L3Harris at Barclays Conference: Strategic Growth Plans Unveiled

On Tuesday, 06 May 2025, L3Harris Technologies (NYSE:LHX) presented at the Barclays Americas Select Franchise Conference, highlighting its strategic plans for growth and financial performance. The company expressed optimism about meeting its ambitious targets for 2025 and 2026, driven by key initiatives in space programs, F-35 upgrades, and Aerojet Rocketdyne’s expansion. While the company is confident in its growth trajectory, challenges such as margin pressures in the space segment were also addressed.

Key Takeaways

• L3Harris aims for $23 billion in revenue by 2026, with at least 16% margins.
• Focus on space programs, F-35 upgrades, and Aerojet Rocketdyne capacity increases.
• Emphasis on shareholder value through dividends and share repurchases.
• International growth opportunities in communication systems and electro-optic infrared capabilities.
• Aerojet Rocketdyne expected to reach $4 billion in revenue by 2028.

Financial Results

L3Harris is targeting significant revenue and margin growth over the coming years:

• Projected revenue of $23 billion by 2026, with 80% from U.S. customers and 20% international.
• Aiming for at least 16% margins, up from the mid-15% range, driven by cost savings and international growth.
• Free cash flow expected to grow 40% to $2.8 billion in 2026, supported by revenue growth and share repurchases.
• Capital expenditure maintained at approximately 2% of sales, with dividends targeting 35% to 40% of free cash flow.

Operational Updates

The company is making strategic investments across several key areas:

• Aerojet Rocketdyne is increasing capacity for solid rocket motors, with significant growth expected in tactical and large-scale applications.
• Investments in space manufacturing and hypersonic detection, with new facilities in Palm Bay, Florida, and Fort Wayne, Indiana.
• F-35 program transitioning to component delivery, with revenue growth anticipated in 2026.
• International expansion focusing on communication systems and software-defined radios.

Future Outlook

L3Harris is confident in its growth trajectory and strategic alignment with government priorities:

• Anticipates a book-to-bill ratio above one for 2025, supported by large awards in aircraft modernization.
• Projects double-digit growth in free cash flow per share, driven by operational efficiencies and share repurchases.
• Aligns with the Golden Dome program for missile warning and tracking, leveraging existing investments.

Q&A Highlights

During the Q&A session, key topics included:

• Budget considerations for FY25 and FY26, with a focus on aligning with administration priorities.
• Confidence in achieving a book-to-bill ratio above one despite early 2025 challenges.
• Emphasis on commercial business models for faster capability delivery, with 20% of the business on commercial terms.

In conclusion, L3Harris Technologies presented a robust strategic plan at the Barclays Americas Select Franchise Conference, showcasing its commitment to growth and shareholder value. For further details, readers are encouraged to refer to the full transcript below.

Full transcript - Barclays Americas Select Franchise Conference:

Unidentified speaker, Interviewer: Pleased to have L3 Harris and Ken Benningfield. Thanks making the trip across the pond, Ken and Dan. Ken is the Chief Financial Officer. He wears two hats, Chief Financial Officer and also President of Aerojet Rocketdyne, is one of the four business segments. So with that, I’ll turn it over to Ken.

I think forward looking statements, Safe Harbor.

Ken Benningfield, Chief Financial Officer, President of Aerojet Rocketdyne, L3Harris: Sure. Yes. I’ll just start by saying the statements and comments made today may include forward looking statements, and forward looking statements do involve risks and uncertainties. And for more information on those risks, please refer to our SEC filings.

Unidentified speaker, Interviewer: Perfect. So for the benefit of everyone in the room, I think you’ve got a pretty unique background given your last couple of stops. Could you just kind of run through where you’ve been over the course of the last ten or I guess post your accounting days where you’ve made stops over the last couple of years. And I think given your experience kind of on the private sponsor side, it’s you bring a bit of an interesting perspective.

Ken Benningfield, Chief Financial Officer, President of Aerojet Rocketdyne, L3Harris: Sure. Yes. Thanks for the opportunity to talk a little bit about my background. So as you referenced, I am a trained GAAP accountant. And but after those days, I did spend a fair amount of time at Northrop Grumman, spent some time in the business.

