L3Harris at Jefferies Conference: Defense Growth and Strategic Investments

On Thursday, 04 September 2025, L3Harris Technologies (NYSE:LHX) presented at the Jefferies Mining and Industrials Conference 2025, outlining a promising strategic direction. The company, buoyed by robust defense sector growth, highlighted both opportunities and challenges, focusing on increased defense budgets and the successful integration of Aerojet Rocketdyne. L3Harris aims to exceed its 2026 revenue targets while navigating evolving market demands.

Key Takeaways

• L3Harris anticipates exceeding its fiscal year 2026 revenue target of 23 billion dollars.
• Aerojet Rocketdyne has shown substantial growth post-acquisition, with a current valuation between 11 billion and 15 billion dollars.
• The company is focusing on expanding capacity and technological advancements in line with modern warfare needs.
• L3Harris is targeting over 1 billion dollars in stock buybacks this year, continuing its trend of increasing dividends.
• The LHX NEXT program is projected to achieve up to 2 billion dollars in cost savings by year-end.

Financial Results

• Fiscal Year 2026 Framework:

- Revenue Target: 23 billion dollars, implying mid-single-digit growth

- Margin Target: Increased to the low 16% range

- Free Cash Flow Target: Increased to 3 billion dollars

• Aerojet Rocketdyne:

- Acquisition Price: 4.7 billion dollars in 2023

- Current Valuation: Estimated between 11 billion and 15 billion dollars

- Revenue Assumption for 2026: 5 billion dollars

• Capital Deployment:

- Stock Buybacks: 750 million dollars last year, with over 1 billion dollars targeted this year

- Dividend: 24 consecutive years of increases, expected to continue in 2026

• LHX NEXT Cost Savings Program:

- Initial Target: 1 billion dollars in three years

- Current Projection: At least 1.5 billion dollars, potentially closer to 2 billion dollars by year-end

Operational Updates

• Aerojet Rocketdyne:

- Leadership: Entire leadership team replaced and upgraded

- Production: Deliveries increased by over 60% in two years

- Capacity Expansion: New factories in Arkansas, Alabama, and Virginia

- Production Volume: Approximately 100,000 solid rocket motors annually

• Space Portfolio (SAS Segment):

- Strategic Shift: From payload provider to space prime focused on missile defense

- SDA Tracking Layer: Secured positions on all three initial tranches

- Manufacturing: New satellite facilities in Indiana and Florida

• Tactical Communications:

- International Market Growth: Over 1 billion dollars in European contracts this year

- DOD Modernization: 42% completion in software-defined radios

Future Outlook

• Golden Dome:

- Revenue Potential: Expects 10% to 20% of the 25 billion dollar FY ’26 budget

- Timeline: Orders and contracts anticipated in the coming months

• Aerojet Rocketdyne:

- Missile Segment Growth: Double-digit growth expected for at least a decade

- RL 10 Upper Stage: Backlog includes several hundred engines for United Launch Alliance

• Tactical Communications:

- International Market: Growth due to the importance of resilient communications

- Modernization: Twelve more years of software upgrade potential

• Space Portfolio (SAS Segment):

- SDA Tracking Layer: Awaiting next award with high expectations

Q&A Highlights

• Golden Dome Revenue:

- Timing: Revenue generation expected sooner due to an executive order

• Fiscal Year 2026 Guidance:

- Upside Potential: More upside than downside seen for the 23 billion dollar revenue target

• Aerojet Rocketdyne Valuation:

- Market Perception: Valued between 11 billion and 15 billion dollars

• Competitive Landscape:

- Solid Rocket Motors: Significant production volume noted

• Tactical Communications Market:

- Growth Factors: Emphasis on resilient communications and interoperability

Readers are encouraged to refer to the full transcript for a detailed analysis.

Full transcript - Jefferies Mining and Industrials Conference 2025:

Sheila Kayalu, Analyst, Jefferies Aerospace and Defense Equity Research: My name is Sheila Kayalu with the Jefferies Aerospace and Defense Equity Research team. Thanks so much for being here. We have l three Harris Technologies here. We have Chris Kubasik, who’s chairman and CEO, in case you aren’t aware, and accounting Ken over there, but, I hesitated on the introduction. Thank you, Ken Bettingfield, for being here, who’s CFO.

