Q1 2024 L3Harris Technologies Inc Earnings Call

Operator: Greetings. Welcome to L3Harris Technologies' first quarter 2024 earnings call. At this time, all participants are in listen-only mode. A brief question and answer session will follow the opening remarks. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Mark Kratz, Vice President of Investor Relations. You may now begin, Mr. Kratz.

Greetings and welcome to the L. Three Harris technologies first quarter 2024 earnings call.

At this time all participants are in a listen only mode.

A brief question and answer session will follow opening remark.

If anyone should require operator assistance during the conference. Please press star zero from your telephone keypad.

As a reminder, this conference call is being recorded.

It's now my pleasure to introduce your host Mark Kratz, Vice President of Investor Relations, you may never get a scratch.

Mark Kratz: Thank you, Rob. Good morning, and welcome to our first quarter 2024 earnings call. Joining me this morning are Chris Kubasik, our CEO, and Ken Bedingfield, our CFO. Yesterday, we published our first quarter earnings release, detailing our financial results and guidance. We also provided a supplemental earnings presentation on our website. As a reminder, today's discussion will include certain matters that constitute forward-looking statements. These statements involve risks, assumptions, and uncertainties that could cause actual results to differ materially. For more information, please refer to our earnings release and our SEC filing. We will also discuss non-GAAP financial measures, which are reconciled to GAAP measures in the earnings release.

Mark Kratz: Thank you Rob good morning, and welcome to our first quarter 'twenty 'twenty four earnings call.

Mark Kratz: Joining me this morning are Chris could basic our CEO and Ken Bedingfield, our CFO.

Mark Kratz: Yesterday, we published our first quarter earnings release detailing our financial results and guidance. We also provided a supplemental earnings presentation on our website.

Mark Kratz: As a reminder, today's discussion will include certain matters that constitute forward looking statements. These statements involve risks assumptions and uncertainties that could cause actual results to differ materially for more information. Please reference our earnings release and our SEC filings.

Mark Kratz: We will also discuss non-GAAP financial measures, which are reconciled to GAAP measures in the earnings release.

Mark Kratz: I'd now like to turn it over to Chris. Hey, thanks, Mark.

Mark Kratz: I'd now like to turn it over to Chris.

Christopher E. Kubasik: Thanks, Mark, and good morning, everyone. Since the merger of L3 and Harris five years ago, and after strategic acquisitions and targeted divestitures, we have built a company with a national security focus. We have critical technologies in all domains that align to national security priorities and the global threat environment. Responsive Space, Resilient Communications, and Rocket Motors are critical for the future fight. The Trusted Disruptor Strategy and our portfolio are setting the stage for L3Harris to differentiate itself, driving Top Line Growth While Simultaneously Increasing Our Industry-Leading Margin. The global security environment continues to be one with heightened tensions and regional conflict.

Christopher E. Kubasik: Thanks, Mark and good morning, everyone.

Christopher E. Kubasik: Since the merger of L. Three and Harris five years ago, and after strategic acquisitions in targeted divestitures, we have built a company with a national security focus we have critical technologies in all domains that align to national security priorities and the global threat environment responsive.

Christopher E. Kubasik: Responsive space resilient communications and rocket Motors are critical for the future fight that.

Christopher E. Kubasik: The trusted disruptor strategy and our portfolio are setting the stage for L. Three Harris to differentiate ourselves with top line growth, while simultaneously, increasing our industry leading margins.

Christopher E. Kubasik: The global security environment continues to be one with heightened tensions and regional conflict.

Christopher E. Kubasik: Domestically, Congress recently passed the 2024 Appropriations Bill, which included $844 billion for defense. Our programs are well funded, and we are positioned for profitable growth across much of the enterprise. Demand remains strong for our products and solutions as we started off the year with a 1.06 book-to-bill ratio. Internationally, we continue to see a strong and geographically diverse pipeline of opportunities. As an example, we were recently awarded a $150 million program to provide secure networking to Taiwan, displacing a longtime incumbent.

Christopher E. Kubasik: Domestically Congress recently passed the 'twenty 'twenty four appropriations bills, which included $844 billion for defense.

Christopher E. Kubasik: Our programs are well funded and we are positioned for profitable growth across much of the enterprise.

Christopher E. Kubasik: Demand remains strong for our products and solutions as we started off the year with a 1.06 book to Bill ratio.

Christopher E. Kubasik: Internationally, we continue to see a strong and geographically diverse pipeline of opportunities.

Christopher E. Kubasik: As an example, we were recently awarded $150 million program to provide secure networking to Taiwan, displacing a longtime incumbent there.

Christopher E. Kubasik: This win is an integral part of our interoperability and supports the C, JADC2 mission. Turning to tactical radios, we maintain a robust international pipeline of over $10 billion, including several FMS cases, primarily for Europe, totaling more than $1 billion. These opportunities, along with the continued strong backlog, give us confidence in an international tactical radio ramp in the second half of the year. Other international opportunities are supported by DoD supplemental funding, particularly in Ukraine. Earlier this week, the President signed a foreign aid package for Ukraine, Israel, and Taiwan that includes $67 billion in funding for key defense programs.

Christopher E. Kubasik: This win is an integral part of our interoperability and supports the C chassis to mission.

Christopher E. Kubasik: Turning to the tactical radios, we maintain a robust international pipeline of over $10 billion, including several Fms cases, primarily for Europe totaling more than $1 billion. These opportunities along with the continued strong backlog gives us confidence in the international Tactical radio ramp in the second half.

Christopher E. Kubasik: Half of the year.

Christopher E. Kubasik: Other international opportunities are supported by the D O D supplemental funding, particularly in Ukraine.

Christopher E. Kubasik: This week, the President signed a foreign aid package for Ukraine, Israel in Taiwan that includes $67 billion in funding for key defense programs L.

Christopher E. Kubasik: L3Harris has been a key supplier in Ukraine since the start of the conflict, and the need for this equipment remains strong. Our products are being used in theaters and exceeding expectations. The Supplemental Bill will provide our allies access to needed capabilities while at the same time supporting the U.S. defense industrial base, including small and mid-sized businesses. With the bill just recently passed, we will give you more information during the next earnings call on the incremental opportunities it provides. Our workforce is proud to support our country and its allies around the world.

Christopher E. Kubasik: L. Three Harris has been a key supplier in Ukraine since the start of the conflict and the need for this equipment remains strong.

Christopher E. Kubasik: Our products are being used in theater and exceeding expectations. The supplemental bill will provide our allies access to needed capabilities. While at the same time support the U S defense industrial base, including small and midsized businesses.

Christopher E. Kubasik: But the Bill just recently passed we will give you more information during the next earnings call on the incremental opportunities that right provides.

Christopher E. Kubasik: Our workforce is proud to support our country and its allies around the globe.

Christopher E. Kubasik: Turning to 2024, our strong first quarter results reflect improvement across our diverse set of programs and products. We're executing on our contracts and improving cost and schedule performance, which helped drive net positive EACs for the second consecutive quarter. In our product businesses, we are improving quality and driving higher on-time delivery. As for programs, I see development risk abating.

Christopher E. Kubasik: Turning to 2024, our strong first quarter results reflect improvement across our diverse set of programs and products, we're executing on our contracts and improving cost and schedule performance, which helped drive net positive EAC is for the second consecutive quarter.

Christopher E. Kubasik: In our product businesses, we are improving quality and driving higher on time deliveries.

Turning to programs I see development risk abating.

Christopher E. Kubasik: This is not to say that we're out of the woods on all of our development programs, but the business is performing well, and the disciplined bidding focus and programmatic rigor is starting to pay off. OHX Next Cost Savings are also starting to contribute, and we see that benefit accelerating in 2024 and 2025. Ken will cover the financials in more detail, but I wanted to highlight that revenue is up double digits year over year and operating income was up $150 million, resulting in margins expanding 80 basis points to 15.1%.

Christopher E. Kubasik: This is not to say that we are out of the woods in all of our development programs, but the business is performing well and the disciplined bidding focus and programmatic rigor is starting to pay off.

Oh why checks next cost savings are also starting to contribute and we see that benefit accelerating in 'twenty 'twenty, four and 'twenty 'twenty five.

Christopher E. Kubasik: Ken will cover the financials in more detail, but I wanted to highlight that revenue was up double digit year over year and operating income was up $150 million.

Christopher E. Kubasik: Resulting in margins expanding 80 basis points to 15, 1%.

Christopher E. Kubasik: Given the strong start to the year, we are raising our 2024 margin EPS and revenue guidance while reaffirming our free cash flow commitment. At our Investor Day, we committed to $1 billion in LHX Next gross cost savings by 2026, focused on optimizing our workforce infrastructure and supply chain. The initiative will enable us to maintain our industry-leading margins while investing in technologies, tools, and systems to support our customers and employees. We are accelerating our LHX Next activity in 2024, and earlier this month, we implemented a workforce reduction that will result in about 5% fewer people than when we began the year. With these reductions, we are focused on eliminating non-core processes, streamlining our organizational structure to maximize efficiency, and right-sizing our physical footprint.

Christopher E. Kubasik: Given the strong start to the year, we are raising our 2024 margin EPS and revenue guidance, while reaffirming our free cash flow commitments.

Christopher E. Kubasik: At our Investor day, we committed to $1 billion in L. A chex snacks gross cost savings by 2026 focused on optimizing our workforce infrastructure and supply chain.

Christopher E. Kubasik: The initiative will enable us to maintain our industry, leading margins, while investing in technologies tools and systems to support our customers and employees.

Christopher E. Kubasik: We are accelerating our L. A checks next activity in 'twenty 'twenty four and earlier. This month, we implemented a workforce reduction that will result in about 5% fewer people than when we began the year.

Christopher E. Kubasik: But these reductions we are focused on eliminating noncore processes streamlining our organizational structure to maximize efficiency and right sizing our physical footprint.

Christopher E. Kubasik: To summarize, our actions to date have put us ahead of our gross run rate savings target of $400 million by the end of the year. There's more work to do, and I am confident in our LHX Next leadership team and know that our collective efforts will yield the $1 billion savings target as previously committed. Operationally, we continue to make progress within our Aerojet Rocketdyne segment. Since closing the acquisition, we've implemented processes and tools that have helped reduce late deliveries by 20 percent.

Christopher E. Kubasik: To summarize our actions to date have put US ahead of our gross run rate savings target of 400 million by the end of the year Theres more work to do and I am confident in our L. A chex snacks leadership team and know that our collective efforts will yield the $1 billion savings target as previously committed.

Christopher E. Kubasik: Operationally, we continue to make progress within our Aerojet Rocketdyne segment since closing the acquisition, we've implemented processes and tools, which has helped reduce late deliveries by 20%.

