Q2 2025 L3Harris Technologies Inc Earnings Call

Operator: At this time, participants are in a listen-only mode.

Operator: A brief question-and-answer session will follow the formal presentation.

Operator: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Operator: As a reminder, this call is being recorded.

Daniel Gittsovich: It is now my pleasure to introduce your host, Dan Gittsovich, Vice President, Investor Relations. Please go ahead.

Greetings, welcome to the L3 Harris Technologies. Second quarter 2025 earnings conference call. At this time, participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance to in the conference, please press star zero on your telephone keypad. As a reminder, this call is being recorded.

Speaker Change: It is now my pleasure to introduce your host Dan gets of it, vice president investor relations. Please go ahead.

Unknown Executive: Thank you, Sylvie. Good morning and welcome.

Christopher Kubasik: Joining me this morning are Chris and Earlier today, we published our second quarter earnings release detailing our financial results and increased 2025 guidance, along with a supplemental earnings presentation available on our website.

Unknown Executive: We will also file our 10-Q later today.

Unknown Executive: 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.

Dan Gets: Thank you, Sylvie. Good morning, and welcome joining me this morning are Chris and Ken earlier. Today, we published our second quarter earnings release detailing our financial results and increased 2025 guidance, along with a supplemental earnings, presentation available on our website. We will also file our 10q later today.

Unknown Executive: For more information, please reference our earnings release and SEC filings. We will also discuss non-GAAP financial measures, which are reconciled to GAAP measures in the earnings release.

Dan Gets: 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.

Christopher Kubasik: With that, I'll turn it over to Chris. Good morning, everyone. Our opportunity set is more robust than it's been in decades, driven by increased global threats requiring speed, capability and modernization. These dynamics are unfolding across both U.S. and international markets, creating a significant opportunity for companies that can move fast and deliver on time. L3Harris is uniquely positioned to lead in this environment. Our trusted disruptor strategy keeps us agile, and after investments in the business, along with acquisitions and divestitures, our portfolio is aligned with our customers' mission-critical priorities, enabling us to execute with a sense of urgency as we head into the second half of the year.

Dan Gets: For more information, please reference our earnings release and SEC filings. We will also discuss non-gaap Financial measures which are reconciled to gaap measures in the earnings release with that. I'll turn it over to Chris.

Chris: Good morning, everyone. Our opportunity set is more robust than it's been in decades driven by increased Global threats, requiring speed capability and modernization.

Chris: These Dynamics are unfolding across both us and international markets, creating a significant opportunity for companies that can move fast and deliver on time.

Chris: L3 Harris is uniquely positioned to lead in this environment.

Christopher Kubasik: Over the last few months, I've had several meetings with senior DoD leaders, and one message is consistent and clear, companies that deliver on schedule will be rewarded with new opportunities such as Golden Dome and missile capacity expansion. I'm proud to say we're doing just that. For example, on F-35, our systems are ahead of need, and we are off the critical path for combat capable TR-3 aircraft. Turning to LHX Next Savings, we set a goal of taking out $1 billion of cost over a three-year period and we're currently tracking 40% ahead of that target and a year earlier than planned.

Chris: Our trusted, disruptor strategy Keeps Us agile and after investments in the business along with Acquisitions and devest our portfolio is aligned with our customers Mission. Critical priorities. Enabling us to execute with a sense of urgency as we head into the second half of the year.

Chris: Over the last few months. I've had several meetings with senior DOD leaders and 1 message is consistent and clear. Companies that deliver on schedule will be rewarded with new opportunities such as golden dome and missile capacity expansion.

Chris: I'm proud to say we're doing just that for example on F-35, our systems are ahead of need and we are off the critical bath for combat capable tr3 aircraft.

Christopher Kubasik: Putting us on track to achieve our 2026 margin target. At Aerojet Rocketdyne, integration is complete, and we've doubled deliveries, we've doubled production rate, and we've reduced the cost of port quality since the acquisition. This performance gives us and our customers confidence and positions us as a dependable partner. Our second quarter results underscore strong execution and represent an inflection point for our business. We posted our highest organic growth in six quarters and achieved a record book-to-bill of 1.5, clear evidence of the momentum behind our strategy and the alignment of our portfolio with the future of warfare.

Chris: Turning to lhx next savings. We set a goal of taking out 1 billion dollars of cost over a 3-year period and we're currently tracking 40% ahead of that Target and a year earlier than planned, putting us on track to achieve our 2026 margin Target.

At aerojet Rocketdyne, integration is complete. And we've doubled. Deliveries, we've doubled production rate and we've reduced the cost of poor quality since the acquisition.

Chris: This performance gives us and our customers confidence and positions us as a Dependable partner.

Chris: Our second quarter results, underscore strong execution, and represent an inflection point for our business.

Christopher Kubasik: In May, the administration released its full fiscal year 26 budget request, calling for about $1 trillion in national defense funding, including $155 billion signed into law through the recent reconciliation bill. The budget is focused in areas where we are well positioned. We're seeing accelerated investments in space-based architectures, missile systems, autonomous platforms, and software-defined capabilities, all core strengths within our company. The Golden Dome Initiative is a leading example of our alignment with U.S. national security priorities, and momentum is building.

Chris: We posted our highest organic growth in 6, quarters and achieved a record book to Bill of 1.5 clear evidence of the momentum behind our strategy and the alignment of our portfolio with the future of warfare.

Including 155 billion signed into law through the recent reconciliation bill.

Chris: The budget is focused in areas where we are well, positioned.

Chris: We're seeing an accelerated investments in space-based architectures missile systems, autonomous platforms and software-defined capabilities. All core strengths within our company.

Christopher Kubasik: Congratulations to General Gutlein on his confirmation as the direct reporting program manager of Golden Dome, accountable for delivering key capabilities of this system within three years, as a direct report to Deputy Secretary of Defense Feinstein. His appointment marks an important milestone for one of the most consequential homeland security initiatives in our history, and we're excited to see a proven leader in place. At L3Harris, we've been preparing for this eventuality. As we shared on our last call, our ability to detect hypersonic threats is a critical component of the Golden Dome architecture. We're preparing to deploy a full constellation of 40 to 45 proven HVTSS satellites in a timely manner.

Chris: the golden dome initiative is a leading example of our alignment with us National Security, priorities, and momentum is building

Chris: Congratulations to General gut line on his confirmation as the direct reporting program manager at golden dome.

Chris: accountable, for delivering key capabilities of this system within 3 years as a direct report to deputy secretary of defense fineberg,

His appointment marks an important milestone for 1 of the most consequential Homeland Security initiatives in our history and we're excited to see a proven leader in place.

At L3 Harris. We've been preparing for this eventuality

Chris: As we shared on our last call, our ability to detect Hypersonic threats as a critical component of the golden dome architecture.

Christopher Kubasik: This isn't a coincidence, as we've invested in Florida and Indiana to scale up space sensor manufacturing and payload integration. We're ready to deliver the HPTSS constellation called for in the executive order. Moving to ground-based interceptors, our propulsion and divert and attitude control systems support nearly every U.S. interceptor program in development or production. We are rapidly scaling solid rocket motor manufacturing to meet the nation's urgent demand, and this effort carries additional personal urgency. I made a commitment to the Deputy Secretary of Defense and the Undersecretaries of Defense to increase capacity and accelerate deliveries, and I intend to keep it.

Chris: Preparing to deploy a full constellation of 40 to 45 proven hbtss satellites in a timely manner.

Chris: This isn't a coincidence as we've invested in Florida and Indiana to scale. Up space sensor, manufacturing and payload integration.

Chris: We're ready to deliver the hbtss constellation called for in the executive order.

Chris: Moving to ground-based interceptors, our propulsion, and divert and attitude Control Systems, Support nearly every us Interceptor program in development or production.

Christopher Kubasik: In partnership with Governors Sanders and Yunkin, we're investing in Arkansas and Virginia to increase solid rocket motor deliveries and drive record production levels. We're not waiting, we're responding to the clear demand signals and delivering now.

We are rapidly scaling solid rocket Motor. Manufacturing to meet the nation's urgent demand and this effort carries additional personal urgency. I made a commitment to the deputy secretary of defense and the under secretaries of defense to increase capacity and accelerate, deliveries, and I intend to keep it.

Christopher Kubasik: Internationally, the outlook remains robust. NATO members are now targeting defense spending increases to 5% of GDP. Much of that investment focused on restocking and modernization. This shift is already translating into meaningful orders for L3Harris and supports sustained medium to long-term international growth for us. A great example, we recently secured software-defined radio awards from the German and Czech Armed Forces, the type of wins that would not have been likely a decade ago. This represents not only alignment with allied modernization priorities, but also instances where we're replacing indigenous providers, a direct result of our resilient, interoperable, battlefield proven technology and expanding global footprint.

Chris: In partnership with Governor Sanders and junkan. We're investing in Arkansas in Virginia to increase, solid rocket motor, deliveries and drive record production levels. We're not waiting. We're responding to the clear demand signals and delivering now,

Internationally the Outlook remains robust.

NATO members are now targeting defense. Spending increases to 5% of GDP.

Chris: With much of that investment focused on restocking and modernization.

This shift is already translating into meaningful orders for L3 Harris and support. Sustained medium to long-term International growth for us.

a great example, we recently secured software-defined Radio awards from the German and Czech armed forces, the type of wins that would not have been likely a decade ago

Christopher Kubasik: With this backdrop, the right strategy, an aligned portfolio, strong demand, operational momentum, and solid financial performance, we are highly confident in our ability to achieve our 2026 financial framework. We also see a clear path to profitable growth beyond 2026, driven by our alignment with long-term defense priorities, both in the U.S. and globally.

Chris: this represents not only alignment with Allied modernization priorities, but also instances where we're replacing indigenous providers, a direct result of our resilient interoperable Battlefield proven technology, and expanding Global footprint

Chris: With this backdrop, the right strategy and aligned portfolio, strong demand, operational momentum and solid financial performance. We are highly confident in our ability to achieve our 2026 Financial framework.

Kenneth Bedingfield: With that, I'll turn it over to Ken. Thanks and good morning everyone. We are at the onset of a generational opportunity for L3Harris, given our capabilities and positioning across key discriminating technologies.

Chris: We also see a clear path to profitable growth Beyond 2026 driven by our alignment with long-term defense priorities both in the US and globally with that. I'll turn it over to Ken.

Ken: Thanks and good morning, everyone. We are at the onset of a generational opportunity for L3 Harris.

Kenneth Bedingfield: Let's talk about consolidated results for the second quarter. Starting with orders, we had a record $8.3 billion this quarter, resulting in a 1.5 book to bill. Revenue was $5.4 billion, reflecting strong organic growth of 6%. This growth was driven by new programs ramping and increased demand across all segments. Segment operating margin was 15.9%, up 30 basis points, marking the seventh consecutive quarter of year-over-year margin expansion. Non-GAAP EPS was $2.78, up 16% year over year, and on a pension-adjusted basis, EPS was $2.42, up 22% year over year. Free cash flow is $574 million, driven by increased operating income and improved working capital performance.

Ken: Given our capabilities and positioning across key. Distributed discriminating Technologies.