So, I was the CFO of one of their operating segments, and then was the CFO there for a period of time, largely under Wes Bush when he was the CEO. I did leave Northrop and spent some time actually in the defense technology world. So I was with one of the defense technology startups, and we were doing a system in defense electronics, essentially directed energy weapons and largely high power microwave for counter swarm. So I spent about three years working in the venture capital, largely defense VC technology community. So I’ve worked with and alongside a number of folks, whether it’s the Andorils of the world, Palantirs, Shield AI and then certainly some of the tech investors as well.

So look, as we at L3Harris are really trying to be, I would say, we understand the mission of the customer like a traditional prime, but we aim to be agile and a bit more nimble like a defense technology startup. I like to think that my background experience and certainly some of those relationships are helpful for us as we think about how do we create value through partnerships and a different mindset around how we deliver capability to the customer.

Unidentified speaker, Interviewer: Great. We’ll touch on that aspect in some of the questions I want to run through. So to start big picture, I have to talk about the budget. And I’ve been doing this for a while. And it’s all most years, it’s convoluted.

I would say this year, it’s even more convoluted than normal. So if I’ve got it right, we’ve got a full year CR for 2025 fiscal ’20 ’20 ’5. We just got a kind of a top line for 2026, but that included a fair amount from the reconciliation bill that hasn’t even passed. It’s still kind of early stages. So your perspective on kind of where we are on the budget and what it means for the company?

Ken Benningfield, Chief Financial Officer, President of Aerojet Rocketdyne, L3Harris: So I think there’s a couple of important things to think about in terms of where we are in the process. Certainly, we’re excited to have a ’25 budget. So I think a full year continuing resolution and a little bit of a nontraditional continuing resolution in terms of how the money is able to be spent and some of the flexibility in reprogramming, that sort of thing. So it’s great to have a ’25 budget, and then a ’26 president’s budget request, and maybe as importantly, you know, a real indication of what the priorities are within the administration. And so there’s still, you know, a process to work through for FY ’26.

Obviously, the request from the administration is in, and now it’s up to the Hill to pass a budget. What that will include in terms of reconciliation and how that will all work remains to be seen. But I think the important takeaway is that defense is clearly a priority. And, you know, within those priorities, I think we have a sense of or within that overall priority in defense, strong support of defense, we know that there are some priorities that the administration has outlined. And we believe that our capabilities and our investments and even the work we’re doing today aligns very well with those priorities.

I might highlight as an example Golden Dome, where we look at it and say, we’ve got significant capabilities where we’ve invested in space to become a prime in in the world of, you know, missile warning, missile tracking. And we’ve got significant capability in that regard. And then if you think about, obviously, investment we made in Aerojet Rocketdyne and the capability we have in interceptors, as an example, ground based interceptors. And then if you think about a future world where there would be an architecture to include interceptors from space, we certainly think we’ve got capability and ultimately technology in that regard as well. So I think there are some important takeaways.

I mean, that’s kind of the way we’re looking at it. Again, strong support for defense and strong alignment between our company’s capabilities and and maybe more importantly, the investments that we’ve been making. So we’ve been modernizing our facilities for space manufacturing, as an example. We’ve been making investments at Aerojet Rocketdyne to drive capacity increases in that business, not just in tactical solid rocket motors, but also in advanced interceptors. We’ve been very successful in winning some positions on important interceptor programs that I think, you know, position us well for the future that would include Golden Dome.

Unidentified speaker, Interviewer: So on on Goldendum, can you talk about where we are in terms of, you know, requests that have been made from the administration, kind of where we are in that? I mean, we hear about this, we hear about the billions that could be spent on, but where where are we actually in that in that process?

Ken Benningfield, Chief Financial Officer, President of Aerojet Rocketdyne, L3Harris: So, you know, clearly, it’s been identified as a priority. And, I think if I remember correctly, within the president’s, budget request, there was a line allocated for Golden Dome. I think it might have been 25 or so billion dollars identified. So, clearly identified as a priority for FY twenty six spending. And again, as that gets finalized between the administration and the Hill, and as that budget moves forward, we think we’ve got strong alignment to, you know, certainly the the near term aspects of of the Golden Dome.

