L3harris Technologies, Inc. · NYSE:LHX
L3harris Technologies — Investor Presentation (February 2023)
51 slides from L3harris Technologies's investor presentation, February 2023
Slide 1: Investor Overview February 2023
Investor Overview February 2023
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 a Trusted Disruptor for the global aerospace and defense industry. With customers’ mission-critical needs always in mind, our 46,000 employees deliver end-to-end technology solutions connecting the space, air, land, sea and cyber domains. 1 Seg
Slide 4: Three well-positioned segments
Three well-positioned segments Integrated Mission Systems Space & Airborne Systems Communication Systems ISR: Signals intelligence and communication Space: Intelligence, global positioning, space Tactical Communications: Tactical radios for systems, including fleet management support exploration, we
Slide 5: A leading financial profile
A leading financial profile Leading margin with expansion …and the highest cash opportunity… conversions versus peers ~15.5% 103% 99% 2023 Segment 11.5% 11.0% 10.9% 10.8% 2023 FCF conversion, operating margin1 (excluding R&D related tax payments) 1 105% 86% 81% LHX LHX guide guide …with pension rela
Slide 6: Strategic focus areas
Strategic focus areas Growth…disrupt and expand Innovation…aligned with growth opportunities Performance…delivering on commitments Refer to endnotes on slides 47 and 48 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… 1 NATO Budget excluding U.S. ($B) $361 $368 $302 $326 $300 2018 2019 2020 2021e 2022e …driving demand for agile, advanced …with budgets rising domestically… 1 and affordable solutions $billions ~820 ~690
Slide 8: Networks and multi-domain operations: leading positions in all domains
…As “The Trusted Disruptor” with leading positions in all domains Communication ~$8.0B Systems Integrated Mission • Signals intelligence (SIGINT) • Multi-function processing Air Systems • Electro-Optical / Infrared • Electronic warfare Space & Airborne turrets • Datalinks and waveforms Networks and
Slide 9: Positioned to navigate a shifting revenue environment
Positioned to navigate a shifting revenue environment Invest in innovation Bid, win and “prime” more programs Expand internationally Industry-leading R&D investments driving Broad and advanced capabilities… Demand for L3Harris capabilities… internal capabilities… Aircraft Soldier Modernization & Mis
Slide 10: Segment operating margin remains stable
Segment operating margin remains stable Near-term setbacks from macroeconomic …with e3 driving sustainment opportunities environment… 16.0% ~15.5% Facility consolidation 15.5% 15.4% Overhead Supply chain management management Program & 14.4% ERP engineering reduction excellence Segment operating mar
Slide 11: Cash generation to remain robust
Cash generation to remain robust Supply chain disruptions driving “smart …with supportive outlook inventory” build in near-term… ($billion) 2.7 2.75 2.5 R&D tax • Segment operating income growth capitalization R&D tax capitalization • Working capital focus on optimizing inventory 2.0 • CapEx discipl
Slide 12: Balanced capital deployment
Balanced capital deployment Total Capital Deployment (mid-2019 to 2025E) • Repurchased over $8.5 billion in shares Debt since mid-2019 Repayments • Continue to support a competitive dividend on both a yield and pay-out ratio Share Repurchases • Completed the strategic Tactical Data Links (TDL) acqui
Slide 13: Aerojet Rocketdyne, a national asset with unique capabilities
Aerojet Rocketdyne, a national asset with unique capabilities Strategic Rationale Summary The acquisition supports the L3Harris Trusted Disruptor On December 17, L3Harris signed a definitive agreement to strategy, providing unique capabilities and technological acquire AJRD for approximately $4.7 bi
Slide 14: Multiple levers for growth and value creation
Multiple levers for growth and value creation Growth Innovation Performance • Program execution • Bidding, winning and • Develop discriminating “priming” more programs solutions • Continuous improvement • International expansion • Leverage investments in • Strengthening risk external partnerships /
Slide 15: L3Harris committed to ESG
L3Harris committed to ESG Environmental Social Governance 2026 Goals1 Dedicated to fostering a diverse and inclusive work environment… Board of Directors elected annually by ~ 50% shareholders 2022 30% Long-term ~ 33% ➢ 13 of 14 directors are independent goal Greenhouse Gases (GHG) 25% 27% ➢ Diverse
Slide 16: Integrated Mission Systems
‘> L3HARRIS* FAST. FORWARD. Integrated Mission Systems
Slide 17: Integrated Mission Systems overview
Integrated Mission Systems overview Segment financials1 Drivers supporting long-term growth • Geopolitical conflict and tighter budgets increase global demand Segment operating 9,000 for affordable ISR solutions income1 $861M $800M - $850M • Advances in missionized business jets and greater focus on
Slide 18: Discriminating signals intelligence, communications and modernization capability
Discriminating signals intelligence, communications and modernization capability The world’s most advanced ISR Aircraft ~30 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 • 60+ years premier airborne SIGINT mission system integration and operations (Rivet Joint) Multi-Modal Targeting Platforms • 10+ years of medium altitude ISR operations
Slide 20: A range of offerings within the sea domain
