L3harris Technologies, Inc. · NYSE:LHX
L3harris Technologies — Investor Day (March 2021)
43 slides from L3harris Technologies's investor day presentation, Mar 10, 2021
Slide 1: Investor Briefing
INVESTOR BRIEFING MARCH 10, 2021 L3HARRIS Investor Briefing 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: Today's agenda
Today’s agenda Time Topic Speaker 10:00am – 10:05am Introduction Rajeev Lalwani 10:05am – 10:10am Opening Remarks Bill Brown 10:10am – 10:30am Strategy and Outlook Chris Kubasik 10:30am – 10:45am Q&A Bill Brown / Chris Kubasik / Jay Malave 10:45am – 11:10am Integrated Mission Systems (IMS) Sean Stac
Slide 4: Merger formed leading defense technology company
Merger formed leading defense technology company Diversified >80% C5ISR Customer Base Increased scale with focus on Commercial Other U.S. Air innovation…aligned with future International Force military spending Cyber Government Computers ISR Stronger platform from complementary Command Other U.S. U.
Slide 5: Off to a strong start…ahead of plan
Off to a strong start…ahead of plan In less than 2 years we’ve integrated L3 and Harris into a single, high-performance, technology-focused operating company… Grow Seamless Flawless Reshape Maximize revenue integration execution portfolio FCF • 8% organic • $270M net cost • Created culture • ~10% of
Slide 6: 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 7: …As a Mission Solutions Prime with leading positions in all domains…
…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- cation • Unmanned aircraft Systems • Datalinks and waveforms Land • Radio commun
Slide 8: …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 9: Ready to enable multi-domain operations
Ready to enable multi-domain operations 4 4 2 5 7 2 3 10 8 9 1 6 1 Communication and sensor systems 6 Unmanned vessels (surface & undersea) 2 Signals intelligence 7 Unmanned aircraft 3 Multi-function processing 8 Battle management systems 4 Exquisite and responsive satellite solutions 9 Radio commun
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: …with progress to-date from prime-level wins and >$125B pipeline
…with progress to-date from prime-level wins and >$125B 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+ Revenue sy
Slide 12: Steady to rising margins ahead…
Steady to rising margins ahead… Upward trajectory to-date… …with additional opportunities • Increased cost synergies to $320M - $350M 18.5%+ net…drives margin expansion in 2021 18.0 - 18.5% 18.0% • Accretive portfolio shaping 16.8% • Acceleration of operational excellence drives next 16.0% phase of
Slide 13: …driven by a culture of Operational Excellence
…driven by a culture of Operational Excellence Direct Labor R&D • Quality improvement...5%+ • Sustain spend at ~4% of escape and cost of poor quality sales…supports innovation reduction per annum • Increase efficiency through • Factory productivity…2-3% per DevSecOps annum • Technology roadmaps alig
Slide 14: Cash generation to remain robust
Cash generation to remain robust Healthy cash conversion… …with supportive outlook ($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 15: 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 16: 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 17: Strategic priorities to build on our success
Strategic priorities to build on our success 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-frien
Slide 18: Integrated Mission Systems
INTEGRATED MISSION SYSTEMS Sean Stackley President, Integrated Mission Systems L3HARRIS Investor Briefing 18
Slide 19: Integrated Mission Systems
Integrated Mission Systems Domain positioning BUSINESSES Intelligence, Surveillance, Reconnaissance (ISR) (~55%) Sea Advanced integrated signals intelligence (SIGINT), communications intelligence (COMINT), electronic intelligence Air (ELINT) and targeting mission systems for strategic and tactical a
Slide 20: Trends Driving Growth …
Trends National Defense Strategy Driving Growth … Insatiable Demand for Core capabilities aligned to National Signals Intelligence Defense Strategy; resilient to budget turmoil: Peer competition driving increased • Advanced Sensors: RF, Acoustic, EO/IR US and International SIGINT demand • Signals, E
Slide 21: Discriminating signals intelligence, communications and modernization capability
Discriminating signals intelligence, communications and modernization capability The world’s most advanced ISR Aircraft 26 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 46 A
Slide 22: Expanding airborne ISR
Expanding airborne ISR 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 • 10+ years of medium altitud
Slide 23: 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: $1B Sensors 20 Ships + Development + Services Bridge and Steering Aviation Mast Mounted Navigation Sensors Controls Systems Power Syste
Slide 24: Maritime platforms
