L3Harris (LHX) 27 Jul 232023 Q2 Earnings call transcript

Greetings, and welcome to the L3Harris Technologies Second Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this call is being recorded.

At this time, it is now my pleasure to introduce your host, Mark Kratz, Vice President, Investor Relations. you. Thank

begin. now may You

you, Rob. to call. and Good morning, welcome today's Thank

our are Michelle me Chris CEO, Joining Kubasik, and CFO. Turner, our

During the reference to we that discussion, published yesterday. the investor we website our letter may

this always, answering call focused be As on primarily questions. will

given imagine, we news, can day. have you busy the As a

So XX follow-ups. this hold morning. the I to to we're throughout for call will day going the minutes be available

that risks, could that call, actual constitute certain forward-looking assumptions we and statements These the differ uncertainties During to matters involve cause results materially. may statements. discuss

For in more our information, provision please reference the the SEC safe harbor found and investor letter filings.

also the which are investor will reconciled in non-GAAP measures GAAP We financial letter. discuss to measures, comparable

study and we your want Board. quarter the I second recently we feedback. thank with Lastly, perception and who those are the an to conducted incorporating participated in reviewed investor we the results

to moving it turn over I'd to questions, Before for opening to remarks. like some Chris

morning, for acquisition marked Okay. Yesterday a and Mark, milestone Aerojet good of significant Thanks, our everyone. Rocketdyne. in LXHarris

Our and will expectations. one Aerojet's poised over initial team of the investor day industry I warm to is transaction, closing acquisition a the for conditions forward to close to acquisition. final and in look welcome part beyond X,XXX FTC soon block employees generate value the of our so. a to letter extending moment next is will of are and for defense company the the who pivotal This become shareholder represents moving This not LXHarris. both our or disclosed we forward that

acquisition strengthen support accelerate competition modernization Upon funding foster base, the Production of the for and war defense DoD expansion of and Budgets has will are industrial this fighter. committed Act, and operations. in increasing Aerojet closing, Rocketdyne's innovation the Defense for the munitions, healthy DPA,

we our focus news, in enterprise have the and commitments to execution conjunction financial quarter. delivered continue exciting on on across this again with In second

each delivered of team sectors, the XX% building the accelerated the year, of top-line growth much segment. we've the XX XX quarter don't technologies, we which last have we about as XX in the priorities. talk that greater had reflect gives momentum confidence been top-line customer increases QX fourth are and but aligned been We results in right than to in investing grew X.X. a me and over the consecutive with of XX Our with our This book-to-bill their

was cash in per -- we margins income total, $X.XX over expanded sequentially line basis positive, we of delivered of and up X% prior flow XX share, was points commentary million. with $X.XX as anticipated. had earnings free and at ahead Operating consensus In $XXX

reiterating revenue commitment. our for to-date, free Given the guidance flow increasing year performance we and our EPS are and cash

and easing half XXXX. delivering supply chain for sequential growth focused in improvement accelerating results constraints, With remain second we on operational businesses, product-centric initiatives,

With Rob. that, questions, the let's line open for

Thank you.

conducting be [Operator Please now question. first Arment session. your Peter will a question-and-answer with Baird. Instructions] proceed We Our from question is with

us agreements consent about through sign to would integration like and go-forward again. any high you you did us talk kind be walk and give quarter. have to But that, the Good start, Yes, Aerojet on asking Michelle the could maybe If Mark. on you congratulations to of it's Chris, thanks. Chris, focus question the would just Aerojet on any Thanks a versus helpful. okay, levels, comments plan wanted of I just and on morning, kind deal. maybe about

Well, Peter. Okay. thanks

close ready in signed our deal X.X here and And announced We we as the mid-March. back request later, December. second to the we months a transaction. announced Just -- reminder, are received in

takes to process. go a much So team effort it really everyone was that effort. I'm time and not how great sure appreciates through it

a emails, team, LXHarris lot text, The of back to this IT contracts external organization in day jobs. their special So all searching going and was to because the our call-out years, a because legal, partners. addition finance,