Christopher E. Kubasik: We've returned multiple programs back to green, and we continue to work with our customers and the DoD to accelerate and improve deliveries of these critical products and to support future growth. Aligned with that growth, it was recently announced that we were selected to be the primary propulsion provider for the Missile Defense Agency's Next Generation Interceptor. We anticipate this to be a multi-billion dollar opportunity over the life of the program. Additionally, outside of operations, our finance team saw an opportunity to refinance some variable-rate debt and replace it with fixed-rate notes, saving 150 basis points.

Christopher E. Kubasik: We've returned a multiple programs back to green and we continue to work with our customers and the D O D to accelerate and improve deliveries of these critical products and to support future growth.

Christopher E. Kubasik: Along with that growth. It was recently announced that we were selected to be the primary propulsion provider for the missile defense Agency's next generation interceptor we.

We anticipate this to be a multibillion dollar opportunity over the life of the program.

Outside of operations, our finance teams saw an opportunity to refinance some variable rate debt and replace it with fixed rate notes saving 150 basis points on.

Christopher E. Kubasik: On capital deployment, we increased our dividend for the 23rd consecutive year, and we were able to get back into the share repurchase market in Q1, executing about half of the 2024 share repurchase target. We expect about $1 billion in gross proceeds from the previously announced divestitures, which will largely be used to reduce our leverage below our 3.0 target ratio. We remain focused on achieving the financial framework we laid out at Investor Day, and our first quarter results are a solid step forward towards delivering on our commitment. I'll now turn it over to Ken to provide additional perspective.

Christopher E. Kubasik: On capital deployment, we increased our dividend for the 23rd consecutive year, and we were able to get back into the share repurchase market in Q1 executing about half of the 'twenty 'twenty four share repurchase target.

Christopher E. Kubasik: We expect about 1 billion in gross proceeds from the previously announced divestitures, which will largely be used to reduce our leverage below our 3.0 target ratio.

Christopher E. Kubasik: We remain focused on achieving the financial framework, we laid out at Investor day in our first quarter results are a solid step forward towards delivering on our commitments.

Christopher E. Kubasik: I'll now turn it over to Ken to provide additional perspective.

Kenneth L. Bedingfield: Thanks, Chris. Let's start with consolidated results for the quarter. We reported solid bookings of $5.5 billion, including over $900 million for SDA Tracking Tronch 2. Nearly $150 million for U.S. Marine Corps and SOCOM handheld tactical radios, and an international award for a NATO country for missionized business jets that leverage our domestic ISR capabilities.

Kenneth L. Bedingfield: Thanks, Chris let's start with consolidated results for the quarter.

Kenneth L. Bedingfield: We reported solid bookings of $5 5 billion, including over 900 million for SDA tracking tranche two.

Kenneth L. Bedingfield: Nearly $150 million for U S Marine Corps, and so calm handheld tactical radios and an international award for a NATO country for Missionize business Jets that leverages, our domestic ISR capabilities.

Kenneth L. Bedingfield: Backlog remains at over $32 billion and supports margin expansion opportunities as we move forward given operational improvements and recent bidding disappointments. Revenue grew 17% and 5% organically, with growth in three of our four segments. However, revenue at IMS reflects aircraft procurements in Q1 2023, resulting in lower sales in Q1 2024.

Kenneth L. Bedingfield: Backlog remains at over 32 billion and supports margin expansion opportunity as we move forward given operational improvements and recent recent bidding discipline.

Kenneth L. Bedingfield: Revenue grew 17% and 5% organically with growth in three of our four segments.

Kenneth L. Bedingfield: Revenue at IMS reflects air aircraft procurements in Q1, 'twenty three resulting in lower sales in Q1 'twenty 'twenty four.

Kenneth L. Bedingfield: As Chris mentioned, operating margins expanded to 15.1%, up 80 basis points from improved operational and program performance, while also starting to see the benefits of LHX Next. EPS grew 7% to $3.06 per share, primarily from segment operating margin performance. Partially offset by higher interest expense and lower pension income. However, on a pension-adjusted basis, first-quarter EPS was up over 10%. Pre-cash was an outflow of $156 million, as first quarter cash flows are typically the lowest of the year.

Kenneth L. Bedingfield: As Chris mentioned operating margins expanded to 15, 1% up 80 basis points from improved operational and program performance. While also starting to see the benefits of L. E checks next.

Kenneth L. Bedingfield: E. P. S grew 7% to $3.06 per share primarily from segment operating margin performance, partially offset by higher interest expense and lower pension income.

Kenneth L. Bedingfield: On a pension adjusted basis first quarter EPS was up over 10%.

Kenneth L. Bedingfield: Free cash was an outflow of $156 million as first quarter cash flows are typically the lowest of the year.

Kenneth L. Bedingfield: As you will recall, we Derisk 2024, our cash taxes at the end of 'twenty, three and we remain confident in delivering free cash flow growth this year to $2.2 billion.

Kenneth L. Bedingfield: As you will recall, we de-risked 2024 cash taxes at the end of 2023, and we remain confident in delivering free cash flow growth this year to $2.2 billion. I'd now like to turn to some segment details for the quarter. I highlighted earlier that revenue grew 17% from the acquisition of Aerojet Rocketdyne and organic growth in our SAS and CS segments as we continue to see strong demand for our space systems and tactical communications business.

Speaker Change: I'd now like to turn to some segment details for the quarter.

Speaker Change: I highlighted earlier that revenue grew 17% from the acquisition of Aerojet Rocketdyne and organic growth in our SaaS and <unk> segments. As we continue to see strong demand for space systems and tactical communications businesses.

Speaker Change: On margins, we drove operational improvements throughout each of our four segments N.

Speaker Change: In SaaS, we are making progress on development programs.

Speaker Change: The recent launch of five L. Three Harris missile tracking satellites as part of the S. T. A tracking tracks zero and H B T. S S programs.

Kenneth L. Bedingfield: On margins, we drove operational improvements throughout each of our four segments. In SAS, we are making progress on development programs, including the recent launch of five L3Harris missile tracking satellites as part of the SDA Tracking Tronch Zero and HBTSS programs.

Speaker Change: These space investments in risk largely behind US we are beginning to realize the benefits of the new growth areas and maturing processes as we move forward.

Speaker Change: These efficiencies were a contributing factor and expanding SaaS margins by 100 basis points in the quarter.

Kenneth L. Bedingfield: With these space investments and risk largely behind us, we are beginning to realize the benefits of the new growth areas and maturing processes as we move forward. These efficiencies were a contributing factor in expanding SAS margins by 100 basis points in the quarter.

Speaker Change: We made progress on program performance, resulting in a $75 million improvement in net EAC is versus the first quarter of 2023.

Speaker Change: These were driven by improvements in all segments as our focus on operational rigor continues to pay dividends.

Kenneth L. Bedingfield: We made progress on program performance, resulting in a $75 million improvement in net EACs versus the first quarter of 2023. This was driven by improvements in all segments as our focus on operational rigor continues to pay dividends. This was most prominent in our CS segment, where the integrated vision system sector saw stronger results. The Tactical Data Links business continues to perform well as we realize synergies benefits of a consolidated business within our broadband communications sector and in tactical communications, which drove solid results with an increased level of lower-margin DoD deliveries.

Speaker Change: This was most prominent in our CS segment, where the integrated vision systems sector saw stronger results.

Tactical data links business continues to perform well as we realized synergy benefits of a consolidated business within our broadband communications sector.

Speaker Change: And in tactical Communications.

Speaker Change: Which drove solid results with an increased level of lower margin D. O D deliveries, we anticipate it will continue through the first half of the year.

Speaker Change: On capital allocation. Our plan remains the same we will continue to focus on deleveraging the balance sheet before we look at opportunities to accelerated share repurchase.

Speaker Change: Beyond offsetting dilution.

Speaker Change: During the first quarter, we returned over $450 million of shell shareholders through dividends and share repurchases.

Kenneth L. Bedingfield: We anticipate it will continue through the first half of the year. On capital allocation, our plan remains the same. We will continue to focus on deleveraging the balance sheet before we look at opportunities to accelerate share repurchase. Beyond Offsetting Dilution

Speaker Change: Moving onto 2024 guidance, we are tightening our revenue range.

Speaker Change: Of 28 billion to $21 3 billion, while we reaffirm our free cash flow commitment of $2 2 billion.

Kenneth L. Bedingfield: During the first quarter, we returned over $450 million to shareholders through dividends and share repurchases. Moving on to 2024 guidance, We are tightening our revenue range of $20.8 billion to $21.3 billion while we reaffirm our free cash flow commitment of $2.2 billion. Additionally, we are increasing total company margin guidance for the year to greater than 15% versus prior guidance of approximately 15%. This increase is most notable in SAS, where we now expect margins of approximately 12%.

Speaker Change: We are increasing total company margin guidance for the year to greater than 15%.

Speaker Change: Prior guidance of approximately 15%.

Speaker Change: This increase was most notable in S. A S where we now expect margins of approximately 12%.

Speaker Change: Up from prior guidance of mid to high 11.

Speaker Change: Outside of operations. We are also updating our guidance for pension income at.

Speaker Change: At the end of last year, we combined the acquired Aerojet.

Speaker Change: Aerojet rocketdyne pension assets with our own.

Speaker Change: Our actuarial update as more positive than our initial outlook. So we have updated those figures accordingly.

Speaker Change: Lastly on guidance, we are increasing our earnings guidance to a range of $12.70 to $13 five per share up from prior guidance of $12.40 to $12.80.

Kenneth L. Bedingfield: Up from prior guidance of mid to high 11. Outside of operations, we are also updating our guidance for pension income. At the end of last year, we combined the acquired Aerojet Rocketdyne pension assets with our own.

Speaker Change: Yeah.

Speaker Change: From a modeling perspective, I would continue to point out that our CS segment will have a heavier D O D tactical mix in the first half that is less margin opportunity than international programs.

Kenneth L. Bedingfield: Our AxforAIL update is more positive than our initial outlook, so we have updated those figures accordingly. Lastly, on guidance, we are increasing our earnings guidance to a range of $12.70 to $13.05 per share, up from prior guidance of $12.40 to $13.80. From a modeling perspective, I would continue to point out that our CS segment will have a heavier DoD tactical mix in the first half, that has less margin opportunity than international

Speaker Change: Interest expense will also remain elevated in the second quarter.

Speaker Change: Both trends should reverse as we make our way into the second half of the year.

Speaker Change: Along with a second half weighted free cash flow profile.