Ken: Let's talk about Consolidated results for the second quarter.

Ken: Starting with orders. We had a record 8.3 billion dollars. This quarter resulting in a 1.5 book to Bill.

Ken: Revenue was 5.4 billion reflecting strong, organic growth of 6%.

Ken: This growth was driven by new programs, ramping and increased demand across all segments.

Ken: Segments operating margin was 15.9% up 30 basis points, marking the seventh consecutive quarter of year-over-year margin expansion.

Ken: Non-gaap EPS was $2.78.

Ken: Up 16% year-over-year and on a pension adjusted basis EPS was $2.42 up 22% year-over-year.

Kenneth Bedingfield: Turning to the segment's second quarter results. CS delivered revenue of $1.4 billion, up 2%, driven by increased demand for resilient communication equipment and related wave . Operating margin remains solid at 24.4%, reflecting higher domestic volumes and LHXMEX-driven cost savings. IMS revenue was $1.6 billion, up 6% organically, with an operating margin of 13.2%, up 120 basis points. Revenue increased due to the ramp up of several classified ISR programs. Operating margin increased due to the monetization of legacy end of life assets. Partially offset by an unfavorable EAC adjustment from the resolution of a subcontract matter related to lower utilization on the Canadian Maritime Helicopter Program.

Ken: Is 574 million driven by increased operating income and improved working Capital Performance.

Ken: Turning to the segments second quarter results.

Ken: % driven by increased demand for resilient communication equipment and related waveforms.

Ken: Operating margin remains solid at 24.4% reflecting higher domestic volumes and lhx. Next driven cost savings.

Ken: IMS Revenue was 1.6 billion up 6% organically with an operating margin of 13.2% up 120 basis points.

Revenue increase due to the ramp up of several classified, ISR programs.

Ken: Operating margin increased due to the monetization of Legacy end of life assets.

Kenneth Bedingfield: Execution performance on the program was strong. However, payment was tied to customer mission cadence, which was well below original bid expectation. The contract is nearing completion and we do not expect to see more negative EAC adjustments. SAS revenue was $1.8 billion, up 7% organically, primarily due to increased volume in FAA networks and improved program performance in our airborne combat systems business. Operating margin was 12.3%, down 30 basis points due to an unfavorable mix. Partially offset by LHX Next cost savings. AirJet Rocketdyne delivered strong results with 12% organic growth and a 2.0 book-to-bill. Growth was driven by improved production volume across key missile programs and new program ramps.

Ken: Partially offset by an unfavorable EAC adjustment, from the resolution of a subcontract matter related to lower utilization on the Canadian Maritime helicopter program.

Ken: Execution performance on the program was strong.

Ken: However, payment was tied to customer Mission Cadence, which was well below. Original bid, expectations

Ken: The contract is nearing completion and we do not expect to see more negative EAC adjustments.

Ken: SAS Revenue was 1.8 billion up 7%, organically primarily due to increased volume, and FAA networks, and improved program performance in our Airborne combat systems business.

Ken: Operating margin was 12.3% down 30 basis points due to an unfavorable mix.

Ken: Partially offset by lhx. Next cost savings.

Ken: Airjet rocket dying delivered, strong results with 12%, organic growth, and a 2.0 book to Bill.

Growth was driven by improved production, volume across key missile programs.

Kenneth Bedingfield: This marks the highest revenue quarter on record for AR, driven by the unprecedented demand in the missile solutions business that we expect to continue for an extended period. Operating margin increased 50 basis points to 13.3% due to solid performance, LHX Max-driven cost savings, and a favorable contract resolution. We are always striving to improve our operations, including reassessing certain unfavorable contract positions, rationalizing non-core legacy business lines, and monetizing legacy assets. An example is the action we took at IMS to exit an unprofitable legacy contract position while at the same time monetizing associated legacy assets. The resulting impacts offset and created a net favorable position for the quarter.

Ken: And new program ramps.

Ken: this marks, the highest revenue quarter on record for our

Ken: Driven by the unprecedented demand in the missile Solutions business that we expect to continue for an extended period.

Ken: Operating margin increased 50 basis points to 13.3%.

Ken: Due to solid performance lhx, Max driven cost savings and a favorable contract resolution.

Ken: We are always striving to improve our operations. Including reassessment reassessing certain unfavorable contract positions, rationalizing, non-core Legacy, business lines and monetizing Legacy assets.

Ken: An example is the action we took at IMs to exit an unprofitable Legacy contract position.

Ken: while at the same time, monetizing Associated Legacy assets,

Christopher Kubasik: Now let me turn it back to Chris. Thanks, Ken. As we look ahead, several milestones from the quarter highlight our momentum and reinforce confidence in our long-term vision. First, we secured approximately $200 million in orders to deliver software-defined, interoperable communication systems to Germany. Secure, resilient communications across NATO allies are critical to operational readiness, and our systems are already delivering on that mission. This award adds to recent wins for our Falcon software-defined radios, including the Netherlands Foxtrot program, along with continued momentum on the U.S. Army's HMS program. These wins further strengthen our market leadership and resilient communications.

Ken: The resulting impacts offset and created a net favorable position for the quarter.

Now, let me turn it back to Chris.

Chris: Thanks Ken as we look ahead, several Milestones, from the quarter highlight our momentum and reinforce confidence in our long-term vision.

Chris: First, we secured approximately 200 million in orders to deliver software-defined, interoperable, communication systems to Germany.

Secure, resilient Communications across, NATO allies are critical to operational Readiness and our systems are already, delivering on that mission.

Chris: This award adds to recent wins for our Falcon software-defined radios, including the Netherlands Fox trop program along with continued momentum on the US Army's HMS programs.

Christopher Kubasik: And our key comm sector backlog today is almost three billion dollars, a 50 percent increase from a few years ago.

Christopher Kubasik: Turning to solid rocket motors, we broke ground on a new production facility in Virginia, including a cast and assembly center. These modular, robotic-enabled facilities will significantly increase capacity, enhance efficiency and quality, and reduce product travel time distances by 90%. This complements similar expansions in Arkansas and Alabama. It's a major step forward in building out the defense industrial base and reflects the progress we've made in the short time since integrating Aerojet Rocketdyne. Demand for solid rocket motor production continues to rise, driven by global conflict. Our Aerojet Rocketdyne Missile Solutions business grew 15% in the quarter and is up 16% year-to-date.

Chris: These winds further strengthen our Market leadership, and resilient Communications, and our key cam sector. Backlog today is almost 3 billion dollars to 50% increase from a few years ago.

Chris: Turning to solid rocket Motors. We broke ground on a new production facility in Virginia, including a cast and Assembly Center.

Chris: These modular robotic enabled facilities will significantly increase capacity, enhance efficiency and quality and reduce product travel time distances by 90%.

Chris: This complements similar, expansions in Arkansas and Alabama, it's a major step forward in building out, the defense industrial base and reflects the progress. We've made in the short time since integrating aerojet rocketing.

Chris: Demand for solid rocket motor. Production continues to rise driven by global conflicts.

Christopher Kubasik: Growth review is durable and likely to continue for decades. Demand is exceptionally strong and we see significant opportunities for further investment in the business, expanding manufacturing capacity, increasing the workforce and accelerating deliveries to meet long-term needs and to support sustained growth. We also continue to see strong demand across our space propulsion portfolio.

Chris: Our aerojet rocket dine missile Solutions, business grew, 15% in the quarter and is up 16% year to date.

Chris: Growth review is durable and likely to continue for decades.

Chris: Demand is exceptionally strong and we see significant opportunities for further investment in the business, expanding manufacturing capacity, increasing the workforce, and accelerating deliveries to meet long-term needs and to support sustained growth.

Christopher Kubasik: This quarter, we secured a major award for 130 upper stage RL-10 engines valued at nearly $850 billion, highlighting our trusted role in enabling space launch missions. Our ongoing partnership with Palantir on the U.S. Army's Titan program continues to mature. The team is nearing initial deliveries on the first four AI-defined vehicles, equipped with our common data links, Link 16, secure SATCOM, and tactical multi-domain waveforms, enabling the Army to process targeting data faster and more effectively on the battlefield.

Secured a major award for 130 upper stage. Rl10 engines valued at nearly 850 billion dollars,

Chris: highlighting our trusted role in enabling space launch missions.

Our ongoing partnership with pelant here on the US. Army's Titan program continues to mature.

Christopher Kubasik: I'm proud to highlight our engagement with the FAA's Newark Task Force, where we played a critical role in supporting Secretary Duffy to meet his goal of enhancing the resilience of our communication networks at the Newark Airport. Our efforts were pivotal in upgrading the telecom infrastructure, ensuring robust and reliable communications for one of the nation's busiest airports. And in the airborne domain, we delivered our second missionized Global 6500 for ISR to the Army, reinforcing our position as the world's leading bizjet missionization provider. With over 100 aircraft delivered and 14 currently under modification, our platform agnostic approach and speed-to-field capability continue to differentiate our offload.

Chris: The team is nearing initial deliveries on the first 4 AI defined Vehicles equipped with our common data links link 16 SEC. Satcom and tactical multi-domain waveforms enabling the Army to process targeting data faster and more effectively on the battlefield.

I'm proud to highlight our engagement with the faa's Newark task force, where we played a critical role in supporting secretary, Duffy to meet his goal of enhancing the resilience of our communication networks at the Newark Airport.

Our efforts were pivotal in upgrading the Telecom infrastructure, ensuring robust and reliable Communications for 1 of the nation's busiest airports.

And in the Airborne domain we delivered our second mission Global 6,500 for ISR to the Army reinforcing our position. As the world's leading bizjet Mission provider,

Christopher Kubasik: Together, these awards and infrastructure investments reflect a common theme. We are accelerating the deliveries of agile, proven solutions to address current and future threats.

Chris: With over a 100 aircraft delivered, in 14, currently under modification. Our platform agnostic, approach, and speed to field capability, continue to differentiate our offerings.

Kenneth Bedingfield: Back to you, Ken. First, an update on LHXnext, then I'll move into guidance updates. The current phase of the LHX Next program is focused on enterprise transformation. Deploying the LHX operating system, digitizing core business processes, and embedding AI-enabled tools across the business. These initiatives are not only improving execution and decision making, but they're also building a more scalable, efficient foundation for growth. We're already seeing results from improved operational performance to new business wins.

Chris: Together these Awards and infrastructure Investments, reflect a common theme. We are accelerating, the deliveries of agile, proven solutions to address current and future threats, back to you, Ken,

Ken: First, an update on lhx next, then I'll move into guidance updates.

Ken: The current phase of the lhx. Next program is focused on Enterprise transformation.

Ken: Deploying the lhx operating system digitizing Core Business, processes and embedding AI enabled tools across the business. These initiatives are not only improving execution and decision-making.

Ken: But they're also building a more scalable efficient foundation for growth.

Kenneth Bedingfield: And we expect these transformation efforts to drive sustained revenue growth and cash generation over the long term.

Ken: We're already seeing results from improved operational performance to new business wins.

And we expect these transformation efforts to drive sustained Revenue growth.

