Financial Data and Key Metrics Changes - The company reported a record $8.3 billion in orders for the quarter, resulting in a book-to-bill ratio of 1.5 [16][80] - Revenue for the quarter was $5.4 billion, reflecting strong organic growth of 6% [16][17] - Non-GAAP EPS was $2.78, up 16% year-over-year, while pension-adjusted EPS was $2.42, up 22% year-over-year [17] - Free cash flow was $574 million, driven by increased operating income and improved working capital performance [17] Business Line Data and Key Metrics Changes - Communication Systems (CS) revenue was $1.4 billion, up 2%, with an operating margin of 24.4% [18] - Integrated Mission Systems (IMS) revenue was $1.6 billion, up 6% organically, with an operating margin of 13.2%, up 120 basis points [18][19] - Space and Airborne Systems (SAS) revenue was $1.8 billion, up 7% organically, with an operating margin of 12.3%, down 30 basis points [20] - Aerojet Rocketdyne (AR) achieved 12% organic growth with a book-to-bill ratio of 2.0, marking the highest revenue quarter on record for AR [20] Market Data and Key Metrics Changes - NATO members are increasing defense spending to 5% of GDP, translating into meaningful orders for the company [13] - The U.S. administration's fiscal year 2026 budget request includes approximately $1 trillion in national defense funding, with a focus on areas where the company is well-positioned [10] Company Strategy and Development Direction - The company aims to take out $1 billion in costs over three years and is currently tracking 40% ahead of that target [8] - The LHX NEXT program focuses on enterprise transformation, deploying an operating system, and embedding AI tools across the business [29] - The company is investing in manufacturing capacity and workforce to meet urgent demand for solid rocket motors and missile solutions [12][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the 2026 financial framework of $23 billion in revenue and 16% segment operating margin [32][36] - The company anticipates strong demand for missile solutions and space propulsion, with growth expected to continue for decades [24][100] - Management highlighted the importance of delivering on schedule to secure new opportunities, particularly in defense contracts [7][10] Other Important Information - The company is preparing to deploy a constellation of 40 to 45 hypersonic threat detection satellites [11] - The integration of Aerojet Rocketdyne has been completed, doubling production rates and reducing costs [8] Q&A Session Summary Question: Can you explain the comment about monetizing legacy end-of-life assets? - Management clarified that monetizing legacy assets is part of the LHX NEXT strategy, focusing on areas of strategic growth [41][42] Question: What impact do you think increased defense spending in Europe will have? - Management noted solid growth internationally, particularly in telecommunications and software-defined radios, with a focus on interoperability and resilience [51] Question: Can you rank the segments by expected growth and margin improvement for 2026? - Management indicated that Aerojet Rocketdyne is expected to be the fastest grower, followed by SAS, CS, and IMS, with all segments showing solid growth opportunities [58][59] Question: How quickly can you get the HPTSS constellation contract under contract? - Management expressed hope to secure the contract by the end of the year, contributing to revenue in 2025 and significantly in 2026 [65] Question: Are you signing contracts that are riskier due to the desire to move faster? - Management assured that they are not taking on riskier contracts, focusing on reasonable agreements that align with their strategy [86][89]

Financial Data and Key Metrics Changes - The company reported a record $8.3 billion in orders for the quarter, resulting in a book-to-bill ratio of 1.5, indicating strong demand and execution [13][14] - Revenue for the quarter was $5.4 billion, reflecting a 6% organic growth year-over-year, marking the highest organic growth in six quarters [14][15] - Non-GAAP EPS was $2.78, up 16% year-over-year, while pension-adjusted EPS was $2.42, up 22% year-over-year [14][15] - Free cash flow was $574 million, driven by increased operating income and improved working capital performance [14] Business Line Data and Key Metrics Changes - Communication Systems (CS) revenue was $1.4 billion, up 2%, with an operating margin of 24.4% [15] - Integrated Mission Systems (IMS) revenue was $1.6 billion, up 6% organically, with an operating margin of 13.2%, up 120 basis points [15][16] - Space and Airborne Systems (SAS) revenue was $1.8 billion, up 7% organically, with an operating margin of 12.3%, down 30 basis points [16] - Aerojet Rocketdyne achieved 12% organic growth with a book-to-bill ratio of 2.0, driven by increased production volume across key missile programs [17] Market Data and Key Metrics Changes - NATO members are increasing defense spending to 5% of GDP, translating into meaningful orders for the company and supporting sustained international growth [10][11] - The U.S. administration's fiscal year 2026 budget request includes approximately $1 trillion in national defense funding, with significant allocations for areas where the company is well-positioned [7][8] Company Strategy and Development Direction - The company is focused on aligning its portfolio with national security priorities, emphasizing resilient communications, space superiority, and missile modernization [31][32] - The LHX NEXT program aims to drive enterprise transformation and operational improvements, with expectations for sustained revenue growth and cash generation [25][26] - The company is investing in manufacturing capacity and expanding its workforce to meet increasing demand for solid rocket motors and missile solutions [21][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the 2026 financial framework of $23 billion in revenue and a 16% segment operating margin, driven by alignment with long-term defense priorities [29][30] - The company anticipates continued strong demand across all segments, with a focus on delivering timely solutions to address current and future threats [24][32] Other Important Information - The company is on track to achieve $1 billion in cost savings over three years, currently tracking 40% ahead of target [6] - The integration of Aerojet Rocketdyne has been completed, resulting in doubled production rates and reduced costs [6][17] Q&A Session Summary Question: Can you explain the comment about monetizing legacy end-of-life assets? - Management clarified that monetizing legacy assets is part of the LHX NEXT strategy, focusing on aligning investments with growth areas [36][39] Question: What impact do you see from increased defense spending in Europe? - Management noted solid international growth opportunities, particularly in telecommunications and software-defined radios, as European countries seek interoperability and resilience [48][49] Question: How do you expect bookings to trend through the rest of the year? - Management expressed optimism for a solid second half, with expectations for a growing backlog and potential for outsized growth driven by large awards [71][73] Question: Can you provide a breakdown of the $8.3 billion in bookings by segment? - Management indicated strong book-to-bill ratios across all segments, with Aerojet Rocketdyne showing nearly a 2.0 book-to-bill ratio [76][79] Question: Are you signing contracts that are riskier due to the desire to move fast? - Management assured that they are not taking on riskier contracts, emphasizing that many awards are follow-on contracts with reasonable terms [84][86]

L3harris Technologies (LHX) FY 2025 Conference May 29, 2025 09:00 AM ET Speaker0 Okay. Good morning. I'm Doug Harned, Bernstein senior global aerospace and defense analyst, and really happy to have with us again Chris Kobacek, chairman and CEO of l three Harris. With us also is Ken Bettingfield, chief financial officer. I think to start, I think I think, Ken, you got a couple things you wanna say, and then we'll go into fireside chat. Speaker1 Yeah. Great. Thanks for having us, Doug. We're excited to be her ...