So pretty relatively of -- team proud short time. pretty the where very period a be in to are we of

the thorough FTC can very have review and imagine a would was some as It Department obviously you had input. by of the Defense, DoD,

to are responded we today. and inquiries all where we are we So

So that the yesterday. as announcement waiting -- out the period we put expired as has

the Over I ground hit so, to we're good financing finalize be or day to going next the and close shape transaction. we to then the a And have the think in running.

we merchant we about agreement. to model rocket engines buy would of question we sell agreement, anyone rocket to can to them supplier a Rocketdyne. legacy We sign and are of globally. motors DoD have consent rules supplier engines the be rocket your or you once consent We a to the the gave negotiate being a did assurances we'll with merchant not and Relative that I and we continue who wants assure within Aerojet a rocket to close motivated that highly long motors

you. never of around a of be to bounced some So theories were the sense a to made that honest heck to me of lot

what this engines day have office going to We'll that's motors hit teams. representatives on did and to running with sell both we're from ready ground We to We the bought and company be integration one. do.

and, go So decision merger, obviously We're had LXHarris acquisition, function, every This of playbook ready we one. been given and a but to time on a lot that has an we day use. every is effort again, on planning will the made.

Appreciate kind Peter. comments. the thanks, So,

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

Hey, kind LXHarris Michelle. much. that to volunteered motors it the their seems along solve that hand problem Good Chris, line and, I of here. department raised yeah, Maybe Aerojet and defense everyone the solid help Chris has to a and problem. I'll thanks has of me rocket kind guess, and continue very morning had just sourcing congratulations,

going now So get it's to solved.

from seen of million standpoint, you of their about those talk and issues, they Aerojet, to $XXX as I could and the both you on plan complaints we've standpoint think, lack that then got. from investment an customers you about all we've address And various an seen think if investment, so, to perceived kind us from over how years a operational the

investment on there's focused programs thinking primarily Stinger, and So but that's the what well requirements those are. think Standard Javelin GMLRS, PAC-X, also and Missile, THAAD? I as about

Yeah, we No, lot did properties of kind several course, in to before, had we M&A again, made was were a And Aerojet sense. or ViaSat companies there there a thanks, those, We to of was the unusual pretty Okay. was thought I've our line I as feedback, hands, same that TDL a active and that help. course quarter. said but of know market companies handful of the And process raise and of Seth. of it Rocketdyne. both came of and one

in strategically it So fits in opinion. my

DoD, on continues to rationale for as strategic help government new well in the significant I growth And Rocketdyne the weapons today, budget. entry we and mentioned. it's markets. DPA know, into increases over you planned. available are are Aerojet mentioned, with always aligned what to as but with money From we're the side especially the markets the -- already when well had priorities, we be So maybe was and in announced the where we to you it above These

lot So of I think makes that sense. a

majority the out the the night, and again, have We've with the you to stay of over staying company. of expect, sites XXX hopefully of sites, XX% the be as And merger. key at those been identified, them to of workforce we've with the last the as individuals, impressed these skill will with agreed talent would and top individuals as or the gone all we so

was I see So to excited that.

where be look is be longer at press, of in I term, capability hypersonics, hypersonics I doesn't pretty the is I but It capability that going think our a when exciting. to headed, that -- think get things sounds good. soon to a actually very whole or lot are

disrupt used lots of to more and be to hypersonic some questions cycle whether is and differentiator short long brings I but the We Our market. this about capability the earnings answer visibility. LXHarris, long us gives going a backlog we're cycled, continue think clearly cycled, to to backlog

the we full full slightly and year in or first case laid And out cash place of in continue flow to the free better. in and year with second back first December EPS maybe business accretion remain that

don't obviously with concept operations, as your the on There's question you to rules. jumping, to So gun we something want relative known which is comply this do.

too we businesses. team. It's diligence They able that through get and we've missile have jump, But the focus their with go means critical plan of a reviewed. did engage a in deliveries So were to couldn't on programs. which not their we gun we forward process, really real involved to quality

that operations and mentioned You the across of of other Camden, expanding a And fair production modernization Arkansas production sites. most those. the amount of surrounds

to programs And $XXX and plan. money That in that million, as will facilities to digitize mentioned, the we've you engineering. the mainly looked also those there but there’s mentioned, money their at the go you DPA,

we're excited quite about that. So

to merger as and the examples. utilize defect just modeling, couple a have we developed So We tools since we've some zero operations processes. of improve planning, capability

