Earnings call transcript: L3Harris Q2 2025 beats expectations, stock rises

L3Harris Technologies reported stronger-than-expected earnings for the second quarter of 2025, with earnings per share (EPS) coming in at $2.78, surpassing the forecast of $2.48. Revenue also exceeded expectations, reaching $5.4 billion compared to the anticipated $5.32 billion. Following the release of these results, L3Harris stock rose by 2.57% in pre-market trading, reflecting investor optimism. With a market capitalization of $51.57 billion, L3Harris has demonstrated remarkable momentum, achieving a 29.55% return year-to-date according to InvestingPro data.

Key Takeaways

• L3Harris reported a 16% year-over-year increase in non-GAAP EPS.
• Revenue reached $5.4 billion, marking 6% organic growth.
• The company’s stock saw a 2.57% increase in pre-market trading.
• Record bookings of $8.3 billion with a book-to-bill ratio of 1.5.
• Raised 2025 revenue guidance to anticipate 5% organic growth.

Company Performance

L3Harris Technologies demonstrated robust performance in the second quarter of 2025, highlighted by a 6% organic growth in revenue and a 16% increase in non-GAAP EPS compared to the same period last year. The company also achieved record bookings, indicating strong demand for its products and services. L3Harris continues to benefit from its strategic focus on innovation and expanding its market presence, particularly in the defense sector.

Financial Highlights

• Revenue: $5.4 billion, up 6% year-over-year
• Earnings per share: $2.78, up 16% year-over-year
• Segment operating margin: 15.9%, increased by 30 basis points
• Free cash flow: $574 million

Earnings vs. Forecast

L3Harris outperformed market expectations with an EPS of $2.78, exceeding the forecasted $2.48 by 12.1%. Revenue also surpassed projections, reaching $5.4 billion against the anticipated $5.32 billion, resulting in a revenue surprise of 1.5%. This marks a significant achievement for the company, continuing its trend of exceeding financial targets.

Market Reaction

Following the earnings announcement, L3Harris stock increased by 2.57% in pre-market trading, reaching $273.4. This positive movement reflects investor confidence in the company’s ability to deliver consistent growth and profitability. The stock’s performance is notable as it approaches its 52-week high, with InvestingPro analysis indicating the stock is currently trading near Fair Value. InvestingPro Tips reveal that L3Harris has maintained dividend payments for 55 consecutive years and generally trades with low price volatility - just two of the dozen valuable insights available to subscribers.

Outlook & Guidance

L3Harris has raised its 2025 revenue guidance, now expecting 5% organic growth. The company also targets a 2026 revenue of $23 billion and a segment operating margin in the low 16% range. These projections underline L3Harris’s confidence in sustaining its growth trajectory, driven by its strategic initiatives and expanding market opportunities.

Executive Commentary

"Our opportunity set is more robust than it’s been in decades," said Chris, CEO of L3Harris. He emphasized the company’s alignment with national security priorities, stating, "We are uniquely aligned to the national security priorities of The US and its allies." Chris also expressed optimism about the company’s growth prospects, noting, "We are well positioned for sustained profitable growth over the long term." This confidence is supported by the company’s strong financial health score of 2.57 (GOOD) on InvestingPro, which offers comprehensive analysis through its Pro Research Report, available for over 1,400 US stocks.

Risks and Challenges

• Potential fluctuations in defense budgets could impact future contracts.
• Supply chain disruptions may affect production timelines and costs.
• Competition in the defense sector remains intense, requiring continuous innovation.
• Geopolitical tensions could influence international sales and operations.
• Economic uncertainties may affect overall market conditions and investment.

Q&A

During the earnings call, analysts focused on L3Harris’s international growth opportunities and the LHX NEXT cost savings strategy. Questions also addressed the potential growth from the Aerojet Rocketdyne integration and concerns over budget fluctuations in tactical communications. These discussions highlighted the company’s strategic priorities and potential challenges in maintaining its growth momentum.

Full transcript - L3Harris Technologies Inc (LHX) Q2 2025:

Conference Operator: Greetings. Welcome to the L3Harris Technologies Second Quarter twenty twenty five Earnings Conference Call. At this time, participants are in a listen only mode. A brief question and answer session will follow the formal presentation. As a reminder, this call is being recorded.

It is now my pleasure to introduce your host, Dan Getzovich, Vice President, Investor Relations. Please go ahead.

Dan Getzovich, Vice President, Investor Relations, L3Harris Technologies: Thank you, Sylvie. Good morning and welcome. Joining me this morning are Chris and Ken. Earlier today, we published our second quarter earnings release detailing our financial results and increased 2025 guidance along with a supplemental earnings presentation available on our website. We will also file our 10 Q later today.

Today’s discussion will include certain matters that constitute forward looking statements. These statements involve risks, assumptions and uncertainties that could cause actual results to differ materially. For more information, please reference our earnings release and SEC filings. We will also discuss non GAAP financial measures, which are reconciled to GAAP measures in the earnings release. With that, I’ll turn it over to Chris.

Chris, CEO, L3Harris Technologies: Good morning, everyone. Our opportunity set is more robust than it’s been in decades, driven by increased global threats requiring speed, capability and modernization. These dynamics are unfolding across both US and international markets, creating a significant opportunity for companies that can move fast and deliver on time. L three Harris is uniquely positioned to lead in this environment. Our trusted disruptor strategy keeps us agile.

And after investments in the business, along with acquisitions and divestitures, our portfolio is aligned with our customers’ mission critical priorities, enabling us to execute with a sense of urgency as we head into the second half of the year. Over the last few months, I’ve had several meetings with senior DoD leaders, and one message is consistent and clear. Companies that deliver on schedule will be rewarded with new opportunities such as Golden Dome and missile capacity expansion. I’m proud to say we’re doing just that. For example, on f thirty five, our systems are ahead of need, and we are off the critical path for combat capable TR three aircraft.