Speaker Change: Overall, a good start to 2024, and we remain focused on executing to deliver on our commitments to our customers and our shareholders.

Speaker Change: With that let's open the line for questions Rob.

Rob: Thank you well now be conducting a question and answer session.

Rob: Interest of time, we ask you please limit yourselves to one single part question.

If you'd like to ask a question. Please press star one from your telephone keypad, a confirmation tone will indicate your line is in the question queue.

Kenneth L. Bedingfield: Interest expense will also remain elevated in the second quarter. Both trends should reverse as we make our way into the second half of the year, along with the second half weighted free cash flow profile. Overall, a good start to 2024. And we remain focused on executing to deliver on commitments to our customers and our shareholders. With that, let's open the line for questions. Rob.

Rob: You May press star two if he like to move your question from the queue.

Rob: Consistent city using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Rob: One moment, please for the call for questions.

Rob: Thank you and our first question is from Noah <unk> with Goldman Sachs. Please proceed with your question.

Noah: Hey, good morning, everyone.

Noah: Hey, good morning Noah.

Noah: Hey, Chris I wanted to ask you do you have the the trusted disruptor strategy and you've talked about you know trying to pry more in.

Operator: Thank you. We'll now be conducting a question and answer session. In the interest of time, we ask that you please limit yourselves to one single-part question.

Speaker Change: Kind of.

Noah: Growing the profile on the sizing in the sector.

Noah: And that's been working to a degree.

Noah: We're seeing you know now that we're seeing I think some new entrants in the space try the same thing and maybe have a little more success than they've had in the past.

Operator: If you'd like to ask a question, please press star 1 on your telephone keypad, and a confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. And our first question is from Noah Poponak with Goldman Sachs.

Speaker Change: How how do you think about that I mean does that crowd that effort for you or is the pie big enough for.

Speaker Change: Multiple companies to do that and then Ken just just one clarification on the only checks next will you will all of that would be adjusted out of earnings and is all of that cash or some of that non cash. Thank you.

Alright, Hey, Noah Thanks, Thanks for the question.

Noah: Yeah, I think our our strategy is working as I sat in the portfolio is well aligned.

Noah Poponak: Hey, Chris, I wanted to ask you, you have the trusted disruptor strategy, and you've talked about trying to prime more and kind of growing the profile and the size in the sector, and that's been working to a degree. Now we're seeing, you know, now that we're seeing, I think, some new entrants in the space try the same thing and maybe have a little more success than they've had in the past

Noah: To the Pi between the supplemental in the fiscal year 'twenty for budget, we're well over $900 billion. So I think there is.

Noah: You know plenty of plenty of D O D funding relative to the new entrants, which sometimes I like to think of us as one since we're five years old but.

Noah: I know, where you're going with your question we've taken the approach to a team and work collaboratively collaboratively with these new new entrants.

Noah Poponak: How do you think about that? I mean, does that crowd that effort for you? Or is the pie big enough for multiple companies to do that? And then, Ken, just one clarification on the LHX next. Will all of that be adjusted out of earnings? And is all of that cash, or some of that non-cash? Thank you.

Noah: At the highest are at the highest levels. So a lot of the new entrants tend to be a little more a software focused I think are the traditional including ourselves are a little more hardware focused so we're working collaboratively there's been some recent awards.

Christopher E. Kubasik: All right. Hey, Noah, thanks for the question.

Noah: In Q1, where we are actually a subcontractor to a new entrant that want a significant program and sometimes they they work under us so.

Christopher E. Kubasik: Yeah, I think our strategy is working, as I said, and the portfolio is well aligned. Relative to the pie between the supplemental and the fiscal year 24 budget, we're well over $900 billion. So I think there's, You know, plenty of DoD funding relative to the new entrance, which sometimes I like to think of us as one since we're five years old. But I know where you're going with your question.

Noah: I would say, we're embracing them and working collaboratively with them and of course Ive talked about are our shield investments in the past and in working with those venture capital companies, who are much smaller but also have great technology. So I think it's working and that's been our approach yeah yeah.

Noah: Yeah, I know that from an L. E checks next perspective, we are adjusting out the implementation costs.

Christopher E. Kubasik: We've taken the approach of teamwork and working collaboratively with these new new entrances at the highest level. So a lot of the new entrances tend to be a little more software focused. I think the traditional.

Noah: Of the program.

Noah: You know certainly than trying to leverage the benefits of ballet chex snacks in that business as we.

Christopher E. Kubasik: Q1 where we are actually a subcontractor to a new entrant that won a significant program, and sometimes they work under us. So I would say we're embracing them and working collaboratively with them. And of course, I've talked about our shield investments in the past and working with those venture capital companies that we've been working with for a long time. So I think it's working, and that's been our approach. [inaudible]

Noah: We talked about you know what that target looks like for 2024 and the businesses are all working hard to.

Noah: Operationalize that.

Noah: And you know reflect that benefit in their performance and I think youre starting to see that here in the first quarter and then from a cash perspective were primarily just adjusting out.

The cash severance costs related to the to the program and you'll see all of that reflected in the schedules to the earnings release.

Speaker Change: Yeah look we've gotten the the feedback are relative to our.

Kenneth L. Bedingfield: Yeah, Noah, from an LHX Next perspective, we are adjusting out the implementation costs of the program, and you know, certainly then trying to leverage the benefits of LHX Next in the businesses. We talked about, you know, what that target looked like for 2024, and businesses are off, you know, working hard to, you know, operationalize that and, you know, reflect that benefit in their performance. And I think you're starting to see that here in the first quarter. And then from a cash perspective, we're primarily just adjusting out the cash severance costs related to the program. And you'll see all that reflected in the schedules to the earnings release.

Speaker Change: Our disclosures so under Ken's leadership, where we're trying to cut back on these one time non-GAAP adjustments and be much more transparent. So I think it will be all laid out clear for you to to analyze.

Speaker Change: Our next question comes from the line of Pizza Kubicki with Olympic Global. Please proceed with your question.

Christopher E. Kubasik: Hey, good morning, guys.

Christopher E. Kubasik:

Christopher E. Kubasik: Hey, Chris how does the win on N G. I would with your partner or how does that impact your outlook for Aerojet and and also considering as you mentioned the fiscal 'twenty for supplemental.

Christopher E. Kubasik: Get more bullish about your ability to hit that $26 billion target with 23 billion I should say.

Christopher E. Kubasik: 23, and 26 [laughter] Yep, absolutely no.

Operator: Yeah, look, we've gotten the feedback relative to our disclosures, so under Ken's leadership, we're trying to cut back. , , , , , , , , , Our next question comes from the line of Pete Skibitski with Olympic Global. Pleased to see you with your question. Good morning, guys. Good morning.

Christopher E. Kubasik: N G I.

Christopher E. Kubasik: Which is designed to protect the U S against the evolving long range ballistic missile threats as a huge a huge win for for the OEM. We were a merchant supplier is as I've talked about before on on both teams. So this this definitely gives us a tailwind.

Operator: Our next question comes from the line of Pete Skibitski with Olympic Global. I'm pleased to see you with your question.

Christopher E. Kubasik: And when we looked I went back and looked at our deal model. This really was not factored in when we made the acquisition of Aerojet Rocketdyne, so from that perspective, it's.

Christopher E. Kubasik: 23 and 26. Yeah, absolutely. NGI, which is designed to protect the US against evolving long-range ballistic missile threats, is a huge, huge win for the OEM. We were a merchant supplier, as I've talked about before on both teams. So this definitely gives us a tailwind.

Christopher E. Kubasik: Be accretive at least to our own internal internal goals.

Christopher E. Kubasik: Aerojet Rocketdyne, a great a great technology, especially with the the large solid rocket motors, but the quantities are still to be determined it's going to start as a development program.

Christopher E. Kubasik: And discussions obviously with with the Prime we haven't actually been awarded and sign the contracts yet, but as you saw on the media we were selected as a propulsion provider. So it's very exciting and.

Christopher E. Kubasik: When we looked, I went back and looked at our deal model, this really was not factored in, you know, when we made the acquisition of Aerojet Rocketdyne. So from that perspective, it's, it's going to be accretive, at least to our own internal goals. You know, Aerojet Rocketdyne has great, great technology, especially with the large solid rocket motors. The quantities are still to be determined. It's going to start as a development program.

Christopher E. Kubasik: And I think it'll be a slower ramp as you would imagine but you know 25 26 time frame I think we'll start to see the revenue hit our financials.

Christopher E. Kubasik: Our next question comes from the line of Kristine <unk> with Morgan Stanley. Please proceed with your question.

Kristine: Good morning, everyone.

Kristine: Hey, Christine.

Christopher E. Kubasik: We're in discussions, obviously, with the prime; we haven't actually been awarded and signed a contract yet. But, as you saw in the media, we were selected as a propulsion provider. So it's very exciting. And, you know, again, I think there'll be a slower ramp, as you would imagine, but, you know, in the 2526 timeframe, I think we'll start to see revenue hit our financials. Our next question comes from the line of Kristine Liwag with Morgan Stanley. Let's just hear your question. Hey, good morning, everyone. Hey, Kristine.

Kristine: You know it sounds you formed a new business Review Committee back in December can you give us any color on how progress has been what are the key areas that has come into focus.

Kristine: And how this compares to your you know Ali Chex snacks, <unk> initiatives as well do they overlap.

Christopher E. Kubasik: Yeah, Kristina it's Chris.

Christopher E. Kubasik: We we we did set up a the AD hoc business Review Committee of the board comprised of a four board members as you saw our we've been meeting a couple of times a month for a few hours each and we brought through a variety of topics that you know have been laid out in the charter that we filed in the 8-K.

Operator: Our next question comes from the line of Kristine Liwag with Morgan Stanley. Hey, good morning, everyone.

Christopher E. Kubasik: Yeah, Kristine, it's Chris. We did set up the Ad Hoc Business Review Committee of the board, comprised of four board members, as you saw. We've been meeting a couple times a month for a few hours each, and we brought through a variety of topics that, you know, have been laid out in the charter that we filed in the 8k. I would say, you know, from anything relating to operations, we've looked at the programs; they reviewed the program, review process, the bidding process, the LHX Next strategy and goals. They've reviewed the portfolio or capital deployment strategy. And we're just kind of checking through the items in the charter. Some topics, you know, are one meeting; some topics are two meetings.

Christopher E. Kubasik: Say, a you know from anything from operations, we've looked at the programs. They reviewed the program.

Christopher E. Kubasik: Due process the bidding process.

Christopher E. Kubasik: You know the alloy chex snacks strategy and goals they've reviewed the portfolio or capital deployment strategy and we're just kind of checking through the the items in the charter. Some topics you know our one meeting some topics or two meetings I feel like we're about halfway through the the process, maybe maybe a little more.