Ken has a quick disclaimer he’s gotta read, and we’re gonna get right into q and a.

Ken Bettingfield, CFO, L3Harris Technologies: Thanks, Sheila. It’s great to be here. And, just, remind everyone that, today’s discussion will include forward looking statements. Those statements do include risks and uncertainties, and they can, you can find more information in our SEC filings.

Sheila Kayalu, Analyst, Jefferies Aerospace and Defense Equity Research: Thank you. Chris, maybe just to start, broadly here. Thank you for being here as always and supporting the conference. There’s a lot going on with budgets, and I think, you know, we saw your interview yesterday on Fox, and I think we all look to you to see what’s moving with the DOD to be quite frank. So how do you think about budgets and strategy from reconciliation from here?

I think you guys have a lot going on with Golden Dome and the most we’ve heard so far. And how do you think about you you European defense budgets contributing?

Chris Kubasik, Chairman and CEO, L3Harris Technologies: Okay. Well, thank you. Thank you all for, joining. It is, somewhat confusing to try to keep track of everything going on, but I would say we have a huge tailwind when it comes to the, defense budget. Just the other day, I think the senate, brought forward $878,000,000,000 budget for 2026.

But the big news is the reconciliation bill of a 155,000,000,000. Normally, those would spread over ten years, but the administration’s been pretty clear that that 155 will be spent in a three to four year period. So that’s how you you hear this trillion dollar number. So, you know, from The US perspective, there’s never been more money in the DOD budget than than we have for ’25 and definitely for ’26. President Trump’s been pretty clear that he wants NATO and our allies to pay their fair share, and, they’ve stepped that up as well.

So when we look at the budgets around, the world and specifically Europe, again, huge opportunities. We’re about 23% of our revenues derived internationally, so, additional growth opportunities for us. Golden Dome has been getting a majority of the, the discussion. Again, in January, the president signed an executive order directing the Department of Defense to establish a, missile shield to protect the, the nation. So that is an executive order.

They recently confirmed the leader in the position, general Gute Line, and he will be a direct report, somewhat, unusual, a direct report to Steve Feinberg, who’s the deputy secretary of defense. So cutting out a lot of layers, a lot of bureaucracy, and the budget there initially is $25,000,000,000. So as it relates to l three Harris, we’ve been on a a role here the last several years with space. Historically, we were a payload provider. We’re now a prime.

We have built and launched hypersonic ballistic tracking satellites for both the Missile Defense Agency and the Space Development Agency. You’ve heard us talk in the past. We’ve won tranche zero, tranche one, tranche two. So we have more backlog than anyone in this particular domain. Part So of Golden Dome will be tracking hypersonic and ballistic missiles, and we think we’re well positioned to to build these satellites, launch them, and there is a scenario where we can have these up and in orbit while president Trump is still in office.

We’re just waiting for the the go sign from the DOD. The other part of two other parts of at a high level of Golden Dome are the solid rocket motors, the munitions. You hear of standard missile, PAC three, THAAD, next gen interceptor, glide phase interceptor, Sentinel. We provide the solid rocket motors for every one of those programs. And there will be an increase in the volume.

Some of those are long term production programs, some are development. And then the third piece, which is still evolving, and we’re still focused on trying to figure out our strategy is for the space based interceptor where there will be interceptors in orbit. And we have great technology. We have to decide if we’re gonna prime, sub, merchant supply, or some combination thereof. So been in the industry a long time, never seen these kind of external tailwinds, and I think it bodes well for for us in the defense industry for the next several years.

Sheila Kayalu, Analyst, Jefferies Aerospace and Defense Equity Research: With the 25,000,000,000 for Golden Dome, if I could just double click on that, how do we think about that being generating revenue for LHX and the potential opportunities there.

Ken Bettingfield, CFO, L3Harris Technologies: And just real quick to clarify, the 25,000,000,000 is the FY ’26, piece of Goldendum.