Aerojet it into the sites be to So execute. we're be take what hit day the and has them at go time going and and those XX we'll have We're ready in we and to take We'll we to processes close running next plan key to ready one. on ground a from to it. going merge about you just but imagine, excited to get some about would It's excited acquisition. they're want there. the so, hours And or

So, thanks, Seth.

question Spingarn your the proceed with question. is Robert next from Research. Please of Melius line Our with

morning. good Hi,

morning. Good

morning. good Hey,

financial wanted the with I to Sticking a question. topic at ask hand,

close to on long CapEx a of was in just guidance for Michelle then investment Given next from in that talk guidance, the I P&L this the two, year And about on how Chris, term? day think yet to you vein, Aerojet the the going could both the and either question then of or included you're follow for wondering, that maybe just about rest 'XX? that updated the Seth's if to perspective CapEx or you or rest perspective you've but with

Yeah.

So morning I'll for joining. start, and Rob. Good thanks

closing out, first on all pointed Chris as employees the we're focused AeroJet for and one day the event. welcoming So then new deal celebratory the

get course part part XXXX, portfolio. then to remaining our January with October of our going QX that'll are our guide. of We to the five rest certainly of call. to as we consistent the update So plan of And update guidance months in do for earnings the for the

value offset year, material to we officially the I is within EPS where to free two. around be we everybody year we around the billion a revenue which the contribution the remind want we one, contribution within will expense we debt. do incremental but consistent shared previously had level, we year Chris' today. do flow the from of income what remainder cash To don't we earnings accretion creation, interest point closed, reviewing anticipate have Once anticipate stand anticipate will just the high the forecasts as along with assumptions, with to the be for but $X and

next the hit we'll think earnings at at -- and I Again, give let’s more more the details next -- call.

And We of think for going months. can will on. all this the so the going actual and for give this of guidance three LXHarris. year, of be growth we And and I to months we've which visibility for 'XX it's mention I remainder for about segments. is said I will January four as of end, have know course results, more to two And we you'll there's was separate ‘XX before, but when give at guidance the segment, a calls have the profitability all several only

So now. I'll it do just

Day We had close. to wanted want until confidence but have schedule to deal December, we in we've that do, Investor are that the didn't going going a we to to was something

other date the in drivers performing going and and time, that and Aerojet Disruptor strategy here is out ahead you our insight weeks in Trusted our something a a portfolio. then a to location. deeper organic give get some that we're refresh But update on Rocketdyne how we'll to growth the at have we of So

So in more look to hopefully December. come, seeing forward to but person in we everybody

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

you. Thank morning. Good

morning, Doug. Good

provide pretty a with with are combined solutions. got I space, you've acquisition, to in position principle, you TDL -- DoD a XX to here. really other bit gears want should right and comms, little a switch integrated look lot Yeah, the of system some it at put you elsewhere, where having IMS, if going interesting When Link things in in in assets now

businesses and go after that small in we've involve large you -- you trying how see Now, something really that just if is there, in do the fact I much make to a company historically And that many operated you interested you opportunity trying to be that seen I'm in don't how do, the work, as would you've how think so integrated assuming see that? then approach past could this silos when here? this in an

thanks, real acquisition operations production Well, will than where to just Look, more we're probably we the was It's pick co-locate declare really then sector up a looking bottom I move Communication expected. of line we the a early BCS, strategic on maybe question. But I'll to too Yeah, get to start. Doug. is first is part strong plan Okay. TDL think lot your had these better the and here the but questions to the to off Salt success, which our of have and headquartered, Lake Broadband City, properties. integrate Systems, there.