Kenneth Bedingfield: Turn into guidance updates for 2025. Our increased guidance reflects our strong first half performance and improved outlook for the rest of the year. For the total company, we are increasing revenue guidance by $200 million, expecting strong organic revenue growth of 5% for the year. We are maintaining and are increasingly confident in our segment operating margin guidance of mid to high 15%. Supported by continued LHX NEXT cost savings and confidence in strong program execution. Non-GAAP EPS guidance reflects a 40 cent increase from strong first half operating performance and a higher revenue outlook. Partially offset by a $0.30 headwind from recent tax reform.

Ken: And cash generation over the long term.

Turn in the guidance updates for 2025.

Our increased guidance reflects our strong first half performance.

Ken: And improved outlook for the rest of the year.

For the total company, we are increasing Revenue, guidance by 200 million.

Ken: Expecting strong organic Revenue growth of 5% for the year.

Ken: We are maintaining and our increasingly confident in our segment. Operating margin guidance of mid to high 15%.

Ken: Supported by a continued lhx next. Cost, savings and confidence in strong program execution.

Ken: Non-gaap EPS, guidance. Reflects a 40 Cent increase from strong first half, operating performance and a higher Revenue Outlook.

Kenneth Bedingfield: While eliminating the requirement to capitalize and amortize R&D expenses, it has some near-term tax rate headwinds. As a result, we are raising our non-GAAP EPS guidance by 10 cents. We are increasing our free cash flow guidance to approximately $2.65 billion, an increase of $200 million from a combination of operating performance and tax reform. Cash tax benefits from tax reform will continue and also drive an increased free cash flow outlook in 2026. At a segment level, IMS revenue guidance increased $100 million, reflecting strong performance in the ISR sector. Operating margin is now expected in the 12% range, up from the high 11% through improved program performance and LHX Next savings.

Partially offset by a 30-cent headwind from recent tax reform.

Ken: While eliminating the requirement to capitalize and advertise our R&D expenses.

Ken: It has some near-term tax rate headwind. As a result, we are raising our non-gaap EPS guidance by 10 cents.

Ken: We are increasing our free cash flow guidance to approximately 2.65 billion.

And increase of 200 million from a combination of operating performance and tax reform.

Ken: Cash. Tax benefits from tax reform will continue and also drive an increased free cash flow Outlook in 2026.

Ken: At a segment level, IMS Revenue, guidance. Increased 100 million reflecting strong performance in the ISR sector.

Ken: operating margin is now, expected in the 12%, range up from the high 11%

Kenneth Bedingfield: We are increasing our revenue guidance for SIS by $100 million, reflecting an improved outlook in space. Operating margin is expected to remain in the low 12% range.

Ken: Through improved program program performance and lhx. Next savings.

Ken: We are increasing our Revenue guidance for SAS by 100 million reflecting an improved Outlook in space.

Kenneth Bedingfield: And we are reaffirming guidance for CS and AR.

Operating margin is expected to remain in the low 12% range.

Kenneth Bedingfield: Given our strong performance and this generational opportunity in defense spending growth, that we are uniquely positioned to capture, we are also updating our 2026 Outlook. On Investor Day in 2023, we set our financial framework at $23 billion in revenue. 16% segment operating margin and $2.8 billion in free cash flow. We continue to expect $23 billion in revenue for 2026. reflecting 6% growth year over year. And we previously updated that we expect margin in the low 16% range.

and we are affirming and we are reaffirming guidance for Cs and our

Given a strong performance and this generational opportunity in defense spending growth.

That we are uniquely positioned to capture. We are also updating our 2026 Outlook.

Ken: On investor day, in 2023, we set our financial framework at 23 billion in Revenue.

16% segment, operating margin and 2.8 billion in free cash flow.

Reflecting 6% growth year-over-year.

Kenneth Bedingfield: Now, while investing in key locations like Indiana, Arkansas, Virginia, and Florida to fuel future growth from Golden Dome and rocket motor capacity increases and staying aligned with our customers' mission-critical needs, we're also raising our 2026 free cash flow guidance to $3 billion, a 13% increase year over year with even stronger free cash flow per share.

Ken: And we previously updated that we expect margin in the low 16% range.

Ken: Now, while investing in key locations, like Indiana, Arkansas, Virginia and Florida to full to fuel future growth from golden dome and rocket motor capacity, increases and staying aligned with our customers Mission, critical needs, we're also raising our 2026 free cash flow. Guidance to 3 billion, a 13%, increase year-over-year.

Christopher Kubasik: With that, I'll turn it back to Chris.

With even stronger, free cash flow per share.

Christopher Kubasik: Before we turn to questions, I want to take a step back and frame where we've been and where we're going. It's clear how far we've come. Over the past several years, we've reshaped the company through internal investments, strategic acquisitions and divestitures, building a portfolio squarely focused on national security. We've also deepened partnerships across the government and industry to accelerate innovation and mission outcomes. Our trusted disruptor strategy and culture is delivering and has positioned us at the right place at the right time. were uniquely aligned to the national security priorities of the U.S. and its allies, whether that's resilient communications, space superiority, or replenishing and modernizing critical missile systems. The awards and milestones this quarter reflect that alignment and will meaningfully contribute to growth in the years ahead.

With that. I'll turn it back to Chris.

Ken: Before we turn to questions, I want to take a step back and frame where we've been and where we're going.

Ken: It's clear how far we've come over the past. Several years. We've reshaped the company through internal Investments, strategic Acquisitions, and destitutes building a portfolio. Squarely focused on National Security.

We've also deepened Partnerships across the government and Industry to accelerate Innovation and Mission outcomes. Our trusted disruptor strategy and culture is delivering and has positioned us at the right place.

Ken: At the right time.

Ken: We're uniquely aligned to the National Security, priorities of the US and its allies.

Ken: whether that's resilient Communications space superiority or replenishing and modern modernizing critical missile systems

Christopher Kubasik: We've also crossed an important operational inflection point with strong top line momentum and expanding margins, we're executing well across a diverse portfolio, delivering strong performance, even as we take on increasingly complex missions. Looking ahead, we expect consistent top line growth with industry leading margins and increasing free cash flow per share. From 2023 through 2026, our free cash flow per share will have a CAGR of 15%. We are well positioned for sustained profitable growth over the long term and will remain disciplined in our capital allocation.

Ken: The awards and Milestones, this quarter reflect that alignment and will meaningfully contribute to growth in the years ahead.

Ken: We've also crossed an important operational inflection point with strong Topline, momentum and expanding margins were executing, well, across a diverse portfolio, delivering strong performance. Even as we take on increasingly complex missions,

looking ahead. We expect consistent Topline growth with industry-leading margins and increasing, free cash flow per share.

From 2023 through 2026, our free cash flow per share, will have a kegger of 15%.

Christopher Kubasik: You can expect more details on our Forward Outlook at our next Investor Day to be scheduled in Q1 of 2026.

Ken: We are well positioned for sustained profitable growth over the long term and will remain disciplined in our Capital. Allocation

Operator: Sylvie, let's go to the Q&A, please.

Ken: You can expect more details on our forward. Outlook at our next investor, day to be scheduled in q1 of 2026.

Operator: Thank you, sir.

Operator: We will now be conducting a question and answer session. Please limit to one question per person. If you'd like to ask a question, please press star one on your telephone keypad and a confirmation tone will indicate your line is in the question queue.

Ken: Sylvie. Let's go to the Q&A, please.

Speaker Change: Thank you, sir.

Operator: You may press star 2 if you'd like to remove yourself from the queue. And if you have any additional questions, please press star 1 again to get back in the queue.

Speaker Change: 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 start to if you'd like to remove yourself from the queue.

Operator: For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the start One moment, please, while we poll for questions. Thank you.

Speaker Change: And if you have any additional questions, please press star 1 again to get back in the queue.

Speaker Change: For participants that are using speaker equipment. It may be necessary to pick up your handset before pressing the star key.

Richard Safran: And our first question today comes from Richard Safran at Seaport Research Partner. Please proceed with your question. Thanks. Chris, Ken, Dan, good morning.

Speaker Change: 1 moment, please while we pause for questions. Thank you.

In our first question today, comes from Richard saffron at Seaport research partner, please proceed with your question.

Christopher Kubasik: I have a two-part LHX Next question. First, you know, I thought you might explain the comment released about monetizing legacy end-life assets. You know, I assume that's part of LHX Next and footprint reductions, but I thought maybe you'd correct me if I'm wrong there. Second, given your opening remarks from both of you, could you discuss a bit more about how much runway you have left on LHX Next cost reductions? I'm wondering if footprint reductions also are going to continue to be part of that. Thanks.

Richard Saffron: Thanks, Chris, and Dan. Good morning. Um, I, I have a 2-part lhx, next question. First, you know, I thought you might explain, uh, the comment and release about monetizing Legacy and life assets. Um, you know, I assume that's part of lhx next, uh, and footprint production, uh, footprint reductions. But I thought, maybe you correct me if I'm wrong there. Second, uh, given your opening remarks from both of you. Um, could you discuss a bit more about how much runway you have left on lhx? Next cost reductions I'm wondering if footprint reductions also are going to continue to be part of that. Thanks.

Kenneth Bedingfield: Yeah, thanks for the question, Rich. Let me focus on the asset monetization first, and the footprint aspect of the question. You know, from my perspective, I think this is really about, you know, looking at our portfolio, where we are investing, and where we see kind of the areas of strategic growth. And as we look at that, we do see, you know, a couple areas where some of the product lines don't necessarily align with the areas of growth that we're investing in and really focused on. And as we see that, we look to to monetize those, those product lines, think of it as, as, you know, taking future revenue and pulling it forward a little bit.

Yeah, thanks for the question, Rich. Let me focus on the uh, asset monetisation first. And, uh, the footprint aspect of the question, you know, for my perspective, I think this is really about, you know, looking at our portfolio, uh, where we are investing and where we see kind of the areas of strategic growth,

Richard Saffron: and as we look at that, we do see, you know a couple areas where some of the

Kenneth Bedingfield: So, I think we've done, you know, a good job of that and, you know, in terms of the footprint, you know, that's, I would say, you know, more of a tangential benefit, certainly, you know, it's really about the strategy and the future growth, but as we exit this product line, it will create an opportunity for us to repurpose that footprint into areas that are growing and aligned with the strategy.

Product lines. Don't necessarily align with the areas of, uh, of growth that we're investing in and really focused on. And as we see that, we look to uh, to monetize those, uh, those product lines. I think of it as, as you know, taking future revenue and and pulling it Forward, uh, a little bit.

Um, so I think we've done, you know, a good job of that. And, uh,

Richard Saffron: you know, in terms of the footprint, you know, that's

Kenneth Bedingfield: For more information, visit www.FEMA.gov On the next question, on LHXnext, you know, look, we'll continue to drive cost savings. We'll continue to drive facility consolidations and really focus on that. It'll become more of kind of our ongoing effort of, you know, operational improvement, what we call E3, but, you know, the LHXnext program from a implementation perspective will largely be through the system by the end of 2025.