Chris Kubasik, Chairman and CEO, L3Harris Technologies: Well, I think it’s gonna be sooner rather than later, mainly because of the executive order by the, by the president. I know a few people have asked, is this gonna slip? I think it would be a bad strategy, for the Department of Defense to ignore this, directive from the, from the president. So I feel confident that, something’s gonna happen here in the next several months relative to orders and contracts. And then, you know, we would probably think we could get 10 to 15%, maybe 20% of that would be addressable to us.

And, you know, I think it would start get in the income statement pretty pretty quickly thereafter. So I think this will be a good tailwind and definitely give us even higher confidence in our 2026 framework, which which I know you ask about every time I talk to you.

Sheila Kayalu, Analyst, Jefferies Aerospace and Defense Equity Research: I’ll go into that question next. As we think about you’ve laid out three year targets with your fiscal twenty six framework for 23,000,000,000 of revenues, which basically implies mid single digit growth. But if we look at the opportunities ahead, Golden Dome coupled with European defense budgets, your recent wins, and just The US defense budget itself, how do we think about the range of outcomes and maybe opportunities folks aren’t factoring in?

Ken Bettingfield, CFO, L3Harris Technologies: Yep. For, you know, for 2026, look, we laid out the 23,000,000,000 revenue target at our Investor Day back in late twenty twenty three. At the time, we had confidence. And I would say between then and now, there are a lot of questions on how are you going get there, how are going to get there. And now the question is, I think how much upside is there to the $23,000,000,000 number for 2026.

And Chris mentioned Golden Dome as a tailwind, and it certainly is. And it’s a portfolio of opportunities between the space based sensors and certainly the the interceptor acceleration. I think the space based interceptor probably will be a little bit of a of a longer burn. But just looking at the portfolio, between the Golden Dome opportunity, some of that in SAS segment, some of that in Aerojet Rocketdyne segment, certainly, the continued demand for international communications, software defined radios and network upgrades, as well as some opportunities in our ISR business within IMS, We are building more and more confidence that we will hit the $23,000,000,000 number. And look, from a ’26 perspective, we’ll give guidance in January, and we’re not updating the framework today.

But my opinion, Sheila, would be that there is more certainly more upside than downside to the $23,000,000,000 in sales for 2026.

Chris Kubasik, Chairman and CEO, L3Harris Technologies: And just as a reminder, we also gave margin and free cash flow as part of that framework and both those numbers have been increased in the last quarter or two. So our plan would be to exceed all those numbers for a three year framework. And then in the ’26, we’ll have an investor conference and lay out a probably 2028 framework, to give you a little more visibility longer term.

Sheila Kayalu, Analyst, Jefferies Aerospace and Defense Equity Research: How do we think about maybe just starting with Aerojet. You acquired it in 2023 for about 4,700,000,000.0, I believe. You know, how do you think about what surprised you to the upside? How do you think about valuation today of the asset? And it’s really driven some growth opportunities for you all.

Chris Kubasik, Chairman and CEO, L3Harris Technologies: Well, I’ll start since I was the guy that, paid the $4,700,000,000. I think today, you know, there’s lots of people roaming around New York who would tell me that it’s worth anywhere from 11 to $15,000,000,000 in just over two years. So we’ve seen a lot of a lot of growth. So what surprised, I I would say, you know, we’ll start with the with the leadership. We’ve changed out the entire leadership.

So I guess I was surprised that the leadership team wasn’t up to the standards that we set. So we quickly upgraded all all the talent from external hires and internal hires. I think a lot of people were questioning whether we had missile and solid rocket motor capability. We have more talent in that area than people gave us credit for. So the team is really operating well there.

I’d say the workforce who had been through a lot with the failed acquisition, Proxy Fight is highly engaged. We do employee engagement surveys. The Aerojet Rocketdyne team is very excited to be part of l three Harris. So that’s kind of on the on the people front. The demand turned out to be more than I think they they were forecasting when they were selling.

Do like to remind people that Russia attacked Ukraine in February ’22. We announced the deal on December 22, so I’m not sure it’s overly insightful to think there would be a surge in the need for missiles and munitions. But, clearly, that was that was a start and, you know, the thirty day war or whatever was still going on, you know, nine months later. So there there’s clearly demand there. I think the Golden Dome initiative is clearly more upside than than was initially forecasted.