Christopher E. Kubasik: And then probably middle of the year or so are the BRC will will report out to our board of directors with observations and recommendations and findings. So I'd say, it's been a very collaborative process I think it's a it's been good for the for the company and it's a good way to Orient some new <unk>.

Christopher E. Kubasik: I feel like we're about halfway through the process, maybe a little more. And then probably in the middle of the year or so, the BRC will report out to our board of directors with observations, recommendations, and findings. So I'd say it's been a very collaborative process. I think it's been good for the company and it's a good way to orient some new board members quickly about the company and what we're trying to accomplish.

Christopher E. Kubasik: Members quickly about the company and what we're trying to accomplish so.

Christopher E. Kubasik: I'd say, all all is going well to this point so.

Christopher E. Kubasik: More to come.

Speaker Change: Thank you.

Speaker Change: The next question is from the line of Kevin Parsons with UBS. Please proceed with your question.

Kevin Parsons: Thanks, Good morning.

Kevin Parsons: Good morning.

Operator: I'd say all is going well to this point. More to come. Thank you. Thank you. Thank you. Thank you. The next question is from the line of Gavin Parsons with UBS. Please proceed with your question. Thanks. Good morning.

Kevin Parsons: I wanted to ask on the nearly 100 basis points of year over year margin expansion, if there's a way to parse that out between the drivers I know a lot of them go hand in hand, but how much of that is next versus EAC is replacing for inflation mix. So I'm just if there's a way to think about what the drivers were in buckets.

Operator: The next question is from the line of Gavin Parsons with UBS. Please proceed with your question.

Kenneth L. Bedingfield: Yeah, hey Gavin, it's Ken. I would say that, you know, we're seeing improvement across the board. I would say, you know, we're seeing some mixed benefits in terms of, as Chris mentioned, kind of moving out of some of the development phase of contracts and into some of the more mature phase. From a mixed perspective, you know, we are seeing some of the areas of the business that are, you know, higher mix of cost plus growing.

Kevin Parsons: Yeah, Hey, Gavin it's Ken.

Kenneth L. Bedingfield: I would say that are you know, we're seeing improvement you know in a kind of a high level buckets across the board I would say.

We're seeing some mix benefits in terms of as Chris mentioned kind of moving out of some of the development.

Kenneth L. Bedingfield: Phase of contracts and into some of the more mature phase.

Kenneth L. Bedingfield: From a mix perspective, we are seeing some of the areas of the business that are.

Kenneth L. Bedingfield: You know higher mix of cost plus growing so as an example.

Kenneth L. Bedingfield: So as an example, space within SAS was a strong grower, and, you know, has a bit of a higher cost plus mix. So that kind of works the other way a little bit. But we are seeing, you know, some of the discipline bidding start to come through in terms of, You know, confidence in our ability to perform as well as price discipline, and then, you know, just performing on our programs, and certainly LHXNext contributing, and I wouldn't want to put numbers on each of the individual buckets, but largely, you know, as we think about kind of how you bridge from last year to this year, for the most part, each of those, each of those major buckets are contributing.

Kenneth L. Bedingfield: Space with N S. A S was a strong grower.

Kenneth L. Bedingfield: And as a bit of a higher cost plus mix, so that kind of works the other way a little bit, but we are seeing you know some of the disciplined bidding start to come through in terms of.

Kenneth L. Bedingfield: Confidence in our ability to perform as well as price discipline and then you know just performing on our programs and certainly.

Kenneth L. Bedingfield: Chex snacks, contributing and I wouldn't want to put numbers on each of the individual buckets, but largely.

Kenneth L. Bedingfield: If we think about kind of how you bridge from last year to this year for the most part each of those each of those major buckets are are contributing.

Operator: Thank you. The next question is from the line of Peter Arment with Baird. Please proceed with your question.

Speaker Change: Thank you.

Speaker Change: Question is from the line of Peter Arment with Baird. Please proceed with your question.

Christopher E. Kubasik: Hey, good morning Chris and Ken. Chris, you've made a lot of progress already on starting on LHX next. And, you know, I think about a third of it is tied to your gross savings targets tied to labor reductions. You recently made an announcement there. Maybe if you could just give us a little more color on how you think things will evolve on what's optimal for LHX and then in relation to all the actions that you've been taking. Also on portfolio shaping, just you, any future, you know, kind of thoughts that you've had on further

Peter J. Arment: Hey, good morning, Chris and Ken.

Peter J. Arment: Chris you can you've made a lot of progress already on starting on analytics next and you know I think about a third of it is tied to gross savings target to start that labor reductions you recently made an announcement there maybe if you could just give us a little more color.

Speaker Change: And how you think things will evolve on what's optimal for checks and then in related to all the actions that you've been taking also on portfolio shaping just in.

Speaker Change: Terms of any future you know kind of our thoughts that you've had on further shaping the portfolio. Thanks.

Christopher E. Kubasik: Yeah, no, thanks. Thanks, Peter. So yeah, the workforce, you know, was probably the quick hitter for what we need to do for LHX next, and as you said, that got us about a third of the way there. The next part's going to be a little more timely and a little more complicated, and, you know, the facilities, I think, are going to be a key part of it. Looking at the infrastructure, you know, we have a goal of getting from 275 facilities down to 200.

Speaker Change: Yeah no. Thanks, Thanks, Peter so yeah the workforce.

It was probably the.

Speaker Change: Quick cater for for what we need need to do for L. A check snacks and as you said that got us about a third of the way there. The next part is going to be a little little more timely and a little more complicated than you know the facilities I think are going to be a key part of it looking at the infrastructure we have.

Our goal of getting it from 275 facilities down to 200, and we have about seven or eight that we've identified that that will start the process here in the second quarter.

Christopher E. Kubasik: We have about seven or eight that we've identified that will start the process here in the second quarter, you know, so they'll have a little bit of a cost to move and relocate and consolidate, but these would be smaller entities that, you know, the business case is better to consolidate into a larger facility. We're continuing to reduce our ERP systems.

Speaker Change: You know so that'll have a little bit of cost to move and relocate and consolidate but these would be smaller smaller entities.

Speaker Change: That you know the business cases, better to consolidate into a larger larger facility.

Speaker Change: To reduce our ERP systems, we've invested in some technology called the unified data later layer to get us access by laying on top of all of our systems to be able to get data more more quickly and then of course, we've talked about our initiatives and I T. Ultimately getting believe it or not from 98 data centers.

Christopher E. Kubasik: We've invested in some technology called the Unified Data Layer to get us access by layering it on top of all of our systems to be able to get data more quickly, and then, of course, we talked about the initiatives in IT ultimately getting, believe it or not, from 98 data centers (I'm sorry, 85 data centers down to two). So that's the infrastructure. That's going to take some time, and that's why it's going to lead into 2025 and 2026.

I'm, sorry, 85 data centers down to two so that's the infrastructure that's going to take some time and that's why it's going to bleed into 2025 and 2026, we've already kicked off with the indirect procurement, we've effectively outsource that taken advantage of the buying power of that enterprise. So that's both a combination of <unk>.

Christopher E. Kubasik: We've already kicked off with indirect procurement. We've effectively outsourced that, and taken advantage of the buying power of that enterprise. So that's both a combination of price and quantity. So we're tracking to that. And then ultimately, we call it the supply chain, but it's really beyond the supply chain. It's the integration of all the functions that are critical to our products, with the overall goal of reducing the cost of our products

Speaker Change: Rice and quantity, so where we're tracking to that and then ultimately we called it the supply chain, but it's really beyond the slot supply chain is the integration of all the functions that are critical to our products, but the overall goal reducing them.

Cost of our products. So there's an engineering component, there's clearly a supply chain component contracting and such so that process is ongoing but that's that's where we're going to get to next.

Speaker Change: 600.

Christopher E. Kubasik: So there's an engineering component. There's clearly a supply chain component, contracting, and such. So that process is ongoing, but that's where we're going to get the next 600 million or so of savings. To your question on portfolio shaping, as you know, we have two that are in process. I'll just give you an update on that.

Speaker Change: A million or so of savings.

Speaker Change: To your question on portfolio shaping as you know we have two that are in process I'll just give you an update there the antenna business, which we announced a couple of hundred million dollars.

Speaker Change: Its tracking to close.

Speaker Change: The middle of this year second quarter to be specific and then our commercial aviation is going to be more in the second half of the year that'll give us the $1 billion of proceeds relative to the rest of the portfolio.

Christopher E. Kubasik: The antenna business, which we announced, a couple hundred million dollars, that's tracking to close in the middle of this year, second quarter to be specific. And then our commercial aviation is going to be more in the second half of the year. That'll give us a billion dollars in proceeds. Relative to the rest of the portfolio, you know, we're just taking a hard look at that. You know, we're going to be able to hit our leverage ratio based on these two, and, you know, to the extent we can get a good price for what we've identified as non-core, we'll do it, but too many of the offers are coming in low, and people think we're desperate to sell, and I can assure you we're not, so we need to get better valuations before we proceed with other transactions.

Speaker Change: We're just taking a hard look at that.

We're gonna be able to hit our leverage ratio based on all these too and you know to extent, we can get a good price for what we've identified as noncore, we'll do it but too many too.

Too many of the offers are coming in low and people think we're desperate to sell and I can assure you were not so we need to get a better valuations before we proceed on other transactions otherwise, we'll keep it around the business and go forward from there.

Speaker Change: Our next question comes from the line of Jason Gursky with Citigroup. Please proceed with your question.

Jason Michael Gursky: Yes, good morning.

Jason Michael Gursky: Hey, Chris would you.

Jason Michael Gursky: Spend a few minutes kind of walking around the communications business and maybe give us some updated thoughts since you.

Jason Michael Gursky: Last reported out on the.

Jason Michael Gursky: The funding environment. We've had you know fiscal 'twenty four they've got past twenty-five they got introduced we've had some.

Jason Michael Gursky: Supplemental as.

Operator: Our next question comes from the line of Jason Gursky with Citigroup. Please answer your question.

Jason Michael Gursky: As well.

Jason Michael Gursky: And are you just kind of give us your take on how this plays out over the next.

Jason Michael Gursky: Good morning. Hey, Chris, would you spend a few minutes kind of walking around the communications business and maybe give us some updated thoughts since you, you know, last reported out on the funding environment we've had, you know, fiscal 24 that got passed, 25 that got introduced, and we've had some Supplementals as well? And just kind of give us your take on how this plays out over the next couple of years and maybe offer up some comments on link 16 and, you know, the expected refresh of all that hardware when that kind of hits. What have we learned here over the last couple of three months about the communications business? Thanks. Yeah, thanks.