So moved as we've slightly built is of that ahead issues no more which today, schedule, first the always lines articles lines of moved. We're And with production good. the we've we've related actually half than of successfully. production already to

planned easy never lines, relocate than have than So to a we the actually for, of more but to line which be move production that's we planned several to production think it's but I expected is better that the contributing kind and had employees success. going agreed or to case,

Sam will be there clearly Mehta, the and few days you're segment President, agenda. on our out about next for are I talking and topics week a

our this seven eight or Navy and Optionally have year better successes on SPEAR classified does We've so on probably some each the LXHarris company than every or on had the segments. significant collaboratively one entities for an integrated last think on these across Vehicle, of some different of I working anyone. programs, multiple Fighting in excess Manned and over approach,

we the it's cost gets who collaboratively, the a all been about. So you're have we the capabilities. has think customer that's mean, the reasons for to working accounting, XX really transfer, Link how fix. discussions the whether very, And I very companies think internal with hard we've challenges bonuses, the strong. what all talking exactly on waveforms BCS most interest credit set us why the up people focused the have of well for time have internally, working And I integrate the able the been

Link about XX,XXX in talked footprint XX over having the We platforms.

a So XX already just the it those then put crudely matter are also boxes them the enhancing of it's possibly integrating Link and taking capabilities. to and and there capabilities

sounds a and won, lot of MIDS, as we letter Prime competitive near $XXX Tactical words, MIDS Radio I that award were the we excited about investor what of Multifunctional Information million put quarter, think, while specifically we is that for is the and of like part a the program. the Joint System end in TDL, the Distribution

the This than the And production times far. result was I have be in as that pleased It's the order to ever. backlog that's largest we business. with three acquisition is think capabilities. example about one I larger I received. and excitement of good anything more everything do, this and we've Obviously, tangible customer strong but And a that couldn't of order looking more said, so as ever still

So helps, hopefully that Doug.

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

ask the quarter how on to you. want Chris I margins specifics morning, second think about and the we Thank half. Good Sure. Michelle. and in

sustainability of second you. in additionally, could the first step-up operational XX% the what then IMS CS in good, supply about ahead performance we normalization pretty QX, and tracking up within the of And sequential think full on do margins your dig Thank of year. the and I if guess chain How benefits, CS? mix was plus So you items the half? drives into

Sheila, for and morning, thanks the question. Good

overall bit happening So there's the lot enterprise good segment start work and of I margins across the because onion our peel will a perspective from with a portfolio. a then that's

throughout margin this again also And consistent XX be place QX our our a us improvement which sequential margin to in getting what terms this point, with point I in land of of This did XX.X%. And note at from want that previously your of just our in come to us is guidance to year. expected communicated a will we've the continues expectations, in QX. terms margins basis industry-leading So improvement from updated performance. to XX% is

years One going the programs, overall by EAC our key our And highlight EACs. of is QX is result couple over perspective which is is a important and is, portfolio driven portfolio to also thing this to because I XX% within this overall driven by drag to last of performance. want it's from right,

it start we was this, first that our with aligned trend so So the QX to the improve And half impacts trajectory second saw EAC line quarter bottom our since XXXX. of

with supply So industries. issues you inflation may labor is and chain, saw macro the started this when recall challenges to permeate we environment within the XXXX. all started that It permeated throughout across then

strong point Sam really quarter, taken. really And that today, and we've the basis within by supply a we resilient within and delivered sit team from driven Mehta CS, so where margins chain kudos QX, CS the the all to specifically improvement actions XXX

talk the us about heard the the we software also over You've electronic of benefit component XX quarter. mix easing increased last shortages XX months, but to and this the within the have also of

for delivery strong QX. really So

As a we year, sites a have look year. IMS from ISR results inefficiencies towards increased remote that loss fourth of being the with and as consistent these to of predominantly This, within QX impact first a permeated with a we with impact They full quarter. related team operational half expect impact an positive the terms to an these some bit of programs the end issues. our our couple and we learning had progress talent Jon of the development are price Rambeau and to at are addressing in actions expect quarter. and perspective, second be mix. mix we within on IMS fixed challenges for the see to CS half domestic ramping at lighter From did we along with continue domestic

by half this continual improvement consistent that laid we around guidance in things. terms One to but is initial driven in of again, of the is ramp, terms this it's really EAC performance. out, the two regards second In

As noted, trend saw QX. to we this I within start upward

with to backlog fixed what that we deliveries. going on by we last second to which XX product been higher continue digits, our product Consistent expect has our expectations. We by driven deliver that impacted as high half, these single expect trend be working past, margin to able that to to second experienced macro the months. through the over And is is the in XX we've are price deliveries the the be in issues

have our TCOM QX, Wescam. within both of The note other is mix you'll product a I play and do see so sales would this out higher thing we within and international

So that margins from to QX. a perspective, expect modeling better than going quarter fourth are be

just I'll chime in.