And that’s just the missile piece, which Ken is also the president of Aerojet Rocketdyne. So we we foresee double digit growth for the Aerojet Rocketdyne missile segment for the foreseeable future, easily a decade, if not longer. And we’re just trying to decide if it’s 10% or 15%, but that’s the visibility that we have. And then on the space propulsion side, again, great visibility and that that market has had more demand. We have the RL 10 upper stage for the United Launch Alliance.

And, of course, they have the contract to launch all the Kuiper satellites. So I think we have a couple 100 engines there in backlog. And then the RS 25 for Artemis through NASA has was a little bit of a concern, but that settled down through the end of the decade at least. So, I mean, pretty much everything from the workforce to the demand. And then the maybe surprised me a little bit.

It’s a turnaround story, how quickly we were able to to turn it around. And part of that was just having a motivated workforce. And I’ll let Ken pile on, but, you know, we’ve invested a lot. The government’s investing. The customer’s investing.

It’s It’s all about capacity. At the end of the day, we’re selling capacity. We’re building factories and facilities in Arkansas, Alabama, and Virginia, and we’ve ordered equipment such as ovens and mixers. And I think we’re in a really, really good position. And I think as I look back, so far, the acquisitions turned out to be better than I would have hoped for.

Ken Bettingfield, CFO, L3Harris Technologies: Yeah. I think Chris covered it well. I’ll just say, you know, really is an incredible business that I would say had some distractions and didn’t have the right amount of investment into modernization. The workforce is engaged, very excited for what they do, and supporting the warfighter and getting solid rocket motors out the door and into the hands of the primes or into the hands of the end customer and ultimately out to the battlefield. And just a couple of examples, Sheila, I would say, we have increased our deliveries in just two years by over 60%.

So it really is impressive how quickly the team has been able to react, to really identify through good solid, I’ll just say, like industrial engineering, identify the choke points, get some of those dealt with, get capacity out the door, get the team engaged, a little bit of student body right, and getting some overtime to get motors going to solve some challenges from the customer on product they need to get in their hands. And then we’re making investments to really modernize the factories there. And that’s going to be across the range of solid rocket motors from tactical motors that we’ve been making some investments in today, Stinger, Javelin, GM, LRS. Certainly, a lot of investment will be going into the interceptor capacity. Chris mentioned, you know, THAAD, PAC three, Standard Missile, Tomahawk, and others.

And some of that will be we’re working very closely with the primes and with the DoD to make sure that that investment that’s across the entire supply base and we’ve identified 17 key suppliers that we’re working with in order to really drive to what the customer needs in terms of delivery of these critical motors. And then strategic motors as well. So if you think about the large motors like Next Gen Interceptor and Sentinel, where we have important positions. So many of these will be decades long runs. And so I think we’re making important decisions today around how do we modernize, use robotics, artificial intelligence to figure out what we’re producing and when and where, and really to get to some common production processes versus a legacy kind of program by program by program effort where each program owned its capital and we didn’t have the ability to use across.

So it really is an incredible business, incredible team, and I think we’re making all the right decisions. And at the end of the day, I think the theory is proven out correct that it’s a much better business in the hands of l three Harris. And we’ve been, you know, really working to make sure we got great relations with our customers, both the primes and the end customer DOD, as well as allied nations. And I think with a recognition that we sell capacity, we are capacity limited, we need to get on contract. When we get on contract, we will start to produce those motors first.

And I think that’s starting to yield results in terms of driving the revenue growth.

Sheila Kayalu, Analyst, Jefferies Aerospace and Defense Equity Research: Great. And maybe if you could talk about the competitive backdrop for that business. I think the stat you provided, and I’m not sure if it’s correct, but I don’t want to misquote you, but the number of solid rocket motors LHX produces in a day is equivalent to all the competitors combined over a year. So if you could talk about that and the 60% increase in capacity over the last two years and the 5,000,000,000 of revenue assumed for Aerojet by 02/1930, what does does does what does that factor in terms of new wins, or is it just current production rates?

