Slide 1: L3Harris CY2019 Second Quarter Earnings Call Presentation
Use of U.S. DoD visual information does not imply or constitute DoD endorsement L3HARRIS CY2019 SECOND QUARTER EARNINGS CALL PRESENTATION July 31, 2019
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 results…well positioned to drive growth
Summary: Strong results…well positioned to drive growth • 4QFY19: Revenue up 12%...highest top-line growth in 8 years; EBIT margin a record 20.2%; 1 Harris 1 2 non-GAAP EPS up 39%; FCF strong at $267M FY19 • FY19: Revenue up 10%; EBIT margin expanded 90 bps to 19.8%...revenue growth and margin 1 res
Slide 4: Harris FY19 highlights
Harris FY19 highlights 1 ✓Accelerate revenue growth across all 3 segments 2✓Expand company margins…double- digit EPS growth 1 • EBIT margin expanded 90 bps to 19.8% with margin Communication Systems expansion in all segments Revenue up 14%...Tactical up 14%, Public Safety up double digits − Communic
Slide 5: Harris 4Q19 and FY19 highlights
Harris 4Q19 and FY19 highlights ($million, unless otherwise noted) 4Q19 FY19 Segment Revenue vs. 2018 Margin vs. 2018 Revenue vs. 2018 Margin vs. 2018 (bps) (bps) CS $ 600 14% 30.0% -70 $ 2,177 14% 30.0% +30 ES $ 728 14% 19.8% +120 $ 2,583 9% 19.3% +100 SIS $ 542 8% 17.3% +120 $ 2,057 8% 17.5% +20 1
Slide 6: L3 2Q19 and 1H19 highlights
L3 2Q19 and 1H19 highlights ($million) 2Q19 1H19 Segment Revenue vs. 2018 Margin vs. 2018 Revenue vs. 2018 Margin vs. 2018 (bps) (bps) ISRS $ 1,153 2% 14.3% +460 $ 2,406 12% 12.3% +280 C&NS $ 785 0% 7.9% - 130 $ 1,570 5% 9.3% +20 ES $ 693 3% 13.6% +10 $ 1,355 3% 14.1% +10 L3 Total Company $ 2,631 2%
Slide 7: L3 and Harris selected combined 1H19 financials
L3 and Harris selected combined 1H19 financials 3 ($million, except per share amounts) Revenue EBIT and margin 1,394 8,834 8,012 +10% 1 1,190 +17% EBIT 723 4,448 621 +16% 4,164 +7% 16.3% 15.8% +4% EBIT 14.9% 14.9% 1 margin 2Q18 2Q19 1H18 1H19 2Q18 2Q19 1H18 1H19 Cash flow EPS Operating cash flow 734
Slide 8: Integrated Mission Systems
Integrated Mission Systems ($million) Revenue1 2,613 2,334 1,211 1,249 +12% • 2Q revenue up 3%, 1H up 12% +3% – Solid growth in electro optical airborne imaging systems – Strength in ISR aircraft missionization 2Q18 2Q19 1H18 1H19 • 2Q operating income up 14%; 1H up 17% Operating income and margin1
Slide 9: Space & Airborne Systems
Space & Airborne Systems ($million) Revenue1 2,306 1,983 +16% • 2Q revenue up 17%, 1H up 16% 1,195 – Double-digit growth in Avionics and Electronic 1,021 +17% Warfare on long-term platforms – Continued strength in classified space 2Q18 2Q19 1H18 1H19 • 2Q operating income up 25%; 1H up 19% Operating
Slide 10: Communication Systems
Communication Systems ($million) Revenue1 2,122 1,898 +12% • 2Q revenue up 6%, 1H up 12% 1,083 – Strong growth in DoD tactical and Public Safety 1,020 +6% – Partially offset by UAE ELTS program transition and night vision delivery timing 2Q18 2Q19 1H18 1H19 • 2Q operating income up 10%; 1H up 18% Op
Slide 11: Aviation Systems
Aviation Systems ($million) Revenue1 1,865 1,878 • 2Q revenue up 2%, 1H up 1% +1% 949 964 – Growth in fuzing and ordnance, airport security +2% equipment and FAA programs – Partially offset by prior year C-17 training loss and lower volume for commercial flight simulators 2Q18 2Q19 1H18 1H19 1 • 2Q
Slide 12: 2H CY19 guidance
2H CY19 guidance Total L3Harris By Segment 1 Revenue 1 Margin2 Revenue1 Margin2 IMS up ~10.5% ~12.5% up 9.5 – 10.5% ~16.7% SAS up ~11.5% ~18.7% EPS2 FCF3 CS up ~9.5% ~22.1% $4.95 – $5.05 $1.30 – $1.35B AS up ~7.0% ~14.0% 1Compared with amounts shown in Unaudited Combined L3 and Harris Historical Fin
Slide 13: CY 2019 full year guidance
CY 2019 full year guidance Total L3Harris By Segment 1 Revenue 1 Margin2 Revenue1 Margin2 IMS up ~11.2% ~12.3% up 9.5 – 10.5% ~16.2% SAS up ~13.9% ~18.4% EPS2 FCF3 CS up ~10.7% ~21.8% $9.60 – $9.70 $2.30 – $2.35B AS up ~4.0% ~12.3% 1Compared with amounts shown in Unaudited Combined L3 and Harris His
Slide 14: Non-GAAP EPS 2H CY19 guidance bridge
