insight 'XX, 'XX tailwinds but for be and well and day. There's

is flip and opportunities upfront legacy up on fact, why navy then I as electro infrared this invest And new That team. our In have announcing, panoramic was perfectly prime, embrace with more to excited the system. about. the the which a it want R&D, we're aligns some to the which known is is we shipboard to be quite optical more strategy, announced of but primes we're something going bring paradigm award that recent entrants our Spear, in or and

options. that's under So believe we million And course, we'll with for for it's just $XXX million have ships the and press upwards it one U.S. ships. $XXX opportunity Navy. the out XXX And We but this on of market. of just XX EMD get a international shortly, be release could

this investing on opportunity passive a started And actually passive a target excited businesses LXHarris together tracking, We which about. provides working detection we're win. XXX multibillion-dollar EOIR really collaboratively. competitive So our our it's IR&D R&D is years needs. by This is or different and within six that what it ago Navy

more want and open attack it the and then in navy, deal. called information you'll big the modular, something is whatever, award on the to which And a put electronic CX with see umbrella JAV or the you systems, it's solutions. It's [ph] waiting If Spectral ahead. the we're it's under sign days is operations for this something next-gen

and all least at And us tailwind with in confidence and start that these give profile. our four more aligns things. it will growth we're and things -- So strategy, these to has going our bidders, after but these

Michelle Turner

words Yeah. second to half And add a our part is of additional growth. of just because this that couple to

We the missionization ISR well. in programs as are half anticipating international second

we from specifically did to international, land QX is X% over growth. so an X X.XX on the international perspective And question book-to-bill within with a with

so think our -- that to working. terms And the us. predictive strategy be for I And continues indicator in growth clearly then the to speaks another side, a space on is of engine

We of are well. tracking X Tranche as on the SCCA award anticipating announcement

And so the we're half competitive the second in anticipating award year. of another that that's

Operator

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

David Strauss

Good Thanks. morning.

Chris Kubasik

David. morning, Good

David Strauss

morning, Michelle. touch I to wanted Mix, Good on Chris, it.

supposed I of think it in year, was a negative but it benefit those full think SAS. headwind the to was like And on it's it a segments. to both I sounds a the be -- to for IMS quarter,

big off on that could the relative Thanks. within that it's And how like-for-like on of now that, moving where you to the is you and decent aviation, mix of think could Commercial pre-pandemic IMS I sold size pieces it? stands you've also impact the actually I touch guess, if the think now? business levels? margins? chunk given So a within kind just big just -- when about And touch on we

Michelle Turner

to can I'll in. your David point, and came at overall an perspective, jump From Chris XX%. so then margins in our segment start, Yeah. mix

to XX% know our You'll that XX.XX%. is guide

variation end low looked So we was came some in when point, you that. your our mix the across certainly of But segments. there to on

I'll quarter, of guide at our execution. a had start and landing to XX.X%, IMS. really to with comparative strong really They So strong XX.X XX.XX,

So complement at ISR big also program within aviation commercial our mix business. look our to but overall team

grow to his that growth is as expecting This aviation and Alan as consecutive the and half quarter second sector, commercial fourth well. compliments within our well. to So to double-digit of we're in team the continue

provided. we the to to that with we modulate And a actually so out then performance. point, that into is expect EAC And do the We playing really within bit second half strong dynamic get SAS. to opposite your align as guide

of QX be a landed increased perspective at productivity expectations there a XX.X So from is XX.X which and to to that implies mix. XX.XX, going versus we guide

SAS. it. Now within space a a have lower-margin us lot new business strong from for of quarter we the wins program within did a perspective a with really That's

going So we help then expect savings, that, second talked coupled chain about with to supply a to year. business our XX.XX%. able And a volume second a to clearly of half get finally, the perspective, recovery we within XX.XX% EX was of that do that the the CS expect We with today, from in in guide be they're but headwind to overall that lot to the the half QX.

Chris Kubasik

million we're pre-pandemic outlook, Commercial the the in Yeah. just business. on range the commercial $XXX this was -- that about to right $XXX million is Aviation, And our training year revenue of for

I'll to rebound, the of sweet a just So the SDA should think classified soon. our spot, we're continuing we've just other satellites, space the satellites whether opportunities, are coming prime to and in really business the such so we're but where $X over revenue, be opportunities, sub to advantage foot billion well and patient XXX doing And military of of space had divested I double-digit GPS, as take GPS that I it's some there. the is about, the And the and exquisite XXX next is well, the be responsive provide generation growth. HBTSS stomp, training, we in talked which mentioned, We previously companies MTSX, these which payload. weather also and

work So it on opportunities. follow-on the positions time. headwind and us going for margins, we're take be every term but long a little and Might each to growth this

Operator

you. Thank

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

Michael Ciarmoli

legacy these margin as you that Chris, guys. plans be given increase guess Thanks it percent to by spending higher-margin Love back in structural rather? trajectory could really at look Michelle, what shifting taking if question. book-to-bill base going of production. And really and the could I increases guess evidence? seeing just new for NATO are with seeing that phase was programs the kind recapitalize industry the next-generation -- to format. for Good tailwinds as if Hey. an morning, countries or their you really NATO go X.XX modernization international And be to growth tangible environment. that DoD the driven their systems I and we're in prewar, GDP, as more provide the this But a U.S. the demand there in into maybe, R&D pointed to you need you potentially guys forward. we of European medium some term their move business this industrial in out

Chris Kubasik

Michael, systems. Yeah. legacy question a on great that's the

a read system to having almost think all production learning you think these production been it's systems out in weapon is we're hear for impossible of now, I that of some decade. the restart if I and about

currently lot It's something, Again, an supply So I or think those to operational, think, be be are contracts. products demand restart something, maybe don't being headwind, but chain with the look I the going that's lying think anyone deploy. to think version difficult. has to challenge. older is is their in something for that and these able the warehouses. I signals easier of I to a We going industry in around

Now customer inventory. the who's seeing is depleting what their been we're

So we're more situation. a in restocking

So international opportunities. real about optimistic look, our I'm

where opportunities use relative products are have staff traditional we and in-focused a for we We're development countries. think I unique are. with combination of business growth more our because a country these global companies think we then network. other focus XX And about in we we executives, distribution countries, focused have to

each a quarter. So company I'm we've It's every and about done increasingly in percentage what of international. larger our optimistic

think maybe I this in quarter, range. XX% the

try more deals. us and are build to the easing, globe going So more of a more to that traveling be to lot these continue COVID around close And to to relationships and is now come.

just of So the say, let on with feedback that, our I format. me new all, appreciate first

going to to our result then working to Agile a more Development they rest industry under we're is we're the in stress, customers something hearing the want and for customer taking and of and with of a and think know Group I I our the So all and come Shield, but what do and up of to listening lot action. support the our this customers. if I mentioned see year can we creative. at even are this do it, again continue least

want of they saying customers Silicon Valley So work lot have new for type this, to innovation. a They our companies. I They with entrants. want credit to want

to a It's lot mission and just hard I we'll for allies looking with we're We'll of momentum, dedication, that. a DoD, spirit. Ukraine. So continue that this at in excitement to of with up got efforts conflict trying really will say solid forward to And inspiring. course, adapt the to the working deal all wrapping the and a employees, NATO I XXXX. work, we've closing lot support the feel people humanitarian I our of others the have the like hand. keep to thank innovative and

thank we'll months. little up great to earlier So you normal. Have you talk of couple weekend. than wrap a in joining Bye. for a the a and call, And

Operator

This concludes teleconference. today's

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

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