Ken Bettingfield, CFO, L3Harris Technologies: Yeah. I would say the that stat that you mentioned is is accurate with respect to the new entrants. You know, legacy ATK Northrop does produce a fair quantity of motors as well. But we produce about 100,000 motors a year at Aerojet Rocketdyne. In terms of the new entrants, I would say, look, I think it’s a recognition attractive, that there’s a lot of capacity that’s needed and that we’re in the right place at the right time.

Now, it takes a lot of time to get these motors qualified and be able to scale and meet all the requirements of max explosive load and where you build them and getting all the permitting and how do you burn off excess powder and excess materials and things like that. So there are complications. As we look at the new entrants, there are some interesting technologies. We’re evaluating where those might be useful for us, such as three d printing a propellant and things like that. But we’re focused on what we can control, which is driving the capacity.

Some of these new entrants will look at small motors, two and threefour inches or four and onefour inches or that type of thing. Some of the motors that we’re focused on producing are 30 feet and six feet diameter sized motors. So you could probably cast seven fifty or 1,000 of these small motors and what it would take to cast just one of these big ones. So we do have scale. And I think we do have a business that is very much specialized between a couple of the players here.

And I think it would be tough for some of these new entrants to break in. That being said, we’re looking to work with them when we can, see what makes sense. And but we’re very satisfied about our growth story, and I don’t think, you know, the new entrants are of a concern in terms of our ability to grow double digits for the foreseeable future.

Chris Kubasik, Chairman and CEO, L3Harris Technologies: And there really aren’t that many new missile programs. And, you know, many of these programs have been around decades long, and, you know, we have the intellectual property and such. So it’s not easy to change out a supplier. And I’ve said before the you know, we we we welcome competition, so bring it on, but we don’t really need a a third solid rocket motor provider. What I’ve been saying to everyone is it’ll it’ll just go to the same supply chain.

We need more companies that make nozzles. We need more companies that make igniters. We need more companies that make cases. So a third or a fourth solid rocket motor provider, they’re gonna call the same people that we already have locked up, you know, for our supply chain, and they’ll just have to get to the back of the line. So, you know, I think that’s where my focus is, and that’s where I think I’ve been pretty outspoken with the DOD and others.

Let’s fix the supply chain. Let’s get more capacity there because you can’t make a 100,000 motors a day or a year if we don’t have a 100,000 nozzles, a 100,000 cases, a 100,000 igniters, and the other 14 suppliers that are critical. So that’s that’s I view the challenge and the choke point. And, again, having a a third SRM provider isn’t gonna solve it. Having them in the market is they’re equally trying to disrupt it, and they’re bringing forward the similar mindset that we have.

How come we can’t have more and more commercial acquisitions? If you have a competition, let the best price win. We don’t need tens of thousands of pages of proposals. We don’t need months of bureaucracy. Let’s just get the competitive bid, check the capability, and and and pick the best value or the lower price, whatever the government wants.

So in this case, you know, these are software defined radios, which is is is pretty exciting because as the threats change, we’re selling more and more software, which has very high high margins. The modernization that has been laid out as of today, it’s about 42% of the way through the, the DOD modernization based on the number of software defined radios they need and the ones that we’ve provided over the last seven, eight years. So there’s plenty of runway. The budgets are are are kinda getting a little hard to follow and and mixed up based on some some new line items. But that process, we we have confidence that we’re gonna have the appropriate budget to continue that modernization.

Probably more exciting is, the international market. It’s really taken off. Europe in particular, the budgets are larger. And one of the learnings coming out of Ukraine is the criticality of how on resilient communications. And everybody will say they have resilient communications, but there are specific ways you can test.

I think we are well recognized as the world leader when it comes to resilient communications, which means you can’t jam it, you can’t intercept it, you can’t locate where the person is sending it or the person getting it. If you don’t have that, you know, it it it’s you can fight, but you’re not gonna win. So this resilient comms is critical. We’ve booked over billion dollars just in Europe alone this year in countries that we never thought were addressable markets that have indigenous capability, whether it’s Germany, whether it’s Poland, Czechia, Netherlands. It’s because of the threat, and it’s because of the superior technology.