You know, I think as Chris mentioned on the q one earnings call, we’ve got capability for hypersonic missile warning tracking detection, and, we could accelerate that. We’ve got a a demonstration system that exists, and is providing capability today, and we could accelerate that and provide some broad coverage and capability while this administration is still in office. So near term, I think some opportunity for that budget to have, you know, near term capability increase. You know, certainly, you know, we’ll be evaluating, if we could accelerate, work on, you know, development of next generation interceptors and and things like that. Even, you know, we’ve talked about, you know, we do some targets for the missile defense agency.

And, you know, with a new system and a new set of capabilities, you know, testing that system against targets, would think, would be important. So we’re, you know, standing ready to be able to provide more capacity for target capability and, really look forward to working with our customers to figure out what their needs are and how we best help them to address it.

Unidentified speaker, Interviewer: High level, talk about the size of your portfolio in terms of U. S. Versus international and how you foresee the growth rates, you know, the growth rate for domestic versus international both this year and maybe thinking beyond over the next couple of years?

Ken Benningfield, Chief Financial Officer, President of Aerojet Rocketdyne, L3Harris: Yeah. So, you know, I would would file this under, you know, kind of a good problem to have, I suppose, where both The U. S. Business and the international business have significant opportunities for growth. And you can think high level of our business as roughly being kind of eightytwenty, 80% of our revenue from U.

S. Customers and about 20% from international, whether that’s direct or foreign military sales. In the first quarter, I think we were maybe 23% international. But because we are a relatively quick turn business, and oftentimes, as an example, at our communication systems business, we can book and ship orders and product in the same quarter. So we were able to respond to some international requirements, quick turn needs, and get some product out the door.

But we’re roughly eightytwenty, and I expect that as we look at opportunities for growth in The U. S. As well as international, it kind of the question becomes which one moves first faster. Obviously, in the first quarter, we saw some international opportunities. And I think big kudos to our team to be able to respond that quickly and drive product through the factory and out the door to support our customers.

But I think both will be growing. It’s possible that international grows a little beyond the 20% of our total sales. But we’re excited about how the portfolio is positioned to support both The U. S. And its allies.

Unidentified speaker, Interviewer: In terms of international, you’re most exposed on the comms side, obviously, but where else do you have exposure on the international side?

Ken Benningfield, Chief Financial Officer, President of Aerojet Rocketdyne, L3Harris: So from the international perspective, CS and in particular, our software defined radios, both the radios themselves as well as waveforms and software products, we’ve got opportunity there. We do have some international businesses that drive international sales. So we’ve got businesses in The U. K. Where we are today that support the UK MOD.

As an example, we’ve got a business in Italy that supports some of our European allies. And then we have an important business at IMS in what we call WESCAM, very high end electro optic infrared capabilities, turrets or IR balls. And they provide a lot of customers around the world with capability in that regard. So that’s been a strong international sales contributor for us as well. And then one thing that we don’t account for as international sales, but Aerojet Rocketdyne, obviously, a lot of the solid rocket motors, in particular, the tactical solid rocket motors provided to our customers, whether it’s U.

S. DoD customers or to the defense primes, ultimately are provided to our allies, either through direct commercial sales or foreign military sales. We account for the sales of all of those motors as US because we don’t actually track once they leave our hands what’s going to a U. S. Customer versus a foreign But good solid demand around the globe clearly for that capability.

And it’s a good model for us. And I think our customers recognize the value we bring in their international business, and we’re able to realize some opportunity for that.

Unidentified speaker, Interviewer: In terms of the contracting environment, you along with, I think, all your prime peers had a book to bill below one in the first quarter. So normally, with a new administration, we think we see things kind of slow down. But how do you view the contracting environment? Do you think it’s just kind of a quarterly thing, seasonal thing that we saw a slowdown in Q1? And what are the big obviously beyond just Golden Dome, what are the maybe some of the big competitions or potential booking opportunities that you’re tracking for this year?

