L3Harris(US:LHX)2021-04-30 17:14Financial Data and Key Metrics Changes - Organic revenue increased by approximately 2%, with mid-single-digit growth in core government businesses, partially offset by a 3-point decline in commercial businesses due to COVID-19 impacts [6][29] - Margins expanded by 140 basis points to 18.9%, resulting in earnings per share of $3.18, up 14% [7][30] - Free cash flow reached $630 million, supporting shareholder returns exceeding $900 million, including $700 million in share repurchases [8][31] Business Line Data and Key Metrics Changes - Integrated Mission Systems (IMS) revenue rose by 5.9%, driven by growth in maritime and ISR sectors [32] - Space & Airborne Systems (SAS) organic revenue increased by 4.1%, with strong growth in Space and classified programs [33] - Communication Systems organic revenue grew by 2.9%, with high single-digit growth in tactical communications [35] - Aviation Systems organic revenue decreased by 8.3%, primarily due to COVID-related impacts in commercial aviation [36] Market Data and Key Metrics Changes - Core government businesses grew by 4.8%, while international revenue saw double-digit growth [15][29] - Funded book-to-bill ratio was 1.10 for the quarter, with total backlog exceeding $21 billion, up 6% year-over-year [23] Company Strategy and Development Direction - The company aims for sustainable topline growth, steady margin expansion, and robust free cash flow, with a focus on national security and military support [14][27] - Strategic priorities include revenue synergies and international expansion, supported by R&D investments [15][27] - The company is well-positioned to capitalize on opportunities in defense, space, and cyber domains, with a strong emphasis on advanced and affordable solutions [14][22] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding growth prospects due to the Biden administration's defense budget increase and focus on national security [14] - The company anticipates more stability in affected businesses as pandemic-related impacts diminish [6] - Management is confident in achieving a $3 billion free cash flow commitment in 2022, alongside double-digit cash growth on a per-share basis [27] Other Important Information - The company is on track to deliver up to $350 million in cumulative net benefits from cost synergies, a year ahead of schedule [24] - Recent portfolio shaping efforts include divestitures, with a focus on maximizing cash flow and shareholder returns [26][27] Q&A Session Summary Question: International growth drivers and Space business outlook - Management highlighted double-digit growth in international markets driven by aircraft ISR and tactical radios, with a $35 billion pipeline of opportunities over the next three years [45] - The Space business is expected to grow due to responsive satellite programs and classified bids, with double-digit growth anticipated [48] Question: Communications margin performance - Management noted that strong margins were due to operational excellence and cost management, but some normalization is expected due to new program pressures [52] Question: Impact of divestitures on margins - Management indicated that announced divestitures would dilute margins by about 100 basis points, but organic improvements could offset this impact over time [85] Question: Confidence in continued margin improvement - Management emphasized the importance of ongoing management attention and the successful integration of cost synergies, which are expected to drive sustainable margin improvements [88][90] Question: Tactical Radios sales and backlog - Management provided insights into strong domestic and international sales, with a funded backlog of $958 million and significant growth expected from Army modernization efforts [73] Question: F-35 program updates - Management discussed progress on the F-35 program, highlighting stable cost estimates and a commitment to production readiness, with expectations for growth in ship set content [80][81]