A range of offerings within the sea domain Constellation-class Frigate Integrated C5ISR 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 Hy
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 RAN SEA 1350 Indigenous Defensive • Growth in size of U.S. Navy Submarine • Airborne ISR to Maritime • International expansion and mod
Slide 22: Unique autonomy, seabed acoustics and network capabilities
…with unique autonomy, seabed acoustics and network capabilities Discriminating capability: Joint All Domain Command • Over 125 L3Harris ASVs and 350 AUVs operating and Control around the world in survey, maritime domain awareness, C5ISR-T and mine counter measures Resilient Naval Networks missions
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 International unmanned surface Shipboard Panoramic vehicles Electro-Optic
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
‘> L3HARRIS* FAST. FORWARD. Space & Airborne Systems
Slide 26: Space & Airborne Systems overview
Space & Airborne Systems overview Segment financials1 Drivers supporting long-term growth • Space, air and cyber domains remain priorities to counter near-peer Segment operating threats $745M $700M - $750M income1 • Space transitioning to warfighting domain…enhanced focused on 8,000 $6.4B – 6.5B lea
Slide 27: Space threats require a resilient and responsive architecture
Space threats require a resilient and responsive architecture Exquisite Solutions $700 $725 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
Slide 28: Customer acquisition strategies centered on mission capabilities
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 integrating advanced capabilities
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 140 Complex mission solutions for classified customers • Intelligence, defense and
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
‘> L3HARRIS* FAST. FORWARD. Communication Systems
Slide 34: Communication Systems overview
Communication Systems overview Segment financials1 Drivers supporting long-term growth 6,500 Segment operating $1,022M $1,150M - $1,200M income1 6,000 • Increased focus on warfighter effectiveness and resilient 5,500 communications $4.8B - $4.9B • Ramping multi-billion-dollar U.S. DoD and internatio
Slide 35: Global leadership
Global leadership ($billion) Historical growth in L3Harris …led to L3Harris as #1 provider Tactical Communications - globally Radios1… 2.0 1.8 1.8 1.7 1.5 All others All others Harris 1.4 1.0 39% L3Harris 1.3 1.3 1.3 0.8 0.8 International 45%+ 1.2 1.2 0.9 0.7 0.9 0.8 0.9 0.9 0.8 0.8 1.0 1.0 1.0 ~$3.
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 ~$8B through mid-decade… U.S. tactical radio contracts1 ($million) $390M SOCOM Tactical Comms IDIQ 2,021 2-channel multiband handheld Single-award 1,729 $552
Slide 38: Maintaining international leadership
…and maintaining international leadership L3Harris’ growing share of the …with multi-billion-dollar Focus areas international installed base1… pipeline1 (Thousands of tactical radios) • Support conflict regions 447 • 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 funded shortages for electronic components… backlog1… • Demand for LHX products remains strong...no anticipated • Sourcing environment for global electronic impact to bookings nor win-rate
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: Expanding with Tactical Data Link acquisition
…expanding with Tactical Data Link acquisition that aligns with L3Harris Trusted Disruptor strategy • Combined with world class technologies at L3Harris, acquisition enhances communications and networking capabilities • Company will utilize scale and scope to expand datalink technology and integrate
Slide 42: Strong position within integrated and networked vision market
Strong position within integrated and 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 • Int
Slide 43: 4Q22 / 2022 Results and 2023 Outlook
4Q22 / 2022 Results and 2023 Outlook
Slide 44: L3Harris 4Q22 financials
L3Harris 4Q22 financials Refer to endnotes on slides 47 and 48 L3HARRIS L3Harris Investor Overview 44
Slide 45: L3Harris 2022 financials
L3Harris 2022 financials -4% -1% 1 -8% 16.0% 15.4% 10.3% -42% 6.2% 1 Refer to endnotes on slides 47 and 48 L3HARRIS L3Harris Investor Overview 45
Slide 46: L3Harris full-year 2023 guidance
L3Harris full-year 2023 guidance Guidance Guidance by Segment 2023 Supplemental Guidance Items Refer to endnotes on slides 47 and 48 L3HARRIS L3Harris Investor Overview 46
Slide 47: Endnotes
Endnotes Refer to endnotes on slides 47 and 48 L3HARRIS L3Harris Investor Overview 47
Slide 48: Endnotes (continued)
Endnotes (continued) Refer to endnotes on slides 47 and 48 L3HARRIS L3Harris Investor Overview 48
Slide 49: 2022 segment realignment reconciliation
2022 segment realignment reconciliation HISTORICAL NON-GAAP BUSINESS SEGMENT INFORMATION AS RECLASSIFIED FOR SEGMENT CHANGES Fiscal year Ended (12/30/2022) 2022 (prior structure) Divestitures1 Adjustments2 2022 (new structure) Revenue Integrated Mission Systems 6,916 (6) (291) 6,619 Space & Airborne
Slide 50: 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 non- GAAP measures, including organic revenue, segment operating income and margin, non- GAAP operating inco
Slide 51: 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 30, 2022 Short-term debt $ 2 Current portion of long-term debt, net 818 Long-term debt, net 6,225 Total debt 7,045 Less cash and cash equivalents 880 Net
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