Jason Michael Gursky: Couple of years, and maybe offer up some some comments on the link 16, and you know the expected.

Jason Michael Gursky: Refresh of all of that hardware when that kind of hits just what do we learned here over the last couple of three months on the communications business.

Speaker Change: Yeah. Thanks, Thanks, Jay So first let me start with link link 16, you know again, we have a.

Speaker Change: Footprint on 20000 platforms and then there's variations of link 16 and in other data links that we've developed that are going to be able to go into those platforms or footprints.

Speaker Change: Think we're starting to see that you know our ultimate goal was to get link 16 into space.

Christopher E. Kubasik: Yeah, thanks. Thanks, Jason.

Christopher E. Kubasik: Let me start with link 16. You know, again, we have a... footprint on 20,000 platforms, and then there's variations of Link 16 and other data links that we've developed that are going to be able to go into those platforms or footprints. So I think we're starting to see that. Our ultimate goal was to get Link 16 into space. I can tell you that for the SDA transport opportunities that are coming up, our team is going to be a merchant supplier.

Speaker Change: I can tell you for the S. T a transport opportunities that are coming up.

Our our team is going to be a merchant supplier and as of now it looks like we're gonna be on all the teams providing a link 16 type capability in space. So we're excited about are excited about that relative to the.

Speaker Change: Communication systems.

Speaker Change: To reiterate the opportunity that we won in Taiwan $150 million four for networking.

Christopher E. Kubasik: And as of now, it looks like we're going to be on all the teams providing link 16 type capability in space. So we're excited about that. Relative to communication systems, I want to reiterate the opportunity that we won in Taiwan, $150 million for networking, which was a cross-company win but led by our communications segment. So that's a big deal for us. And as I mentioned, it really supports the CJADC2 initiative that our country has been talking about for quite some time.

Speaker Change: Which was a cross company.

Speaker Change: Win but led by our communications segment. So that that's that's a big deal for us and as I mentioned it really supports the C. Jadson two initiatives that our country has been talking about for quite some time.

Speaker Change: Relative to the radios I mean this is just just absolute good news I know, we've been talking about our modernization not only here in the U S but globally.

Speaker Change: As I mentioned, we have six Fms Fms cases that are currently going through the process through the system in Europe.

Speaker Change: You know the backlog is gonna be record backlog, even in Q1, we were able to get the the marine and so com radio orders booked.

Christopher E. Kubasik: Relative to the radios, I mean, this is just absolute good news, I know. We've been talking about modernization, not only here in the U.S. but globally, and as I mentioned, we have six FMF cases that are currently going through the process, the system in Europe.

Speaker Change: And you know there is a certain capacity and an ability.

Speaker Change: You know to deliver out of our Rochester facility and it really comes to be honest how quickly we can get these.

Speaker Change: Supplemental funds under contract and are approved and delivered.

Christopher E. Kubasik: You know, the backlog is going to be a record backlog. Even in Q1, we were able to get the Marine Corps and the SOCOM radio orders booked. Supplemental funds under contract and approved and delivered, and you know, with our trusted disruptor strategy, our business model actually allows us to potentially deliver radios within a week of getting a contract, depending on the configuration in the country. The way I look at it, we have high confidence in the guidance we've given.

Speaker Change: And you know with our trusted disruptor strategy, our business model actually allows us to potentially deliver radios within a week of getting the contract depending on the configuration in the country. So.

Speaker Change: The way I look at it we have high confidence in the guidance we've given.

Speaker Change: We clearly have the second half.

Speaker Change: Ramp up, but which countries will get which radios will really be a be a factor of when the the.

Speaker Change: Funding turns into a contract and those that don't get signed and delivered in 'twenty 'twenty four will clearly be 2025, so just feel better about the business in a huge way and and again the products are in theater being tested daily.

Christopher E. Kubasik: We clearly have the second half ramped up, but which countries will get which radios will really be a factor when the funding turns into a contract. And those that don't get signed and delivered in 2024 will clearly be in 2025. So just feel better about the business in a huge way. And again, the products are in theater being tested daily, and they're working and exceeding expectations, and, you know, the whole focus on resilient communications is paying off.

Speaker Change: And they're working and exceeding expectation and you know the whole focus on resilient communications.

Speaker Change: This is paying off.

Speaker Change: Our next question is from the line of Ken Herbert with RBC Capital markets. Please proceed with your question.

Kenneth George Herbert: Yeah, Hi, good morning.

Kenneth George Herbert: Good morning.

Kenneth George Herbert: Hey, Chris and Ken Hey, maybe.

Kenneth George Herbert: Maybe just a two part question first on the on the Communications segment.

Operator: Our next question is from the line of Ken Herbert with RBC Capital Markets. I'm pleased to see you with your question.

You, obviously did 24% margins in the first quarter you know the the guidance implies.

Kenneth George Herbert: Some some slight ramp in the second half, but it clearly sounds like with international mix and maybe a little bit of a depressed second quarter there could be some upside to that can you just talk about if there's any anything one time in this segment in the first quarter and any puts and takes there.

Kenneth George Herbert: Hey Chris and Ken, Hey, um, maybe just a two part question. First, on the communication segment, you obviously did 24% margins in the first quarter. The guidance implies some slight ramp-up in the second half, but it clearly sounds like with the international mix and maybe a little bit of a depressed second quarter, there could be some upside to that. Can you just talk about if there's anything one time in the segment in the first quarter and any puts and takes there that we should think about as we think about the second quarter and then just or the second half of the year and then, obviously, international seems to be a growing business, maybe faster than the U.S. Can you just talk about, longer term, the margin impact of the international opportunity within the CS segment, but then more broadly? Thank you.

Kenneth George Herbert: You should think about as we think about the second quarter and then just on the second half of the year and then just at a higher level, obviously international seems to be a growing business maybe faster than the US Can you just talk about longer term the margin impact of the international opportunity within the <unk> segment, but then more broadly thank you.

Kenneth George Herbert: [laughter].

Speaker Change: Sure I'll take that one.

Speaker Change: So the first part of the question on CFS margins, we delivered 24% margin in the first quarter, which.

Speaker Change: Actually I think it was great performance by the team.

Speaker Change: And that does reflect a higher domestic mix there.

Kenneth L. Bedingfield: Sure, I'll take that one. So the first part of the question on CS margins, you know, we delivered 24% of a margin in the first quarter, which I think was a great performance by the CS team, and you know that does reflect a higher domestic mix. Then we saw late in 23, as well as a higher domestic mix than we expect to see in the second half of 24. We did guide, you know, a low to mid 24% margin for CS for 24.

Speaker Change: Then we saw late in 'twenty, three as well as a higher domestic mix and we expect to see in the second half of 'twenty. Four we did guide you know low to mid 24% margin for CFS for 'twenty four.

Speaker Change: And I think what we're trying to communicate is that we expect the domestic mix to be kind of consistent in the second quarter with the first quarter solid performance could yield similar results, but in driving that margin up to the low to mid 24% for the full year.

Kenneth L. Bedingfield: And I think what we're, you know, trying to communicate is that, you know, we expect the domestic mix to be kind of consistent in the second quarter with the first quarter, and solid performance could yield, you know, similar results. But in driving that margin up to the low to mid-24% for the full year, we are looking at some international opportunities to realize some additional margin benefits as we think about that kind of full year impact.

Speaker Change: We are looking at some international opportunities to realize some additional margin benefit that was as we think about that kind of a full year impact and I think so that's that's what we're trying to communicate on <unk> margins from Q1 and full year 'twenty for perspective.

Speaker Change: And then from the international side.

Speaker Change: Clearly as Chris talked about in his prepared remarks and in response to Jason's question.

Kenneth L. Bedingfield: And I think that's what we're trying to communicate on CS margins from a Q1 and full year 24 perspective. And then on the international side, you know, clearly, as Chris talked about in his prepared remarks and in the response to Jason's question, a lot of international opportunity in the CS segment. But as we look beyond that as well, we see international opportunities, you know, in particular at IMS, and, you know, certainly the other segments have international components to their business.

Speaker Change: A lot of international opportunity at certainly the SCS segment.

Speaker Change: But as we look beyond that as well, we see international opportunity in particular at IMS and.

Speaker Change: Certainly the other segments have international components to their business, we don't necessarily track.

Speaker Change: <unk> some of the ultimate end customer quite as closely and some of those but the international margins tend to be stronger across the board.

Kenneth L. Bedingfield: You know, we don't necessarily track some of the ultimate end customers quite as closely in some of those, but the international margins tend to be stronger across the board. In my remarks, I talked about an ISR program for a NATO country. We would expect that it would have strong margins as we, you know, again, think about how we make those deliveries to our international allies and our country's partners and, you know, recognize them.

Speaker Change: In my remarks, I talked about.

Speaker Change: ISR program for a NATO country.

Speaker Change: We would expect that would have strong margins as we you know again to think about how we make those deliveries to our international allies and our country's partners.

Speaker Change: And recognizing the.

Speaker Change: The different risks and challenges that come with those with those programs.

Speaker Change: That should you perform and we expect to be able to form will generate higher margins for the business. So we.

Kenneth L. Bedingfield: The different you know risks and challenges that come with those with those programs that that should you perform and we expect to be able to form will generate higher margins for the business so we do see that you know continuing to to move into the business I will comment you know see as clearly as the, The quickest turn segment, the shortest cycle segment in terms of ability to take international orders and turn it into sales. Just an example, that ISR program we talk about will be a multi-year program, and we'll see that move into the revenue over a bit more time. With that, I'll turn it to Chris for a few more comments. Yeah, Ken, just as a

Speaker Change: We do see that continuing to to move into the business I will comment. She is clearly is the.

Speaker Change: Kind of the quickest turn segment the shortest cycle segment in terms of ability to take international orders and turn it into sales. So just an example that ISR program, we talk about will be a multi year program and we'll see that kind of.

Speaker Change: Move into revenue over over a bit more time, but that I'll turn it to Chris for a few more comments, yes, Ken just as a reminder, we're we're in the low 20% of our revenue comes from international customers and part of our margin improvement strategy is to grow our international business and just as a reminder, about half of that is foreign.

Christopher E. Kubasik: Yeah, Ken, just as a reminder, we're in the low 20% of our revenue comes from international customers, and part of our margin improvement strategy is to grow our international business. And just as a reminder, about half of that is foreign military sales, which has margins consistent with the DOD work for the most part, and the other half is direct commercial sales, and that's where we tend to have the higher margins. But as Ken said, more international business is synonymous with higher margins, and that's where our

<unk> sales, which has margins consistent with the D. O D work for the most part and the other half is direct commercial sale and that's where we tend to have the higher margins, but as Kevin said more international is synonymous with higher margins and that's where our focus is the supplemental or a big step in the right direction.