Turning to LHX next savings. We set a goal of taking out $1,000,000,000 of cost over a three year period, and we’re currently tracking 40% ahead of that target and a year earlier than planned, putting us on track to achieve our 2026 margin target. At Aerojet Rocketdyne, integration is complete, and we’ve doubled deliveries, we’ve doubled production rate, and we’ve reduced the cost of port quality since the acquisition. This performance gives us and our customers confidence and positions us as a dependable partner. Our second quarter results underscore strong execution and represent an inflection point for our business.

We posted our highest organic growth in six quarters and achieved a record book to bill of 1.5, clear evidence of the momentum behind our strategy and the alignment of our portfolio with the future of warfare. In May, the administration released its full fiscal year twenty six budget request, calling for about $1,000,000,000,000 in national defense funding, including $155,000,000,000 signed into law through the recent reconciliation bill. The budget is focused in areas where we are well positioned. We’re seeing accelerated investments in space based architectures, missile systems, autonomous platforms, and software defined capabilities, all core strengths within our company. The Golden Dome initiative is a leading example of our alignment with US national security priorities, and momentum is building.

Congratulations to general Gudlein on his confirmation as the direct reporting program manager at Golden Dome, accountable for delivering key capabilities of this system within three years as a direct report to deputy secretary of defense Feinberg. His appointment marks an important milestone for one of the most consequential homeland security initiatives in our history, and we’re excited to see a proven leader in place. At l three Harris, we’ve been preparing for this eventuality. As we shared on our last call, our ability to detect hypersonic threats is a critical component of the Golden Dome architecture. We’re preparing to deploy a full constellation of 40 to 45 proven HVTSS satellites in a timely manner.

This isn’t a coincidence as we’ve invested in Florida and Indiana to scale up space sensor manufacturing and payload integration. We’re ready to deliver the HPTSS constellation called for in the executive order. Moving to ground based interceptors, our propulsion and divert and attitude control systems support nearly every US interceptor program in development or production. We are rapidly scaling solid rocket motor manufacturing to meet the nation’s urgent demand, and this effort carries additional personal urgency. I made a commitment to the deputy secretary of defense and the undersecretaries of defense to increase capacity and accelerate deliveries, and I intend to keep it.

In partnership with governor Sanders and Youngkin, we’re investing in Arkansas and Virginia to increase solid rocket motor deliveries and drive record production levels. We’re not waiting. We’re responding to the clear demand signals and delivering now. Internationally, the outlook remains robust. NATO members are now targeting defense spending increases to 5% of GDP, with much of that investment focused on restocking and modernization.

This shift is already translating into meaningful orders for L3 Harris and support sustained medium to long term international growth for us. A great example, we recently secured software defined radio awards from the German and Czech Armed Forces, the type of wins that would not have been likely a decade ago. This represents not only alignment with allied modernization priorities, but also instances where we’re replacing indigenous providers, a direct result of our resilient, interoperable, battlefield proven technology and expanding global footprint. With this backdrop, the right strategy and aligned portfolio, strong demand, operational momentum and solid financial performance, we are highly confident in our ability to achieve our 2026 financial framework. We also see a clear path to profitable growth beyond 2026, driven by our alignment with long term defense priorities both in The U.

S. And globally. With that, I’ll turn it over to Ken.

Ken, CFO, L3Harris Technologies: Thanks, and good morning, everyone. We are at the onset of a generational opportunity for L3Harris, given our capabilities and positioning across key discriminating technologies. Let’s talk about consolidated results for the second quarter. Starting with orders, we had a record $8,300,000,000 this quarter, resulting in a $1.5 book to bill. Revenue was $5,400,000,000 reflecting strong organic growth of 6%.

This growth was driven by new programs ramping and increased demand across all segments. Segment operating margin was 15.9%, up 30 basis points, marking the seventh consecutive quarter of year over year margin expansion. Non GAAP EPS was $2.78 up 16% year over year. And on a pension adjusted basis, EPS was $2.42 up 22% year over year. Free cash flow was $574,000,000 driven by increased operating income and improved working capital performance.

Turning to the segment’s second quarter results. CS delivered revenue of $1,400,000,000 up 2%, driven by increased demand for resilient communication equipment and related waveforms. Operating margin remained solid at 24.4%, reflecting higher domestic volumes and LHX NEXT driven cost savings. IMS revenue was $1,600,000,000 up 6% organically, with an operating margin of 13.2%, up 120 basis points. Revenue increased due to the ramp up of several classified ISR programs.

Operating margin increased due to the monetization of legacy end of life assets, partially offset by an unfavorable EAC adjustment from the resolution of a subcontract matter related to lower utilization on the Canadian Maritime Helicopter Program. Execution performance on the program was strong. However, payment was tied to customer mission cadence, which was well below original bid expectations. The contract is nearing completion, and we do not expect to see more negative EAC adjustments. SAS revenue was $1,800,000,000 up 7% organically, primarily due to increased volume in FAA networks and improved program performance in our airborne combat systems business.

Operating margin was 12.3%, down 30 basis points due to an unfavorable mix, partially offset by LHX NEXT cost savings. Airjet Rocketdyne delivered strong results with 12% organic growth and a two point zero book to bill. Growth was driven by improved production volume across key missile programs and new program ramps. This marks the highest revenue quarter on record for AR, driven by the unprecedented demand in the missile solutions business that we expect to continue for an extended period. Operating margin increased 50 basis basis points to 13.3% due to solid performance, LHX MAX driven cost savings and a favorable contract resolution.

We are always striving to improve our operations, including reassessing certain unfavorable contract positions, rationalizing noncore legacy business lines and monetizing legacy assets. An example is the action we took at IMS to exit an unprofitable legacy contract position while at the same time monetizing associated legacy assets. The resulting impacts offset and created a net favorable position for the quarter. Now let me turn it back to Chris.

Chris, CEO, L3Harris Technologies: Thanks, Ken. As we look ahead, several milestones from the quarter highlight our momentum and reinforce confidence in our long term vision. First, we secured approximately $200,000,000 in orders to deliver software defined interoperable communication systems to Germany. Secure resilient communications across NATO allies are critical to operational readiness, and our systems are already delivering on that mission. This award adds to recent wins for our Falcon software defined radios, including The Netherlands Foxtrot program, along with continued momentum on the US Army’s HMS programs.

