L3Harris Technologies Reports Strong First Quarter 2024 Results, Increases 2024 Profitability Guidance
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Orders1 of
$5.5 billion ; book-to-bill of 1.06x -
Revenue of
$5.2 billion , up 17%, up 5% organically1 - Operating margin of 7.3%; Adjusted segment operating margin1 of 15.1%
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Earnings per share (EPS) of
$1.48 ; Non-GAAP EPS1 of$3.06 - 2024 adjusted segment operating margin1 guidance increases from ~15% to >15%*
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2024 non-GAAP EPS guidance range increases from
$12.40 -$12.80 to$12.70 -$13.05 *
"We're off to a strong start to 2024, reporting solid revenue with higher operating margin across all four segments and our Trusted Disruptor strategy continues to drive demand for innovative, resilient and mission-critical solutions aligned with national security needs. We delivered double-digit top line growth while continuing to drive improvements to operational and program performance," said
Kubasik continued, "Given the strength of our first quarter, we are increasing 2024 profitability guidance, while reaffirming revenue and free cash flow commitments. With our progress, we remain confident in the financial framework that we laid out at investor day which is driven by operational rigor and structural enhancements from our LHX NeXt initiative."
* A reconciliation is not available. See the note on page 2 and Non-GAAP Financial Measures on page 5 for more information. |
SUMMARY FINANCIAL RESULTS AND 2024 GUIDANCE
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First Quarter |
2024 Guidance* |
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($ millions, except per share data) |
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2024 |
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2023 |
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Change |
Current |
Prior |
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Revenue |
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Space & Airborne Systems |
$ |
1,751 |
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$ |
1,655 |
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1,669 |
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1,700 |
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Communication Systems |
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1,294 |
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1,163 |
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542 |
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— |
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Corporate eliminations |
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(45 |
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(47 |
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Revenue |
$ |
5,211 |
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$ |
4,471 |
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17% |
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Operating income |
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Space & Airborne Systems |
$ |
216 |
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$ |
187 |
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190 |
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185 |
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Communication Systems |
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310 |
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266 |
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72 |
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— |
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Unallocated items |
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(410 |
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(245 |
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Operating income |
$ |
378 |
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$ |
393 |
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(4)% |
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Operating margin |
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7.3 |
% |
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8.8 |
% |
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(150) bps |
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Adjusted segment operating income1 |
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Space & Airborne Systems |
$ |
216 |
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$ |
187 |
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190 |
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185 |
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Communication Systems |
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310 |
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266 |
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72 |
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— |
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Adjusted segment operating income1 |
$ |
788 |
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$ |
638 |
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24% |
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Adjusted segment operating margin1 |
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15.1 |
% |
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14.3 |
% |
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80 bps |
> 15% |
~15% |
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Effective tax rate (GAAP) |
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1.7 |
% |
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9.1 |
% |
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(740) bps |
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Effective tax rate (non-GAAP1) |
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13.1 |
% |
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13.4 |
% |
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(30) bps |
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EPS |
$ |
1.48 |
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$ |
1.76 |
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(16)% |
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Non-GAAP EPS1 |
$ |
3.06 |
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$ |
2.86 |
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7% |
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Cash from operations |
$ |
(104 |
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$ |
350 |
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(130)% |
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Adjusted free cash flow1 |
$ |
(156 |
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$ |
315 |
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(150)% |
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*When we provide our expectation for adjusted segment operating margin, effective tax rate on non-GAAP income, non-GAAP EPS and adjusted free cash flow on a forward-looking basis, a reconciliation of these non-GAAP financial measures to the corresponding GAAP measures is not available without unreasonable effort due to the unavailability of items for exclusion from the GAAP measure. We are unable to address the probable significance of this information, the variability of which may have a significant impact on future GAAP results. See Non-GAAP Financial Measures on page 5 for more information. |
Revenue: First quarter revenue increased 17%, primarily from the acquisition of
Operating Margin:
GAAP: First quarter operating margin decreased 150 bps to 7.3% driven by higher LHX NeXt implementation costs and intangible amortization from the
Adjusted segment operating margin 1: Expanded 80 bps to 15.1% due to improved operational and program performance across the SAS, IMS and CS segments and partially driven by LHX NeXt savings.