Our next question is from the line of Gautam Khanna with TD count.

Gautam J. Khanna: With your question.

Gautam J. Khanna: Hi.

Gautam J. Khanna: Can you hear me guys.

Gautam J. Khanna: Yes, we can.

Gautam J. Khanna: Terrific. Thank you.

Operator: Our next question is from the line of Gautam Khanna with TVGallon. Please proceed with your question.

Speaker Change: I just had two quick questions first I was wondering if you could give us more granularity on the RF tactical backlog book to Bill trends, you mentioned something on <unk> com.

Gautam J. Khanna: Hi, can you hear me guys? Terrific. Hey, thanks.

Kenneth L. Bedingfield: I just have two quick questions. First, I was wondering if you could give us more granularity on the RF tactical backlog book to build trends. You mentioned something about SOCOM, and I wanted to just talk a little bit about the overall mix this year and perhaps next in that business. And then I had a question about IMS EACs, and if those have turned positive, and if not, you know, what's sort of still holding that segment back? with respect to the kind of The Profit Accruals. Thank you.

Speaker Change: You can just talk a little bit about the.

Speaker Change: Overall mix this year and perhaps next in that business and then I had a question on <unk>.

Speaker Change: IMS Ea's season, if those have turned positive and if not what sort of still holding that segment back.

With respect to kind of the.

Speaker Change: The profit accruals. Thank you.

Speaker Change: Yeah from an from a tactical radio perspective, I would say where.

Kenneth L. Bedingfield: Yeah, from an art perspective, I would say, you know, we're, you know, had a solid bookings order in the quarter, we've got a very solid backlog for that business at this point in time, you know, looking at a multi billion dollar backlog in that business. And for a pretty quick turn, you know, our shortest cycle business, that is a very robust backlog. At this point in time, so, you know, we're excited about the opportunities. I would say, you know, the Marine Corps and SOCOM opportunity is a great one as we continue to expand that partnership with that very important customer for the business. We were also down-selected for the Air Force Next Gen Survivor Radio, which is... A great opportunity for that business to expand into a new market as well.

Speaker Change: <unk> had a solid bookings order in the quarter.

Speaker Change: Got it.

Speaker Change: Very solid backlog for that business at this point in time.

Speaker Change: Now looking at a multibillion dollar backlog in that business and for a pretty quick turn our shortest cycle business that has a very robust backlog.

Speaker Change: At this point in time so.

Speaker Change: We're excited about the opportunities I would say.

Speaker Change: The Marine Corps and Silicon opportunity is a great. One as we continue to expand that partnership with that very important customer for the business and.

We were also down selected for the Air Force Nexgen Survivor radio, which is a great opportunity for for that business to expand into a new market as well.

Kenneth L. Bedingfield: And then, clearly, the supplemental equipment, as Chris mentioned, and the international opportunities. So, I think a huge opportunity in terms of really strong backlog in the tactical communications business. And, you know, as Chris mentioned, a great business model that enables them to kind of turn that factory pretty quick to deliver the radios to appropriate customers as needed based on, you know, critical, critical demand and critical needs on the battlefield.

Speaker Change: And then clearly the supplemental as Chris mentioned in the international opportunities. So I think a huge opportunity in terms of really strong backlog at the tactical communications business and it's.

Speaker Change: As Chris mentioned, a great business model enables them to.

Speaker Change: Kind of turning that factory pretty quick to deliver the radios to appropriate customers as needed based on.

Speaker Change: Critical critical demand and critical needs on the battlefield.

Kenneth L. Bedingfield: At IMS, in terms of, I think the question was about EACs. And I would say that, you know, as we talked about in the prepared remarks, every segment performed better from a net EAC perspective, and IMS was a part of that significantly better performance than Q1 23. IMS, you know, is our longest-cycle business and takes a while to, you know, kind of turn those those programs and the operations and get everything working through the system.

Speaker Change: At IMS.

Speaker Change: In terms of I think the question was about EAC is.

Speaker Change: And I would say that as we talked about it in the prepared remarks every segment performed better from a.

Speaker Change: Net EAC perspective.

IMS was a part of that is significantly better performance than Q1 'twenty three.

Speaker Change: As you know is our longest cycle business and it takes a while to.

Speaker Change: Kind of turn those those programs in the operations and get everything working through the system.

Kenneth L. Bedingfield: I think IMS had great performance in the first quarter at 11.4%, working towards the guidance that we put out there for IMS for full year 24. And strong performance on their programs, I think really starting to stabilize. Uh, both the operations in terms of, you know, rates, realizing some of the benefits of LHX Next, as well as all the hard work that the sectors within IMS are doing to deliver on their programs.

Speaker Change: I think IMS had great performance in the first quarter at our <unk>.

Speaker Change: Seven 4% working towards the guidance that we've put out there for IMS for full year 'twenty four.

Speaker Change: <unk>.

Speaker Change: Strong performance on their programs I think are really starting to stabilize.

Speaker Change: Both the operations in terms of rates realized in some of the benefits of ally Chex snacks as well as all of the hard work that the sectors within IMS segment are doing to to.

Speaker Change: To deliver on their programs. So we're really excited about.

Kenneth L. Bedingfield: So we're really excited about, you know, kind of the stabilization and the continued strong performance as we look out into the remaining quarters of 24. Our next question is from the line of Richard Safran with Seaport Research Partners. Please proceed with your question. Good morning. Chris, Ken, Mark, how are you doing? So I wanted to ask you something.

Speaker Change: Kind of a stabilization and a continued strong performance as you look out into the remaining quarters of 'twenty four.

Speaker Change: Our next question is from the line of Richard Safran with Seaport Research Partners. Please proceed with your question.

Richard Tobie Safran: Yeah. Good morning, Chris can Mark How're you doing.

Richard Tobie Safran: <unk>.

Richard Tobie Safran: So I wanted to to ask two things about stand and attack it.

Richard Tobie Safran: It was an opportunity you could it be prime and correct me if I'm wrong I think he decided to no bid.

Operator: Our next question is from the line of Richard Safran with Seaport Research Partners. Please proceed with your question.

Speaker Change: We're hearing a lot more about too much risk being pushed to industry. One of your competitors just talked about.

Christopher E. Kubasik: Yeah, thanks, Richard. I think I've been pretty consistent on our bidding strategy. We talk about the bidding discipline been referenced a few times. There are there's two things going on there.

Speaker Change: Adjusting for that in their bids. So I was curious about what your thinking is about bidding going forward and what's the next opportunity for you to be prime.

Speaker Change: Yeah. Thanks rich.

Speaker Change: I think I've been pretty consistent on the on our bidding strategy, we talk about the bidding discipline, it's been referenced a.

Christopher E. Kubasik: You know, a lot of people in this industry spend an inordinate amount of time and money trying to focus on a price to win strategy and hiring outside consultants. We kind of find that interesting, but irrelevant. So, you know, we've taken a different approach. What is our labor? What is our supply chain? What is our overhead? And what's a reasonable fee?

Speaker Change: A few times. There's this there's two things going on there you know a lot of people in this industry, sending an inordinate amount of time and money trying to focus on a price to win strategy and hiring outside consultants.

Speaker Change: We kind of find that interesting, but irrelevant. So you know we've taken a different approach what is our labor what is our supply chain what is our overhead and what's a reasonable fee, we add that up and that's the bid we put in and if its deemed too high we move on and you know if it's appropriate based on our past performance and capabilities, we book the <unk>.

Christopher E. Kubasik: We add that up, and that's the bid we put in. And if it's deemed too high, we move on. And, you know, if it's appropriate based on our past performance and capabilities, we book the order. So that's a little bit of a change here over the last year or so. But more importantly, it's bidding on the right types of contracts. And I think it can stand up to an

Speaker Change: Order, so that that's a little bit of a change here over the last year or so but more importantly is bidding the right types of contracts and I think it can withstand an attack weapon. It was a fixed price contract for development.

Christopher E. Kubasik: It was a fixed price contract for development, again, with fixed-priced options. And we will not bid on any programs where we are asked to give a fixed price on an option for a product that's yet to be developed. It's just plain and simple common sense.

Speaker Change: Again with fixed priced options and we will not bid any programs, where we are asked to give a fixed price on an option for a product that you have to be developed is just plain and simple common sense. I think there are some people in the department that agree with me and maybe.

Christopher E. Kubasik: I think there are some people in the department that agree with me, and maybe there are others that don't. But, you know, what happens in most of these negative EACs across the industry when you do a root cause corrective action. More times than not, it's a bad contracting vehicle. Nobody's perfect, and there are performance issues.

Speaker Change: There are others that don't but.

Speaker Change: See what happens in most of these negative EAC used across the industry. When you do a root cause corrective action more times than not it's a bad contracting vehicle nobody's perfect and there are performance issues, but you cannot perform out of a bad contract and that's what we're trying to trying to do I guess on.

Christopher E. Kubasik: But you cannot perform out of a bad contract. And that's what we're trying to do. I guess on. You know, next opportunities to prime. I mean, we have them, and again, we take an approach where the best is. The best approach would either be a merchant supplier, a subcontractor, or a prime based on our capabilities and what the customer needs. You know, there's armed overwatch.

Next opportunities to prime I mean, we have.

Speaker Change: And again, we've taken approach, whereas the best.

Speaker Change: Best approach either be a merchant supplier of subcontractor or or prime based on our capabilities.

Speaker Change: What.

Speaker Change: What the customer needs.

Speaker Change: Armed Overwatch you know we've been.

Christopher E. Kubasik: You know, we've been successful there. We just got delivery order number three, so we're up to 25 aircraft already. Hades, which is a big opportunity for the Army.

Speaker Change: Successful there we just got the delivery order three so we're up to 25 aircraft already.

Speaker Change: <unk>, which is a big opportunity for the army hits the.

Christopher E. Kubasik: It's the high accuracy detection and exploitation system. It's basically up to 14 aircraft. We're bidding on a global 6,500. This aligns clearly with our ISR and other capabilities. So that would be a big win for us.

Speaker Change: High accuracy detection and exploitation system, it's basically up to 14 aircrafts were bidding a global 6500.

Speaker Change: This aligns.

Speaker Change: Clearly with our our ISR and other capabilities, so that that would be a big a big win for US we have some maritime.