Ken Benningfield, Chief Financial Officer, President of Aerojet Rocketdyne, L3Harris: Yes. I would say, from my perspective, first thing is there is no reason for concern in terms of our ability to grow the business based on a single quarter or the first quarter’s book to bill being below We had few large things that kind of slipped into April into early second quarter. And then was there a little bit of a slowdown with a continuing resolution that hadn’t been yet passed into a full year budget? Sure, there’s a little bit of that. But we’re very confident in our ability to grow the business both in 2025 as well as into the financial framework that we’ve been talking about now for a couple of years for the 2026 sales growth as well.

If you look kind of post Q1, we did have a couple of big awards in April. So we had a large restricted award that we talked about on the earnings call that was several hundred million dollars. There was an international customer that gave us an award for some aircraft modernization that was a couple hundred million dollars. And then, you know, there’s a few other, you know, inter I think there’s some international communication systems awards that we’ll be rolling in. Now some of those are, you know, announced network modernizations that will kind of come in, in smaller chunks and how we actually account and book the awards.

But I think Q2 is off to a solid start, and we are projecting that we’ll have a book to bill for 2025 in excess of one. And, you know, again, we’re very confident in our growth profile for ’25 and into ’26. And I know, you know, people often ask a question about, hey, what’s the growth rate into ’26? And, you know, if you’re at the midpoint of ’25, you know, then that that leaves you with a higher growth rate in ’26. So maybe I’ll just address that a little bit, you know, up front now.

You know, first of all, we obviously incentivize the team to continue to drive growth and we’re not waiting for ’26. So we’ll we’ll be trying to drive upside to to revenue forecast for ’25 to certainly provide some derisking to the ’26 growth. And then, we had mentioned for a few quarters now, there were a few things that were impacting ’25 that would kind of start to contribute again in 2026. So space programs had a little bit of a lull in budget, but we expect the space programs to return to growth in 2026. Great example is SDA Tranche three is expected to be awarded, I believe, now in late twenty twenty five, and that would contribute certainly to top line growth in 2026.

I’d mentioned for a while that we had F-thirty five, development of TR3 kind of ramping down at the end of twenty twenty four. So a little bit of a low point in 2025 on F-thirty five program. That will start to grow again in 2026. And then as we’ve invested in capacity increases at Aerojet Rocketdyne, that will certainly be a grower into ’26 and beyond. So those are sort of three kind of temporal things that we’ve known were existing.

And then, you know, the competitive win on the international aircraft modernization that I mentioned in April, the restricted award in April, and then some of the continued success on the international opportunities for communication systems, again, continue to give us confidence in ’25 and that growth into ’26. So look, we put the ’26 framework out of $23,000,000,000 of revenue in 2023. But I will tell you, David, I have more confidence today, and I expect I’ll have more confidence tomorrow and a quarter from now in what that 2026 revenue number is going to be of at least $23,000,000,000

Unidentified speaker, Interviewer: In terms of thinking about the path to get there, how much is in the book or you have really good visibility? And how much do you still think is out there you’ve got to go out and win to bridge that gap between, call it, 21,500,000,000.0 to twenty three billion dollars in 2026?

Ken Benningfield, Chief Financial Officer, President of Aerojet Rocketdyne, L3Harris: From my perspective, I think a lot of the backlog is is in the books today or or should be awarded here shortly. Thinking about what’s still competitive to be awarded between now and then. You know, probably the biggest one that would jump out to me would be Space Development Agency Tranche three. Would, would sound like the third tranche. It’s actually the fourth tranche because they started with tranche But, and we’ve been successful on all three of tranche zero, one and two.

And we’re confident in our, you know, the the capabilities we’re putting forward for Tranche three. So we would expect to be successful on that one as well. That’s probably the biggest one that jumps out to me as, you know, still to be competitively awarded. You know, we’re still working through negotiations with, you know, primes on on certain advanced aircraft that we that we support from a advanced electronics perspective. And so we’ve got to work through some of those dynamics.

But again, I feel confident between what’s in the backlog today and what I see hitting the book to bill between now and the end of the year in getting to that $23,000,000,000 number.