I capability IMS, think test we similar the have try select in for just US those successful which been of capabilities. say amount country of few a be a Compass We've talked on do for maritime since mainly that focused the the the similar recently undersea we've Air and lot highlight challenges within have Force. and and been US be these modernizing will will were margins sectors. to within the winning on Australia. for the I to the already about in products there will European continues fair aircraft work programs ranges We There's higher Call for for demand aircraft, Navy a ISR here that capabilities procured. the

and missionizing business years range about ago. and Navy, or ago five the pursue We're kind to capability test continuing the here a jets. the to in We've strategy something business jets talked US winning that follow-on four started to we start of undersea sensing years

very the which an the we about. excited here east, won Europe. we We in And opportunity to have you another saw that opportunity we're have far US, program, ATHENA-R in then

two another XX teaming hope known I think on And Army of program two. which going of be and for a kind that as to one we two to ATHENA-S. day to announced go win now then could we're we're We'd the other the with the HADES, has aircraft. OEM up

really this I not the especially of lot is fixed we're to haven't to production, be price So lot margins price makes sense relative to bad probably back hard that's selective say, and just there's you going some programs, I've the businesses, business which push going continue customer They or want tie and on has of we're that said other CS backlog think for is when development no the a to publicly a back opportunities the rate contract, how longer low developed. with have very IMS in fixed particular. to I cycle price a to and bid those to production bidding and forward, asking simultaneous because price development, going something fixed

discussions we on customers the that with to have until contracting continue is will But those vehicle our no-bid appropriate. regularly I topic and

challenges Michelle laid that learned that I business. bids some of of these performance, cycle taken and updated or cost. is latest lessons the the So latest because or long clearly effect more really the in out those these lagging We've that which of throw attrition based on we've well the inflation bluntly we've

double digit every I program double So single is or margins higher double digit and sometimes mentioned more than digit.

So that we'll get his we'll those backlog those get IMS and wins, to that able margins be me team. with gives in confidence improve we'll Jon in the

I thing buying reminder, when we still other in able guidance add that because to a historically we any to not out only timing that and just our get year, set strong were know line this we including just them we have there, then those international of recognition purposeful constraints. is as when the events, the a or The Yeah. we goal we've been put chasing of pipeline disappointed not their that we're would over

as we look into XXXX strong And there so beyond. with we backlog to pipeline our and continue a have

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

guys. good Hey, morning,

Good morning.

of some well. was low a space things on there's I in first like could space for but know of lot color in seems done orbit add the if have strong obviously other guys I awards, at Chris, well book-to-bill you half on wondering you as particular. And earth more you going with

how kind set more So of wondering it and there you're about winning winning talk the you and big could your there? approach, is what you're if opportunity how

I level. close And it as and expect, the Trusted When each one this flows we about talk We we XX down Pete. the sectors. really you Disruptor LXHarris of strategy And Thanks, every to have up sectors mentioned But able as Aerojet would better embrace at execute to sectors Rocketdyne, to hard maybe than think it's two a strategy we'll and within they've this where XX that example sectors segment. be been they'll it. of really upon to have space Yeah.