Christopher E. Kubasik: We have some maritime undersea ranges where we've primed, and there are some follow-on opportunities, a bunch in classified space. You know, I usually get a space question for now, but I'll just plug that we had no satellites in orbit at the date of merger. We launched six in the quarter, you know, and we've been awarded 60 sats as prime, and there's more in the pipeline. So those come to mind just off the top of my head, and of course, we have a lot of opportunities at Aerojet Rocketdyne. Those are follow-on programs, but those are not prime programs.

Speaker Change: <unk> ranges, where we've primed and theres some follow on opportunities a bunch in classified space you know I'm, usually get a space question for now, but I'll I'll just plug that we had no no satellites in orbit at the date of our merger we launched six in the quarter.

Speaker Change: And we've been awarded 60, SaaS as prime and Theres more in the in the pipeline. So that does come come to mind are just off the top of my head and of course, we have a lot of opportunities at Aerojet Rocketdyne. Those are follow on but those are not prime Prime program. So I guess S. T. A David I was thinking S. T a trough.

Christopher E. Kubasik: So I guess SDA, maybe I was thinking SDA Tronch 3 for tracking. As you know, we're the only company to have been awarded Tronch 0, 1, and 2 for a total of 38 satellites. We should get an RFP in the fourth quarter for Robert Tronche 3, and that could be another 18 satellites, so.

Speaker Change: Three for tracking as you know where they are.

Speaker Change: Only company to have been awarded triumph zero, one and two for a total of 38 satellites, we should get an RFP in the fourth quarter for tranche.

Speaker Change: Three and that could be another 18 satellite so.

Richard Tobie Safran: Hope that helps Richard.

Richard Tobie Safran: Thank you. Our next question is from the line of David Strauss with Barclays. Please proceed with your question.

Yes.

David Egon Strauss: Okay great.

David Egon Strauss: Yes.

Christopher E. Kubasik: Hope that helps, Richard. Thank you. Our next question is from the line of David Strauss with Barclays. Please answer your question.

David Egon Strauss: Hey, David.

David Egon Strauss: I wonder about that the performance in the quarter.

David Egon Strauss: Well above.

Your full year guide. So so how are you how are you thinking about that and if you could.

Operator: Thank you. Thank you. Hey, David. Good to see you.

David Egon Strauss: Touch on.

Operator: Thank you. Our next question is from the line of David Strauss with Barclays. Please proceed with your question.

David Egon Strauss: Two programs there.

David Egon Strauss: In the press a lot where your where your supplier.

David Egon Strauss: 35 tier three and then so how youre right.

David Egon Strauss: Yeah, thanks for the question, David. I appreciate it.

David Egon Strauss: Alright.

David Egon Strauss: Thanks.

David Egon Strauss: Yes.

Speaker Change: Yeah. Thanks for the question David I appreciate it Yeah, I think you were breaking up a little bit but I believe the question was about SaaS performance in the quarter.

Kenneth L. Bedingfield: Yeah, I think you were breaking up a little bit, but I believe the question was about SAS performance in the quarter. And, you know, solid performance by the SAS team in the first quarter, 12.3% margin rate. And, you know, they are performing well on their programs. We talked a little bit about some of the drivers there, including, you know, maturing some of the development programs. And we also talked a little bit about the mix.

Speaker Change: Uh huh.

Speaker Change: Solid performance by the SaaS team in the first quarter 12.

Speaker Change: 3% margin rate and.

Speaker Change: They are performing well on their programs, we talked a little bit about a little bit about some of the drivers there including.

Maturing some of the development programs.

Speaker Change: We also talked a little bit about the mix and as you know as space continues to grow.

Kenneth L. Bedingfield: And as space continues to grow, that's a little more cost plus mix, that could temper a little bit of the margins in the last three quarters of the year. But we did update guidance for SAS to approximately 12% on the margin rate. They were 12.3 in the first quarter, some upside from EAC adjustments. And as we saw, you know, strong program performance, you've got to kind of book that in the quarter.

Speaker Change: That's a little more cost plus mix.

Speaker Change: That could.

Speaker Change: Temporary a little bit of the margins in the last three quarters of the year, but we did update our guidance for SaaS to approximately 12% on the margin rate they were $12 three in the first quarter.

Speaker Change: Some upside from EAC adjustments and as we saw strong program performance, you've got a kind of up that in the quarter. You do does result in a higher booking rate as you move forward, but you do pick up some Q.

Kenneth L. Bedingfield: You do, it does result in a higher booking rate as you move forward, but you do pick up some, you know, cumcatch adjustment that flows through in that, you know, 90 day period versus the, you know, full year impact, where that gets tempered a little bit. But we're very confident in the team at SAS. And we're confident in the guide that we put out there for approximately 12%, and I know the SAS team is out there working hard as we speak to try to figure out how to drive that up from there.

Speaker Change: <unk> catch adjustment that flows through in that 90 day period.

Speaker Change: Since the full year impact where that gets tempered a little bit, but we're very confident in the team at SaaS.

Speaker Change: We're confident in the guide that we put out there for approximately 12% and I know the SaaS team is out there.

Speaker Change: Working hard as we speak to try to figure out how to drive that.

Speaker Change: Drive that up from there.

Christopher E. Kubasik: And I think the second part of your question was about the F-35. You know, our production deliveries are tracking. We have a ramp up in production here starting next month. So we continue to have good relations with Lockheed. In fact, I was just talking to them yesterday. They'll be starting to deliver aircraft, as you know. They'll comment on that themselves. But as they start delivering aircraft, we're going to have to ramp up even further and quicker, and that's our plan.

Speaker Change: Yeah, and I think.

Speaker Change: Second part of your question was that 35, you know our production deliveries are our tracking we have a ramp coming up and production here. Starting next next month. So we continue to have good relations with Lockheed in fact, I was just talking to them yesterday.

Speaker Change: That'll be starting to deliver aircraft as you know a little comment on that themselves, but as they start delivering aircraft, we're going to have to ramp up even even further and quicker and that's our plan we've made the.

Christopher E. Kubasik: We've made the investments in most of the infrastructure we need. So continued improvement, you know, month over month, quarter over quarter. And it's all about the core processor, and that's where the focus of the team is. Our next question is from the line of Matt Akers with Wells Fargo. Please answer your question.

Investments in most of the infrastructure, we need so continued improvement month over month quarter over quarter.

Speaker Change: It's all about the core processor and that's that's where the focus of the team is.

Speaker Change: Our next question is from the line of Matt Akers with Wells Fargo. Please proceed with your question.

Matthew Carl Akers: Hey, guys. Good morning, Thanks for the question, Chris I Wonder if you could comment on the international pipeline that IMF in particular, you mentioned the award in the quarter.

Operator: Our next question is from the line of Matt Akers with Wells Fargo. Who's received your question?

Operator: Yeah, thanks, Matt. I mean, at IMS, we did get the NATO electronic attack aircraft. And, you know, this is something we were thinking back on not that long ago. I mean, this is something about eight years ago, nine years ago. We talk about disrupting the market. And I always give the space example.

Matthew Carl Akers: Just curious if orders are starting to move there.

Christopher E. Kubasik: Yeah, Thanks, Matt I mean at IMS, we did get the NATO electronic attack.

Speaker Change: Aircraft and you know this.

Speaker Change: We were thinking back on this not not that long ago. I mean this is something.

Speaker Change: Eight years ago nine years ago, we talk about disrupting the market and I always give this space example, but you know it.

Christopher E. Kubasik: But, you know, it feels like we pretty much invented and created this bizjet ISR market; we have over 50 bizjet orders in the last eight or nine years on five different platforms. So, we have this one opportunity that I mentioned in Europe, a NATO country; there are some longer-term opportunities kind of in the Mideast. These things take a year or two to get booked.

Speaker Change: Feels like we pretty much invented and created this biz jet ISR market, we have over.

Speaker Change: <unk> 50, a biz jet orders in the last eight or nine years on five different platforms. So we have this one opportunity that I mentioned in Europe NATO country.

Speaker Change: There's some longer term opportunities kind of in the are in the mid east These things take a year or two to get booked so you know.

Christopher E. Kubasik: So, you know, the BizJet market for electronic attack, ISR, whatever capabilities are still out there. There's a huge opportunity in the Far East, and we're on our third bid relative to being downselected. So, that could be a couple billion dollars. [inaudible] Yeah, there it is as well. Viper Shields is actually out of SAS, but you know, great capability on F-16EW. So I see that growing as well. And then, of course, WESCAM. With the turrets, you know, that's just a high-growth market with opportunities. Pretty much everyone, all over the globe.

Speaker Change: The biz jet market for electronic attack ISR whatever capabilities are are still are still out there there's a huge opportunity and are in the far east that.

We're on our third bad relative to being down selected so that could be a couple of billion dollars.

Speaker Change: 2025, so very excited about that armed Overwatch, we're starting to get interest from our international customers. You know once we start making deliveries later this year early next year I think that market is going to pick up from from the aircraft side and we still have some C 130 capabilities that I believe have some some international opportunity.

Speaker Change: These maritime we're doing a lot of work with Australia. So we continue to see opportunities.

Speaker Change: Yes, there is well Viper shields actually out of SaaS, but you know great capability on F 16, EW, so I see that that growing as well and then of course west Cam.

Christopher E. Kubasik: Yeah, Chris, maybe I'll just go.

Speaker Change: With the terrorists.

Speaker Change: That's just a high growth market with opportunities.

Kenneth L. Bedingfield: Yeah, Chris, maybe I'll just add real quick to that in terms of armed overwatch beyond BizJets at IMS. We did get delivery order three on that program for nine aircraft, I think bringing the total order to 25. And to your comments, I think as that program matures, it gives us greater confidence in the international opportunities for that aircraft, so looking to build competence on that one.

Speaker Change: Pretty much all all over the globe.

Speaker Change: Yes, Chris maybe I'll, just I'll just add real quick on to that in terms of armed Overwatch said beyond Biz Jets and.

Speaker Change: At IMS.

Speaker Change: Did get <unk>.

Christopher E. Kubasik: Delivery order three on that program for nine aircraft I think bringing the total order to 25 and to your comments I think as that program matures gives us greater confidence in the international opportunities for.

Christopher E. Kubasik: For that for that aircraft.

Christopher E. Kubasik: So look into.

Christopher E. Kubasik: To the building confidence on that one.

Operator: Thank you. Our next question is from the line of Sheila Kahyaoglu with Jeffries. Please proceed with your question.

Speaker Change: Thank you.

Speaker Change: Our next question is from the line of Sheila <unk> with Jefferies. Please proceed with your question.