Richard Saffron: You know, it's really about uh, the strategy and and the future growth. Um, but as we exit this product line, it will create an opportunity for us to repurpose that, uh, footprint into areas that are um, are growing in aligned with the strategy.

Richard Saffron: Uh, on the next question on lhx. Next, you know look we'll continue to drive uh cost savings. We'll continue to drive facility consolidations and um, and really focus on that, it'll become more of

Kind of our ongoing effort of, um, you know, operational Improvement. Uh, what we call E3.

Christopher Kubasik: And I'll just add on that... Yeah, yeah, Rich, just just on the product line, it's really all about management focus. And I want the team focused on things that are going to move the needle for our customers and shareholders. So these are really small, immaterial product lines that have better owners, in our opinion. So we effectively are monetizing today with would have been immaterial amounts of revenue, OI and cash over the next several years. And agree with Ken on LHX next, we'll we'll hit the 1.4 or greater cost savings by the end of the year, we'll declare victory and the program and make it part of our normal business cadence, all while transitioning to the transformation of the of the company and having more of a digital ecosystem to get timely, accurate data to make our decisions.

Richard Saffron: Um, but uh, you know, the lhx next program from a, uh, implementation perspective will, uh, largely be through the system by the end of, uh, end of 25.

Richard Saffron: Can I just add on this? Uh,

Yeah, yeah, Rich just just on the product line, it's really All About Management focus and I want the team focus on things that are going to move the needle for our customers and shareholders. So these are really small in material product lines that have better owners in our opinion. So we effectively are monetizing today with would have been immaterial amounts of Revenue, oi and cash over the next several years and uh, agree with Ken on the lhx. Next we'll we'll hit uh the the 1.4 or greater cost savings by the end of the year, we'll declare a victory and the program and make it part of our normal business Cadence, all while transition.

Richard Saffron: listening to the transformation of the, uh,

Christopher Kubasik: So that's how I see the future played out on LHX next.

Unknown Executive: Thanks to both of you. Appreciate it.

Richard Saffron: of the company and having more of a digital ecosystem to get timely accurate data to uh make our decisions. So that's how I see the future. Play it out on ohx next.

Thanks to both of you, appreciate it.

Ronald Epstein: Next question is from Ron Epstein at Bank of America. Please proceed. Yeah, hey, good morning. Just wanted to follow up with a question on the international opportunities that you both referred to in your prepared remarks. Given the increased spend spending in Europe, what impact do you think that will have for you guys? What opportunities are out there? You know, it's kind of outsiders looking in. Can we kind of keep an eye on that?

Speaker Change: Next question is from Ron Epstein at Bank of America, please proceed.

Yeah. Hey, good morning guys. Uh thanks

Just wanted to follow up with that a question on the um International opportunities that you both refer to when you're prepared remarks, given the increased defense spending in.

Speaker Change: In Europe, you know what, what impact do you think that'll have for you guys? What opportunities are out there? You know, it's kind of Outsiders looking in. Um, can we kind of keep an eye on

Christopher Kubasik: Yeah, thanks, Ron. We're seeing solid, solid growth internationally. You know, we've always had about 20% of our revenue from from our international customers in Europe. As I mentioned in my prepared comments, we're seeing a lot of opportunities, really focused on the telecommunications, the software defined radios, and countries, you know, that historically went to their indigenous providers. So the importance of interoperability and resilience and security is making a making a huge difference. You know, our business jets, missionized business jets, we have opportunities in the Far East, and also in Europe as well. So that continues to be a growth market for us.

Speaker Change: Yeah, thanks Ron. Uh, we're we're seeing the solid solid growth. Uh, internationally, you know, we've always had about 20% of our revenue from, from our International customers in Europe. As I mentioned, in my prepared comments, we're seeing a lot of opportunities, really, uh, focused on the uh, telecommunications, the software defined radios in uh, countries. You know that historically went to their indigenous providers. So the the importance of interoperability and resilience and security is is making a making a huge difference, you know, our business Jets. Uh, Mission Jets, we have opportunities in the Far East.

Christopher Kubasik: And then of course, the Mideast, whether we're a prime, a sub or a merchant supplier, we do get the benefits, especially with the missile production, as a subcontractor going to the Mideast and other parts of the world. So we feel very confident about our international growth. And I think it's reflected in today's results.

Christopher Kubasik: And then, Chris, if I may, as a follow on, do you think you need a bigger footprint in Europe? I mean, one of the things that we've heard discussed a lot from the European allies is just, they want kind of more sovereignty. I mean, how do you think about that strategically for the country? Yeah, well, I mean, our strategy, Ron, has been to partner and bring the best of breed to our customers. So while we have a footprint of employees and infrastructure in certain countries, the partnership model seems to work best. And we've had great success working with other defense and technology companies around the globe.

Speaker Change: And also, uh, in in Europe as well. So that continues to be a, a growth Market, uh, for us. And then, of course, the Middle East, uh, whether we're, uh, a prime, a sub or a merchant supplier, we do get the benefits, especially with the missile production, uh, as a subcontractor going to the Middle East and other parts of the world. So you feel very confident about our International growth and I think it's reflected in today's results.

Speaker Change: And then if Chris I met as a follow on, do do you think you need a bigger footprint in Europe? I mean, 1 of the things that we've heard discussed a lot from you know, the European allies is just just they want kind of more sovereignty. I mean, how do you think about that strategically for for the company?

Speaker Change: Yeah. Well, I mean, our strategy Ron has been to to partner, and, and bring the best of breed to, to our customers. So

Christopher Kubasik: And again, we're not adverse to subcontracting to them. But more times than not, we're the prime and we put them on our team. So that's how it works. In the Mideast, you know, we have a little more of a presence because they like to have the technology transfer in the footprint. But we're agile and we kind of read country by country what needs to be done. I think you recall a few years ago, we opened a factory in Poland for that very reason. So we're happy with the strategy so far, but can adjust if needed.

Uh, what we have a footprint of, uh, employees and, and infrastructure and certain countries. Uh, the partnership model seems to to work best. Uh, and we've had great success, uh, working with uh, other defense and technology companies around the globe. And again, we're not adverse to subcontracting to them but more time to not we're the prime and we put them on our team so that uh that's how it works in the Middle East. You know, we have a little more of a a presence because they like to have the technology transfer in the in the footprint but we're agile and uh we kind of read country by country. What needs to be done? I think you recall a few years ago we opened a factory

Speaker Change: Factory in Poland for that very reason. So we're happy with the strategy so far, but can adjust if needed.

David Strauss: Next question will be from David Strauss at Barclays. Please proceed. Thanks, Maureen. Thanks for taking the question. Chris, the...

Thank you. Next question, will be from David Strauss at Barkley's, please proceed.

David Strauss: Thanks. Good morning. Thanks for taking the question.

Kenneth Bedingfield: The growth and margin improvement that you're predicting for forecasting for 2026, could you kind of rank by segment where you would expect to see the most growth, kind of highest to lowest, and then same from a margin improvement standpoint? Thanks.

Chris I: Uh, Chris the um,

Chris I: For our forecasting for 2026. Could you uh kind of ranked by segment where you would expect to see the most growth kind of highest to lowest and then seen from a margin Improvement standpoint? Thanks.

Kenneth Bedingfield: Yeah, David, if can, I can, I'll take that question. From a, you know, from a growth perspective. I think, you know, we're seeing growth across all four segments, I think we expect that to continue largely. But if you wanted to rank them, you know, right now with the demand we're seeing at Aerojet Rocketdyne, especially around solid rocket motor production, and some of the contracts that Chris mentioned that we assigned for space propulsion, Aerojet likely would be the fastest grower. As we look at opportunities like, you know, Golden Dome, and SDA Tronch 3 that we've responded to an RFP for, certainly SAS will be a strong grower, CS as it looks at continued international opportunities, and then IMS as well.

Chris I: Yeah, David, it's Ken, I can, uh, I'll take that question. Um, from a, um, you know, from a growth perspective.

Chris I: I think, you know, we're we're seeing growth across all 4 segments. I think we expect that to continue largely. Um, but if you wanted to rank them, uh, you know, right now with the demand, we're seeing at area, jet rocket dine, uh, especially around solid solid rocket motor production and some of the uh, contracts that Chris mentioned that we've signed for space propulsion. Uh, airjet likely would be uh the fastest grower as we look at opportunities like, you know, golden dome and uh SDA tranche 3 that uh We've responded to an RFP for certainly SAS will be a strong grower.

Kenneth Bedingfield: So, you know, maybe that's the way to think about it. But solid growth opportunities across all four segments.

Kenneth Bedingfield: In terms of margin improvement, you know, I think, really, it comes down to continuing to integrate the benefits of the LHX Next program, as well as solid program performance. You know, burning down risk on programs, just, you know, just performing well, and I think we're, you know, seeing that we're on a good rhythm in terms of delivery. I think it's having a couple benefits. You know, number one, I think it's really giving the customer confidence and you know providing new awards and new opportunities for L3Harris and you're seeing that in the over 8 billion dollars of awards in the quarter as well as the solid book the bill but it's also you know yielding itself in terms of good margin output.

Um, CS as it looks at uh, continued International opportunities and then uh IMs as well. So you know, maybe that's the way to, to think about it. Um but uh solid growth opportunities across all 4 segments.

In terms of margin Improvement, you know, I think, uh, really it comes down to, uh, continuing to integrate the benefits of the lhx next program.

Chris I: Uh, as well as solid program performance.

Chris I: You know, burning down risk on programs. Just you know just performing well and I think we're uh you know seeing that we're on a good rhythm in terms of uh delivery. I think it's uh having a couple benefits. Um, you know, number 1. I think it's really given the customer confidence.

Christopher Kubasik: So, kind of a win-win, and we expect that to continue into 26 with the low 16% margin. Yeah, I mean, David, the commercial business model is big contributor to our industry leading margins and each and every segment is looking in conjunction with the DOD's desire to go faster at more and more commercial acquisition models. So, you know, I think it's going to be a matter of which segment, which programs we can transition to more of a commercial model quicker, and that should drive the higher margins sooner. So, I think it was December of 23, we said each of the segments would grow the margins 100 basis points.

Chris I: And, uh, you know, providing new Awards and new opportunities for L3 Harris. And you're seeing that in the, uh, over 8 billion dollars of Awards in the quarter as well as the solid book, the bill. Um, but it's also, you know, yielding itself, in terms of uh good margin outcomes.

Chris I: So uh, kind of a win-win and um, we expect that uh, that to continue into 26 with uh you know, the low 16% margin rate.

Chris I: yeah, and the uh David the uh the commercial business model is

Chris I: A big contributor to our industry-leading uh margins and each and every segment is looking uh in conjunction with the dod's desire, to go faster at more and more uh commercial acquisition models. So you know, I think it's going to be a matter of which uh segment which programs we can transition to uh more of a commercial model quicker and that should drive the uh, the higher margins sooner. So I think it was uh, December of 23. We said Each of

Kenneth Bedingfield: We've either achieved that or tracking to that. So very proud of the team to get over 16% so quickly.

Chris I: The segments would grow the margins 100 basis points.

Chris I: Uh, We've either achieved that or attract tracking to that. So, very proud of the team, uh, to get over 16% so quickly.