And when you have a war going on not too far from where you live, you’re gonna get the best technology and they’re buying ours plain and simple. And it’s interoperable with The US as we continue to approach other countries or they approach us. You know, it’s it’s it’s just kind of a bow wave because if five of your neighbors have our technology and The US has our technology, it’d be pretty crazy to buy something other than that because of the interoperability. So we’re we’re super excited about the tactical comms market and the software defined radios. I think people have been predicting that this is the last year for twenty years.

But without comms, there are no bombs, as we say, and it’s the key to warfare, plain and simple.

Sheila Kayalu, Analyst, Jefferies Aerospace and Defense Equity Research: Okay. I I did some quick math while while you were speaking, Chris. So I might be mistaken, but I think the last time I went to Rochester where you make the radios, it was 2018, and the stat was 10%. I haven’t heard the 42% modernized yet. That was seven years ago.

So would it be fair to say you have twelve more years of runway in your software upgrades?

Chris Kubasik, Chairman and CEO, L3Harris Technologies: When were you last there?

Sheila Kayalu, Analyst, Jefferies Aerospace and Defense Equity Research: 2018.

Chris Kubasik, Chairman and CEO, L3Harris Technologies: 2018. 2018.

Sheila Kayalu, Analyst, Jefferies Aerospace and Defense Equity Research: June 11.

Chris Kubasik, Chairman and CEO, L3Harris Technologies: Sure. So that’s takes us to 2037. Yeah. Okay. So, yes, I’ll go on record and say at least 2037.

And I think in 2037, the people with the 2018 radios will want new ones, if not sooner. I mean, how many of you in the audience, of which there’s hundreds of you, thank you for joining, have held on to a rate your your your iPhone for more than, like, a year or two. Right? I mean, it’s constantly upgrading. And, again, it’s really gonna be more and more, software defined waveforms that we’re gonna be able to sell.

And, you know, I’m super excited about the really the whole the whole portfolio, which I probably should have said at the beginning. You know? We’ll talk about broadband and Okay.

Sheila Kayalu, Analyst, Jefferies Aerospace and Defense Equity Research: Maybe if you could just touch on that because I think it’s, somewhat underappreciated when we think about TDL or NextGen Jammer finally awarded last year. How does that tie into the future of LHX?

Chris Kubasik, Chairman and CEO, L3Harris Technologies: Yeah. I I was gonna say the, you know, we we were formed six years ago with the merger as you’ve you’ve all heard and probably get tired of hearing me say it, but that was the starting point. And over the last five years, we’ve taken a lot of time and effort to optimize our portfolio. We divested over $3,000,000,000 of revenue and about a dozen different transactions that we thought and concluded were noncore and belonged in in different owners’ hands. The same time, we made two acquisitions, interestingly enough, for a similar amount, 3,000,000,000 of revenue, to position our portfolio, which I’m sure everybody tells you, to to align, you know, with the future of warfare and where it’s going.

So if you look at the space capabilities, you know, we’re in great shape there. We just covered the munitions. We talked about comms. So relative to our broadband communication business headquartered out in Salt Lake City, You know, that was the the entity where we integrated the ViaSat tactical data link business. One of the main reasons to buy that was to have the footprint on 20,000 different platforms.

So Link 16 is on 20,000 platforms. Recently, it was launched. Company, York Aerospace, launched some satellites which had our Link 16. So we now have Link 16 in space, which I don’t think anybody thought was possible and now gives us an opportunity literally to have hundreds, if not thousands, of satellites with link 16 in addition to the aircraft and the ships and the other platforms. So it got us the footprint.

Again, commercial business model, high margin, high growth, and it ties into the whole resilient comms thematic. And then, of course, we won next gen jammer. So electronic warfare is another key capability that we have. We’ve been successful for the US Navy. That program is in development.

It’s cost plus lower margin, but has a long runway once it gets into production. And then a a variant of that to some degree is the Viper Shield for the f 16, another electronic warfare capability to jam and in inter interrupt our adversary’s, communication. So I don’t know if you wanna add anything to that, Ken.