Sheila Karin Kahyaoglu: Good morning, Chris and Ken, thank you. In the past, you guys have talked about revenue synergies with a lot of discussion today. I focused on LIHX next, which is clearly great because your profit was up over 20%. So, Chris, you mentioned Taiwan, and you won a bid over a 20-year incumbent. Maybe there is any way to think about potential share gains and investment, and what it means for the revenue top line outlook over the next few years? I know you laid out mid-single-digit targets, but how do we think about your revenue growth and market share gains?

Sheila: Good morning, Chris and Tom. Thank you in the past you guys have talked about synergies for a lot of discussions about Pakistan Orange Zach snacks switches.

Sheila: Profit was up over 20%, So Chris you mentioned, Taiwan, Ami why not a ballpark 20 Yang.

Speaker Change: Maybe is there any way to.

Think about some share gains on investment what it means for the.

On the top line outlook.

Speaker Change: I know you laid out.

Speaker Change: But how do we think about your revenue growth and market share gains.

Speaker Change: Yeah. Thanks, Thanks Sheila.

Speaker Change: We're being selective in where we invest in bid and you know if I look at the the different domains I think spaces is a perfect example, where we were absolutely taking market share and.

Christopher E. Kubasik: Yeah, thanks. Thanks, Sheila. You know, we're being selective in where we invest in bids. And, you know, if I look at the different domains, I think space is a perfect example where we are absolutely taking market share. And, you know, as I said earlier, we've been awarded 60 satellites as a prime just since the merger, including 38 for SDA tracking alone. And, you know, it's a hot market. And, you know, but every couple of weeks or months, you can pick up a paper and see there's one less company in this market. A lot of SPACs, a lot of companies are withdrawing from that market.

Speaker Change: Now as I said earlier, we've been awarded 60 satellites is a prime just just since our since the merger.

Speaker Change: Including 38 for for S. T a tracking.

Speaker Change: Alone and you know, there's a it's a hot market.

Speaker Change: But every couple of weeks or months, you can pick up the paper and see Theres one less company.

Speaker Change: In this market a lot of Spacs a lot of companies are withdrawing from that market and we take that as a sign of our success, we're making money and we disrupted the market. So I feel really good about what we've done in space you know the airborne domain I think it's really going to be more with what I referenced with the biz.

Christopher E. Kubasik: And we take that as a sign of our success. We're making money. And we've disrupted the market. So I feel really good about what we've done in space. And we found an opportunity to unseat a long-term 40-year incumbent and came up with a different solution. And, you know, it's been well well received around the globe as an example.

Speaker Change: Jeff maybe armed Overwatch to a lesser degree where again, we're filling in gaps in and replacing our long term incumbents are giving them different platforms.

Speaker Change: Another capability for the missions that they they want our maritime work on the the undersea ranges as World Class again, you go back six years, we had no work in that regard and we found an opportunity to unseat a long term 40, your incumbent and came up with a different solution.

Christopher E. Kubasik: We've talked historically about our torpedo launch and recovery system using unmanned undersea vehicles. That market is, in my opinion, a hot market. We just have to get out there and get a couple of customers. I think that could be a real game changer for our undersea business. On the radios, we talk about the radios, a lot of good work there. An exciting one that we haven't really talked much about is for the Air Force, which is the next-gen survivable radio.

Speaker Change: It's been well well received around the globe as an example.

Speaker Change: We've talked historically about our torpedo launch and recovery system, using our unmanned undersea vehicles.

Speaker Change: That market is a hot market in my opinion, we just have to get out there and get a couple a couple of customers in and I think that could be a real a real game changer for our our undersea business you know on the radios you talk about the radios a lot of good work there.

An exciting one that we haven't really talked much about is for the air Force, which is the Nextgen survivable radio. So we're one of two companies competing on that.

Christopher E. Kubasik: We're one of two companies competing on that. In a couple of years, we could be down-selected; it's a new market, and another example of dislodging a long-term incumbent. And then, of course, innovation and cyber. You know, there's something going on there every day, and you kind of have to innovate daily to stay ahead of the threat, and we're doing that and seeing good growth and good performance in that domain as well. Hope that answers your question.

Speaker Change: And you know.

Speaker Change: A couple of years, we could be down selected a new a new market and another example, dislodging.

Speaker Change: Long term, our incumbent and then of course, our innovation cyber.

Speaker Change: There's something going on there every day and you kind of have to innovate daily to stay ahead of the threat and.

Speaker Change: We're doing that and seeing good growth and good performance in that domain as well.

Speaker Change: Hope that answers your question.

Operator: Rob, we'll go ahead and take our last question this morning.

Rob will go ahead and take our last question. This morning.

Operator: Thank you. Our last question is from Doug Harned with Bernstein.

Rob: I think our last question is from Doug Harned with Bernstein.

Douglas Stuart Harned: Good morning. Thank you. Morning. You know, Chris, when you right now you're looking at Aerojet Rocketdyne and, Demand in that market is just getting better and better, and you talked a little bit about the NGI win earlier, but when you look at the demand there, and I think back to, I remember a year ago talking with you about the situation at Aerojet Rocketdyne, Camden, for example, and how serious the bottlenecks were in trying to get production up, So when you look at the business now, and you see the potential to ramp up, can you talk about what kind of growth you could potentially get from that business and then where you stand in the process of being able to get those bottlenecks out and really move production higher?

Douglas Stuart Harned: Good morning, Thank you.

Douglas Stuart Harned: Good morning.

Douglas Stuart Harned: Yeah, Chris Flynn.

Speaker Change: Right now Youre looking at Aerojet Rocketdyne and.

Douglas Stuart Harned: I mean demand in that market is just getting better and better and you talked a little bit about the N. G. I went earlier, but when you look at the demand there and I think back to <unk>.

Douglas Stuart Harned: I remember a year or a year ago talking with you about the situation at Aerojet Rocketdyne Camden.

Douglas Stuart Harned: For example.

Douglas Stuart Harned: And you know how serious the bottlenecks were in trying to get production up.

Douglas Stuart Harned: So when you look at the business now.

Douglas Stuart Harned: And you see the potential to ramp up can you talk about what kind of growth you can potentially get from that business and then where do you stand in the process of being able to get those bottlenecks out and really move production higher.

Christopher E. Kubasik: Yeah, Doug, great, great question. And yeah, it was about 16 months ago when we announced this, this acquisition. And I think I agree with you when I look at where we are now. The business case gets better and better. The demand, there was no conflict in Israel.

Speaker Change: Yeah, Great Great question then.

Speaker Change: Yeah. It was about 16 months ago, when we announced this acquisition.

Speaker Change: And then I think.

Speaker Change: I agree with you when I when I look at where we are now.

You know the business case gets better and better the demand there was no conflict in Israel people thought Ukraine would be done.

Christopher E. Kubasik: People thought Ukraine would be done. Nobody anticipated $900 billion in defense spending for 2024. So the tactical missiles, the nuclear deterrent, NGI, there's just tons of opportunities for SRMs. Over the long term, call it five or seven years.

Speaker Change: Nobody anticipated a $900 billion of defense spending for 2024, so the tactical missiles, the nuclear deterrent N G I.

Speaker Change: There's just tons of opportunities on SRM.

Speaker Change: You know over the long term call it five seven.

Christopher E. Kubasik: You know, double-digit growth on the top line does not seem unreasonable to me. We have to, of course, invest in capacity. You know, the bottlenecks are some of them are based on low yields and performance and supply chain.

Speaker Change: Seven years, you know double digit growth on the top line does not seem.

Speaker Change: Unreasonable to me.

Two of course.

Speaker Change: Vest in the AR and the capacity.

Speaker Change: The bottleneck some some of them are based on a low yields and performance and supply chain I think we've made good progress in that regard investing in our suppliers getting additional suppliers I continue to think the more money to the government can can get to the supply chain the better off we are.

Christopher E. Kubasik: I think we've made good progress in that regard, investing in our suppliers, and getting additional suppliers. I continue to think the more money the government can give to the supply chain, the better off we are. I continue to believe we don't need an additional solid rocket motor prime. What we need is someone working on the igniters, the nozzles, and the cases. And I think that would help unlock the potential.

Speaker Change: To believe we don't need and and additional solid rocket motor Prime what we need is.

Speaker Change: Someone working all the igniter as the nozzles in the cases and and I think that would help us unlock the potential we have ordered equipment you know to continue to expand whether its mixers ovens.

Christopher E. Kubasik: We've ordered equipment, you know, to continue to expand, whether it's mixers or ovens. Unfortunately, they tend to have a 50-60 week lead time, but we placed those orders, and once we get that in, I think it's going to be a help with the ramp. You know, we have DPA money to build some buildings, take existing facilities and modify them. So, you know, consolidation. Unknown Executive, Scott Deuschle, Unknown Executive, Scott Deuschle, Unknown Executive. You know, we'll have the factories digitized by the end of this year.

Unfortunately tend to have a 50 60 week lead time, but we placed those orders and once we get that and I think it's going to be.

Speaker Change: Help help with the ramp you know we have DPA money to build some buildings take existing facilities and modify them. So you know the consolidation and in peace dividend and budget control Act for a decade.

Speaker Change: Stifle the ability for companies to invest and grow and inconsistent demand signals, but you know right now I think everything has a potential tailwind in <unk>.

Speaker Change: We will have the factories digitized by the end of this year and we're making the investments and fixing the processes. So pretty excited about it and are you.

Christopher E. Kubasik: And we're making the investments and fixing the processes. So I'm pretty excited about it. And, you know, 2024 is kind of a catch-up year and continues to burn down the delinquent backlog and simultaneously invest and put in processes. But I think by the time we get to 2026, 2027. If all stays as is, it's going to really turn out to be a great acquisition. I appreciate the question, Doug, and let me just wrap it up and, first of all, thank the workforce and the leadership team for a great first quarter.

Speaker Change: You know 2024 is kind of catch up and continue to burn down the delinquent backlog and simultaneously invest and put in processes, but I think by the time, we get to 2026 2027.

Speaker Change: Paul stays as it is going to really turn out to be a great acquisition. So.

Speaker Change: I appreciate the question, Doug and let me just wrap it up and first of all thank the workforce of the leadership team for a great first quarter. Obviously, thank you all for joining the call today.

Christopher E. Kubasik: Obviously, thank you all for joining the call today, and Ken, Mark, myself, and the team will be engaging with many of you in person in the months to come, so thank you all and have a great weekend.

Speaker Change: And can mark myself and the team will be engaging with many of you in.

Speaker Change: In person in the months to come so thank you all and have a great weekend.

Operator: Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.

Speaker Change: Thank you. This concludes today's teleconference. You may disconnect your lines at this time.

Speaker Change: You for your participation and have a wonderful day.