L3Harris Technologies Reports Strong Second Quarter 2024 Results, Increases 2024 Guidance
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Orders1 of
$5.2 billion ; book-to-bill of 1.0x -
Revenue of
$5.3 billion , up 13% - Operating margin of 9.0%; adjusted segment operating margin1 of 15.6%
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Diluted earnings per share (EPS) of
$1.92 ; non-GAAP EPS1 of$3.24 -
2024 revenue guidance range increases from
$20.8B -$21.3B to$21.0B -$21.3B - 2024 adjusted segment operating margin1 guidance increases from >15% to 15.2% - 15.4%*
-
2024 Non-GAAP EPS guidance range increases from
$12.70 -$13.05 to$12.85 -$13.15 *
"We delivered another strong quarter of financial results with improved margins, reflecting our commitment to operational excellence and a relentless focus on execution that delivers value to our customers and shareholders," said
Kubasik added, "As we celebrate the five year anniversary of the L3 and Harris merger, I'm proud of the progress we've made as the industry's Trusted Disruptor. Our first half results reflect progress toward achieving our 2026 financial framework. We are raising our revenue, margin and EPS guidance for the year, underscoring the tangible results of our LHX NeXt initiative, which is focused on streamlining our operations and enhancing our efficiency while transforming the company."
* A reconciliation is not available. See the note on page 2 and Non-GAAP Financial Measures on page 6 for more information.
SUMMARY FINANCIAL RESULTS AND 2024 GUIDANCE
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Second Quarter |
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Year to Date |
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2024 Guidance* |
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($ millions, except per share data) |
2024 |
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2023 |
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Change |
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2024 |
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2023 |
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Change |
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Revenue |
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Space & Airborne Systems |
$ |
1,707 |
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$ |
1,715 |
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$ |
3,458 |
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$ |
3,370 |
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1,729 |
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1,735 |
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3,398 |
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3,435 |
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Communication Systems |
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1,346 |
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1,289 |
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2,640 |
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2,452 |
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581 |
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— |
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1,123 |
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— |
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Corporate eliminations |
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(64 |
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(46 |
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(109 |
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(93 |
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Revenue |
$ |
5,299 |
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$ |
4,693 |
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13 |
% |
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$ |
10,510 |
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$ |
9,164 |
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15 |
% |
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(Prior: |
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Operating income |
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Space & Airborne Systems |
$ |
215 |
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$ |
168 |
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28 |
% |
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$ |
431 |
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$ |
355 |
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21 |
% |
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206 |
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162 |
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27 |
% |
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396 |
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347 |
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14 |
% |
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Communication Systems |
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329 |
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325 |
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1 |
% |
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639 |
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591 |
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8 |
% |
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75 |
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— |
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n/a |
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147 |
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— |
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n/a |
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Unallocated items |
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(349 |
) |
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(255 |
) |
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(759 |
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(500 |
) |
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Operating income |
$ |
476 |
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$ |
400 |
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19 |
% |
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$ |
854 |
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$ |
793 |
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8 |
% |
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Operating margin |
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9.0 |
% |
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8.5 |
% |
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50 bps |
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8.1 |
% |
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8.7 |
% |
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(60) bps |
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Adjusted segment operating income1 |
$ |
825 |
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$ |
694 |
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19 |
% |
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$ |
1,613 |
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$ |
1,332 |
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21 |
% |
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Adjusted segment operating margin1 |
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15.6 |
% |
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14.8 |
% |
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80 bps |
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15.3 |
% |
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14.5 |
% |
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80 bps |
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15.2% - 15.4% (Prior: > 15%) |
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Effective tax rate (GAAP) |
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5.9 |
% |
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5.6 |
% |
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30 bps |
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4.1 |
% |
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7.4 |
% |
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(330) bps |
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Effective tax rate (non-GAAP1) |
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12.9 |
% |
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13.3 |
% |
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(40) bps |
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13.0 |
% |
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13.4 |
% |
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(40) bps |
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EPS |
$ |
1.92 |
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$ |
1.83 |
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5 |
% |
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$ |
3.40 |
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$ |
3.60 |
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(6 |
%) |
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Non-GAAP EPS1 |
$ |
3.24 |
$ |
2.97 |
9 |
% |
$ |
6.30 |
$ |
5.82 |
8 |
% |
(Prior: |
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Cash from operations |
$ |
754 |
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$ |
414 |
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82 |
% |
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$ |
650 |
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$ |
764 |
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(15 |
%) |
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Adjusted free cash flow1 |
$ |
714 |
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$ |
342 |
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109 |
% |
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$ |
558 |
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$ |
657 |
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(15 |
%) |
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~2.2B |
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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 7 for more information. |
Revenue: Second quarter revenue increased 13%, primarily driven by the acquisition of
* A reconciliation is not available. See the note on page 2 and Non-GAAP Financial Measures on page 6 for more information.
