L3harris Technologies, Inc. · NYSE:LHX
L3harris Technologies — Investor Presentation (November 2022)
47 slides from L3harris Technologies's investor presentation, November 2022
Slide 1: Investor Overview
Investor Overview November 2022 L3HARRIS L3Harris Investor 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 Segment 2 2 Revenue : 2 Adjusted EBIT : Adjusted FCF : operating margin : $17.2B 16% $3.4B $2.75B Creatin
Slide 4: Three well-positioned segments
Three well-positioned segments Integrated Mission Systems Space & Airborne Systems Communication Systems ISR: Advanced integrated signals, Space: Payloads, sensors and full-mission Tactical Communications: Tactical radios for communications and electronic intelligence and solutions for intelligence,
Slide 5: A leading financial profile
A leading financial profile Leading margin with expansion …and among the highest cash opportunity… conversions versus peers ~15.5% 107% 90% 2022 Segment 11.8% 11.1% 11.0% 2022 FCF conversion, 10.1% operating margin4 (excluding R&D tax5 capitalization) 104% 86% 69% LHX LHX guide guide Strong balance
Slide 6: Strategic focus areas
Strategic focus areas Grow revenue…innovate, disrupt and expand Drive high performance culture and sustain margins Disciplined allocation of capital Refer to endnotes on slides 44 and 45 L3HARRIS L3Harris Investor Overview 6
Slide 7: A growing need for L3Harris offerings…
A growing need for L3Harris offerings… Threats accelerating… …and in key international markets… 9 NATO Budget excluding U.S. ($B) 2% GDP $361 $368 Target $302 $326 $300 1.7% 1.7% 1.6% 1.5% 1.5% 2018 2019 2020 2021e 2022e …driving demand for agile, advanced …with budgets rising domestically… 8 and af
Slide 8: …As “The Trusted Disruptor” with leading positions in all domains
…As “The Trusted Disruptor” with leading positions in all domains 2021 Organic Revenue Air ~$7.5B • Signals intelligence (SIGINT) • Multi-function processing • Electro-Optical / Infrared • Electronic warfare turrets • Datalinks and waveforms Networks and multi-domain operations Communication Systems
Slide 9: Positioned to navigate a shifting revenue environment
Positioned to navigate a shifting revenue environment Invest in innovation Bid, win and “prime” more programs Expand internationally Industry-leading R&D investments driving Broad and advanced capabilities… Demand for L3Harris capabilities… internal capabilities… Aircraft Soldier Modernization & Mis
Slide 10: Segment operating margin remains strong
Segment operating margin remains strong Near-term setbacks from macroeconomic …with e3 driving sustainment opportunities environment… Macro- 16.0% economic headwinds Facility consolidation 15.5% ~15.5% Overhead Supply chain management management Program & 14.4% ERP engineering reduction excellence S
Slide 11: Cash generation to remain robust
Cash generation to remain robust Efficient cash conversion… …with supportive outlook ($billion) Free cash 2.75 flow13 (FCF) 2.7 2.5 • Continued segment operating income growth R&D tax capitalization • Working capital focus on optimizing inventory ~2.0 and vendor terms • CapEx discipline…~2% of reven
Slide 12: Disciplined allocation of capital
Disciplined allocation of capital ($billion, except share count in millions) Dividends 0.8 • Announced 10% increase in February 2022…4th 0.7 raise since merger 0.5 • Target dividend at 30-35% payout of FCF over medium-term (excluding R&D tax capitalization) CY19 CY20 CY21 3Q22 Annualized • Further d
Slide 13: Tactical Data Links (TDL) Acquisition
Tactical Data Links (TDL) Acquisition Summary Strategic Rationale On October 3, L3Harris announced the signing of a definitive The acquisition aligns with L3Harris Trusted Disruptor agreement to acquire Viasat’s TDL product line for strategy to provide customers innovative and alternative approximat
Slide 14: Multiple levers for growth and value creation
Multiple levers for growth and value creation Cash generation and Top-line growth Margin expansion efficient capital allocation • R&D spend driving • Increased volume • Continued segment internal innovation operating income growth • Operational excellence • Investments in external acceleration • Wor
Slide 15: L3Harris committed to ESG
L3Harris committed to ESG Environmental Social Governance 2026 Goals27 Dedicated to fostering a diverse and inclusive Board of Directors elected annually by work environment… shareholders ~ 50% ➢ 13 of 14 directors are independent 30% 2021 Long-term ~ 33% ➢ Diverse mix of backgrounds, skills and goa
Slide 16: Integrated Mission Systems
