L3Harris Technologies, Inc. Q3 FY2025 earnings call

• The company delivered double-digit organic growth, 15.9% margins, and a book-to-bill of 1.2. - Secured a $2.2 billion award from South Korea for next-generation airborne early warning business jets. - Expanded capacity across space portfolio from Florida to Indiana. - Aerojet Rocketdyne saw exceptional demand with a record financial backlog of $8.3 billion. - Launched Program Digital Cockpit, a program management platform to accelerate decision-making and improve execution.

CS delivered revenue of $1.5 billion, up 6% with an operating margin of 26.1%. IMS revenue was $1.7 billion, up 17% with an operating margin of 12% (pro forma increase of 40 bps excluding CAS divestiture). SAS revenue was $1.8 billion, up 7% with an operating margin of 12.1%. Aerojet Rocketdyne delivered organic growth of 15%, record revenue, and an operating margin expanded 130 basis points to 12.7%.

• Increased total company revenue guidance to $22 billion, with full year organic growth of 6%. - Increased segment operating margin guidance to high 15%. - Non-GAAP EPS expected in the range of $10.50 to $10.70 per share. - Reiterated free cash flow guidance of $2.65 billion. - Increased CS revenue guidance to $5.7 billion, reaffirming operating margin. - Increased IMS revenue guidance to approximately $6.5 billion, increasing operating margin to low to mid-12% range. - Increased Aerojet Rocketdyne revenue guidance to $2.8 billion to $2.9 billion, with operating margins expected to remain in mid-12% range.

• Ongoing government shutdown, budget challenges, and potential prolonged continuing resolution impacting contract awards and cash collections. - Supply chain and export license issues affecting operations.

Q: Sheila Kahyaoglu asked about ISR segment wins and outlook.

A: Christopher Kubasik said ISR segment backlog doubled in 12 months, with positive outlook including international opportunities like Armed Overwatch and C-130 up award in Morocco.

Q: Ronald Epstein asked about working with smaller companies.

A: Christopher Kubasik said they've empowered leadership, eliminated bureaucracy, and are successful in partnering with new entrants like Shield AI and Anduril.

Q: Myles Walton asked about Golden Dome space-based competitions and SAS margin.

A: Christopher Kubasik said confident in missile defense capabilities, and Kenneth Bedingfield noted SAS margin performance is maturing with continued award opportunities.

Q: Seth Seifman asked about margin expansion outlook for 2026.

A: Kenneth Bedingfield said they're focused on program performance and expect net EACs to turn positive, offsetting any minor headwinds.

Q: Scott Mikus asked about IRAD spend.

A: Christopher Kubasik said they focus on portfolio opportunities and invest in areas aligned with market needs, not just percent of revenue.

Q: Michael Ciarmoli asked about Golden Dome and competing as prime for missiles.

A: Christopher Kubasik and Kenneth Bedingfield discussed being positioned to compete as prime with significant in-house capability and focus on customer and shareholder value.

Q: Noah Poponak asked about Aerojet Rocketdyne growth.

A: Christopher Kubasik and Kenneth Bedingfield discussed strong demand, capacity expansion, and double-digit growth outlook for Aerojet Rocketdyne.

Q: Peter Arment asked about international teaming operations.

A: Christopher Kubasik said they're partners of choice internationally with local production capabilities and open to various supply relationships.

Q: Gavin Parsons asked about Aerojet margin.

A: Kenneth Bedingfield said strong growth outlook won't weigh on margin, with transition from legacy contracts to newer signed contracts and development programs supporting margin.

Q: Kristine Liwag asked about gap between demand signals and contract awards.

A: Christopher Kubasik cited government shutdown as a challenge, needing government to open and make decisions to close the gap.

Q: Richard Safran asked about multiyear contracts.

A: Christopher Kubasik and Kenneth Bedingfield discussed need for multiyear contracts to support capacity expansion and supply chain investments, with government being amenable to the concept.

Q: Ronald Epstein followed up on NASA work.

A: Kenneth Bedingfield discussed NASA as an important customer, with RS-25 engines for SLS system being a key part of Aerojet Rocketdyne's space propulsion business.