Ken Bettingfield, CFO, L3Harris Technologies: No. I think that’s right. You know, it it really is a good solid business out there in, Salt Lake. Great team focused on, broadband communications, data links. And as the weapon systems proliferate all all the the missile production, there will be more capacity and opportunity from that perspective as well.

Next gen jammer, I think, is is going very well. The team’s very focused on getting that kicked off in the right way, and we look forward to, getting that through development into production. I think there’s billions of dollars, of production. And then the question becomes, what else could that, system grow into in terms of, capability for the Navy?

Sheila Kayalu, Analyst, Jefferies Aerospace and Defense Equity Research: Maybe if we could switch over to IMS. The international ISR pursuits and domestic ones really somewhat swing move the needle within the segment. How do we think about opportunities that are upcoming, and how your platform agnostic approach has benefited?

Chris Kubasik, Chairman and CEO, L3Harris Technologies: Yeah. Our ISR, we are platform agnostic. I think we’ve worked on over a 100 different aircraft over over our, our history. It really started kicking in about a decade ago when we, started, at that time with Gulfstream for, missionizing business jets. We were very successful, based on the endurance and the, altitude that these planes need to fly.

We talk took on an incumbent who had a more traditional passenger jet, and we were successful with the Air Force on compass call that’s continuing. Italy, Australia, and and other countries, We’re now using used or slightly flown Gulfstream five fifties because they shut down the line, and now we’re transitioning over to the Bombardier Global 6,500. And we have some opportunities around the globe that are literally billions of dollars. Point is we can work with pretty much any any aircraft based on their availability and, you know, the the the different requirements. Now on the very low end, you know, one of my favorite programs is with the special ops command where we missionize a crop duster air tractor based in Texas and basically can hold more weapons like 9,000 pounds than probably any other airplane out there.

It’s a single engine, but, you know, we’re probably not gonna go to China with it. But there are parts of the world that could use, you know, the crop duster to the business jet all the way up to the the large two and four engine aircraft. Lot of classified opportunities as well here in The US for missionized aircraft. So, you know, a lot of the capabilities in space, situational awareness, the ability to jam, again, key key parts of our national defense strategy, and and these are the platforms, and we’re the company to do it. And, you know, everybody spins their own story, but it is kinda nice not to have an airplane because you can use the best airplane based on availability.

We buy them green. We missionize. We modernize them, and it’s pretty pretty exciting.

Sheila Kayalu, Analyst, Jefferies Aerospace and Defense Equity Research: Was talking about the growth opportunity earlier, so echoing your comments working with you there. If we could move on to SAS, talking about your space portfolio today, how do you characterize your business and programs such as HBTSS and Tracking Layer contributing to it?

Ken Bettingfield, CFO, L3Harris Technologies: Sure. I can start on that one. Look, from an SAS perspective, I think what Chris and the team did when the companies merged and came together really is impressive in terms of going from a capable payload provider on both sides of the merger to a capable and growing space prime and with a focus on missile defense, missile warning, missile tracking. And, again, it’s just a very timely investment that was made in terms of growing into that business IRAD that was done in order to take basically optical weather payloads and adding more capable optics and then algorithms to be able to use that to track detect and track missiles, incoming missile threats. That’s enabled us to be the only company that’s won a position on all three of the first tranches of the Space Development Agency tracking layer.

And we’re looking forward to the next award on that, where hopefully we will be successful. And then looking forward at Golden Dome, we think SAS is right squarely in the middle of the space sensing, again, between SDA and then importantly, the HPTSS or hypersonic ballistic tracking space sensor that enables you to to track incoming hypersonic threats and and queue ultimately an intercept. So important and growing business. We see that it is going to have significant growth opportunity for a long period of time. We do expect to get turned on here for a couple of awards.

I talked about a few of them. There’s also probably 40% of that business that’s classified and we can’t talk specifically about, but there’s significant growth opportunity there as well. And I think it’s going to be enduring growth for some period of time. These are long cycle programs. And some of these systems, as they are in low Earth orbit, and therefore, the life of the individual satellites are, call it, three to five years, will require some continued upgrade and replenishment down the road.