Maritime platforms From systems provider to systems integrator for U.S. and international navies Strong Maritime Book:Bill driven by: • Higher content on new ship classes • Evolving Systems Integrator role • Growth in size of U.S. Navy Saudi Future Frigate Indigenous Defensive Submarine • Internatio
Slide 25: Maritime capability
Maritime capability Unmanned, seabed acoustics and naval networks Discriminating Capability Joint All Domain Command • 115 L3Harris USV’s operating around the world in and Control (Navy) survey, maritime security, & mine counter measures - no one else has as much experience Resilient Naval Networks
Slide 26: Expanding Electro-Optical capabilities
Expanding Electro-Optical capabilities Land, Maritime, Unmanned domains Driving growth through: • Differentiating capabilities: Extensive service footprint, proven reliability, superior performance, large ITAR/Non-ITAR product portfolio Saudi High-Speed Shipboard Panoramic Interceptor (HSI) Electro-
Slide 27: Integrated Mission Systems summary
Integrated Mission Systems summary ($million) Segment financials Drivers supporting medium-term outlook 15.25 - 15.75% non-GAAP 7,000 15.3% 16.0% Core Capabilities tightly aligned with National operating Defense Strategy…resilient to budget turmoil margin 6,500 13.0% 14.0% 2 6,000 up 4.0 - 6.0% Geop
Slide 28: Break
BREAK L3HARRIS Investor Briefing 28
Slide 29: Space & Airborne Systems
SPACE & AIRBORNE SYSTEMS Ed Zoiss President, Space & Airborne Systems L3HARRIS Investor Briefing 29
Slide 30: Space & Airborne Systems
Space & Airborne Systems Domain positioning BUSINESSES Space (~40%) Cyber End-to-end solutions for ISR, Missile Defense, Precision Navigation/Timing (PNT), and Air Weather for classified, DoD, civil and commercial customers Space Mission Avionics (~25%) High performance avionics, weapon release syst
Slide 31: Peer level threats driving next generation solutions in Space, Air and Cyber
Peer level threats driving next generation solutions in Space, Air and Cyber Peer threats Generational opportunities SPACE Transition from peaceful domain to warfighting domain Resilient, responsive constellations $13B ISR GPS Missile Defense AIR Shift from permissive to contested environment Next-g
Slide 32: 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 33: Customer acquisition strategies centered on selecting the mission capabilities, not the platform
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 34: 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 35: Modernizing existing airborne platforms for the fight, while creating advanced capabilities for future platforms
Modernizing existing airborne platforms for the fight, while creating advanced capabilities for future platforms $10B+ $4B+ NEXT-GENERATION PLATFORMS INTEGRATED MULTI-DOMAIN NETWORKS Open architecture modular electronics Small form electronics enabling networked distributed ops Advanced Software-Def
Slide 36: Cyber capabilities to counter hardened problem set
Cyber capabilities to counter hardened problem set DESIGN, BUILD, AND OPERATE SOLUTIONS FOR THE MOST COMPLEX CYBER AND INTELLIGENCE NEEDS Strategic Missions • 2,500 employees, 5 countries • 30 years mission experience Complex mission solutions for classified customers • Intelligence, defense, and la
Slide 37: Space & Airborne Systems summary
Space & Airborne Systems summary ($million) Segment financials Drivers supporting medium-term outlook non-GAAP 6,000 18.8% operating 18.6% 18.25 - 18.75% margin Space, air and cyber remain priorities to counter near- peer threats 5,500 2 up 4.0 - 6.0% 5,000 4,946 4,689 Space transitioning to a warfi
Slide 38: Appendix
APPENDIX L3HARRIS Investor Briefing 38
Slide 39: 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 40: Reconciliation of Non-GAAP Financial Measures – Organic Revenue Growth
Reconciliation of Non-GAAP Financial Measures – Organic Revenue growth since the L3Harris Merger Organic Revenue Growth Fiscal Year Ended (Dollars in millions) January 1, 2021 June 28, 2019 Revenue(1) $ 18,194 $ 17,240 Adjustment for divestitures(2) (195) (562) Organic Revenue $ 17,999 $ 16,678 % in
Slide 41: Reconciliation of Non-GAAP Financial Measures – Organic Total Backlog Growth
Reconciliation of Non-GAAP Financial Measures – Organic Total Backlog growth since the L3Harris Merger Total Backlog Growth (Dollars in millions) January 1, 2021 January 3, 2020 June 29, 2019 Backlog $ 21,670 $ 20,551 $ 19,893 Adjustment for divestitures(1) — (405) (394) Organic Backlog $ 21,670 $ 2
Slide 42: Reconciliation of Non-GAAP Financial Measures – Adjusted EBIT Margin Growth
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
Slide 43: 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) January 1, 2021 Short-term debt $ 2 Current portion of long-term debt, net 8 Long-term debt, net 6,908 Total debt 6,918 Less cash and cash equivalents 1,276 Net d