Unidentified speaker, Interviewer: And on F-thirty five, talk about where you are today, why it’s kind of leveled off or slowed down and why specifically accelerates into 2026?

Ken Benningfield, Chief Financial Officer, President of Aerojet Rocketdyne, L3Harris: Yes. So from an F-thirty five perspective and from an overall program perspective, I would suggest that you talk to obviously the prime Lockheed Martin about it. But from our role on the program, you know, we’ve obviously got some of the key advanced electronics within the aircraft from the, you know, mission processor, you know, to other electronic, components and assemblies. We were working with the customer, both the DoD and the Joint Program Office, as well as Lockheed Martin around the, continued, investment in and development of tech tech refresh three, for advanced electronics, and advanced capabilities on the f 35 program. That was on a development contract, and we have largely delivered the capability that we had been asked to deliver under that set of capability development.

Therefore, that aspect of the program, the engineering and development side has ramped down, kind of ended in late twenty twenty four. And now we’re off and kind of delivering components. And as the lots that are delivering TR2 components change over to lots that are delivering TR3 components, we’re just seeing a little bit of a lag in that kind of manufacturing acceleration or delivery acceleration that will drive that revenue growth. But as we look forward, I see that growing in ’twenty six, a bit further growth in ’twenty seven, and that will more than offset that decline that we’ve seen again as it’s just the timing of the development on TR3 is now behind us.

Unidentified speaker, Interviewer: You touched on a little bit on the space side with SGA and your wins there. So it sounds it seems like you’ve done really well on the space side. You’ve won a lot of business, but you’ve had some pressure from a margin perspective in terms of fixed price development program. So talk about kind of the contrast there with the growth you’re seeing, the wins you’re seeing, but at the same time, some margin pressure at SAS? And where exactly are in terms of retiring the risk on these fixed price development programs?

Ken Benningfield, Chief Financial Officer, President of Aerojet Rocketdyne, L3Harris: Yes. Look, growth is not without its challenges. And in particular, when you’re growing into a new market or a new business, you know, there’s there’s gonna be some challenges. And and we do some very, you know, very hard things. We’ve got a great team in space within the SAS segment.

I think they’re doing great work to support their customers, whether that’s other primes or ultimately the DOD or Intel community. And we’ve taken on some challenging work. Some of that challenging work was signed up, you know, a number of years ago, some of it even pre merger under fixed price contracts. But we are, you know, accepting, you know, obviously the the work that we’ve signed up to do, and we’re delivering the capability. We expect to deliver that capability or at least we expect to have our cost baselines or our EACs, ETCs largely understood roughly by the end of the year.

And we think we’ve got the risk, you know, pretty well provisioned. So there’s some schedule risk as we continue to manage those programs, but we think it’s in breadbasket, as I think how I’ve referred to it. So we’ve done our best to manage that risk in our full year guidance and forecasts. But I think the fact of the matter is we have moved from a capable, high end payload provider in space to a very capable prime in space. And we see that as a business that can generate, you know, billions of dollars of opportunity for us as we look forward.

And as we better understand, you know, what it means to be a prime and what of these capabilities and systems are, you know, moving forward and moving forward at better volume from our customer perspective and where we’re, you know, better able to drive value from our capability perspective, we see it as a business that can kind of build on itself and become even more profitable as we look forward and as we get some of these growth challenges So great work by our space team, a great strategy to invest to become a prime. We’ve put several hundred millions of dollars into facilities for spacecraft integration in Palm Bay, Florida for very high end optics. As an example, hypersonic detection and tracking in Fort Wayne, Indiana. And we’re really excited about how those investments that we have made align to the Golden Dome opportunity going forward.

People often ask us, like, are you gonna invest for Golden Dome? And the great news is we’ve already invested. And we’re ready to deliver that capability based on the timely investments that the team has been making.

Unidentified speaker, Interviewer: So your other job is president of Aerojet Rocketdyne. Talk about where that business is in terms of the capacity additions coming online, what that will mean for production going forward. And I think back at your Investor Day, at the end of twenty twenty three, you had just started. Aerojet’s kind of a 2,500,000,000.0 close to $3,000,000,000 business, but have been projected growing to like $4,000,000,000 by 2028, if that’s still possible?