* A reconciliation is not available. See the note on page 2 and Non-GAAP Financial Measures on page 5 for more information. |
EPS:
GAAP: First quarter EPS decreased 16% to
Non-GAAP
1: Increased 7% to
Cash Flows:
GAAP: First quarter cash used in operations was
Adjusted free cash flow
1: Use of
SEGMENT RESULTS AND GUIDANCE:
Space & Airborne Systems (SAS)
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First Quarter |
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2024 Guidance |
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($ millions) |
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2024 |
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2023 |
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Change |
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Current |
Prior |
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Revenue |
$ |
1,751 |
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$ |
1,655 |
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6% |
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Operating margin |
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12.3 |
% |
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11.3 |
% |
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100 bps |
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~12%* |
mid-high 11%* |
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Revenue: First quarter revenue increased 6%, primarily from continued growth in Space Systems and classified program growth in Intel and Cyber.
Operating Margin: First quarter operating margin increased 100 bps largely due to improved operational and program performance, particularly in Space Systems reflecting progress on development programs and maturing capabilities resulting in net favorable program matters. Operating margin also benefited from higher volume which was partially offset by mix.
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First Quarter |
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2024 Guidance |
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($ millions) |
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2024 |
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2023 |
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Change |
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Current |
Prior |
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Revenue |
$ |
1,669 |
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$ |
1,700 |
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(2)% |
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Operating margin |
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11.4 |
% |
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10.9 |
% |
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50 bps |
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low-mid 11%* |
low-mid 11%* |
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Revenue: First quarter revenue decreased 2%, primarily from lower ISR aircraft procurement activity compared with first quarter 2023.
Operating Margin: First quarteroperating margin increased 50 bps from improved program performance, including stabilizing programs resulting in fewer negative Estimate as Completion (EAC) adjustments, partially offset by less favorable product mix.
* A reconciliation is not available. See the note on page 2 and Non-GAAP Financial Measures on page 5 for more information. |
Communication Systems (CS)
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First Quarter |
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2024 Guidance |
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($ millions) |
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2024 |
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2023 |
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Change |
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Current |
Prior |
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Revenue |
$ |
1,294 |
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$ |
1,163 |
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11% |
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Operating margin |
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24.0 |
% |
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22.9 |
% |
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110 bps |
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low-mid 24%* |
low-mid 24%* |
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Revenue: First quarter revenue increased 11%, primarily from higher volumes in
Operating Margin: First quarter operating margin increased 110 bps primarily from the benefit of higher volume and improved operational performance in Integrated Vision Systems, partially offset by higher domestic tactical radio mix.
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First Quarter |
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2024 Guidance |
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($ millions) |
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2024 |
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2023 |
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Change |
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Current |
Prior |
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Revenue |
$ |
542 |
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$ |
— |
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Operating margin |
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13.3 |
% |
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— |
% |
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high 11%* |
high 11%* |
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Revenue and Operating Margin: First quarter resultsare attributed to program execution across Missile Solutions and Space Propulsion and Power Systems.
