L3Harris(US:LHX)2026-01-29 16:30Financial Data and Key Metrics Changes - Revenue for 2025 was $21.9 billion, representing a 5% organic growth, with adjusted segment operating margin at 15.8%, up 40 basis points from 2024 [14][15] - Non-GAAP EPS increased to $10.73, an 11% rise year-over-year, while adjusted free cash flow grew to $2.8 billion, over 20% increase [14][15] Business Line Data and Key Metrics Changes - Communications Systems (CS) generated $5.7 billion in revenue for 2025, with a margin of 25.2%, reflecting 4% growth and 50 basis points margin expansion [16] - Integrated Mission Systems (IMS) reported $6.6 billion in revenue, achieving 8% organic growth with a margin of 12.2% [16] - Space and Airborne Systems (SAS) had revenue of $6.9 billion and a margin of 12.3% for 2025, with Q4 revenue slightly up due to increased FAA volume [17] - Aerojet Rocketdyne delivered 12% organic revenue growth, exceeding $2.8 billion, with a margin of 12.5% [18] Market Data and Key Metrics Changes - The company ended 2025 with a record backlog exceeding $38 billion and a Book-to-Bill ratio of 1.3 [10] - Key awards included a $2.2 billion contract from South Korea for airborne early warning jets and an $850 million SDA contract for missile defense satellites [11][12] Company Strategy and Development Direction - The company is focusing on aligning its portfolio with defense priorities, including a recent divestiture of a majority stake in its civil space propulsion business to enhance focus on military needs [3][4] - Plans for an IPO of the missile solutions business in 2026 are underway, with the Department of War as an anchor investor [4][19] - The company aims to increase production capacity for missile systems and solid rocket motors to meet growing demand [5][6] Management's Comments on Operating Environment and Future Outlook - Management highlighted a complex and rapidly evolving defense environment, emphasizing the need for speed and execution [7][9] - The company anticipates a 7% organic growth for 2026, supported by a robust order outlook and record backlog [12][20] - Management expressed confidence in meeting future demand and maintaining operational agility [24][25] Other Important Information - The company has reorganized its business segments from four to three to better align technology and business models [4] - The 2026 guidance includes expected revenue of $23 billion to $23.5 billion, with a segment operating margin anticipated to be in the low 16% range [20][21] Q&A Session Summary Question: Long-term agreements for Missile Solutions - Management confirmed ongoing discussions with the Department of War regarding long-term agreements and expressed optimism about the growth potential of the Missile Solutions business [26][27][30] Question: CapEx expectations - Management indicated a planned increase in CapEx to $600 million for 2026, emphasizing the need for investment to modernize production capabilities [32][34] Question: Government stake in Missile Solutions - Management clarified that the government is expected to hold a single-digit equity stake in the Missile Solutions business post-IPO [39] Question: Revenue outlook for RemainCo - Management projected solid mid-single-digit growth for RemainCo, with expectations of leveraging a potentially increased defense budget in 2027 [44][46] Question: Production plans and competitive landscape in space - Management discussed the ramp-up of production capabilities in new facilities and the competitive landscape for satellite contracts, emphasizing the importance of speed and scale [78][80]