merger, we highest doing just to more know about the And work we had at being four And satellites in the back contract. I in talk prime with clearly I five being the agile. what's like time more today, working. it's sounds which satellites. XX for up, that's users, demo XXx level, it we're to buzzwords, I it satellites, innovative, what mainly at question And end doing working that space. contracts more reinforces but mean, is of experimental a the over years, under implied have your we in think

two ago, we We constellation. might other their have operational years have actually people's five any. classified didn't had have We Again, constellations. on satellites on parts

prime a facilities, So manufacturing. down viewed satellite a we legitimate have a winning as performing. facilitating, market Wayne, in one and we're we're position get actually two in Fort and R&D Florida fair invested competitor us and we Bay, have in this capital. We're expanded in this and disrupted Indiana that and we We've amount in really Palm one here we're to

mean, growth, just to space So in XX%. we're allow to the investing perform. continue our up revenue us capital which is I since alone merger, for will over

do name, -- bring kind can out always just call to companies We anybody some don't by We've record them those suppliers. with but we had solid work challenges have execution. of We certain with with We better. those we along. have backlog,

all So in space it comes to down the world, launches.

the have October a hits road. bunch in We and of where coming that's the launches up money

SDA be going up we satellites the will the launch our about co-manifested both excited We're a satellite. X payloads, with HBTSS have, MDA's tranche

real work that satellites, for out We that. feel program. year. weather coming their think do $XXX back It's million I sounder decades So NOAA about opportunity lot opportunities, for going this up good worked we of the about called well. really Upcoming a

never I satisfying and hear, you opportunities, they a to of classified for is which but others always, lot are As there. Pete, know

The SDA out. the RFP X coming tranche is for tracking,

there. So we'll day, space. is at customers' be And one number Air respond and Force, operating prepared hear lot think Secretary aligning a end talk the the needs. with imperative me prioritization you at to of about their all Kendall the about I

So we the have mission sets.

adapted successful. the quite We rapid process have the phenomenologies. acquisition and to We've we've been

team. example where couldn't been working. just more So proud one executed of out, has the laid been it's and be the strategy it's And it's

to come. more So,

just cash would because initiative. fully really is team our embracing that, performance-first strong well. the I They're add with to as driving along this performance also top-line, also

working day QX -- QX. nine to from capital improvement So within

team to Kelly Ed fully business. And with grow and along to -- all metrics in cash easier doing it's kudos it's so space the without it they financial the because the really top-line drive sometimes embraced to the and this

take question this morning. Rob, in the at the interest and ahead of time and to stop XX minutes, go we'll last

question. with Walton with Our Wolfe final from Please your Myles proceed Research. is question

sort Hi, a if (ph), then $XXX million in? back for drop get the thanks. on a sales of the it contract those of XX%] it? and acquired And Chris, TDL, [about significant the expansion morning. Thanks. market loss turn strip making sales a a year-to-date that since I did at MIDS margin run bit ask margin about where the around, case the down above contracts, margin side, MIDS there once to you the side, wanted some rate Good light. you've margins think out Is I you the mentioned you look rounded I

a and of see I other coming a start. see of with TDL. second for mentioned a some the or opportunities Yeah, $XXX more to was But of million definitely a Good we're It Thanks, Yeah. MIDS slower we we questions. path bit little win revenue pursuing, half Myles. MIDS. ramp with the

is XX. number lot I think this

been it's we've mentioned, production cycle legacy program. long So long as a a

same, I And on margins. the think similarly

facilities. efficiencies, only move, part and overhead not labor, As of in to we're the have some going but

start and base see to to all if kick further mainly all in It's Lake programs. in and about win will the the So potential. you City. Salt ability will, margin we'll synergies, new our upward again, be this And

my of in report an one know. substantive programs, hoping I've was Salt that with you their and well. review a out turned Jammer, And years as the Lake about Gen finally September. several as done no that there end in Next came to process with by in would There team we're for hear throw independent City also of I'll our be that's been year that work changes. proposal We've talked

throw opportunities overhead, the because same if just absorb other us gives that in thereby for larger the it's will, base, facility So margin creating I in and you a Myles expansion. to

So much. thank you very

we'll it the that, And, Michelle up some tasks can a hope all work Again, apologies be to you little acquisition appreciate. and have I day. call. bit team will and I related guess Mark his short, wrap I go available just to but with as cut

for of we'll information the thanks Day December have dialing Investor about again, more a in in. great and the Thanks. And rest get you So week.

This concludes today's teleconference.

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