Chris Kubasik, Chairman and CEO, L3Harris Technologies: Yeah. What I like about our business, I think we spend a lot of time in the Pentagon, the DOD. You know, they always like capability. They like affordability, and and they like schedule. And I would say for the last couple years and for the foreseeable future, as I’m reading the tea leaves, there’s a sense of urgency, and schedule is their top priority.

They need weapons and systems as soon as possible, and that becomes a priority. The reason I mentioned that is that you talk about, these big opportunities. They look at scalability. And in SAS earlier this year, we opened two facilities, factories of the future for satellites, one in Indiana, which can handle the surge for Golden Dome and HBTSS and SDA, and one in Palm Bay, Florida, both 100,000 square foot state of the art buildings. So as they look at who is gonna do the work, you know, part of it is how quickly can you get it?

And, you know, nobody is gonna wait in the DOD to give a company award who says, well, I’m gonna buy some real estate in ’25, get permitting in ’26, build a building in ’27, get the equipment in ’28, and I’ll get you your fill in the blank in ’32. We have the infrastructure. We have 24,000,000 square feet. We’re expanding in places. We’re ready to go.

And just like the, buildings we’re building in in Arkansas, Alabama, and and, Virginia, state of the art integrating o AI for for flow robotics, super exciting time. So we’re ready. We have the facilities, and, can’t wait for the, the orders to start coming in.

Sheila Kayalu, Analyst, Jefferies Aerospace and Defense Equity Research: Maybe one last one just to wrap it up. I think you’ve raised your margin target to twice or one so far. I’ve lost count, but to low 16% range, free cash flow to 3,000,000,000 by 2026. You know, how do you think about some of the productivity measures that have helped that? And any changes in capital deployment now that, you know, you you keep beating and raising for the last six to seven quarters?

Ken Bettingfield, CFO, L3Harris Technologies: Sure. Yeah. Look, we’re trying to get onto a cadence where we say what we’re going to do, and we go off and do it and deliver on that. So I appreciate the recognition on that front, Sheila. And in terms of the margin guidance, 23,000,000,000 in sales and 26%, at least 16% margins and now $3,000,000,000 of free cash flow.

I would say, to your question on the margin, some of it is just program performance. And so we’ve invested in our program managers, provided them better tools, and really focused on being able to perform confidently on our programs, as well as better bidding discipline, making sure that we’re getting the right business deals as new bids are going out the door. And then certainly, 1.5 plus billion of LHX NEXT run rate savings doesn’t hurt in terms of driving the ability to continue to yield margin on programs. So then from a cash perspective, we’ve grown from 2,400,000,000.0 to 2,800,000,000.0 to $3,000,000,000 And we’ll continue to, I would say, deploy capital in a value creating manner. I think we’ve had twenty four straight years of dividend increases.

We’ll continue to have a dividend increase I expect in 2026 and pay a competitive dividend in that regard. And then we bought back, I think, about 750,000,000 of stock last year. We targeted a billion initially this year, and now we’ll be over a billion and probably targeting that in the foreseeable future as well.

Chris Kubasik, Chairman and CEO, L3Harris Technologies: Yeah. I just wanna go back on LHX next. It was 2023. We said we’d take out a billion dollars of cost in three years. I don’t think a lot of people thought we would do it.

And in two years, a year early, we’ll do at least a billion 5. I’m hoping to get closer to 2,000,000,000 by the end of the year. So this is growing organically, reducing the headcount, eliminating layers, all the basic stuff that everybody knows how to do, but nobody seems to do it. And, company our size to take out a billion 5 to 2,000,000,000 of cost in two years on top of the 650 we took out when we merged in 2019 is making us more affordable, more competitive. I think that’s why we’re winning more business, and it makes us more efficient, less layers, less bureaucracy, and, there’s more more to go.

And, I’m excited about the progress we’ve made in that regard.

Sheila Kayalu, Analyst, Jefferies Aerospace and Defense Equity Research: Well, thank you both. Thank you, Chris and Ken.

Chris Kubasik, Chairman and CEO, L3Harris Technologies: Alright. Thank you. Thanks, Sheila.

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