L3Harris(LHX)2023-04-28 14:58Financial Data and Key Metrics - Revenue grew by 9% YoY, with all segments contributing to growth [33] - Operating income increased in two out of three segments despite headwinds [33] - EPS for Q1 was 300 million, up from the previous year [33] - The company front-loaded its share repurchase commitment, with 100 million remaining for the year [11] Business Line Data and Key Metrics - The space business recorded 5.8 billion record orders in Q1, with a book-to-bill ratio over 1.5 for international markets [6] - The company submitted over 842 billion for defense represents a 3% growth, with a 4% increase in investment accounts [4] - The company expects a book-to-bill ratio over 1.0 for the year, driven by international growth and defense spending [4] - The Defense Production Act (DPA) funding of 1 billion in proceeds from two or three divestitures [1][2] - The acquisition of Aerojet Rocketdyne is strategic, filling a gap in the portfolio and aligning with growth markets highlighted in recent budget decisions [61] - The company is leveraging its domestic footprint to drive international growth, particularly in the space domain [94] Management Commentary on Operating Environment and Future Outlook - Management is confident in the 2023 close of the Aerojet Rocketdyne acquisition, citing no vertical or horizontal competition with the company [36][61] - The company is optimistic about supply chain improvements, with 1,300 alternative parts introduced to mitigate shortages [96] - Management expects margins to improve in the second half of the year, driven by higher-margin product deliveries and easing supply chain constraints [73][74] Other Important Information - The company is undergoing an enterprise transformation, focusing on cost savings and efficiency improvements, with tangible results expected in the next 90 days [102][103] - Working capital improved by 14 billion in debt expected post-Aerojet acquisition [119] Q&A Session Summary Question: Timing and process for Aerojet Rocketdyne acquisition [57] - The company is gathering data for the FTC's second request, with a submission expected by June [58] - Management is confident in the deal closing in the second half of 2023, citing no competition with Aerojet Rocketdyne [36][61] Question: Supply chain improvements and potential upside to guidance [27] - The company has introduced 1,300 alternative parts to mitigate supply chain challenges, with improvements tracking as expected [96] - If supply chain improvements accelerate, there could be upside to the full-year guidance [43] Question: Margin improvement drivers for the second half of the year [98] - Margins are expected to improve due to higher-margin product deliveries and easing supply chain constraints [73][74] - Fixed-price backlog impacts, particularly in the ISR business, are stabilizing, which will help margins in the second half [48] Question: Capital allocation and debt management [118] - The company plans to continue share buybacks and dividends, with a focus on reducing debt to maintain an investment-grade credit rating [119][134] - Post-Aerojet acquisition, the company aims to bring its leverage ratio below 3 over the next few years [119] Question: International growth and space business opportunities [26] - The space business is seeing strong international growth, with 50% of the $1.5 billion in bookings coming from international markets [40] - The company is well-positioned in the space domain, with 33 satellites in backlog and significant growth opportunities [39][66]