These wins further strengthen our market leadership in resilient communications, and our TCOM sector backlog today is almost $3,000,000,000 a 50% increase from a few years ago. Turning to Solid Rocket Motors, we broke ground on a new production facility in Virginia, including a cast and assembly center. These modular robotic enabled facilities will significantly increase capacity, enhance efficiency and quality, and reduce product travel time distances by 90%. This complements similar expansions in Arkansas and Alabama. It’s a major step forward in building out the defense industrial base and reflects the progress we’ve made in the short time since integrating Aerojet Rocketdyne.

Demand for solid rocket motor production continues to rise driven by global conflicts. Our Aerojet Rocketdyne missile solutions business grew 15% in the quarter and is up 16% year to date. Growth we view is durable and likely to continue for decades. Demand is exceptionally strong, and we see significant opportunities for further investment in the business, expanding manufacturing capacity, increasing the workforce, and accelerating deliveries to meet long term needs and to support sustained growth. We also continue to see strong demand across our space propulsion portfolio.

This quarter, we secured a major award for 130 upper stage RL-ten engines valued at nearly $850,000,000,000 highlighting our trusted role in enabling space launch missions. Our ongoing partnership with Palantir on the U. S. Army’s Titan program continues to mature. The team is nearing initial deliveries on the first four AI defined vehicles equipped with our common data links, Link 16, secure SATCOM, and tactical multi domain waveforms, enabling the army to process targeting data faster and more effectively on the battlefield.

I’m proud to highlight our engagement with the FAA’s Newark Task Force where we played a critical role in supporting secretary Duffy to meet his goal of enhancing the resilience of our communication networks at the Newark Airport. Our efforts were pivotal in upgrading the telecom infrastructure, ensuring robust and reliable communications for one of the nation’s busiest airports. And in the airborne domain, we delivered our second missionized Global 6,500 for ISR to the army, reinforcing our position as the world’s leading bizjet missionization provider. With over 100 aircraft delivered and 14 currently under modification, our platform agnostic approach and speed to field capability continue to differentiate our offerings. Together, these awards and infrastructure investments reflect a common theme.

We are accelerating the deliveries of agile, proven solutions to address current and future threats. Back to you, Ken.

Ken, CFO, L3Harris Technologies: First, an update on LHX NEXT, then I’ll move into guidance updates. The current phase of the LHX NEXT program is focused on enterprise transformation, deploying the LHX operating system, digitizing core business processes, and embedding AI enabled tools across the business. These initiatives are not only improving execution and decision making, but they’re also building a more scalable, efficient foundation for growth. We’re already seeing results from improved operational performance to new business wins, and we expect these transformation efforts to drive sustained revenue growth and cash generation over the long term. Turning to guidance updates for 2025.

Our increased guidance reflects our strong first half performance and improved outlook for the rest of the year. For the total company, we are increasing revenue guidance by 200,000,000 expecting strong organic revenue growth of 5% for the year. We are maintaining and are increasingly confident in our segment operating margin guidance of mid to high 15%, supported by continued LHX NEXT cost savings and confidence in strong program execution. Non GAAP EPS guidance reflects a $0.40 increase from strong first half operating performance and a higher revenue outlook, partially offset by a $0.30 headwind from recent tax reform. While eliminating the requirement to capitalize and amortize R and D expenses, it has some near term tax rate headwind.

As a result, we are raising our non GAAP EPS guidance by $0.10 We are increasing our free cash flow guidance to approximately 2,650,000,000.00 an increase of $200,000,000 from a combination of operating performance and tax reform. Cash tax benefits from tax reform will continue and also drive an increased free cash flow outlook in 2026. At a segment level, IMS revenue guidance increased $100,000,000 reflecting strong performance in the ISR sector. Operating margin is now expected in the 12% range, up from the high 11% through improved program performance and LHX NEXT savings. We are increasing our revenue guidance for SAS by $100,000,000 reflecting an improved outlook in space.

Operating margin is expected to remain in the low 12% range. And are reaffirming guidance for CS and AR. Given our strong performance and this generational opportunity in defense spending growth that we are uniquely positioned to capture, we are also updating our 2026 outlook. On Investor Day in 2023, we set our financial framework at $23,000,000,000 in revenue, 16% segment operating margin and $2,800,000,000 in free cash flow. We continue to expect $23,000,000,000 in revenue for 2026, reflecting 6% growth year over year.

And we previously updated that we expect margin in the low 16% range. Now while investing in key locations like Indiana, Arkansas, Virginia and Florida to fuel future growth from Golden Dome and Rocket Motor capacity increases and staying aligned with our customers’ mission critical needs, we’re also raising our 2026 free cash flow guidance to $3,000,000,000 a 13% increase year over year with even stronger free cash flow per share. With that, I’ll turn it back to Chris.

Chris, CEO, L3Harris Technologies: Before we turn to questions, I want to take a step back and frame where we’ve been and where we’re going. It’s clear how far we’ve come. Over the past several years, we’ve reshaped the company through internal investments, strategic acquisitions and divestitures, building a portfolio squarely focused on national security. We’ve also deepened partnerships across industry to accelerate innovation and mission outcomes. Our trusted disruptor strategy and culture is delivering and has positioned us at the right place at the right time.

We’re uniquely aligned to the national security priorities of The US and its allies, whether that’s resilient communications, space superiority, or replenishing and modernizing critical missile systems. The awards and milestones this quarter reflect that alignment and will meaningfully contribute to growth in the years ahead. We’ve also crossed an important operational inflection point. With strong top line momentum and expanding margins, we’re executing well across a diverse portfolio, delivering strong performance even as we take on increasingly complex missions. Looking ahead, we expect consistent top line growth with industry leading margins and increasing free cash flow per share.

From 2023 through 2026, our free cash flow per share will have a CAGR of 15%. We are well positioned for sustained profitable growth over the long term and will remain disciplined in our capital allocation. You can expect more details on our forward outlook at our next Investor Day to be scheduled in Q1 of twenty twenty six. Sylvie, let’s go to the Q and A, please.