Non-GAAP EPS 2H CY19 guidance bridge 1 $(0.04) ($4.95 - $5.05) CHQ & Segment consolidation Supply chain 2 Volume Operational efficiencies − Mix 1Non-GAAP EPS excludes merger deal and integration costs and amortization of acquisition-related intangibles. For non-GAAP reconciliations reference
Slide 15: Non-GAAP EPS CY19 guidance bridge
Non-GAAP EPS CY19 guidance bridge 1 ($9.60 - $9.70) CHQ & Segment consolidation Supply chain 2 Volume Operational efficiencies − Mix 1Non-GAAP EPS excludes merger deal and integration costs and amortization of acquisition-related intangibles. For non-GAAP reconciliations reference other quar
Slide 16: L3Harris strategic priorities
L3Harris strategic priorities Execute seamless integration…$500M in gross cost synergies Drive flawless execution and margin expansion…e3 operational excellence Build a new performance culture…strong bias for action and accountability Grow revenue…invest in differentiated technology and innovation R
Slide 17: Appendix
Appendix L3HARRIS CALENDAR YEAR 2019 SECOND QUARTER EARNINGS PRESENTATION 17
Slide 18: Other combined financial information
Other combined financial information 1 ($million, except noted) 2Q 1H 2H CY19 CY19 CY19 CY19 Cost synergies $0 $0 ~$40 ~$40 Net capital expenditures $109 $191 ~$190 ~$380 Net interest expense $73 $147 ~$157 ~$304 Minority interest ($6) ($12) ~($14) ~($26) Effective tax rate (GAAP) 14.8% 14.5% n.m.2
Slide 19: Q4 and FY19 Harris Non GAAP EPS bridges
Q4 and FY19 Harris Non GAAP EPS bridges 1 Net Interest Tactical, Avionics, EW and Classified Space volume Volume Operational Operational efficiencies − Mix efficiencies Program execution − Investments − Environmental volume − Investments 1Non-GAAP EPS excludes, as applicable, deal and in
Slide 20: Harris stand-alone Communication Systems
Harris stand-alone Communication Systems ($million) Revenue 600 2,177 +14% 527 +14% 1,904 • 4Q and FY revenue up 14% – Tactical Comms FY revenue up 14% – DoD up 31% and International up 3% – Public Safety 4Q and FY up double digits 4Q18 4Q19 FY18 FY19 • 4Q operating income up 11%; FY up 16% Operatin
Slide 21: Harris stand-alone Electronic Systems
Harris stand-alone Electronic Systems ($million) Revenue 2,583 728 2,365 +9% 636 +14% • 4Q revenue up 14%; FY up 9% – Double digit growth in Avionics and Electronic Warfare on long term platforms 4Q18 4Q19 FY18 FY19 • 4Q operating income up 22%; FY up 16% Operating income and margin 499 +16% • 4Q ma
Slide 22: Harris stand-alone Space & Intelligence Systems
Harris stand-alone Space & Intelligence Systems ($million) Revenue 1,913 2,057 +8% 542 503 +8% • 4Q and FY revenue up 8% – Driven by mid-teens growth in Classified, partially offset by Environmental headwinds 4Q18 4Q19 FY18 FY19 • 4Q operating income up 16%; FY up 8% Operating income and margin 359
Slide 23: Supplemental Harris tactical communications history
Supplemental Harris tactical communications history 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 FY17 FY18 FY19 Orders 332 389 502 448 289 477 1,242 1,755 1,716 Sales 340 377 334 386 406 432 1,230 1,367 1,558 DoD 121 139 144 170 188 193 392 530 694 International 219 238 190 216 219 240 838 837 864 Funded Backlog1
Slide 24: L3Harris Segments
L3Harris Segments Legacy HRS Legacy L3 Combined Integrated Mission Systems Space and Airborne Systems ISR Space Advanced COMINT, ELINT and targeting mission systems for strategic Payloads, sensors, and full-mission solutions for classified, civil and and tactical aircraft platforms commercial custom
Slide 25: Unaudited combined L3 and Harris historical financial information
Unaudited combined L3 and Harris historical financial information CY2018 CY2019 Q1 Q2 Q3 Q4 Total Q1 Q2 Revenue by Segment 1 Integrated Mission Systems 1,123 1,211 1,187 1,331 4,851 1,365 1,249 Space & Airborne Systems 962 1,021 972 1,070 4,025 1,111 1,195 Communication Systems 878 1,020 932 1,014 3
Slide 26: Basis of Preparation
Basis of Preparation As supplemental information for investors, L3Harris has provided unaudited combined L3 and Harris historical financial information, which combines L3 and Harris historical operating results as if the businesses had been operated together on the basis of the newly announced four