Ken Benningfield, Chief Financial Officer, President of Aerojet Rocketdyne, L3Harris: Yeah, yeah. Investor Day twenty three was my first day with the company. You know, certainly will be a day I’ll remember. And yeah, look, we’re really excited about Aerojet Rocketdyne and all things going on in the worlds of, you know, both solid rocket motor capacity acceleration, as well as, you know, space propulsion. And so maybe I’ll talk a little bit about missile solutions and solid rocket motor.

You know, clearly I think the customer recognized the importance of investing in the supply chain and the need to invest in the capacity for delivery of this type of capability to restock product that had been depleted through a number of conflicts and or test fires of various sorts. So we received an award from the Department of Defense to invest in capacity increases for three programs, GMLRS, Stinger and Javelin, and we’ve been executing on that. We’re also investing in capacity increases, both facilities as well as production lines for other capacity increases for solid rocket motors, whether it’s, you know, Patriot, standard missile, you know, other programs that certainly have a lot of demand for for multiple years. So we see, you know, significant capacity demand for tactical solid rocket motors, we are investing to drive our ability to produce to that demand, and we see that probably for a decade or so. Following on that, we’ve been successful in large solid rocket motor competitions.

And so, you know, we’re on the Sentinel program. We were successful on Next Gen Interceptor, where we’re not just the propulsion, but also divert and attitude control. We’re on glide phase interceptor, Zeus, as well as some classified programs. And so from a large solid rocket motor perspective, we’re investing not only in capacity, engineering, technology, but certainly what I see as multiple decades of opportunity to deliver growth in large solid rocket motors. And some of these are exceedingly large.

I mean, we’re talking some of these motors are the size of a small school bus. So there’s clearly some barriers to entry in terms of competition in that regard. So really excited about Airjet Rocketdyne. I think the investment case when we bought the business is certainly playing out as expected or better than expected. And to your question about 2028 and where Airjet Rocketdyne can go, obviously, we haven’t given guidance on 2028 yet, but we’ll think about the kind of the next financial framework.

And I do expect that Aerojet Rocketdyne will be a big component of our next growth story.

Unidentified speaker, Interviewer: Margin side, your margins are certainly higher than your prime peers. So maybe talk about what makes your business model different. The various cost savings initiatives you’ve been running next, LHX NEXT, how that’s benefited the company, and the trajectory for margins from here.

Ken Benningfield, Chief Financial Officer, President of Aerojet Rocketdyne, L3Harris: Yes, look, there is no reward without risk, right? And so, in some respects, you know, we are, we are risk takers at L3Harris, and that’s a part of the trusted disruptor strategy is, you know, you’ve gotta lean forward, you’ve got to invest, and, you know, we do follow, as much as practical and as much as possible a commercial business model, where we invest in the r and d. You know, we develop the new product, and we bring that product to the market as a commercial item. And we receive, you know, commercial item determination from the customer. We price it fixed price, you know, and we bear the risk of, you know, yielding the benefits of that investment, whether it’s in R and D, capital, and making sure that the product is, you know, supportive of the customer’s needs and delivers the capabilities required.

So, you know, we’re willing to take those risks. I think we understand the customer, we understand the needs, we understand the missions. And historically, we’ve been able to effectively deliver that capability to make sure that we’re answering the mail. So we’re very comfortable with the commercial model. We would love to continue to see our customers, including the US DOD, try to procure more in a commercial model.

And, you know, through an executive order, I can’t remember exactly what it was called, but, you know, there’s a focus on, you know, using more commerciality, you know, rethinking federal acquisition regulation. And we’re excited about the opportunity to to work with our customer in rethinking how they acquire, what they acquire, and how they can acquire more in a commercial model. And, you know, what I think is important from a commercial perspective is you can move faster. And you can get capability in the hands of the war fighter faster. That’s the biggest benefit.

And, you know, we stand ready to to support our customer to to figure out how we can continue to drive capability and product into their hands faster.