Conference Operator: Thank you, sir. We will now be conducting a question and answer session. Please limit to one question per person. You. And our first question today comes from Richard Safran at Seaport Research Partners.

Please proceed with your question.

Richard Safran, Analyst, Seaport Research Partners: Thanks. Chris, Ken, Dan, good morning. I have a two part LHX NEXT question. First, I thought you might explain the comment release about monetizing legacy end life assets. I assume that’s part of LHX NEXT and footprint production footprint reductions, but I thought maybe you’d correct me if I’m wrong there.

Second, given your opening remarks from both of you, could you discuss a bit more about how much runway you have left on LHX NEXT cost reductions? I’m wondering if footprint reductions also are going to continue to be part of that. Thanks.

Ken, CFO, L3Harris Technologies: Yeah. Thanks for the question, Rich. Let me focus on the asset monetization first and the footprint aspect of the question. From my perspective, I think this is really about looking at our portfolio, where we are investing and where we see kind of the areas of strategic growth. And as we look at that, we do see, you know, a couple areas where some of the product lines don’t necessarily align with the areas of, of growth that we’re investing in and really focused on.

And as we see that, we look to, to monetize those, those product lines. Think of it as as, you know, taking future revenue and and pulling it forward, a little bit. So I think we’ve done, you know, a good job of that. And, you know, in terms of the footprint, you know, that’s, I would say, you know, more of a tangential benefit. Certainly, you know, it’s really about the strategy and and the future growth.

But as we exit this product line, it will create an opportunity for us to repurpose that footprint into areas that are, are growing and aligned with the strategy. On the next question on LHX NEXT, you know, look, we’ll continue to drive, cost savings. We’ll continue to drive facility consolidations and and really focus on that. It’ll become more of kind of our ongoing effort of, you know, operational improvement of what we call e three. But, you know, the LHX NEXT program from a, implementation perspective will, largely be through the system by the end of,

Analyst: end of twenty five.

Chris, CEO, L3Harris Technologies: Yeah. I’ll just add on this. Yeah. Yeah. Rich, just just on the product line, it’s really all about management focus, and I want the team focused on things that are gonna move the needle for our customers and shareholders.

So these are really small immaterial product lines that have better owners in our opinion. So we effectively are monetizing today with would have been immaterial amounts of revenue, OI, and cash over the next several years. And agree with Ken on LHX next. We’ll we’ll hit the the 1.4 or greater cost savings by the end of the year. We’ll declare victory on the program and make it part of our normal business cadence, all while transitioning to the transformation of the of the company and having more of a digital, ecosystem to get timely accurate data to, make our decisions.

So that’s how I see the future played out on LHX NEXT.

Analyst: Thanks to both of you. Appreciate it.

Conference Operator: Next question is from Ron Epstein at Bank of America. Please proceed.

Ron Epstein, Analyst, Bank of America: Yeah. Hey. Good morning, guys. Thanks. Just wanted to follow-up with a question on the international opportunities that you both referred to in your prepared remarks.

Given the increased defense spending in Europe, what impact do you think that’ll have for you guys? What opportunities are out there? It’s kind of outsiders looking in, can we kind of keep an eye on.

Chris, CEO, L3Harris Technologies: Yeah. Thanks, Ron. We’re seeing solid growth, internationally. You know, we’ve always had about 20% of our revenue from from our international customers in Europe. As I mentioned in my prepared comments, we’re seeing a lot of opportunities really, focused on the, telecommunications, the software defined radios in, countries, you know, that historically went to their indigenous providers.

So the the importance of interoperability and resilience and security is is making a making a huge difference. You know, our business jets, missionized business jets, we have opportunities in the Far East and also, in in Europe as well. So that continues to be a a growth market, for us. And then, of course, the Mideast, whether we’re a prime, a sub, or a merchant supplier, we do get the benefits, especially with the, missile production, as a subcontractor going to the Mideast and other parts of the world. So we feel very confident about our international growth, and I think it’s reflected in today’s results.

Ron Epstein, Analyst, Bank of America: And then, Chris, if I may as a follow on, do do you think you need a bigger footprint in Europe? I mean, one of the things that we’ve heard discussed a lot from, you know, the European allies is just they want kind of more sovereignty. I mean, how do you think about that strategically for for the company?

Chris, CEO, L3Harris Technologies: Yeah. Well, I mean, our strategy, Ron, has been to to partner and and bring bring the best of breed to to our customers. So while we have a footprint of employees and and infrastructure in certain countries, the partnership model seems to to work best, and we’ve had great success, working with other defense and technology companies around the globe. And, again, we’re not adverse to subcontracting to them, but more times than not, we’re the prime, and we put them on our team. So that that’s how it works.

In the Mideast, you know, we have a little more of a a presence because they like to have the technology transfer in the in the footprint, but we’re agile, and, we kinda read country by country what needs to be done. If you recall a few years ago, we opened a factory in Poland for that very reason. So we’re happy with strategy so far, but can adjust if needed.

Conference Operator: Thank you. Next question will be from David Strauss at Barclays. Please proceed.

Ron Epstein, Analyst, Bank of America: Thanks. Good morning. Thanks for taking the question. Chris, the growth and margin improvement that you’re predicting for forecasting for 2026, could you kind of rank by segment where you would expect to see the most growth, kind of highest to lowest and then same from a margin improvement standpoint? Thanks.

Ken, CFO, L3Harris Technologies: Yeah. David, it’s Ken. I can I’ll take that question. From a, you know, from a growth perspective, I think, you know, we’re we’re seeing growth across all four segments. I think we expect that to continue largely.

But if you wanted to rank them, you know, right now with the demand we’re seeing at Aerojet Rocketdyne, especially around solid solid rocket motor production and some of the contracts that Chris mentioned that we assigned for space propulsion, Aerojet likely would be the fastest grower. As we look at opportunities like, you know, Golden Dome and SDA Tranche three that we’ve responded to an RFP for, Certainly, SAS will be a strong grower. CS, as it looks at continued international opportunities, and then IMS as well. So, you know, maybe that’s the way to to think about it, but solid growth opportunities across all four segments. In terms of margin improvement, you know, I think, really, it comes down to continuing to integrate the benefits of the LHX NEXT program as well as solid program performance, you know, burning down risk on programs, just, you know, just performing well.

