L3harris Technologies, Inc. · NYSE:LHX
L3harris Technologies — Investor Presentation (March 2021)
56 slides from L3harris Technologies's investor presentation, Mar 16, 2021
Slide 1: L3Harris Investor Overview
L3HARRIS INVESTOR OVERVIEW CALENDAR 2020 Q4 RESULTS REPORTED JANUARY 29, 2021 L3HARRIS L3Harris Overview 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements Statements in this presentation that are not historical facts are forward-looking statements that reflect management's current expectations, assumptions and estimates of future performance and economic conditions. Such statements are made in reliance on the safe harbor pro
Slide 3: L3Harris Technologies overview
L3Harris Technologies overview L3Harris Technologies is an agile global aerospace and defense technology innovator, delivering end-to-end solutions that meet customers’ mission-critical needs. 1 1 1 Revenue: EBIT : Margin : FCF : $18.2B $3.3B 18.0% $2.7B Creating a leading global defense technology
Slide 4: Segment descriptions
Segment descriptions Integrated Mission Space & Airborne Communication Aviation Systems Systems Systems Systems ISR: Advanced integrated signals, Space: Payloads, sensors and full- Tactical Communications: Defense Aviation: Precision communications and electronic mission solutions for intelligence,
Slide 5: Financial profile
Financial profile Leading margin with expansion …and high cash conversion opportunity… versus peers 18.0 - 18.5% 14.7% 97% 94% 2021 13.9% adjusted 12.0% 10.8% 2021 FCF margin1 conversion2 108% 90% 79% LHX LHX guide guide Healthy balance sheet… …with pension relatively well-funded 86% 0.9x 1.7x 85% 2
Slide 6: Strategic priorities
Strategic priorities Grow revenue…investment in innovation and well-aligned portfolio Deliver on integration commitments Build on operational excellence and expand margins Reshape portfolio…focus on high margin, high growth businesses Maximize cash flow with shareholder-friendly capital deployment L
Slide 7: A growing need for L3Harris offerings
A growing need for L3Harris offerings… …drive demand for advanced, resilient Threats rapidly evolving… and affordable solutions Resilient Communications Resilient Space …and DoD budgets1 flattening… Networked and Multi- ISR capabilities Function Systems2 $billions ~705 ~690 ~290 Survivability Autono
Slide 8: Networks and multi-domain operations
…As a Mission Solutions Prime with leading positions in all domains… 2020 Revenue Air ~$8.0B • Signals intelligence (SIGINT) • Multi-function processing • Electro-Optical / Infrared • Electronic warfare turrets Communi- • Unmanned aircraft Networks and multi-domain operations cation Systems • Datali
Slide 9: Differentiated by focused R&D spend
…Differentiated by focused R&D spend …creating unique technological Industry leading R&D investments… solutions • Interoperability in contested environments Unmanned Platforms Resilient Comms • Signal processing to counter advanced and evolving & Networking threats…enhancing survivability Avionics S
Slide 10: Well-positioned to navigate a shifting revenue environment
Well-positioned to navigate a shifting revenue environment… Domestic positioning Revenue synergies International expansion Well-aligned solutions… Demand for L3Harris capabilities… ═ Aircraft Communication Sats Missionization Modernization Night ISR Avionics Vision Aircraft Tactical Radios Maritim C
Slide 11: Progress to-date from prime-level wins and 3-year pipeline
…with progress to-date from prime-level wins and >$125B 3-year pipeline $2B+ ~$4B $1B+ Long-term potential value Domestic positioning Hypersonic and Ballistic Next Generation Unmanned Surface >$95B pipeline Tracking Space Sensor Jammer - Low Band Vessels (HBTSS) (NGJ-LB) (USV) $2B+ $0.7B+ $0.2B+ Rev
Slide 12: Deliver on remaining integration commitments
Deliver on remaining integration commitments Cumulative Cost Synergies $320M - $350M net Functional efficiencies, OH Expanded shared services for IT and Finance reduction and shared services Leverage scale for lower employee benefits cost $270M net Corporate and Merged CHQ headquarters segment Conso
Slide 13: Steady to rising margins ahead
Steady to rising margins ahead Upward trajectory to-date… …with additional opportunities • Increased cost synergies to $320M - $350M 18.5%+ net…drives margin expansion in 2021 18.0 - 18.5% 18.0% • Accretive portfolio shaping 16.8% • Acceleration of operational excellence drives next 16.0% phase of c
Slide 14: Portfolio shaping progressing well