SUPPLEMENTAL INFORMATION:
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2024 |
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2023 |
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Other Information |
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Current |
Prior |
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Actuals |
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FAS/CAS operating adjustment |
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Non-service FAS pension income |
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Net interest expense |
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Effective tax rate on GAAP income |
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1.9% |
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Effective tax rate on non-GAAP income1* |
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13.0% - 13.5% |
13.0% - 13.5% |
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13.0% |
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Average diluted shares |
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flat - up slightly |
flat - up slightly |
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190.6 |
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Capital expenditures |
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~2% sales |
~2% sales |
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2% sales |
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* A reconciliation is not available. See the note on page 2 and Non-GAAP Financial Measures on page 5 for more information. |
Non-GAAP Financial Measures
This press release contains Non-GAAP Financial Measures ("NGFMs") (as listed on page 15) within the meaning of Regulation G promulgated by the
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About
Forward-Looking Statements
Statements in this press release 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 provisions of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements in this press release include but are not limited to: 2024 guidance; 2024-2026 capital deployment priorities; anticipated LHX NeXt program costs and savings targets and their impacts on operational performance, margin expansion and accelerating adjusted free cash flow growth; supplemental financial information for 2024; and other statements regarding the business outlook and financial performance guidance that are not historical facts. The company cautions investors that any forward-looking statements are subject to risks and uncertainties that may cause actual results and future trends to differ materially from those matters expressed in or implied by such forward-looking statements, including but not limited to: competitive markets and
Financial Tables
To see the entire earnings tables, please see: https://www.l3harris.com/resources/first-quarter-2024-results
1Key terms and Non-GAAP measures - see definitions at the end of this earnings release |
Non-GAAP Terms and Definitions
Description |
Definition |
Amortization of acquisition-related intangibles |
Consists of amortization of identifiable intangible assets acquired in connection with business combinations. Amortization charges are recorded over the estimated useful life of the related acquired intangible asset, and thus are generally recorded over multiple years. |
Additional cost of revenue related to the fair value step-up in inventory sold |
Difference between the balance sheet value of inventory from the acquiree and the acquisition date fair value. |
Merger, acquisition, and divestiture-related expenses |
Transaction and integration expenses associated with TDL and AR acquisitions. Also, includes external costs related to pursuing acquisition and divestiture portfolio optimization, non-transaction costs related to divestitures and salaries of employees in roles established for and dedicated to planned divestiture and acquisition activity. |
Impairment of goodwill and other assets |
In 2023, charges for the impairment of contract assets and other assets related to the restructuring of a customer contract. |
LHX NeXt implementation costs |
Costs associated with transforming multiple functions, systems and processes to increase agility and competitiveness. Costs related to the LHX NeXt initiative are expected to continue through 2025, and are expected to include workforce optimization costs ( |
Orders |
Represents the total value of funded and unfunded contract awards received from the |
Organic revenue |
Organic revenue excludes the impact of completed divestitures and first year revenue associated with acquisitions; refer to non-GAAP financial measure (NGFM) reconciliations in the tables accompanying this press release and to the disclosures in the non-GAAP section of this press release for more information. Organic revenue is reconciled in table 4. |
Adjusted segment operating income and margin |
Adjusted segment operating income and margin on a consolidated basis represents operating income and margin (GAAP measures) excluding the FAS/CAS operating adjustment, corporate expenses and other unallocated items. Refer to the disclosures in the non-GAAP financial measures section of this press release for more information. Adjusted segment operating income and margin is reconciled in table 5. |
Non-GAAP net income attributable to |
Non-GAAP net income attributable to |
Non-GAAP EPS |
Non-GAAP EPS represents EPS (net income per common share attributable to |
Adjusted Free Cash Flow (FCF) |
Adjusted FCF represents net cash provided by operating activities (a GAAP measure) less capital expenditures (additions to property, plant and equipment less proceeds from sale of property, plant and equipment, net), cash used for merger, acquisition, and severance. Adjusted FCF is reconciled in table 8. |
Cash used for merger, acquisition, and severance |
Cash related to merger and acquisition expenses as discussed in the "merger, acquisition, and divestiture-related expenses" heading above and cash related to severance costs included in our LHX NeXt implementation costs. |
Effective tax rate on non-GAAP income |
Effective tax rate on non-GAAP income represents the effective tax rate (tax expense as a percentage of income before income taxes, a GAAP measure) adjusted for the tax effect associated with amortization of acquisition-related intangibles; additional cost of revenue related to the fair value step-up in inventory sold; merger, acquisition, and divestiture-related expenses; impairment of goodwill and other assets; and LHX NeXt implementation costs. Refer to the disclosures in the non-GAAP financial measures section of this press release for more information. Non-GAAP effective tax rate is reconciled in table 6. |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240424421451/en/
Investor Relations Contact:
investorrelations@l3harris.com
Media Relations Contact:
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