And I think we’re, you know, seeing that we’re on a good rhythm in terms of, delivery. I think it’s having a couple benefits. You know, number one, I think it’s really given the customer confidence and, you know, providing new awards and new opportunities for l three Harris, and you’re seeing that in the over $8,000,000,000 of awards in the quarter as well as the solid book to bill. But it’s also, you know, yielding itself in terms of, good margin outcomes. So, kind of a win win, and, we expect that, that to continue into ’26 with, you know, the low 16% margin rate.

Chris, CEO, L3Harris Technologies: Yeah. I mean, David, the the commercial business model is a big contributor to our industry leading margins, and each and every segment is looking in conjunction with the DOD’s desire to go faster at more and more commercial acquisition models. So, you know, I think it’s gonna be a matter of which segment, which programs we can transition to more of a commercial model quicker, and that should drive the the higher margin sooner. So I think it was December 23, we said each of the segments would grow the margins a 100 basis points. We’ve either achieved that or track tracking to that.

So very proud of the team to get over 16% so quickly.

Conference Operator: Thank you. Next question will be from Myles Walton at Wolfe Research. Please proceed.

Ken, CFO, L3Harris Technologies: Thanks. Good morning. Chris, how quickly can you get the HPTSS constellation contract under contract? And does that become revenue in ’twenty five? And then for tranche three, I think there’s an October decision for that outcome.

Is your 26 confidence hinge on winning that? Or does the 26 sales guidance you have confidence even without winning tranche three? Thanks.

Chris, CEO, L3Harris Technologies: Yes. Thanks, Myles. On HPTSS, as you know, the the general was, just confirmed. You know, he’s talking about, doing a sixty day, study to refine the, the architecture. So, you know, we’ll await in RFI or in RFP to see how quickly they’re gonna move.

I think given, the fact that this was the only program highlighted in the executive order, we’d be hopeful that we could get something under contract by the end of the year, and maybe that contributes a little bit of the revenue for ’25 and clearly a a fair amount in ’26. T three, you know, it’s it’s hard to pull out one particular program, and, we’ve managed more of a portfolio. But but, clearly, we’re gonna make our 2026 framework. We’re assuming we’re gonna win t three. If we don’t, we’ll still find a way to get to 2020, six framework.

We we are proud of the fact that we’ve had a couple years of meeting our commitments one way or another. So we manage the portfolio. And, as you said, the proposal’s been submitted. We’re waiting for an October award. There’ll be three winners, I think, based on our performance, based on our cost, based on the customer’s confidence and us being able to deliver on time, I’d be disappointed if we don’t win that.

Conference Operator: Thank you. Next question will be from Noah Popodak at Goldman Sachs. Please proceed.

Noah Popodak, Analyst, Goldman Sachs: Hey, good morning everyone.

Chris, CEO, L3Harris Technologies: Good morning.

Noah Popodak, Analyst, Goldman Sachs: I wondered if given the strength in the bookings in the quarter, I wondered, Chris and Ken, if you could talk about how you expect bookings to trend through the rest of the year. I know, you know, kinda to the prior question and some others, there there’s maybe some binary ish things in there, but just curious to hear you talk through it. And then, I guess, you know, given the bookings in the quarter and the last year or two and the Golden Dome opportunity, are there at least is at least in the scenario analysis that the growth rate breaks out from the four to 6% that you kinda have been talking about for this year, and that’s implied by the 23 next year. You know, it seemed like the Golden Dome opportunity could could be an accelerant to that. Thanks.

Chris, CEO, L3Harris Technologies: Yeah. I’ll I’ll go first and then ask Ken to to add a little more. Yeah. Clearly, there’s there’s there’s a ton of opportunities. You know, we we try to secure as much business as we can as quickly as we can.

1.5 is a record. I think that’ll be hard to repeat in q three and q four, but we, have pretty good visibility and hope to be well over one in both of those quarters. And single, large awards like, t three or HPTSS, which could be multibillion dollars. Some of the, missionization on business jets, in the Mideast or the Far East, again, billions of dollars awards can can move that, pretty pretty quickly. And, you know, to the extent you deliver on time, which has been our focus, it does help with the, the revenue recognition.

So, yeah, I would hope we could potentially do more than four to six. I don’t know if I’d call it a breakout, but, we’re highly motivated. And, as I said, the customer wants to reward and allocate work to companies that are delivering, and we’re delivering. And, I expect our backlog to grow by the end of the year and, also expect that our revenue will look, strong for the foreseeable future. Ken?

Ken, CFO, L3Harris Technologies: Yep. I agree with what Chris said. And from a from a book to bill or or awards and backlog perspective, Noah, I think we’re looking at a solid, second half from an awards perspective. Awards are probably the the hardest thing to predict in terms of timing. But certainly, in terms of the number of opportunities we see in front of us, I think we’re gonna have a a solid book to bill in the second half of the year.

And as Chris mentioned, we should have a growing backlog through to the end of twenty five. So feel really good about about our position. And and I agree with Chris. I think, you know, looking at the opportunities in front of us, it does give us, again, confidence to that 23,000,000,000. No single order or single award is is key to hitting that number given the diversity of our portfolio.

But I think if a couple of things go in the right direction, we certainly got the opportunity for driving some, some outsized growth, not just in ’26, but as we look forward for for some period of time.

Conference Operator: Thank you. Next question will be from Douglas Harnett at Bernstein. Please proceed.

Douglas Harnett, Analyst, Bernstein: Good morning. Thank you. On the bookings, the $8,300,000,000 can you give us a picture of what the major pieces of that were and how that breaks down by segment given you know, it was a it was a big number this this quarter.

Chris, CEO, L3Harris Technologies: Yeah. Good morning. Good morning, Doug. I I can tell you each and every segment was over one one point o. Aerojet, almost two x book to bill.