Integrated Mission Systems Refer to endnotes on slides 44 and 45 L3HARRIS L3Harris Investor Overview 16
Slide 17: Integrated Mission Systems overview
Integrated Mission Systems overview Segment financials17 Drivers supporting long-term growth • Geopolitical conflict and tighter budgets increase global demand Segment operating 9,000 13.5% ~13.0% for affordable ISR solutions 14.0% margin12 12.6% • Advances in missionized business jets and greater f
Slide 18: 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 Rivet Joint Signals Intelligence The nation’s highest priority missions ~50 Aircraft $30
Slide 19: Expanding airborne ISR…building off leading position
Expanding airborne ISR…building off leading position Current Future Premier Signals Intelligence and Electronic Warfare capability Multi-Modal Targeting Platforms • 60+ years premier airborne SIGINT mission system integration and MENA operations (Rivet Joint) Eastern Europe • 10+ years of medium alt
Slide 20: A range of offerings within the sea domain
A range of offerings within the sea domain 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 Management Systems Flight Deck Equipment Hybri
Slide 21: Systems provider to systems integrator on maritime platforms…
Systems provider to systems integrator on maritime platforms… Maritime opportunity driven by: • Higher content on new ship classes • Evolving Systems Integrator role Saudi Future Frigate Indigenous Defensive • Growth in size of U.S. Navy Submarine • International expansion • Airborne ISR to Maritime
Slide 22: …with unique unmanned, seabed acoustics and network capabilities
…with unique unmanned, seabed acoustics and network capabilities Discriminating capability: Joint All Domain Command • Over 100 L3Harris USV’s operating around the world in and Control survey, maritime security and mine counter measures Resilient Naval Networks • Commanding lead in autonomy Snakehea
Slide 23: Expanding reach of Electro-Optical capabilities
Expanding reach of Electro-Optical capabilities Driving growth through: • Differentiating capabilities: Extensive service footprint, proven reliability, superior performance and global product portfolio • New platform captures Saudi High-Speed Shipboard Panoramic Interceptor (HSI) Electro-Optical •
Slide 24: Stabilizing commercial aerospace exposure
Stabilizing commercial aerospace exposure Significant downturn for air traffic in 2020, …LHX managed headwind via right-sized cost with modest recovery to date… structure to position for continued recovery Revenue of $475M+ on a LTM basis Recorders Traffic Collision Avoidance • Optimized cost struct
Slide 25: Space & Airborne Systems
Space & Airborne Systems Refer to endnotes on slides 44 and 45 L3HARRIS L3Harris Investor Overview 25
Slide 26: Space & Airborne Systems overview
Space & Airborne Systems overview Segment financials17 Drivers supporting long-term growth • Space, air and cyber domains remain priorities to counter near-peer Segment operating 13.1% threats 8,000 12.8% margin12 12.0% 7,000 • Space transitioning to warfighting domain…enhanced focused on leading pa
Slide 27: Space threats require a resilient and responsive architecture
Space threats require a resilient and responsive architecture Exquisite Solutions 750 550 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 28: Customer acquisition strategies centered on selecting the mission capabilities, not the platform
Customer acquisition strategies centered on selecting the mission capabilities, not the platform INTELLIGENCE, SURVEILLANCE, & RECONNAISSANCE WON WON • Over 60 years delivering high priority mission solutions • Leading EO/IR and RF mission payload provider WON Classified • Leading provider of reflec
Slide 29: 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
Slide 30: Modernizing existing platforms and creating and integrating advanced capabilities for future platforms
Modernizing existing platforms and creating and integrating advanced capabilities for future platforms $6B+ $3B+ NEXT-GENERATION EXQUISITE PLATFORMS INTEGRATED RESPONSIVE AIR SOLUTIONS Open architecture modular, advanced and integrated electronics Small form electronics enabling distributed, novel o
Slide 31: Cyber capabilities to counter hardened problem set
Cyber capabilities to counter hardened problem set Design, build and operate solutions for the most complex cyber and intelligence needs Strategic Missions • 2,500 employees, 5 countries • 30 years mission experience Complex mission solutions for classified customers • Intelligence, defense and law
Slide 32: Leveraging trusted FAA partnership and performance