Myles Walton: Next question will be from Myles Walton at Wolf's Research. Please proceed. Thanks.

Christopher Kubasik: Good morning. Chris, how quickly can you get the HBTSS Constellation contract under contract? And does that become revenue in 2025? And then for Tranche 3, I think there's an October decision for that outcome. Is your 26 confidence hinge on winning that? Or does the 26 sales guidance, you know, you have confidence even without winning Tranche 3? Yeah, thanks. Thanks, Myles. On HBTSS, as you know, the general was just confirmed, you know, he's talking about doing a 60-day study to refine the architecture. So, you know, we'll await an RFI or an RFP to see how quickly they're going to move.

Speaker Change: Thank you. Next question, will be from Mi Walton at wolves research, please proceed.

Mi Walton: Thanks, good morning. Um, Chris, how quickly can you get the hbtss constellation contract under, uh, contract? And does that become Revenue in 205, and then for trunk 3, I think there's an October decision for that outcome. Um, is your 26 confidence? Um, hinge on winning that or does the 26 sales guidance? Um uh you know you have confidence even without winning T 3. Thanks

Christopher Kubasik: I think given the fact that this was the only program highlighted in the executive order, we'd be hopeful that we could get something under contract by the end of the year, and maybe that contributes a little bit of the revenue for 25 and clearly a fair amount in 26. T3, you know, it's hard to pull out one particular program, and we've managed more of a portfolio, but clearly we're going to make our 2026 framework. We're assuming we're going to win T3. If we don't, we'll still find a way to get to 2026 framework. We are proud of the fact that we've had a couple years of meeting our commitments one way or another.

Mi Walton: Yeah, thanks. Thanks miles on on hbtss. As you know, the, the general was just confirmed, you know, he's talking about doing a 60-day study to refine the, uh, the architecture. So, you know, we'll await and RFI or in RFP to see how quickly they're going to move. I think given the fact that this was the only program highlighted in the executive order uh would be hopeful that we could get something under contract by the end of the year and maybe that contributes a little bit of the revenue for 25. And clearly a fair amount in 26 T3, you know, it's, it's hard to pull out 1 particular program and

Christopher Kubasik: So, we managed the portfolio, and as you said, the proposal's been submitted. We're waiting for an October award. There'll be three winners, I think, based on our performance, based on our cost, based on the customer's confidence in us being able to deliver on time. I'd be disappointed if we don't win that.

Mi Walton: Uh, we manage more of a portfolio, but but clearly, we're going to make our 2026 framework. Uh, we're assuming we're going to win T3. Um, if we don't, we'll still find a way to get to 20206 framework. We, we are proud of the fact that we've had a couple years of meeting, our commitments, 1 way or another. So we manage the portfolio and uh as you said, the proposal has been submitted. We're waiting for an October award, it'll be 3 winners. I think based on our Performance, Based on our cost based on the customer's confidence in us, being able to deliver on time,

Unknown Executive: Thank you.

Noah Poponak: Next question will be from Noah Poponak at Goldman Sachs. Please proceed. Hey, good morning, everyone.

Speaker Change: Thank you. Next question, will be from Noah papaak at Goldman Sachs. Please proceed.

Noah Papaak: Hey, good morning, everyone.

Christopher Kubasik: I wondered, given the strength in the bookings in the quarter, I wondered, Chris and Ken, if you could talk about how you expect bookings to trend through the rest of the year? I know, you know, kind of to the prior question and some others there, there's maybe some binary-ish things in there, but just curious to hear you talk through it. And then I guess, you know, given the bookings in the quarter, and the last year or two, and the Golden Dome opportunity, Are there at least is at least in the scenario analysis that the growth rate breaks out from the four to six percent that you kind of have been talking about for this year and that's implied by the 23 next year?

Speaker Change: Good morning.

Speaker Change: I wondered if given the the the strength in the bookings in the quarter, I wondered Chris and Ken if you could talk about how you expect

Speaker Change: Bookings to Trend through the rest of the year. I know, you know, kind of to the prior question and some others there, there's maybe some

Speaker Change: binary, uh, if things in there but just curious to hear you talk through it and then I guess, you know, given the bookings in the quarter and the last year or 2

Speaker Change: and the golden dome opportunity.

Speaker Change: Are there at least is at least in the scenario analysis that the growth rate, breaks out from the 4 to 6% that you kind of have been talking about for this year. And that's

Christopher Kubasik: You know, it seemed like the Golden Dome opportunity could could be an accelerant to that. Thanks.

Speaker Change: Implied by the 23 next year.

Speaker Change: Um you know it would seem like the golden dome opportunity. Could could be an accelerant to that. Thanks.

Christopher Kubasik: Yeah, I'll go first and then ask Ken to add a little more. Yeah, clearly, there's a ton of opportunities. You know, we try to secure as much business as we can as quickly as we can. 1.5 is a record. I think that'll be hard to repeat in Q3 and Q4, but we have pretty good visibility and hope to be well over one in both of those quarters and single large awards like T3 or HBTSS, which could be multibillion dollars. Some of the missionization on business jets in the Mideast or the Far East, again, billions of dollars of awards can can move that pretty, pretty quickly.

Speaker Change: Yeah, I I'll go first and then asked again to to add a little more. Um, yeah. Clearly there's there's, there's a ton of opportunities, you know? We, we try to secure as much business as we can, as quickly as we can. 1.5 is a record. I think that'll be hard to repeat in Q3 and Q4 but we uh, have pretty good visibility and hope to be well over 1 in both of those quarters and single uh, large Awards like uh T3 or a

Hbtss, which could be multi-billion dollars. Some of the uh mission on business Jets, uh, in the Middle East or the Far East again.

Kenneth Bedingfield: And, you know, to the extent you deliver on time, which has been our focus, it does help with the the revenue recognition. So, yeah, I would hope we could potentially do more than four to six. I don't know if I'd call it a breakout, but we're highly motivated. And as I said, the customer wants to reward and allocate work to companies that are delivering and we're delivering. And I expect our backlog to grow by the end of the year and also expect that our revenue will look strong for the foreseeable future.

Speaker Change: Uh, billions of dollars of wards can can move that, uh, pretty pretty quickly. And, um, you know, to the extent you deliver on time which has been our focus, it does help with the, uh, the revenue recognition. So,

Speaker Change: Yeah, I would hope we could potentially do more than 4 to 6. I don't know if I'd call it a breakout but uh, we're highly motivated. And uh, as I said, the customer wants to reward and allocate work to companies that are delivering and we're delivering and uh, I expect our backlog to grow by the end of the year. And uh also expect that our Revenue will look uh strong for the foreseeable future.

Kenneth Bedingfield: Yep, I agree with what Chris said. And from a book-to-bill or awards and backlog perspective, Noah, I think we're looking at a solid second half from an awards perspective. Awards are probably the hardest thing to predict in terms of timing, but certainly in terms of the number of opportunities we see in front of us, I think we can have a solid book-to-bill in the So I feel really good about our position, and I agree with Chris. I think You know, looking at the opportunities in front of us, it does give us, again, confidence to that $23 billion.

Speaker Change: Again.

Yep. Uh, I agree with what Chris said. And from a, from a book to Bill, or, or Awards, and backlog perspective, Noah, I think we're looking at a solid, uh, second half from an awards perspective, awards are probably the, the hardest thing to predict in terms of timing. Um, but certainly, uh, in terms of the number of opportunities we see in front of us,

Speaker Change: Uh I think we can have a solid book to bill in the second half of the year. And as Chris mentioned, we should have

Speaker Change: Uh, growing backlog through to uh the end of 25. So feel really good about about our positions and and I agree with Chris I think um

Kenneth Bedingfield: No single order or single award is key to hitting that number, given the diversity of our portfolio. But I think if a couple things go in the right direction, we certainly got the opportunity for driving some outsized growth, not just in 26, but as we look forward for some period of time. Thank you.

Speaker Change: You know, looking at the opportunities in front of us uh it does give us uh again confidence to that 23 billion.

Speaker Change: Uh, no single order or single. Uh, award is is key to hitting that number, given the diversity of our portfolio, but I think if a couple things go in the right direction, uh, we certainly got the opportunity for driving some, uh, some outsized growth, not just in 26. Uh, but as we look forward for for some period of time,

Douglas Harned: Next question will be from Douglas Harned at Bernstein. Please proceed. Good morning. Thank you.

Speaker Change: thank you. Next question.

Speaker Change: Please proceed.

Kenneth Bedingfield: You know, on the bookings, the $8.3 billion, can you give us a picture of what the major pieces of that were and how that breaks down by segment, given it was a big number this quarter? Yeah, good morning. Good morning, Doug. I can tell you, each and every segment was over 1.0. Aerojet, almost 2x book to bill. SAS, close behind and IMS and communications were kind of in that 1.1 to 1.3 range. So, it all added up to a 1.53 book to bill.

Speaker Change: Good morning. Thank you.

Speaker Change: Um, you know, on on the bookings that that 8.3 billion. Can you give us a a picture of, of what the major pieces of that were and how that breaks down by segments given? You know, was it was a big number. This, this quarter,

Speaker Change: Yeah, good morning. Uh, good morning Doug. I, I can tell you, uh, each and every segment uh was uh over uh, 1 1.7-liter.

Kenneth Bedingfield: I'll ask Ken to maybe highlight a few of the big wins, but it was not one particular item. It was just across all 14 sectors. Yeah, yeah, he can go through the details. Yeah, thanks, Chris. I appreciate it. Yeah. And I would say again, strong book to bill across all the segments. If you look at Aerojet with, you know, 2.0 book to bill, you know, solid orders in both the missile solutions business as well as space propulsion. At SAS, really strong orders in mission networks and the work it does with FAA and solid positioning for growth in airborne combat systems sector.

Speaker Change: SAS close close uh, behind and uh ifs and uh Communications were uh kind of in that 1, 1 1 to 1, 3 range. So it all added up to to a 1.53 book to Bill. I'll ask again to maybe highlight a few of the uh,

A few of the big wins but it was not 1 particular item. It was just uh across all 14 sectors and um

Speaker Change: Yeah, I I yeah you can go through the details. Yeah. Thanks Chris. I appreciate it. Yeah. And uh, I would say again, strong book, The Bill across all the segments, if you look at our jet with, uh,

Speaker Change: You know 2.0 book, the bill, you know solid orders in both the missile Solutions business as well as space propulsion.

Kenneth Bedingfield: IMS had strong orders at ISR as well as Maritime. And then CS, again, we continue to see strong orders from an international perspective. I think Chris mentioned a couple, Germany and Czech Republic. So really solid performance across the board.

Speaker Change: Mission networks and the work, it does with FAA. And, um, solid positioning for growth in Airborne combat systems, uh, sector

Speaker Change: IMS, have strong orders at ISR, uh, as well as maritime.

Kenneth Bedingfield: And I think maybe more importantly, all of those orders are very aligned to the areas that we're investing in and driving the strategy towards from a growth perspective. Thank you.

And then CS again. We continue to see um, strong orders from an international perspective. I think Chris mentioned, a couple Germany and and Czech Republic. Um, so really solid performance across the board. And I think maybe more, importantly, all of those orders are very aligned to the areas that we're investing in and driving, uh, the strategy towards from a growth perspective.

Robert Stallard: Next question will be from Robert Stallard at Vertical Research. Please proceed. Thanks so much.

Speaker Change: Thank you.

Next question.

Speaker Change: From Robert Stallard at vertical research, please proceed.

Christopher Kubasik: Good morning. Hey Rob. Ken and Chris, just wanted to follow up. is this Yeah, thanks, Rob. I can assure you, we're not signing up to the things that are riskier, racier, if that's what you said. No, there's a desire to go fast for the customer. A lot of these awards are follow-on awards, change orders to existing contracts. A lot of classified work in ISR and space this quarter. And, you know, it seems like the new administration, with their great business background, understands business maybe better than prior administrations. And we're receiving cost-plus contracts where appropriate, and fixed-price contracts when we move into production.

Speaker Change: Thanks so much. Good morning.

Speaker Change: Hey Rob.

Speaker Change: Ken and Chris just wanted to follow up on Chris's comments earlier about, um, the customer wanted to go faster, uh, and all that, um, is this check coming with, uh, an an embracement of risk? That's appropriate. I mean, are you signing up to contracts that are perhaps a little bit, um, racier than you perhaps would like, if things weren't going so fast.

Christopher Kubasik: Not a lot of desire to lock in long-term fixed-price options for development programs that haven't been developed. So, I find them so far to be quite reasonable and kind of enjoyable to work with. So, somewhat refreshing in my experience. Yeah, I'll just add, from a contracts perspective, Rob, you know, moving faster doesn't necessarily mean taking more risk. I think the business deals that we're working on, we work closely with the customer. We've got a great contracts team that, I think, negotiates good deals for us and makes sure that we're thinking about the risk and making sure we sign up for the right statement of work.

Speaker Change: Yeah, thanks Rob. Uh, I can assure you. We're not signing up to uh to things that are riskier or racier if that's uh what what we, what you said. Um, know there's, there's a desire to go fast for the customer. Um, a lot of these, uh, awards are, uh, follow on Awards, change orders to existing contracts. Um, a lot of classified work in ISR and space this quarter. And, you know, it's seems like the new Administration with their great, uh, business background understands, uh business maybe better than than prior administrations. And uh, we're receiving Cost Plus, uh, contracts where appropriate and fixed price contracts. When we move into production, not a lot of desire to lock in long-term fixed price options for development programs that haven't been developed. So I find them, uh, so far to be, uh, quite reasonable and, uh,

Christopher Kubasik: So, I think all that is moving well on that front. And, you know, we're – I think this is really something that L3Harris is built for. I mean, we're able to manage risk, move fast. I think we've got more agility. You know, we've got smaller teams that look at these things, really make sure they align with the strategy, they align with our profitable growth plans. You know, certainly we take risk in certain areas, and we work to offset that with operational performance and other parts of the portfolio. But I think it's all, you know, it's all hanging together really nicely, and I think our risk profile, as I look forward, is appropriate.

kind of enjoyable to work with. So, somewhat refreshing in my experience. Yeah, I'll just add from a contract perspective. Uh, Rob. Um, you know, moving faster, doesn't necessarily mean taking more risk. I think the, uh, the business deals that we're working on, we work closely with the customer. We've got a great contracts team that I think negotiates, good deals for us and make sure that we're thinking about the rest and making sure we sign up for the right.

Speaker Change: Statement of work. So I think uh all that is moving well um on that front. And um you know we're I think this is really something that L3 Harris has built for. I mean we're able to manage risk move fast, I think we've got more agility. You know, we've got smaller teams, that look at these things. Really, make sure they align with the strategy. They align with our profitable growth plans. You know, certainly we take risk in certain areas and we work to offset that with operational performance and other parts of the portfolio.

Christopher Kubasik: Yeah, a lot of this comes from the basis of estimate, and we've now, after several years since the merger of L3 and Harris, have been able to build up some data. to do a little better job with our parametric modeling and such and using AI and our digital backbone. So we're getting better and better data to base our bids on. So if you get the basis of estimate right, whether it's the hours or the subcontracts, it's going to make it easier to perform and make money. And that's what we're doing. We're submitting bids based on what it costs.

Speaker Change: Um, but I think it's all, um, you know, it's all hanging together, uh, really nicely and I think our our risk profile as I look forward is is uh appropriate. Yeah, a lot of this comes from the basis of estimate and we've. Now after several years, since the merger of L3 and Harris had been able to build up some data,

Speaker Change: uh,

Christopher Kubasik: And in some cases, or a lot of cases, we're winning, and some cases we're not. But we're not going to bid bad deals knowingly just to grow market share.

Speaker Change: To do a little better job with our parametric modeling and, and such and using Ai and our digital backbone. So we're getting better and better data, uh, to base our, uh, bids on. So, if you get the basis of estimate, right? Whether it's the, uh, the hours or the subcontracts, it's going to make it easier to uh, perform and make make money. And that's what we're doing. We're submitting bids based on what it costs and in some cases or a lot of cases we're winning and um some cases we're not, but we're not going to bid. Bad deals knowingly just to uh grow market share.

Sheila Kahyaoglu: Next question will be from Sheila Kahyaoglu at Jeffreys. Please proceed.

Sheila Kahyaoglu: Good morning, Chris and Ken. Chris, I really appreciate the color around the strategy. Any way you could quantify maybe just specifically TDL and Aerojet hitting their stride with Aerojet having the highest revenue quarter? How does that contribute or accelerate 26 growth and on Aerojet specifically, just increases in production? How are you thinking about the business over the next five years, and the biggest growth drivers for Aerojet?

Speaker Change: Thank you. Next question, will be from Sheila Kay. At Jeffrey's please proceed.

Christopher Kubasik: All right, well, thank you, Sheila. I'll say, you know, on both these acquisitions that we made in 2023, TDL and Aerojet are exceeding the business model that we built to approve and get our board of directors to approve these acquisitions. I'll give a little insight on TDL.

Speaker Change: Um, good morning, Kristen Ken. Um, Chris I really appreciate the color around the strategy. Anyway you could quantify maybe just specifically TDL and aerojet hitting their stride with a having the highest revenue quarter. How does that contribute or accelerate 26 growth and on aerojet specifically just increases in production? How are you thinking about the business over the next 5 years? And the biggest growth drivers for for air jet.

All right. Well, thank you, Sheila. I'll uh, I'll say uh,

Kenneth Bedingfield: I'll ask Ken to talk about Aerojet Rocketdyne. But on TDL, which you don't see the visibility, but it's within the CS segment, you know, since acquiring them in January of 2023, the revenue has been upper single digits, so both accretive to CS and accretive to L3Harris. The margins, as a result of the cost synergies and consolidating the facilities in Salt Lake City, streamlining and improving the roll throughput yield and the production capability, are almost at the CS segment level, so very high margins, especially on the commercial business model again. And the cash has been very strong, not even considering some of the tax benefits as a result of the way the transaction was modeled.

Christopher Kubasik: So, you know, as we go into year two and a half here, very pleased with TDL. And again, part of that upside has been our success in getting League 16 into the space, which had never been done before, and I think that's huge opportunities as these various comms and transport layers under Golden Dome evolve in the years ahead.

Speaker Change: Are exceeding. The business model that we built to approve and get our board of directors to approve these Acquisitions. I'll give a little insight on TDL. I'll ask him to talk about aerojet rocketing but on TDL, which you don't see the visibility, but it's within the Cs, uh, segment. You know, since acquiring them in January of 2023, the revenue has been the upper single digits. So both the creative to Cs and the creative to L3 Harris, uh, the margins, uh, as a result of the cost synergies and consolidating the facilities and Salt Lake City. Uh, streamlining and improving the role, throughput yield and the production capability, uh, are almost at the Cs segment level. So very high uh margins and especially on the commercial business model again. And the cash has been very strong, uh, not even considering some of the tax benefits as as a result of the way, the transaction was was modeled. So, you know, as

Kenneth Bedingfield: Ken, you want to talk about Aerojet Rocketdyne? Yeah, thanks, Chris. Yeah, from an Aerojet Rocketdyne perspective, Sheila, I would say. You know, there is just a significant amount of opportunity. And it does take investment. This is a long cycle cycle kind of capital intensive business. I mentioned that Aerojet Rocketdyne should be the fastest grower as we look 26 and beyond. Missile Solutions is certainly a big part of that. If you look at where we're investing, we did work with the government to get some Defense Procurement Act funding for programs like Javelin, Stinger, and a couple others.

Speaker Change: We go into, uh, year 2 and a half here, uh, very pleased with with TDL. And again, part of that upside has been, uh, our success in getting League 16 into the space which had never been done before, and I think that's huge opportunities as these various comms and transport layers, uh, under golden dome evolved, in the years ahead, Ken, you want to talk about, uh, aerojet rocket. I yeah. Thanks Chris. Um, yeah, from an air jet rocket time perspective. Sheila.

I would say, um,

Speaker Change: You know, there is just, uh, a significant amount of opportunity. Um, and it does take investment. This is, uh, a long cycle cycle kind of capital intensive business. Um, I mentioned that are jet rocket dine should be the fastest grower, as we look, you know, kind of 26 and Beyond missile Solutions is certainly a big part of that.

Speaker Change: And uh, if you look at where we're investing, uh you know we were we did work with the government to get some defense. Procurement act funding

Kenneth Bedingfield: We see growth in the near term, certainly in the tactical motor side. From an interceptor perspective, we're on PAC-3 standard missile on THAAD, and we're seeing growth and increased demand on the interceptor level, and some of that could potentially accelerate as those are a part of the Golden Dome opportunity. And then long term, we've been investing, we've talked about large solid rocket motors, supporting programs like Sentinel, some classified programs, Next Generation Interceptor, as well as Glide Phase Interceptor, which is technically a medium-sized motor, but I would throw it in there, as well as the business we have supporting Missile Defense Agency for Targets that we think would be a grower related to Golden Dome and testing some of those new systems. So, you know, even within Aerojet Rocketdyne, it's a diverse portfolio.

Speaker Change: For programs like Javelin, uh, stinger and a couple others. Um, so we see growth in the near-term, certainly in the Tactical motor side, from an Interceptor perspective, you know, we're on Pack, 3 standard missile on sad.

And we're seeing growth and increased demand uh on the Interceptor level and some of that.

Speaker Change: uh, could potentially accelerate as those are a part of the golden dome opportunity,

And then long-term, uh, we've been investing, we've talked about large, solid rocket Motors supporting programs like Sentinel, um, some classified programs, Next Generation interceptor.

Speaker Change: Um as well as Glide phase Interceptor which is uh technically a medium-sized motor. Um but uh I would throw it in there as well as uh the business we have supporting missile defense Agency for targets that we think would be a grower related to golden dome and testing some of those new systems. So

Christopher Kubasik: I think they're positioned very well across key and what are important missile programs, and certainly those that are seeing increasing demand from the customer, and we expect to drive growth for, you know, a decade or plus in some regards. Yeah, so we're going to try to get to 5 billion of revenue by the end of the decade. That's our aspirational goal. I think we have pretty good visibility into that. I will say when I meet with the primes and the end customers, there's no, nobody disputes that we have by far the best technology in this market.

Speaker Change: You know, even within are jet rocket dying. It's a diverse portfolio. I think they're, uh, positioned very well across key and, um, what our important missile programs and certainly those that are, uh, seeing increasing demand from the customer and we expect to uh, to drive growth for, you know, a decade or plus, uh, in some regards.

Christopher Kubasik: And I think that's been a differentiator. You heard me say we're on pretty much every interceptor in the U.S., whether it's in development or in production. The large solid rocket motors, I mean, we're pretty much have each and every one of those in our portfolio already. So huge, huge opportunities. Again, at the end of the day, it's about delivery and scale.

Speaker Change: Yeah, so we're we're going to try to get to 5 billion of Revenue by by the end of the decade, that's our aspirational goal. I think we have pretty good visibility, uh, into that. I will say, when I meet with the, uh, the primes and and the end customers, uh, there's no nobody disputes that we have, by far the best technology in this market, and I think that's been a differentiator, you heard me say we're on pretty much every Interceptor in the US, whether it's in development, or in production, the large solid rocket Motors. I mean, we're pretty much, uh,

Unknown Executive: You know, you didn't ask about the new entrance. We continue to meet with new entrants. We look to partner. We welcome the competition. But when you look at the investments we're making, that the primes are making and the government's making, you know, in less than two years, we're going to have the facilities, the equipment to ramp up, and it's going to take others half a decade or more to get there. So I feel very, very confident that this was a good acquisition. We have a great team running it and a highly motivated workforce and couldn't be more proud of what we've done and what we're going to do in the future.

Speaker Change: Have have have each and every 1 of those in our portfolio already so huge huge opportunities. Again at the end of the day it's about delivery and scale you know you didn't ask about the new entrance, we continue to meet with new entrance. We look to partner, we welcome the competition but when you look at the Investments we're making that the primes are making and the government's making, you know, unless less than 2 years, we're going to have the facilities, the equipment to ramp up and it's going to take others, half a decade or or more to get there. So feel very very, uh, confident

Gautam Khanna: Q. Next question will be from Gautam Khanna at TD Cowan. Please proceed. Yes, good morning and great results. Thank you.

That this was a good acquisition, we have a great team, running it and highly motivated, Workforce and couldn't be more proud of uh what we've done and what we're going to do in the future.

Thank you.

Next question will be from Gotham comma at TD Cowen, please proceed.

Speaker Change: Yes, good morning and uh, great results.

Christopher Kubasik: I have a two part question. In the president's budget request, you may have seen, you know, the military radio line items were a little bit softer in 26. Likewise, Armed Overwatch and some others. I wanted to get your perspective on, you know, what the growth rate might be beyond 26 for tactical radios, and some of those other areas with the backfill from foreign or otherwise. If you could just give us some framework to think about.

Thank you.

Speaker Change: requests, you may have seen, you know, the military radio

line items were a little bit softer in 26.

Christopher Kubasik: Yeah, great, great question. You know, we, so we'll start with the radios. I'll let Ken talk about armed overwatch. But first of all, it is the 26 PBR. So this is the first step of a multiple step process. So we noticed what the cuts in the HMS and the COPS line, those two line items, but there's quite, quite a long way to go through the process to see where that ends up. And historically, you know, customers weigh in, members of Congress weigh in, and ultimately the end users weigh in. So we'll see how that plays out.

Speaker Change: Uh, likewise armed OverWatch and some others. I wanted to get your perspective on, you know what the growth rate might be Beyond 26, for tactical, radios and some of those other areas with the back. So, from foreign or or otherwise, if you could just give us some framework to think about that.

Christopher Kubasik: But when you look at the actual numbers, you know, we're comparing two line items known as HMS and COPS to the same two in 26. But there was a third line item added called Next Gen Command and Control, or NGC2. So I kind of look at those three as the telecom and the radio line items. And those are on a combined basis, several hundred million more than in 2025. So the question is, what is in NGC2? And as we've looked at it, there is clearly a transport layer, where we believe our software defined radios, and our network capability and architecture capability can meet those needs and continue with the modernization.

Speaker Change: Yeah, great great, uh, question, you know, we uh, so, we'll, we'll start with the radios. I'll call that can talk about armed OverWatch, but, uh, first of all, it is the, uh, 26, PBR. So this is the first step of a multiple step process. So, uh, we we noticed what, uh, the cuts in the HMS and the cops line, those 2 line items. But, uh, there's quite quite a long way to go through the process to see where that ends up and historically, uh, you know, customers weigh in members of Congress weigh in and ultimately, the end user's weigh in. So, we'll see how that plays out. But when you look at the actual numbers, you know, we're comparing 2 line, items known as HMS and cops to the same 2 and 26, but there was a third line item added called NextGen command and control or NGC too. So I kind of look at those 3 as the Telecom and the, the radio line items. And uh, those are on a combined basis, several hundred million more than 2025.

Christopher Kubasik: So I think a lot of the modernization that needs to continue, we're just talking U.S. domestic, is embedded within that NGC2. And our teams are looking at how do we how best to proceed. So we'll monitor this situation, but we'll let you know as that plays out. I don't see this as being a significant headwind, based on our performance and based on our capability. And of course, international, we've already covered, we have great opportunities there as well. So in total, tactical comms, radios, or T-com sector, continue to see growth for the foreseeable future. Haven't even mentioned the waveforms and some of the other product sales that we have.

Kenneth Bedingfield: With much, much higher margins, so.

Speaker Change: So the question is, what, what is in NGC 2? And as we've looked at it, there is clearly a transport layer where we believe our software defined radios, um, and our Network capability and architecture capability, uh, can can meet those needs and continue with the modernization. So I think a lot of the modernization that needs to continue. We're just talking us. Domestic is embedded within that NGC too and our teams are looking at how best to proceed. So we'll monitor the situation but we'll let you know as that plays out. I I don't see this as being a significant headwind based on our performance and based on our capability and of course International, we've already covered. We have great opportunities there as well. So, in total tactical comms, uh, radios or tecom sector. Uh, continue to see growth for the foreseeable future. Um, haven't even mentioned the waveforms and some of the other products sales that we have, uh, with much much

Kenneth Bedingfield: You want to talk about armed overwatch? And sure. Yep. Thanks, Scott. From a, um, armed overwatch perspective, I would say, you know, we did see that there's a dip in quantities, uh, in, uh, I think it's 26. No concerns from our perspective, and I think a couple things, you know, it's a long cycle program, it doesn't impact our production flow, you know, we've got plenty of aircraft in order, and I think we've got a good delivery cadence on that, and maybe more importantly, we're seeing a fair amount of international opportunity for Armed Overwatch that we'll look to drive some awards for, and certainly if you think about the overall ISR business, and as it rolls up to IMS, Nothing in that profile from a funding perspective that would impact our ability for growth in the business.

Speaker Change: Much higher margins. So

you want to talk about armed, OverWatch and sure. Yep. Thanks Scott from uh, um, armed OverWatch perspective. I would say, you know, we did see that there's a dip in quantities, uh, in uh, I think it's 26.

Speaker Change: Um, no concerns from our perspective. And I think a couple things, you know, it's a, it's a long cycle program, it doesn't impact our production flow. Um, you know, we've got plenty of uh, aircraft in order and I think we got a good delivery, Cadence on that. And maybe more importantly we're seeing a fair amount of international opportunity for armed OverWatch that will look to uh, to drive some awards for and certainly if you think about the overall ISR business and as it rolls up to, uh, IMS

Kenneth Bedingfield: So we're tracking it, looking to fill it in with some international. Thank you.

Speaker Change: Nothing in that uh profile from a funding perspective that would impact our ability for uh growth in the business. So um we're tracking it uh looking to fill it in with some International opportunity.

Seth Seifman: Next question will be from Seth Seifman at J.P. Morgan. Please proceed. Thanks very much, and good morning and nice results. I wanted to ask, maybe if you could level set us on where things stand in the mission networks piece of the business within within SAS, kind of how big is that now? And it's something that kind of thought of as, you know, maybe rolling off over time. But it seems like there's opportunity in the near term, given FAA demand. And, you know, maybe the way that the FAA is looking to do things in the future, you know, opens up some longer opportunities as well.

September: Thank you. Next question, will be from September at JP Morgan. Please proceed?

Christopher Kubasik: So I guess, how should we think about that piece of the portfolio? Yeah, thanks. Thanks, Tim. Good morning. And thanks for the kind words. We'll pass it on to the team.

Uh, thanks very much and, uh, good morning and nice results. Um, I wanted to ask maybe if you could level a set us on, um, where things stand in the mission networks, uh, piece of the business within, within SAS kind of how big is that now and it's something that kind of thought of as, you know, maybe rolling off over time. Um, but um, it seems like there's opportunity in the near term, uh, given FAA demand and, you know, maybe the way that the FAA is looking to do things in the future, you know, opens up some longer opportunities as, as well. So I guess how should we think about that piece of the portfolio?

Christopher Kubasik: Yeah, we don't we don't talk much about the Mission Networks business. I mentioned a few things in my prepared remarks. You know, our specialty here is really on the telecommunications of the telecommunications infrastructure. And specifically, you know, the migration from the older, you know, copper wire to fiber that you might have heard Secretary Duffy talk about. So we were able to successfully upgrade the Newark airport, as I mentioned, which got a lot of press over the last several months. But there's literally dozens of other opportunities, and literally 1000s of sites that need to transition from, I'll just say older technology to newer technology.

Christopher Kubasik: And we're kind of in the sweet spot of doing that. So you've heard about the need for a brand new air traffic control system. We will not, at this point, have any interest in being the prime integrator, or try to manage that whole portfolio. I think there's probably other companies that are better suited for that. We want to stay in our sweet spot, which is really the telecom infrastructure, the broadcast services, you know, the data integration and data services. So all in, I think this sector is right around a billion dollars or so, isn't it?

And literally thousands of sites that, uh, need to transition from. I'll just say older technology to newer technology and we're kind of in The Sweet Spot of of doing that. So you've heard about the, uh, need for a brand new air traffic control system. Um, we will not, uh, at this point, uh, have any interest in being the prime integrator or try to manage that whole portfolio. I think there's probably other companies that are better suited for that. Uh, we want to stay in our sweet spot which is really the uh the Telecom infrastructure, the broadcast services at, you know, the data integration and data services. So

Christopher Kubasik: Yeah, with with good margins, and we would expect this to continue to grow and part of our national security infrastructure supporting the U.S. government. So, good business. You know, clearly more upside today than maybe a year or two ago, so the team really came through and did a great job. Thank you.

Uh, all then, uh, I think this, uh, sector is right around a billion dollars or so, is it, um, with with, with good margins? And we would expect this to, uh, continue to grow and it's part of our, uh, National Security infrastructure supporting the US government. So a good business and, uh,

September: You know, clearly more upside today than maybe a year or 2 ago so the team really came through and did a did a great job.

Scott Mikes: Next question will be from Scott Mikes at Emilius Research. Please proceed. Morning, Chris and Ben, nice results. Chris, I wanted to ask about the Wolfpack announcement that you guys came out with. You're effectively going to be competing with Lockheed and Raytheon, who are two of Aerojet's largest customers.

Speaker Change: Thank you. Next question, will be from Scott Mikus at the Milius research?

Speaker Change: Please proceed.

Christopher Kubasik: I'm just wondering when you initially acquired Aerojet, was that something you decided to do more recently, or has it been in the works for a long time? And then long term, what do you see as the revenue opportunity for Wolfpack, both domestically and internationally? All right. Thanks, Scott. I wasn't sure I was going to get a Wolfpack question today. So I'm glad you keep abreast of our announcements. Yeah, this is something that we've been working on well before Aerojet Rocketdyne acquisition. It's a unique transformational capability. Launch effects is something that each of the DoD service branches need.

Scott Mikus: Morning, Christian, nice results. Um, Chris I wanted to ask about the Wolfpack announcement that you guys came out with. You're effectively going to be competing with block Eden rathvon for 2 of a Jet's largest customers. I'm just wondering when you initially acquired aerojet. Was that something you decided to do more recently, or has it been in the works for a long time?

Scott Mikus: And then long-term, what do you see as the revenue opportunity for Wolfpack? Both domestically and internationally

Christopher Kubasik: And we think we have a unique offering that we've been developing. One of these will actually be a kinetic strike and the other will be more of a EW, kind of falls in that attritable market that everybody keeps talking about. And I think these are quite affordable relative to other products that are out there. So we kind of have to start small and build up there. We do have a hot production line. We've had demos, well over 40 flights that have been tested. And there's a lot of interest here domestically, whether we can export or not to be determined.

Scott Mikus: All right. Thanks Scott. I wasn't sure. I was going to get a Wolfpack question today. So, uh, I'm glad you, uh, keep keep a breast of our announcements. Yeah. This is something that, uh, we've been working on, uh, well before, uh, aerojet, uh, rockety acquisition. It's a unique, uh, transformational capability. You know, launch effects is something that, uh, each of the dod, uh, service branches, uh, need and we think we have a unique, uh, offering, um, that we've been, uh, developing the 1 of these will will actually be a kinetic strike and the other will be, uh, more of a e. Ew, kind of Falls in that, uh, a tribal Market that everybody, uh, keeps talking about. And I think these are quite, uh, quite affordable relative to other other products that are out there. So, you know, we got to have to start small and, and, and build up there. We've we've had, uh, we do have a hot, uh, production line.

Christopher Kubasik: And this asset, depending which variation you get, obviously goes inside larger platforms. So we'll try to get a couple hundred million here in the next several years and see where it goes from there. But pretty innovative, pretty creative opportunity. And of course, with Aerojet Rocketdyne, it's just giving us more and more synergy, although these particular assets don't have solid rocket motors in them.

Unknown Executive: Probably all I can say from a technical standpoint.

Scott Mikus: Um, we've had demos well over 40 flights that are that have been uh tested and there's a lot of interest uh, here domestically whether we can export or not to be determined and, you know, this this asset depending which variation you get obviously goes inside larger platforms. So, you know, we'll try to get a couple hundred million here in the next several years and see where it goes from there. But, uh, pretty Innovative pretty creative opportunity. And, of course, with aerojet rocket design, it just gives us more and more Synergy, uh, although these particular assets don't have a solid rocket Motors in them, uh,

Operator: Sylvie, we'll take the last question. Certainly so.

Probably, all I can say from a technical standpoint.

Jason Gursky: And the last question will be from Jason Gursky at Citi. Please proceed. Hey, good morning, everybody. Ken, just a quick clarification question for you. And then Chris, just a bigger picture one, if you don't mind.

That Sylvie will, uh, take the last question.

Speaker Change: Certainly sir. In the last question will be from Jason gursky at City, please proceed.

Speaker Change: Hey, good morning everybody. Um,

Kenneth Bedingfield: On the clarification one, has there been any change, Ken, to your expectations on how much of the LHX NEXT savings you'll pass on versus what gets captured by the customer? I think you've commented on that ratio in the past. And then Chris, I was wondering if you could just spend a little bit more time on space. I know there's been quite a few questions on it today already. So I appreciate that. I appreciate the color there. But I'm just kind of curious, the overall demand environment for space and any kinds of new projects that you might see or new technologies, programs that you see on the horizon, either here domestically, or maybe even over in Europe, and whether European capabilities are going to be something that they're going to spend money on in the space domain here, and whether companies like LHX you think might play a role in increased spending in Europe.

Can just a quick clarification question for you and then Chris just a bigger picture of 1 if you don't mind. Um on the clarification 1 has there been any change you can to your expectations on how much of the lhx next savings deal pass on versus what gets captured by the customer. I think you've commented on that ratio in the past and then Chris

Christopher Kubasik: Thanks. Yeah, Jason, on your first question, in terms of LHX next, no, no, no change of any significance from our expectation around a the margin opportunity. You know, the program goes out and identifies cost savings opportunities. and really make sure that we focus on the run rate opportunities that will impact the longer term business. We work to generate those savings and then certainly flow it through our contract mix. We do expect roughly 30 to 40% of that to generate margin opportunity for us and the remainder will be passed back to the customer through lower cost and essentially providing some benefit to the customer as well as our competitive positioning for winning new work.

Speaker Change: I was wondering if you can just spend a little bit more time on space. I know there's been quite a few questions on it today already, uh, so I appreciate the color there but I'm just kind of curious. Um, the the the overall demand environment, uh, for space and any kinds of new projects that you might see or new technologies programs that you see, um, on the horizon either here domestically or or maybe even over in Europe, and whether, um, you know, European capabilities are going to be something that they're going to spend money on in, um, you know, the space domain here and whether, you know, companies like lhx, you think might play a role um, and increase spending in Europe. Thanks.

Speaker Change: Uh, cost savings opportunities.

Speaker Change: Um, and really make sure that we focus on kind of the Run rate opportunities that will, uh, impact the longer term business. Uh, we work to generate those savings and then certainly flow it through, uh, our contract. Mix. Uh, we do expect, you know, roughly 30 to 40% of that to uh, generate margin opportunity for us and the remainder will be, uh,

Kenneth Bedingfield: So no change to the model, you know, different types of cost savings have, you know, different profiles to them. But overall at a portfolio level, we still expect roughly that 30 to 40%.

Christopher Kubasik: Yeah, Jason, great, great question on space. We've highlighted this in the past as kind of a key part of our trusted disruptive strategy, how we've moved up the food chain. You know, we don't really talk a whole lot about some of the things we do for NASA and NOAA, especially in the weather satellites. And weather satellites have a significant military application, in addition to all of us looking at our apps and checking the weather on a daily basis. So we actually see some international opportunities using our weather satellite technology, which is the same technology we used, you know, to innovate into the missile tracking, missile warning.

You know, passed back to the customer through lower cost and, um, essentially providing some benefit to, uh, to the customer as well as our competitive positioning for winning new work. So no change to the model uh you know, different types of uh cost savings have, you know, different profiles to them. But overall at a portfolio level uh we still expect roughly that 30 to 40% and Chris

Christopher Kubasik: So there's a lot of opportunities for us. We continue to, you know, stick with our strategy in a lot of cases. We're the prime now, which we weren't historically. We still sub on some of these exquisite geo-synchronous satellites focused on our great antenna strategy or technology. And we're also a merchant supplier, even on some of these transport using Link 16 and some other technologies that we've talked about. So a lot of growth potential, I'll say, since the new administration. I think things slowed down. You see that across the industry for the first six months as the new administration comes in place, as we wait for the confirmation, as we figure out what's going to happen with SDA, MDA, SSC, and all these other customers that procure satellites.

Chris I: Yeah, Jason great. Great question on Space. We've highlighted this in the past, is kind of a key part of our trusted disruptive strategy, how we move it up the, uh, the food chain, you know, we don't really talk a whole lot about some of the things we do for NASA and Noah, especially in the weather satellites and weather satellites have a significant military application. In addition to all of us, looking at our apps and checking on the weather on a daily basis. So, we actually see some, uh, International op opportunities, uh, using our weather satellite technology, which is the same technology we used, you know, to, uh, innovate into the missile tracking missile warning. So, there's there's a

Christopher Kubasik: So I think we're going to pick up some momentum here in the third and fourth quarter as the architectures are finalized. But we pretty much play in every orbital plane and every size and, you know, as a prime, a sub, and a merchant supplier. So we're looking for good things out of space. And again, we're performing, we're delivering, and that's going to lead to more business.

A lot of opportunities for us, we continue to, you know, stick with our strategy in a lot of cases where the prime now, which we weren't historically, we still sub on some of these Exquisite Geo, uh, synchronous satellites focused on our great uh antenna strategy or or technology. And we're also a merchant supplier even on uh some of these transport using link 16 and some other Technologies uh, that we've talked about. So uh, a lot of growth potential I'll say, since the new Administration I think things slow down you see that in across the industry for the first 6 months as the new Administration comes in place because we wait for the confirmation as we figure out what's going to happen with SDA, MDA SSC, and all these other, uh, customers that procure a satellite. So I I think we're going to pick up some momentum here in the third and fourth quarter as the architectures are finalized, but we pretty much play in every orbital plane and every

Christopher Kubasik: So as we close today's call, I want to thank my leadership team and our employees for their continued focus, agility, and commitment to the mission. More than 90% of my executive leadership team is new to the company or has taken on expanded roles in the last three years. The team brings a strong mix of defense industry experience, operational expertise, and commitment to advancing national security priorities by investing in talent, technology, and long-term growth. We are fearless. We have the courage to defy the status quo and challenge convention. We don't follow trends. We set them, and we're forging original paths that advance mission success.

Chris I: Size and you know as a prime a sub and a merchant supplier. So we're looking for good things, out of space and again we're performing we're delivering and that's going to lead to more business.

Chris I: So as we close today's call, I want to thank my leadership team, and our employees, for the continued. Focus agility and commitment to the mission.

Chris I: More than 90% of my executive leadership. Team is new to the company or has taken on expanded roles in the last 3 years. The team brings a strong mix of Defense industry experienced operational, expertise and commitment to advancing National Security priorities by investing in Talent technology and long-term growth. We are fearless

Christopher Kubasik: The progress we're making is a direct result of their teamwork, their focus, and their commitment.

Christopher Kubasik: So thank you all for joining us today, and we look forward to connecting with many of you in the weeks ahead.

Chris I: We have the courage to defy the status quo and challenged convention. We don't follow the trends we set them and we're forging original paths that advanced Mission success. The progress. We're making is a direct result of their teamwork, their focus and their commitment.

Operator: Thank you. Thank you, sir.

Chris I: So thank you all for joining us today and we look forward to connecting with many of you in the weeks ahead.

Operator: Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. And at this time, we do ask that you please disconnect your line.

Chris I: Thank you.

Thank you, sir. Ladies and gentlemen, this is indeed conclude your conference call for today. Once again, thank you for attending and at this time we do ask that you please disconnect your lines