SAS, close close behind, and IMS and communications were kind of in that one one one to one three range. So it all added up to to a 1.53 book to bill. I’ll ask Ken to maybe highlight a few of the a few of the big wins, but it was not one particular item. It was just across all 14 sectors. And Yeah.

I’ll I’ll yeah. He can go through the details.

Ken, CFO, L3Harris Technologies: Yeah. Thanks, Chris. Appreciate it. Yeah. And, Doug, I would say, again, strong book to bill across all the segments.

If you look at Aerojet with, you know, 2. O book to bill, you know, solid orders in both the missile solutions business as well as space propulsion. At SAS, really strong orders in mission networks and the work it does with FAA and, solid positioning for growth in airborne combat systems, sector. IMS had strong orders at, ISR, as well as maritime. And then CS, again, we continue to see, strong orders from an international perspective.

I think Chris mentioned a couple, Germany and and Czech Republic. So really solid performance across the board. And I think maybe more importantly, all of those orders are very aligned to the areas that we’re investing in and driving the strategy towards from a growth perspective.

Conference Operator: Thank you. Next question will be from Robert Stallard at Vertical Research. Please proceed.

Dan Getzovich, Vice President, Investor Relations, L3Harris Technologies0: Thanks so much. Good morning.

Ken, CFO, L3Harris Technologies: Hey, Rob.

Dan Getzovich, Vice President, Investor Relations, L3Harris Technologies0: Ken and Chris, just wanted to follow-up on Chris’ comments earlier about the customer wanting to go faster and all that. Is this coming with an embracement of risk that’s appropriate? I mean, are you signing up to contracts that are perhaps a little bit racier than you perhaps would like if things weren’t going so fast?

Chris, CEO, L3Harris Technologies: Yes. Thanks, Rob. I can assure you we’re not signing up to things that are riskier or racier, if that’s, what what we what you said. No. There’s there’s a desire to go fast for the customer.

A lot of these, awards are follow on awards, change orders to existing contracts. A lot of classified work in, ISR and, space this quarter. And, you know, it seems like the new administration, with their great business background understands business maybe better than than prior administrations. And we’re receiving cost plus contracts where appropriate and fixed price contracts when we move into production. Not a lot of desire to lock in long term fixed priced options for development programs that haven’t been developed.

So I find them so far to be quite reasonable and kind of enjoyable to work with. So somewhat refreshing in my experience.

Ken, CFO, L3Harris Technologies: Yeah. I’ll just add from a contracts perspective, Rob. You know, moving faster doesn’t necessarily mean taking more risk. I think the the business deals that we’re working on, we work closely with the customer. We’ve got a great contracts team that I think negotiates good deals for us and make sure that we’re thinking about the risk and making sure we sign up for the right statement of work.

So I think, all that is moving well, on that front. And, you know, we’re I think this is really something that l three Harris is built for. I mean, we’re able to manage risk, move fast. I think we’ve got more agility. You know, we’ve got smaller teams that look at these things, really make sure they align with the strategy, they align with our profitable growth plans.

You know, certainly, we take risk in certain areas, and we work to offset that with operational performance in other parts of the portfolio. But I think it’s all, you know, it’s all hanging together, really nicely, and I think our our risk profile, as I look forward, is is, appropriate.

Chris, CEO, L3Harris Technologies: Yeah. A lot of this comes from the basis of estimate. And we’ve now after several years since the merger of l three and Harris, have been able to build up some data to do a little better job with our parametric modeling and and such and using AI and our digital backbone. So we’re getting better and better data to base our bids on. So if you get the basis of estimate right, whether it’s the the hours or the subcontracts, it’s gonna make it easier to perform and make make money.

And that’s what we’re doing. We’re submitting bids based on what it costs. And in some cases or a lot of cases, we’re winning, and in some cases, we’re not. But we’re not gonna bid bad deals knowingly just to grow market share.

Conference Operator: Thank you. Next question will be from Sheila Kahyaoglu at Jefferies. Please proceed.

Dan Getzovich, Vice President, Investor Relations, L3Harris Technologies1: Good morning, Chris and Ken. Chris, I really appreciate the color around the strategy. Any way you could quantify maybe just specifically TDL and Aerojet hitting their stride with Aerojet having the highest revenue quarter? How does that contribute or accelerate ’26 growth? And on Aerojet specifically, just increases in production, how are you thinking about the business over the next five years and the biggest growth drivers for Aerojet?

Chris, CEO, L3Harris Technologies: Alright. Well, thank you, Sheila. I’ll say, you know, on a both these acquisitions that we made in 2023, TDL and Aerojet, are exceeding the business model that we built to approve and get our board of directors to approve these acquisitions. I’ll give a little insight on TDL. I’ll ask Ken to talk about Aerojet Rocketdyne.

But on TDL, which you don’t see the visibility, it’s within the CS segment. You know, since acquiring them in January, the revenue has been upper single digits, so both accretive to CS and accretive to L3Harris. The margins as a result of the cost synergies and consolidating the facilities in Salt Lake City, streamlining and improving the roll throughput yield and the production capability are almost at the CS segment level, so very high margins, especially on the commercial business model again. And the cash has been very strong, not even considering some of the tax benefits as as a result of the way the transaction was was modeled. So, you know, as we go into year two and a half here, very pleased with with TDL.

And, again, part of that upside has been our success in getting league 16 in the space, which had never been done before. And I think that’s huge opportunities as these various comms and transport layers under Golden Dome evolve in the years ahead. Ken, you wanna talk about Aerojet Rocketdyne?

Ken, CFO, L3Harris Technologies: Yeah. Thanks, Chris. Yeah. From an Aerojet Rocketdyne perspective, Sheila, I would say, you know, there is just a significant amount of opportunity, and it does take investment. This is a long cycle cycle kind of capital intensive business.

I mentioned that Aerojet Rocketdyne should be the fastest grower as we look, you know, kind of ’26 and beyond. Missile solutions is certainly a big part of that. And if you look at where we’re investing, you know, we were we did work with the government to get some defense procurement act funding for programs like Javelin, Stinger, and a couple others. So we see growth in the near term, certainly, in the tactical motor side from an interceptor perspective. You know, we’re on PAC three standard missile on THAAD, and we’re seeing growth and increased demand on the interceptor level.