Unidentified speaker, Interviewer: And so your margins there kind of in the mid 15% range. I think you forecasted a gain to 16% plus in 2026. What gets us there from where we are today?

Ken Benningfield, Chief Financial Officer, President of Aerojet Rocketdyne, L3Harris: Yes. So mid-15s today, we I think in 2023, we were if I remember correctly, maybe we closed out high 14s in 2023. We talked about, you know, a little over a 100 basis point increase to 16 approximately 16% in 2026. We’ve subsequently updated to at least 16% margins in 2026. Clearly, we’ve been investing in ourselves.

We like to say we dodged ourselves before doge was a thing with the customer. So we’ve been investing in L3Harris and working to cut cost and be as lean, as efficient as we can be, but at the same time, new tools and data driven decision making to our employees to drive annual run rate savings out of the business that will help us yield the 16 plus percent margins in ’26. And then the additional opportunity in the commercial business model and additional opportunity from international should help us all contribute to driving at least 16% margins.

Unidentified speaker, Interviewer: And about 20% of your business today is on commercial based terms, is that real?

Ken Benningfield, Chief Financial Officer, President of Aerojet Rocketdyne, L3Harris: That’s about right. Yes. So

Unidentified speaker, Interviewer: in the last couple of minutes, I wanted to touch on cash flow and capital deployment. So last year, 2.3%, this year 2.4%, two point five %, then the 2.8% in 2026 on free cash flow. Help bridge us to how we get to two point

Ken Benningfield, Chief Financial Officer, President of Aerojet Rocketdyne, L3Harris: eight So when we laid out the financial framework, I’ll just remind you that we had on a baseline of $2,000,000,000 in free cash flow in 2023. So getting to our 2,800,000,000.0 in 2026 will be a 40% growth in free cash flow. And, you know, we get there through, you know, a combination of growing the business, right, as we grow the top line, expand our margins to greater than 16% from in the 14% range, and then effectively managing our working capital. And then we are investing in the business from a CapEx perspective, but we’re keeping that pretty consistent at about 2% of sales.

And that gives us a lot of confidence in our free cash flow growth. We over delivered in ’24. I think we had guided 2.2, we ended up at 2.3. We’ve got a range at 2.4% to 2.5% for 25%, and we got off to a good start in the first quarter. We were negative on free cash flow, but Q1 is historically our low point, and we did better Q1 of this year than Q1 of last year.

So it gives us confidence in that momentum and trajectory towards the full year 2025. And then at the end of the day in 2026, again, it’s just driving that revenue growth, the continued margin expansion to 16% margins, effective working capital management. And that should, I think, safely get us to our $2,800,000,000 And then what are we doing with all that cash? I’ll just say that you know, we are looking to be effective allocators of capital. So I mentioned about 2% going to CapEx for capacity expansion, investing in our team and our factories.

We’ve increased our dividend every year for twenty four years. So that continues to be an important part. We target 35% to 40% of free cash flow as dividends. And then we’ve largely deleveraged, as we had talked about, kind of post the acquisitions. And we are returning to returning cash to shareholders through share repurchase.

We did about 500,000,000 last year. We talked about a billion dollars in ’25. And then we kind of updated to at least $1,000,000,000 in 2025. And you may have seen we did about $5.60 and change just in the first quarter alone. So we’re off and I would say delivering on our commitments from a shareholder value creation perspective when it comes to capital deployment.

Unidentified speaker, Interviewer: And I think you’ve talked about high level double digit free cash flow per share growth is kind of your what you’re targeting?

Ken Benningfield, Chief Financial Officer, President of Aerojet Rocketdyne, L3Harris: Yes. I think if you look at the model with the free cash flow growth that we’re targeting and then with capital deployment and share count reductions that we see coming out of that, we expect that could get us to kind of a mid double digit growth on free cash flow per share, which we’re pretty excited about from a value creation perspective.

Unidentified speaker, Interviewer: All right. Terrific. We’re out of time, Ken. Appreciate the time.

Ken Benningfield, Chief Financial Officer, President of Aerojet Rocketdyne, L3Harris: Fantastic. Thanks for having us. Really appreciate it.

Unidentified speaker, Interviewer: Thanks.

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