Slide 1: Fiscal 2018 Fourth Quarter Earnings Call Presentation
Place image here (13.33” x 3.5”) FISCAL 2018 FOURTH QUARTER EARNINGS CALL PRESENTATION HARRIS.COM | #HARRISCORP
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: Summary: Strong FY18 results, accelerating growth in medium term
Summary: Strong FY18 results…accelerating growth in medium term • EPS $1.78* – up 19%...margin expansion of 50 bps to 19.6%* • Revenue up 8%...growth in all three segments 4Q18 • Orders growth of 18%...B:B 1.1, >1.0 in all segments • Strong FCF of $464M** • EPS $6.50* – up 18%, excluding tax reform
Slide 4: Strong execution against strategic priorities
Strong execution against strategic priorities 1 Grow revenue across all 3 segments 2 Maximize cash flow with balanced capital deployment Communication Systems • Record adjusted FCF of $915M**…116%* of NI Revenue up 9%...Tactical up 11%, Night Vision up double digits • Returned ~60% to shareholders
Slide 5: Strong 4Q18 and FY18 financial results
Strong 4Q18 and FY18 financial results ($million, except per share amounts) Orders EPS GAAP 1.35 1.74 5.12 5.94 7,429 6.50 +18% +23% 1.78 5.53 1,861 6,026 Orders 1,574 +18% Non-GAAP* 1.49 +19% +4% 1.1 1.2 Book-to-bill 1.0 1.0 4Q17 4Q18 FY17 FY18 4Q17 4Q18 FY17 FY18 Revenue and operating margin Cash
Slide 6: FY18 EPS bridge
FY18 EPS* bridge $6.50 $0.49 Tax planning $0.49 Tax reform $5.53 $0.21 $0.20 CS & ES volume SIS program execution Net interest Exelis amortization Pension income Productivity Share repurchases − Environmental − Mix & Investments FY17 ADS-B transition Interest/ Segments Tax FY18 (no
Slide 7: Communication Systems
Communication Systems ($million) Revenue 1,753 1,903 +9% 523 449 +16% • 4Q revenue up 16%; FY18 up 9% − 4Q growth in all businesses…Tactical up 21% − FY18 Tactical DoD up 35%, Night Vision up double digits 4Q17 4Q18 FY17 FY18 • 4Q operating income up 11%; FY18 up 9% Operating income and margin 571 5
Slide 8: Electronic Systems
Electronic Systems ($million) Revenue 2,251 2,373 • 4Q revenue up 8%; FY18 up 5% +5% − Strong growth in long-term platforms: F-35, F/A-18, F-16 640 591 +8% − Double-digit growth in weapon release systems − Contribution from U.K. robotics and UAE battle management • 4Q operating income up 14%; FY18 d
Slide 9: Space & Intelligence Systems
Space & Intelligence Systems ($million) Revenue 1,902 1,921 +1% • 4Q revenue up 0.4%; FY18 up 1% 506 508 − Growth in Classified programs +0.4% − Partially offset by Environmental programs down high teens • 4Q and FY18 operating income up 8% 4Q17 4Q18 FY17 FY18 − Strong operational performance and in
Slide 10: FY19 guidance summary
FY19 guidance* summary Total Harris By Segment Revenue Margin** Revenue Margin** CS up 8.0 – 10.0% 29.5 – 30.5% up 6.0 – 8.0% 19.3 – 19.7% up 7.0 – 8.0% 18.0 – 19.0% ES EPS FCF** $7.65 – $7.85 ≥$1B SIS up 4.0 – 5.0% 17.0 – 18.0% *Reflects adoption of new revenue recognition standard (ASC 606) - refe
Slide 11: FY19 EPS bridge
FY19 EPS bridge range $0.51 - $0.53 $7.65 – $7.85 range $0.52 $0.54 - $0.72 $0.10 Tax planning $0.63 Net interest Tax reform $6.50 Share repurchases Volume Operational efficiencies Program execution − Mix FY18 as reported* Segments** Interest/Shares Tax FY19** (non-GAAP) *For non-GAAP
Slide 12: Strong execution of strategic priorities
Strong execution of strategic priorities… • Re-shaped portfolio “high growth and high margin” FY17 & • Completed Exelis integration…exited FY17 with $145M in run-rate savings Prior • Invested in technology for future growth…R&D spend >5% of sales • Revenue growth in all three segments…CS up 9%, ES u
Slide 13: Accelerating growth and margin expansion in the medium term
…accelerating growth and margin expansion in the medium term Business FY18 Medium term* Margin Medium term drivers Communication Systems up 9% up high-single digits Tactical Comms International • E. Europe stability; ME recovery; installed-base modernizations $1.9B DoD ~30.0% • Army, SO
Slide 14: Appendix
Appendix Fiscal 2018 Fourth Quarter Earnings Call Presentation | 14
Slide 15: Other information
Other information ($million except noted) FY17 4Q18 FY18 FY19 Amortization of Exelis acquisition intangibles $110 $26 $101 ~$101 CHQ costs $56 $13 $60 $55 – 60 non-GAAP non-GAAP non-GAAP FAS Pension expense/(income)* ($90) ($30) ($120) ~($120) Net capital expenditures $119 $57 $136 ~$170 Net interes
Slide 16: FY17 & FY18 preliminary recast per ASC 606
FY17 & FY18 preliminary recast* per ASC 606 ($million) *Effective June 30, 2018 (the first day of fiscal 2019), Harris adopted the new revenue recognition standard, Accounting Standards Codification 606, Revenue from Contracts with Customers, using the full retrospective method. Harris is presenting
Slide 17: Supplemental information - tactical communications history
Supplemental information - tactical communications history ($million) 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 FY15 FY16 FY17 FY18 Orders 404 238 290 237 369 301 279 293 681 353 332 389 1,169 1,242 1,755 Sales 340 346 335 276 311 276 328 306 296 348 336 371 1,297 1,221 1,352