And some of that could potentially accelerate as those are a a part of the Golden Dome opportunity. And then long term, we’ve been investing. We’ve talked about large solid rocket motors, supporting programs like Sentinel, some classified programs, next generation interceptor, as well as glide phase interceptor, which is technically a medium sized motor, but, I would throw it in there, as well as, the the business we have supporting missile defense agency for targets that we think would be a grower related to Golden Dome and testing some of those new systems. So, you know, even within Aerojet Rocketdyne, it’s a diverse portfolio. I think they’re positioned very well across key and what are important missile programs and certainly those that are seeing increasing demand from the customer, and we expect to to drive growth for, you know, a decade or plus, in some regards.

Chris, CEO, L3Harris Technologies: Yeah. So we’re we’re we’re gonna try to get to 5,000,000,000 of revenue by by the end of the decade. That’s our aspirational goal. I think we have pretty good visibility, into that. I will say when I meet with the, the primes and and the end customers, there’s no dis nobody disputes that, we have by far the best technology in this market, and I think that’s been a differentiator.

You heard me say we’re on pretty much every interceptor in The US, whether it’s in development or in production. The large solid rocket motors, I mean, we’re pretty much have each and every one of those in our portfolio already. So huge, huge opportunities. Again, at the end of the day, it’s about delivery and scale. You know, you didn’t ask about the new entrants.

We continue to meet with new entrants. We look to partner. We welcome the competition. But when you look at the investments we’re making, that the primes are making, and the government’s making, you know, in less than two years, we’re gonna have the facilities, the equipment to ramp up, and it’s gonna take others half a decade or or more to get there. So feel very, very confident that this was a good acquisition.

We have a great team running it and a highly motivated workforce and couldn’t be more proud of what we’ve done and what we’re gonna do in the future.

Conference Operator: Thank you. Next question will be from Gautam Khanna at TD Cowen. Please proceed.

Analyst: Yes. Good morning and great results.

Chris, CEO, L3Harris Technologies: Thank you.

Analyst: I had a two part question. In the president’s budget request, you may have seen the military radio line items were a little bit softer in ’26. Likewise, armed overwats and some others. I wanted to get your perspective on what the growth rate might be beyond ’26 for tactical radios and some of those other areas with the backfill from foreign or or otherwise. If you could just give us some framework to think about that.

Chris, CEO, L3Harris Technologies: Yeah. Great. Great question. You know, we so we’ll we’ll start with the radios. I’ll I’ll let Ken talk about armed overwatch.

But first of all, it is the 26 PBR. So this is the first step of a multiple step process. So, we we noticed what the cuts in the HMS and the COPS line, those two line items. But, there’s quite quite a long way to go through the process to see where that ends up. And historically, you know, customers weigh in, members of congress weigh in, and ultimately, the end users weigh in.

So we’ll see how that plays out. But when you look at the actual numbers, you know, we’re comparing two line items known as HMS and COTS to the same two in ’26. But there was a third line item added called NextGen command and control or NGC two. So I kinda look at those three as the telecom and the the radio line items, and, those are, on a combined basis, several 100,000,000 more than 2025. So the question is what what is in NGC two?

And as we’ve looked at it, there is clearly a transport layer where we believe our software defined radios, and our network capability and architecture capability, can can meet those needs and continue with the modernization. So I think a lot of the modernization that needs to continue, we’re just talking US domestic, is embedded within that NGC two, and our teams are looking at, how best to proceed. So we’ll monitor the situation, but we’ll let you know as that plays out. I I don’t see this as being a significant headwind based on our performance and based on our capability. And, of course, international, we’ve already covered.

We have great opportunities there as well. So in total, tactical comms, radios, or TCOM sector continue to see growth for the foreseeable future. Haven’t even mentioned the waveforms and some

Ken, CFO, L3Harris Technologies: of the other product sales that we have with much, much higher margins. So you wanna talk about Armed Overwatch and Sure. Yep. Thanks, Gautam. From a Armed Overwatch perspective, I would say, you know, we did see that there’s a dip in quantities in I think it’s ’20 six.

No concerns from our perspective. And I think a couple of things. You know, it’s a it’s a long cycle program. It doesn’t impact our production flow. You know, we’ve got plenty of aircraft in order, and I think we’ve got a good delivery cadence on that.

And maybe more importantly, we’re seeing a fair amount of international opportunity for armed overwatch that we’ll look to drive some awards for. And certainly, if you think about the overall ISR business and as it rolls up to IMS, nothing in that profile from a funding perspective that would impact our ability for growth in the business. So we’re tracking it, looking to fill it in with some international opportunity.

Conference Operator: Thank you. Next question will be from Seth Seifman at JPMorgan. Please proceed.

Ken, CFO, L3Harris Technologies: Thanks very much and good morning and nice results. I wanted to ask maybe if you could level set us on, where things stand in the mission networks, piece of the business within SAS. Kinda how big is that now? And it’s something that kinda thought of as, maybe rolling off over time. But it seems like there’s opportunity in the near term given FAA demand.

And maybe the way that the FAA is looking to do things in the future opens up some longer opportunities as well. So I guess how should we think about that piece of the portfolio?

Chris, CEO, L3Harris Technologies: Yeah. Thanks, Tim. Good morning, and thanks for the kind words. We’ll pass it on to the team. Yeah.

We don’t talk much about the Mission Networks business. I mentioned a few things in my prepared remarks. You know, our our our specialty here is really on the telecommunications and the telecommunications infrastructure and, specifically, you know, the migration from the older, you know, copper wire to to fiber that you might have heard secretary Duffy talk about. So we we were able to successfully, upgrade, the Newark Airport, as I mentioned, which got a lot of press, over the last several months. But there’s literally, dozens of other opportunities and literally thousands of sites that, need to transition from, I’ll just say, older technology to newer technology, and we’re kind of in the sweet spot of of doing that.

