L3Harris Technologies, Inc. Q4 FY2025 earnings call

• Wrapped up 2025 with strong execution, meeting customer commitments and achieving a record order book.
• Aligned the portfolio to fastest-growing defense priorities, including acquisitions and divestitures.
• Reorganized into three segments.
• Announced intention to pursue an IPO of the missile solutions business in 2026.
• Secured key awards such as a $2.2 billion award from South Korea, an international weather set satellite program worth ~$200 million, and an SDA contract valued at ~$850 million.
• Exceeded the $1 billion savings commitment of LHX NEXT one year ahead of plan.

In 2025, total revenue was $21.9 billion, up 5% organically. For segments:

• CS (Communications and Spectrum Dominance) delivered revenue of $5.7 billion in 2025 with a margin of 25.2%, and $1.5 billion in the fourth quarter with a margin of 24.9%.
• IMS (Intelligence, Mission Systems) had revenue of $6.6 billion in 2025, 8% organic growth, and a margin of 12.2%, with $1.7 billion in the fourth quarter.
• SAS (Space and Airborne Systems) generated revenue of $6.9 billion in 2025 with a margin of 12.3%, and $1.7 billion in the fourth quarter.
• Aerojet Rocketdyne had 12% organic revenue growth in 2025, with revenue exceeding $2.8 billion and a margin of 12.5%, and 12% organic growth in the fourth quarter with a margin of 11.8%.

• Expect revenue of $23 to $23.5 billion in 2026, representing 7% organic growth at the midpoint.
• Segment operating margin is anticipated to be in the low 16% range.
• Free cash flow is expected to be $3 billion.
• GAAP diluted EPS is expected to be in the range of $11.30 to $11.50.
• SMS revenue is expected to be $11.5 billion, CSD revenue at approximately $8 billion, and MSL revenue at ~$4.4 billion with mid-12% margins.

• Government shutdown delayed awards and limited revenue growth in 2025.
• Supply chain challenges in various segments, including satellite manufacturing.

Q: Considering the strong demand for missile solutions, should we continue to see long-term agreements similar to PAC-3 and THAAD, or is this satisfied by the IPO plans with the US government? And follow-up on double-digit growth.

A: Christopher E. Kubasik responded that everything is tracking as discussed, with upside potential and plans for IPO filing, expecting double-digit CAGR for missile solutions.

Q: On CapEx, is there a much bigger step up happening in the future?

A: Kenneth L. Bedingfield said CapEx in 2026 is ~$600 million, a 35-40% increase from 2025, with plans to maximize cash inflows in future years.

Q: Clarification on government stake in missile solutions and cash from ops.

A: Kenneth L. Bedingfield confirmed single-digit equity ownership stake and focus on disciplined working capital management for cash from ops.

Q: Revenue outlook for RemainCo and leverage with defense budget.

A: Christopher E. Kubasik said RemainCo expects mid-single-digit growth, well-positioned with strong portfolio and backlog.

Q: Total opportunity for Golden Dome and quantification.

A: Christopher E. Kubasik discussed Golden Dome's components and L3Harris' position, ready to respond to awards.

Q: Robustness of international tactical comms growth and balancing domestic.

A: Christopher E. Kubasik talked about resilient comms, international growth, and domestic strategy.

Q: Funding for certain programs in 2027 and margin improvement in 2026.

A: Christopher E. Kubasik on 2027 budget uncertainty and Kenneth L. Bedingfield on margin improvement via execution.

Q: Book-to-bill for the year and parsing by segments.

A: Christopher E. Kubasik said book-to-bill was 1.3 in 2025, expecting at least 1.1 or larger in 2026.

Q: Sustainability of CSD margin and clarification on radio funding.

A: Christopher E. Kubasik and Kenneth L. Bedingfield discussed CSD margin sustainability and radio funding situation.

Q: Space production plans and tracking layer evolution.

A: Christopher E. Kubasik talked about space production ramps and tracking layer competitiveness.

Q: Supply chain and personnel capacity for growth.

A: Christopher E. Kubasik and Kenneth L. Bedingfield addressed supply chain and personnel readiness.

Q: Unwinding Aerojet and MSL model and DOW stipulations.

A: Christopher E. Kubasik said no DOW stipulations, focus on what L3Harris does well.