Leveraging trusted FAA partnership and performance 20+ years delivering resilient and secure …combine to enable growth infrastructure “as a service”… LHX owned and operated infrastructure Strong pipeline of opportunities COMMUNICATIONS FTI recompete, FENS (FAA Enterprise Network Services) DoD cross-
Slide 33: Communication Systems
Communication Systems Refer to endnotes on slides 44 and 45 L3HARRIS L3Harris Investor Overview 33
Slide 34: Communication Systems overview
Communication Systems overview Segment financials17 Drivers supporting long-term growth 5,500 Segment operating 24.3% 24.3% margin125,000 23.5% • Increased focus on warfighter effectiveness and resilient communications 4,500 4,402 4,287 down ~3.0% • Ramping multi-billion-dollar U.S. DoD and internat
Slide 35: Global leadership
Global leadership ($billion) Historical growth in L3Harris …led to L3Harris as #1 provider Tactical Communications21… globally 1.8 1.8 1.7 1.5 1.4 1.3 1.3 1.3 0.8 0.8 1.2 1.2 All others 0.9 Harris All others 39% L3Harris International 0.7 0.9 45%+ 0.8 0.9 0.9 0.8 0.8 1.0 1.0 0.8 ~$3.5B Domestic 0.7
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…supports opportunities to e
Slide 37: Executing on well-funded DoD modernization priority…
Executing on well-funded DoD modernization priority… DoD Tactical Radio modernization spend set to …with LHX awarded positions on all major be ~$8B through mid-decade… U.S. tactical radio contracts24 ($million) $390M SOCOM Tactical Comms IDIQ 2-channel multiband handheld Single-award $552M SOCOM Tac
Slide 38: …and maintaining international leadership
…and maintaining international leadership L3Harris’ growing share of the …with multi-billion-dollar Focus areas international installed base25… pipeline25 (Thousands of tactical radios) • Support conflict regions 411 • Incumbency / local partnerships, driving global refresh and modernization • Ally
Slide 39: Tightly managing supply chain delays
Tightly managing supply chain delays Global supply chain disruptions creating …but outlook reinforced by strong shortages for electronic components… backlog26… • Demand for LHX products remains strong...no anticipated • Sourcing environment for global electronic impact to bookings nor win-rates at T
Slide 40: Incumbency position and technology in broadband communications…
Incumbency position and technology in broadband communications… Leverage strong incumbent position in …to drive spectrum superiority networked communications and integration… Primary platforms driving ~$1B in annual revenue Assured Communications Advanced tactical datalinks, networked-collaborative
Slide 41: …and integrated & networked vision market
…and integrated & networked vision market L3Harris has grown into an industry leader… • Leading edge Night Vision technology • Full suite of electro-optic / infrared day / night fighting equipment for the soldier • Bundled portfolio solutions for U.S. DoD and trusted allies • Integrated warfighter s
Slide 42: Third Quarter Calendar 2022 Results
Third Quarter Calendar 2022 Results Refer to endnotes on slides 44 and 45 L3HARRIS L3Harris Investor Overview 42
Slide 43: L3Harris 3Q22 financials and full-year 2022 guidance
L3Harris 3Q22 financials and full-year 2022 guidance Refer to endnotes on slides 44 and 45 L3HARRIS L3Harris Investor Overview 43
Slide 44: Endnotes
Endnotes 12021 organic revenue, business mix (Prime / Sub, Cost Plus / Fixed Price) and customer revenue (DoD, International, Other) exclude revenue attributable to divested businesses in 2021; refer to non-GAAP financial measure (NGFM) reconciliations and disclosures in quarterly earnings materials
Slide 45: Endnotes (continued)
Endnotes (continued) 15CY19 average diluted shares is on a pro-forma basis; CY22 guidance initially provided January 31, 2022; refer to quarterly earnings and related materials on the L3Harris investor relations website 16Cash flow excludes moderate pension contributions for international plans 17Se
Slide 46: 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 measures of income from continuing operations per diluted common share, net income, net income margin, net c
Slide 47: Reconciliation of Non-GAAP Financial Measures – Net Debt to Adjusted EBITDA Ratio
Reconciliation of Non-GAAP Financial Measures – Net Debt to Adjusted EBITDA Ratio Net Debt to Adjusted EBITDA Ratio (Dollars in millions) December 31, 2021 Short-term debt $ 2 Current portion of long-term debt, net 11 Long-term debt, net 7,048 Total debt 7,061 Less cash and cash equivalents 941 Net
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