Operating Margin:
GAAP: Second quarter operating margin increased 50 bps to 9.0% driven by improved operational performance, partially offset by the impact of increased corporate unallocated items, including intangible amortization from mergers and acquisitions and LHX NeXt implementation costs.
Adjusted segment operating margin 1: Expanded 80 bps to 15.6% due to improved operational and program performance across the SAS, IMS and CS segments, including LHX NeXt driven cost savings.
EPS:
GAAP: Second quarter EPS increased 5% to
Non-GAAP
1: Increased 9% to
The largest differences between GAAP and Non-GAAP EPS are attributable to intangible amortization and LHX NeXt implementation costs.
Cash Flows:
Cash from Operations: Second quarter cash from operations was
Adjusted free cash flow
1: Delivered
SEGMENT RESULTS AND GUIDANCE:
SAS
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Second Quarter |
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Year to Date |
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2024 Guidance* |
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($ millions) |
2024 |
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2023 |
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Change |
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2024 |
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2023 |
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Change |
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Revenue |
$ |
1,707 |
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$ |
1,715 |
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— |
% |
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$ |
3,458 |
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$ |
3,370 |
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3 |
% |
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Operating margin |
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12.6 |
% |
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9.8 |
% |
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280 bps |
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12.5 |
% |
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10.5 |
% |
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200 bps |
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low 12%* (Prior ~12%) |
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Revenue: Second quarter revenue was flat year-over-year, resulting from continued growth in Space Systems and classified program growth in Intel and Cyber, which was offset by lower volumes in our Airborne Combat Systems business and lower revenues from the divestiture of the antenna business. Excluding this divestiture, organic revenue increased 1%.
Operating Margin: Second quarter operating margin increased 280 bps largely due to the absence of a non-cash charge that impacted 2023, improved operational and program performance, including the impact of the LHX NeXt cost savings initiative.
* A reconciliation is not available. See the note on page 2 and Non-GAAP Financial Measures on page 6 for more information.
IMS
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Second Quarter |
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Year to Date |
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2024 Guidance* |
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($ millions) |
2024 |
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2023 |
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Change |
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2024 |
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2023 |
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Change |
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Revenue |
$ |
1,729 |
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$ |
1,735 |
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— |
% |
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$ |
3,398 |
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$ |
3,435 |
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(1 |
)% |
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(Prior |
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Operating margin |
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11.9 |
% |
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9.3 |
% |
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260 bps |
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11.7 |
% |
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10.1 |
% |
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160 bps |
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mid 11%* (Prior low-mid 11%) |
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Revenue: Second quarter revenue was flat, as higher volumes on Maritime programs were offset by lower volume in our
Operating Margin: Second quarteroperating margin increased 260 bps from improved program performance, including the impact of LHX NeXt cost savings.