Portfolio shaping progressing well Providing clarity on portfolio shaping Divested To be • ~10% of revenues anticipated to be divested announced ~10% of over time with ~80% completed or announced Revenue • Efforts are ongoing…transactions will be announced as they occur Announced • Expect to use 100
Slide 15: Cash generation to remain robust
Cash generation to remain robust Healthy cash conversion… …with supportive outlook ($billion) ~3.0 2.8 - 2.9 • Continued EBIT growth Free cash flow1 (FCF) 2.7 • Opportunity to reach ~40 days of working L3 pre- capital from 54…focus on optimizing inventory merger adjusted 0.4 FCF management and terms
Slide 16: Differentiated and accelerated capital returns
Differentiated and accelerated capital returns ($billion, except share count in millions) Dividends • Announced 20% increase in January 2021…3rd 0.8 raise since merger for ~50% cumulative increase 0.7 • Target dividend growth to 30-35% payout of FCF 0.5 over medium-term • Healthy dividend increases
Slide 17: Multiple levers for growth and value creation
Multiple levers for growth and value creation Top-line growth Margin1 expansion FCF1 & capital allocation • R&D spend driving • Increased cost synergy • Continued EBIT growth innovation savings in 2021 • Working capital and • Well-aligned with DoD • Accretive portfolio capex discipline budget priori
Slide 18: Integrated Mission Systems
INTEGRATED MISSION SYSTEMS L3HARRIS L3Harris Overview 18
Slide 19: Integrated Mission Systems overview
Integrated Mission Systems overview Segment financials Drivers supporting medium-term growth non-GAAP 7,000 15.3% 15.25 - 15.75% • Core air and sea capabilities tightly aligned with National 16.0% Defense Strategy…creates budget resiliency operating 6,500 margin 13.0% 2 14.0% up 4.0 - 6.0% • Geopoli
Slide 20: Discriminating signals intelligence, communications and modernization capability
Discriminating signals intelligence, communications and modernization capability The world’s most advanced ISR Aircraft ~25 Aircraft $800M-$1B/ RC-135 year USAF Rivet Joint Special Purpose Aircraft International (UK and KSA) Rivet Joint Signals Intelligence The nation’s highest priority missions ~50
Slide 21: Expanding airborne ISR building off leading position
Expanding airborne ISR…building off leading position Current Future Premier Signals Intelligence and Electronic Warfare capability Calidus B250 International ~$600M / year • 60+ years premier airborne SIGINT mission system integration and Multi-Modal operations (Rivet Joint) Targeting Platforms MENA
Slide 22: Mission system provider and integrator
Mission system provider and integrator U.S. Navy surface ship and submarine programs Constellation Class Frigate Communication Systems Acoustic Total program value: ~$1B Sensors 20 ships + development + services Mast Mounted Steering Aviation Bridge and Sensors Controls Systems Navigation Power Mana
Slide 23: Maritime platforms
Maritime platforms From systems provider to systems integrator for U.S. and international navies Strong Maritime Book:Bill driven by: • Higher content on new ship classes • Evolving Systems Integrator role • Growth in size of U.S. Navy Saudi Future Frigate Indigenous Defensive Submarine • Internatio
Slide 24: Maritime capability
Maritime capability Unmanned, seabed acoustics and naval networks Discriminating capability: Joint All Domain Command • 115 L3Harris USV’s operating around the world in and Control (Navy) survey, maritime security, & mine counter measures - no one else has as much experience Resilient Naval Networks
Slide 25: Expanding Electro-Optical capabilities
Expanding Electro-Optical capabilities Land, Maritime, Unmanned domains Driving growth through: • Differentiating capabilities: Extensive service footprint, proven reliability, superior performance, large ITAR/Non-ITAR product portfolio Saudi High-Speed Shipboard Panoramic Interceptor (HSI) Electro-
Slide 26: Space & Airborne Systems
SPACE & AIRBORNE SYSTEMS L3HARRIS L3Harris Overview 26
Slide 27: Space & Airborne Systems overview
Space & Airborne Systems overview Segment financials Drivers supporting medium-term growth non-GAAP • Space, air and cyber domains remain priorities to counter near- operating 18.6% 18.8% peer threats 6,000 18.25 - 18.75% margin 5,500 2 up 4.0 - 6.0% • Space transitioning to warfighting domain…enhan
Slide 28: Space threats require a resilient and responsive architecture
Space threats require a resilient and responsive architecture Exquisite Solutions 750 450 Responsive Solutions 60-year legacy of providing Augmenting Exquisite Systems high performance mission Weather with rapid delivery of end-to-end payloads mission solutions ISR WON PNT PNT Antennas GOES-R Next-G
Slide 29: Customer acquisition strategies centered on mission capabilities
Customer acquisition strategies centered on selecting the mission capabilities, not the platform 5 prime awards in last 6 months INTELLIGENCE, SURVEILLANCE & RECONNAISSANCE WON WON • Over 60 years delivering high priority mission solutions • Leading EO/IR and RF mission payload provider WON Classifi
Slide 30: Driving to full operational constellations and rapid factory production
Driving to full operational constellations and rapid factory production INTELLIGENCE, SURVEILLANCE & RECONNAISSANCE SATELLITE DELIVERIES $4B PER YEAR Radio 45 Frequency Full Mission 50+ 4x 40 Electro Optical Full Mission 50+ 35 Radio Full Frequency Mission 10+ 30 25 POSITION, NAVIGATION, & TIMING $1
Slide 31: Modernizing existing airborne platforms while creating advanced capabilities
Modernizing existing airborne platforms for the fight, while creating advanced capabilities for future platforms $10B+ $4B+ NEXT-GENERATION PLATFORMS INTEGRATED MULTI-DOMAIN NETWORKS Open architecture modular electronics Small form electronics enabling networked distributed ops Software- Advanced Sm
Slide 32: Cyber capabilities to counter hardened problem set
Cyber capabilities to counter hardened problem set DESIGN, BUILD, AND OPERATE SOLUTIONS FOR THE MOST COMPLEX CYBER AND INTELLIGENCE NEEDS Strategic Missions • 2,500 employees, 5 countries • 30 years mission experience Complex mission solutions for classified customers • Intelligence, defense, and la
Slide 33: Communication Systems
COMMUNICATION SYSTEMS L3HARRIS L3Harris Overview 33
Slide 34: Communication Systems overview
Communication Systems overview Segment financials Drivers supporting medium-term growth non-GAAP 5,500 24.4% 24.25 - 24.75% operating 5,000 22.4% • Increased focus on warfighter effectiveness and resilient margin 2 communications up 2.5 - 4.5% 4,443 4,278 4,500 • Ramping multi-billion-dollar U.S. Do
Slide 35: Global leadership
Global leadership ($billion) Historical growth in …led to L3Harris as #1 provider L3Harris tactical… in DoD and international 1.9 1.7 1.7 1.7 1.6 1.6 1.4 1.4 0.9 1.3 0.5 0.5 1.3 1.3 1.3 1.3 0.5 0.7 1.2 0.9 Harris Allothers All others L3Harris 0.4 39% 40%+ 1.0 0.7 0.9 0.8 0.9 0.9 0.8 0.3 0.8 0.7 0.5
Slide 36: #1 position driven by commercial model
#1 position driven by commercial model Commercial business model… … enabled competitive edge 1 Global customer intimacy • Anticipating and driving requirements • Extensive distribution network • Large installed base 1 2 2 Continuous innovation • Investment of internal R&D resources • Leverage common
Slide 37: Executing on well-funded DoD modernization priority
Executing on well-funded DoD modernization priority… DoD Tactical Radio-related budget increased to …with LHX awarded positions on all major ~$8B over the next 5 years, up $1B versus U.S. tactical radio contracts1 GFY20 FYDP… ($million) $390M IDIQ SOCOM Tactical Comms (STC) Single-award 2-channel mu
Slide 38: Maintaining international leadership
…and maintaining international leadership L3Harris’ growing share of the …with multi-billion-dollar Growth strategy international installed base… modernization pipeline (Thousands of tactical radios) • Drive global refresh & 380 modernization leveraging incumbency and local partnerships • Capture Al
Slide 39: Expand into near adjacencies
Expand into near adjacencies Tactical radio Airborne radios and ISR segments • Growing demand for manned and unmanned Raven aerial platforms Manned Unmanned • Leverage position on legacy Exelis ARC-201 platform Tactical ISR Small Tactical • Interoperability with L3Harris ground tactical Radio Small
Slide 40: Strong incumbency position and technology in Broadband Communications
Strong incumbency position and technology in Broadband Communications… Leverage strong incumbent position in networked communications and integration… …to drive spectrum superiority Primary platforms driving ~$1B in annual revenue Assured Communications Advanced tactical datalinks, networked- collab
Slide 41: Integrated & networked vision market
…and integrated & networked vision market Strong market at the beginning of a L3Harris has grown into an industry leader… modernization cycle ($billion) • Leading edge Night Vision technology • Full suite of EO/IR day/night fighting equipment for the dismounted warfighter • Bundled portfolio solutio
Slide 42: Aviation Systems
AVIATION SYSTEMS L3HARRIS L3Harris Overview 42
Slide 43: Aviation Systems overview
Aviation Systems overview Segment financials Drivers supporting medium-term growth non-GAAP 13.75 - 14.25% 5,000 13.8% operating 12.8% margin 4,500 • Near-peer threats driving demand for next-gen weapon systems 4,000 3,917 • Increased demand for tactical UAS to operate in contested 3,448 2 3,500 up
Slide 44: Defense Aviation enhances the battlefield
Defense Aviation enhances the battlefield Supporting the battlefield today… …and driving future capability Multi-Function Apertures Weapons Range and Test • Converges Radar, EW, SIGINT & Sensors Solutions Communications • Enterprise-wide applications • Leader in defining the open system standards an
Slide 45: Leveraging 25-year trusted FAA partnership
Leveraging 25-year trusted FAA partnership to grow air traffic management franchise Strong performance on FAA …and FAA NextGen Telecommunications …positions us well for… programs… Infrastructure (FTI)… (select programs) Early FAA successes led to FTI 1. FTI program recompete, FENS (FAA cornerstone w
Slide 46: Managing the downturn in Commercial Aerospace
Managing the downturn in Commercial Aerospace …however, L3Harris well positioned to Significant downturn in air traffic… manage headwinds Global air traffic 7% 8% 7% 4% growth • Top tier growth in defense portfolio Source: IATA data -66% 2016 2017 2018 2019 2020 • Accelerating merger-related cost sy
Slide 47: Integration
INTEGRATION L3HARRIS L3Harris Overview 47
Slide 48: Potential revenue synergies
Potential revenue synergies Penetrate new markets Avionics Enhanced resource usage, lower SWaP and Multi-function interoperability open architecture Strengthens offering for existing refresh opportunities and next-gen platforms Open systems processor Multi-function phased array Electronic Warfare Ex
Slide 49: Optimizing best-in-class R&D spend
Optimizing best-in-class R&D spend Analyzed combined R&D spend… Increase efficiency through DevSecOps… …and instrumenting the business to improve performance …to improve effectiveness • Redeployed ~10% of R&D spend • ~1/2 from overlapping projects • ~1/2 from alternate funding and strategic realignm
Slide 50: Significant working capital improvement opportunities exist
Significant working capital improvement opportunities exist Roadmap of opportunities... ...to drive best in class working capital 10 businesses drive ~70% of Path to 40 - 50 days in working capital 2022 and beyond Revenue ($million) Represents working capital dollars 2,000 1 75 Inventory (55 - 65 da
Slide 51: Fourth Quarter Calendar 2020 Results
FOURTH QUARTER CALENDAR 2020 RESULTS L3HARRIS L3Harris Overview 51
Slide 52: Solid 4Q20 and CY20 financials
Solid 4Q20 and CY20 financials ($million, except per share amounts) 1Represents pro forma or adjusted pro forma results, combining actual GAAP results for 3Q19 and 4Q19 (which occurred following the L3Harris merger) with corresponding results for 1Q19 and 2Q19 (preceding the L3Harris merger) in pro
Slide 53: 2021 full-year guidance
2021 full-year guidance 1Organic revenue growth excludes revenue attributable to each divested business for the portion of the prior-year period equivalent to the portion of the current-year period following the date the business was divested; refer to non-GAAP financial measure (NGFM) reconciliatio
Slide 54: COVID
COVID As communicated in connection with the company’s prior releases of quarterly financial results for 2020, the ongoing attempts to contain and reduce the spread of COVID, such as mandatory closures, “shelter-in-place” orders and travel and quarantine restrictions, have caused significant disrupt
Slide 55: Regulation G Disclosures
Regulation G Disclosures To supplement our condensed consolidated financial statements presented in accordance with U.S. generally accepted accounting principles (GAAP), we provide additional financial measures that exclude or include amounts, or are subject to adjustments, so as to be different fro
Slide 56: Reconciliation of Non-GAAP Financial Measures
Reconciliation of Non-GAAP Financial Measures – Adjusted EBIT Margin growth since the L3Harris Merger Adjusted EBIT Margin Growth Fiscal Year Ended (Dollars in millions) January 1, 2021 June 29, 2019(1) Revenue from product sales and services (A) $ 18,194 $ 17,240 Net income (B) $ 1,086 $ 1,527 Adju
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