So you’ve you’ve heard about the, need for a brand new air traffic control system. We will not, at this point, have any interest in being the prime integrator or try to manage that whole portfolio. I think there’s probably other companies that are better suited for that. We wanna stay in our sweet spot, which is really the, the telecom, infrastructure, the broadcast services, you know, the data integration and data services. So, all in, I think this sector is right around a billion dollars or so, isn’t it?

Yep. With with with good margins, and we would expect this to, continue to grow, and it’s part of our national security infrastructure supporting the US government. So a good business and, you know, clearly, more upside today than maybe a year or two ago. So the team really came through and did a did a great job.

Conference Operator: Thank you. Next question will be from Scott Micas at Amelius Research. Please proceed.

Ron Epstein, Analyst, Bank of America: Morning, Chris and Ben. Nice results. Chris, I wanted to ask about the Wolfpack announcement that you guys came out with. You’re effectively going to be competing with Lockheed and Raytheon, first of Aerojet’s largest customers. I’m just wondering when you initially acquired Aerojet, was that something you decided to do more recently?

Or has it been in the works for a long time? And then long term, what do you see as the revenue opportunity for Wolfpack both domestically and internationally?

Chris, CEO, L3Harris Technologies: Alright. Thanks, Scott. I wasn’t sure I was gonna get a Wolfpack question today, so I’m glad you keep keep abreast of our announcements. Yeah. This is something that we’ve been working on well before Aerojet Rocketdyne acquisition.

It’s a unique transformational capability. You know, launch effects is something that, each of the, DOD, service branches, need, and we think we have a unique, offering, that we’ve been developing. The one of these will will actually be a kinetic strike, and the other will be, more of a e EW, kinda falls in that, attributable market that everybody, keeps talking about. And I think these are quite, quite affordable relative to other other products that are out there. So, you know, we kinda have to start small and and and build up there.

We’ve we’ve had, we do have a hot, production line. We’ve had demos well over, 40 flights that are that have been, tested, and there’s a lot of interest, here domestically, whether we can export or not to be determined. And, you know, this this asset, depending which variation you get, obviously goes inside larger platforms. So, you know, we’ll try to get a couple 100,000,000 here in the next several years and see where it goes from there. But pretty innovative, pretty creative opportunity.

And, of course, with Aerojet Rocketdyne, it just gives us more and more synergy. Although these particular assets don’t have solid rocket motors in them. Probably all I can say from a technical standpoint.

Dan Getzovich, Vice President, Investor Relations, L3Harris Technologies: And, Shelby, we’ll take the last question.

Conference Operator: Certainly, sir. And the last question will be from Jason Gersky at Citi. Please proceed.

Analyst: Hey, good morning, everybody. Ken, just a quick clarification question for you and then Chris, just a bigger picture one if you don’t mind. On the clarification one, has there been any change Ken to your expectations on how much of the LHX NEXT savings you’ll pass on versus what gets captured by the customer? I think you’ve commented on that ratio in the past. And then Chris, I was wondering if can just spend a little bit more time on space.

I know there’s been quite a few questions on it today already, so I appreciate the color there. But I’m just kind of curious, the overall demand environment for space and any kinds of new projects that you might see or new technologies programs that you see on the horizon, either here domestically or maybe even over in Europe, and whether European capabilities are going to be something that they’re going to spend money on in the space domain here and whether companies like LHX you think might play a role in increased spending in Europe? Thanks.

Ken, CFO, L3Harris Technologies: Yes, Jason, on your first question in terms of LHX NEXT, no change of any significance from our expectation around a the margin opportunity. You know, the program goes out and identifies cost savings opportunities and really make sure that we focus on kind of the run rate opportunities that will impact the longer term business. We work to generate those savings and then certainly flow it through our contract mix. We do expect, you know, roughly 30% to 40% of that to generate margin opportunity for us, and the remainder will be, you know, passed back to the customer through lower cost and essentially providing some benefit to to the customer as well as our competitive positioning for winning new work. So no change to the model.

You know, different types of cost savings have, you know, different profiles to them. But overall, at a portfolio level, we still expect roughly about 30 to 40%. And Chris?

Chris, CEO, L3Harris Technologies: Yeah. Jason, great great question on space. We’ve highlighted this in the past as kind of a key part of our trusted disruptive strategy, how we move it up the the the food chain. You know, we don’t really talk a whole lot about some of the things we do for NASA and NOAA, especially in the weather satellites. And weather satellites have a significant military application in addition to all of us looking at our apps and checking the weather on a daily basis.

So we actually see some international opportunities using our weather satellite technology, which is the same technology we used, you know, to innovate into the missile tracking, missile warning. So there’s there’s a lot of opportunities for us. We continue to, you know, stick with our strategy. In a lot of cases, we’re the prime now, which we weren’t, historically. We still sub on some of these exquisite geo, synchronous satellites focused on our great, antenna strategy or or technology.

And we’re also a merchant supplier even on, some of these transport using link 16 and some other technologies, that we’ve talked about. So, a lot of growth potential. I’ll say since the new administration, I think things slowed down. You see that in across the industry for the first six months as the new administration comes in place, because we wait for the confirmation, as we figure out what’s gonna happen with SDA, MDA, SSC, and all these other customers that procure satellites. So I I think we’re gonna pick up some momentum here in the third and fourth quarter as the architectures are finalized.

But we pretty much play in every orbital plane, in every size, and, you know, as a prime, a sub, and a merchant supplier. So we’re looking for good things out of space. And, again, we’re performing, we’re delivering, and that’s gonna lead to more business. So as we close today’s call, I wanna thank my leadership team and our employees for their continued focus, agility, and commitment to the mission. More than 90% of my executive leadership team is new to the company or has taken on expanded roles in the last three years.

The team brings a strong mix of defense industry experience, operational expertise, and commitment to advancing national security priorities by investing in talent, technology, and long term growth. We are fearless. We have the courage to defy the status quo and challenge convention. We don’t follow trends we set them, and we’re forging original paths that advance mission success. The progress we’re making is a direct result of their teamwork, their focus, and their commitment.

So thank you all for joining us today, and we look forward to connecting with many of you in the weeks ahead. Thank you.

Conference Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your lines.

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