CS
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Second Quarter |
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Year to Date |
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2024 Guidance* |
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($ millions) |
2024 |
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2023 |
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Change |
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2024 |
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2023 |
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Change |
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Revenue |
$ |
1,346 |
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$ |
1,289 |
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4 |
% |
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$ |
2,640 |
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$ |
2,452 |
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8 |
% |
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Operating margin |
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24.4 |
% |
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25.2 |
% |
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(80) bps |
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24.2 |
% |
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24.1 |
% |
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10 bps |
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mid 24%* (Prior low-mid 24%) |
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Revenue: Second quarter revenue increased 4%, primarily from higher volumes in
Operating Margin: Second quarter operating margin decreased 80 bps primarily from higher domestic tactical radio mix and timing of software sales, partially offset by LHX NeXt cost savings and the favorable impact of legal settlements.
AR
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Second Quarter |
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Year to Date |
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2024 Guidance* |
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($ millions) |
2024 |
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2023 |
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Change |
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2024 |
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2023 |
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Change |
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Revenue |
$ |
581 |
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$ |
— |
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$ |
1,123 |
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$ |
— |
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Operating margin |
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12.9 |
% |
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— |
% |
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13.1 |
% |
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— |
% |
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high 11%* |
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Revenue and Operating Margin: Second quarter resultsare attributed to program execution across Missile Solutions and Space Propulsion and Power Systems.
* A reconciliation is not available. See the note on page 2 and Non-GAAP Financial Measures on page 6 for more information.
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 |
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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Ad Hoc Business Review Committee: The company entered into a Cooperation Agreement in
* A reconciliation is not available. See the note on page 2 and Non-GAAP Financial Measures on page 6 for more information.
Non-GAAP Financial Measures
This earnings release contains Non-GAAP Financial Measures ("NGFMs") (as listed on page 16) within the meaning of Regulation G promulgated by the
Conference Call and Webcast
The dial-in numbers for the teleconference are (
About
Forward-Looking Statements
Statements in this earnings 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 earnings release include but are not limited to: potential divestitures and their timing; 2024 guidance; 2026 financial framework; anticipated LHX NeXt initiative costs and savings targets and their impacts; 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/second-quarter-2024-results
1Key terms and Non-GAAP measures - see definitions at the end of this earnings release
Key Terms and Non-GAAP Definitions
Description |
Definition |
Amortization of acquisition-related intangibles and additional cost of revenue related to the fair value step-up in inventory sold |
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 is the 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. |
Asset group and business divestiture-related losses, net and impairment of goodwill and other assets |
In 2023, includes a gain on sale of our Visual Information Solutions business, impairment of contract assets and other assets related to the restructuring of a customer contract and impairment of in-process research and development associated with a facility closure. In 2024, includes loss on sale and impairment of goodwill recognized in connection with the sale of our antenna and related businesses and a loss associated with the pending divestiture of our Commercial Aviation Solutions business. |
LHX NeXt implementation costs |
Costs associated with reducing costs and transforming the Company and its 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 earnings release and to the disclosures in the non-GAAP section of this earnings 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 unallocated items; 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; asset group and business divestiture-related losses (gains), net, impairment of goodwill and other assets; and LHX NeXt implementation costs. Refer to the disclosures in the non-GAAP financial measures section of this earnings release for more information. Adjusted segment operating income and margin is reconciled in table 5. |
Non-GAAP EPS |
Non-GAAP EPS represents EPS (net income per diluted 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. |
Non-GAAP income before income taxes |
Non-GAAP income before income taxes represents income before income taxes, a GAAP measure, adjusted for 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; asset group and business divestiture-related losses (gains), net, impairment of goodwill and other assets; and LHX NeXt implementation costs. Refer to the disclosures in the non-GAAP financial measures section of this earnings release for more information. |
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; asset group and business divestiture-related losses (gains), net, impairment of goodwill and other assets; and LHX NeXt implementation costs. Refer to the disclosures in the non-GAAP financial measures section of this earnings 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/20240725558614/en/
Investor Relations Contact:
Daniel Gittsovich, 321-724-3170
investorrelations@l3harris.com
Media Relations Contact:
media@l3harris.com
Source: