Q4 2025 L3Harris Technologies Inc Earnings Call

January 29, 2026

Speaker #1: Greetings. Welcome to the L3Harris Technologies fourth quarter 2025 earnings conference call. At this time, participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation.

Operator: Greetings. Welcome to the L3Harris Technologies' Q4 2025 Earnings Conference Call. At this time, participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this call is being recorded. It is now my pleasure to introduce your host, Tony Calderon, Vice President, Investor Relations, and Corporate Development. Thank you. Tony, you may now begin.

Speaker #1: If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this call is being recorded.

Speaker #1: It is now my pleasure to introduce your host, Tony Calderon, Vice President, Investor Relations, and Corporate Development. Thank you, Tony. You may now

Speaker #1: begin. Thank you, Tiffany.

Tony Calderon: Thank you, Tiffany, and good morning, everyone. Joining me are Chris and Ken. Earlier this morning, we issued our Q4 earnings release outlining our results and our 2026 guidance, along with a presentation available on our website. Before we begin, please note that today's discussion will include forward-looking statements subject to risks, assumptions, and uncertainties that could cause actual results to differ materially. For more information, please refer to 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, let me turn it over to Chris.

Q4 2025 L3Harris Technologies Inc Earnings Call

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Q4 2025 L3Harris Technologies Inc Earnings Call

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Thursday, January 29th, 2026 at 3:30 PM

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Speaker #2: And good morning, everyone. Joining me are Chris and Ken. Earlier this morning, we issued our fourth quarter earnings release outlining our results and our 2026 guidance, along with a presentation available on our website.

Speaker #2: Before we begin, please note that today's discussion will include forward-looking statements subject to risks, assumptions, and uncertainties that could cause actual results to differ materially.

Speaker #2: For more information, please refer to our earnings release and SEC filings. We will also discuss non-GAAP financial measures, which are reconciled to GAAP measures in the earnings release.

Speaker #2: With that, let me turn it over to

Speaker #2: Chris. Thanks, Tony.

[Analyst] (Jefferies): Thanks, Tony, and good morning, everyone. We wrapped up 2025 by continuing to execute with speed and discipline, meeting our customer commitments, improving on-time delivery, and investing to increase production capacity while delivering strong Q4 and full-year results. We ended the year with a record order book and strong demand signals from our customers. All of this is positioning us for sustained growth going forward. We are equally focused on how we evolve our business. Over the past six years, we have aligned our portfolio to the fastest-growing defense priorities with a vision of the future of warfare. As a result, we have acquired and divested billions of dollars of businesses, including our recently announced sale of a majority stake in our civil space propulsion and power business. 60% of this business is being sold to AE Industrial Partners.

Christopher Kubasik: Thanks, Tony, and good morning, everyone. We wrapped up 2025 by continuing to execute with speed and discipline, meeting our customer commitments, improving on-time delivery, and investing to increase production capacity while delivering strong Q4 and full-year results. We ended the year with a record order book and strong demand signals from our customers. All of this is positioning us for sustained growth going forward. We are equally focused on how we evolve our business. Over the past six years, we have aligned our portfolio to the fastest-growing defense priorities with a vision of the future of warfare. As a result, we have acquired and divested billions of dollars of businesses, including our recently announced sale of a majority stake in our civil space propulsion and power business. 60% of this business is being sold to AE Industrial Partners.

Speaker #3: And good morning, everyone. We wrapped up 2025 by continuing to execute with speed and discipline, meeting our customer commitments, improving on-time delivery, and investing to increase production capacity while delivering strong fourth quarter and full-year results.

Speaker #3: We ended the year with a record order book and strong demand signals from our customers. All of this is positioning us for sustained growth going forward.

Speaker #3: We are equally focused on how we evolve our business. Over the past six years, we have aligned our portfolios to the fastest-growing defense priorities, with a vision of the future of warfare.

Speaker #3: As a result, we have acquired and divested billions of dollars of businesses including our recently announced sale of a majority stake in our civil space propulsion and power business.

Speaker #3: Sixty percent of this business is being sold to AE Industrial Partners. AE's multiple investments in space assets make them an effective steward to scale the business and unlock its value for our shareholders.

[Analyst] (Jefferies): AE's multiple investments in space assets make them an effective steward to scale the business and unlock its value for our shareholders. This transaction enables us to sharpen our focus on our priorities for the Department of War and our allies. We have continued to improve our operational agility and market position. We reorganized our businesses from 4 segments to 3 in order to align technology and business models, and we announced our intention to pursue an initial public offering of our missile solutions business in the second half of 2026. The Department of War is the anchor investor, creating a $4 billion-plus revenue majority-owned public company with sustainable double-digit growth. This new company will deliver critical propulsion systems at unprecedented speed and scale, as well as other missile solutions such as air-launched effects, IR seekers, and weapon release systems.

AE's multiple investments in space assets make them an effective steward to scale the business and unlock its value for our shareholders. This transaction enables us to sharpen our focus on our priorities for the Department of War and our allies. We have continued to improve our operational agility and market position. We reorganized our businesses from 4 segments to 3 in order to align technology and business models, and we announced our intention to pursue an initial public offering of our missile solutions business in the second half of 2026. The Department of War is the anchor investor, creating a $4 billion-plus revenue majority-owned public company with sustainable double-digit growth. This new company will deliver critical propulsion systems at unprecedented speed and scale, as well as other missile solutions such as air-launched effects, IR seekers, and weapon release systems.

Speaker #3: This transaction enables us to sharpen our focus on our priorities for the Department of War and our allies. We have continued to improve our operational agility and market position.

Speaker #3: We reorganized our businesses from four segments to three in order to align technology and business models. And we announced our intention to pursue an initial public offering of our Missile Solutions business in the second half of 2026.

Speaker #3: The Department of War is the anchor investor creating a four-billion-dollar-plus revenue majority-owned public company with sustainable double-digit growth. This new company will deliver critical propulsion systems at unprecedented speed and scale, as well as other missile solutions such as air-launched effects IR seekers and weapon release systems.

Speaker #3: This is an example of the strategic partnerships we have pursued to drive business growth and address critical needs for our customers. We've spent time in the Pentagon and listened to the DOW's needs to significantly expand missile production.

[Analyst] (Jefferies): This is an example of the strategic partnerships we have pursued to drive business growth and address critical needs for our customers. We've spent time in the Pentagon and listened to the DoD's needs to significantly expand missile production, and we responded, negotiating a novel partnership structure that benefits the warfighter, taxpayer, and our shareholders. We, along with our supply chain, will build production capacity faster than anyone in the industry to meet the demand signal. The U.S. government is planning to make a financial investment in a new company critical to our national security. Their stake is solely economic. They want greater capacity quickly and a return on their investment. The strategy is straightforward. Construction began last year to expand capacity on large solid rocket motors and certain tactical rocket motor programs.

This is an example of the strategic partnerships we have pursued to drive business growth and address critical needs for our customers. We've spent time in the Pentagon and listened to the DoD's needs to significantly expand missile production, and we responded, negotiating a novel partnership structure that benefits the warfighter, taxpayer, and our shareholders. We, along with our supply chain, will build production capacity faster than anyone in the industry to meet the demand signal. The U.S. government is planning to make a financial investment in a new company critical to our national security. Their stake is solely economic. They want greater capacity quickly and a return on their investment. The strategy is straightforward. Construction began last year to expand capacity on large solid rocket motors and certain tactical rocket motor programs.

Speaker #3: And we responded negotiating a novel partnership structure that benefits the warfighter, taxpayer, and our shareholders. We along with our supply chain will build production capacity faster than anyone in the industry to meet the demand signal.

Speaker #3: The U.S. government is planning to make a financial investment in a new company critical to our national security. Their stake is solely economic. They want greater capacity quickly and a return on their investment.

Speaker #3: The strategy is straightforward. Construction began last year to expand capacity on large solid rocket motors and certain tactical rocket motor programs. The government invests now, allowing us to further increase capacity for critical interceptor programs such as THAAD, PAC-3, and Standard Missile.

[Analyst] (Jefferies): The government invests now, allowing us to further increase capacity for critical interceptor programs such as THAAD, PAC-3, and Standard Missile. There is no waiting for contracts or acquisition funding. The investment gives us the confidence to build today while the long-term contracts are being negotiated and finalized. Capacity is now the most important capability. Our actions are deliberate. We are leading the industry to meet the needs of our customers. We are strengthening the industrial base, reinvigorating competition following decades of consolidation, and unlocking value for our shareholders. In our industry, the year unfolded against one of the most demanding defense and security environments in decades. It was complex, competitive, and rapidly evolving. Speed and execution mattered. Against that backdrop, our workforce delivered. So thanks to them for our best year ever.

The government invests now, allowing us to further increase capacity for critical interceptor programs such as THAAD, PAC-3, and Standard Missile. There is no waiting for contracts or acquisition funding. The investment gives us the confidence to build today while the long-term contracts are being negotiated and finalized. Capacity is now the most important capability. Our actions are deliberate. We are leading the industry to meet the needs of our customers. We are strengthening the industrial base, reinvigorating competition following decades of consolidation, and unlocking value for our shareholders. In our industry, the year unfolded against one of the most demanding defense and security environments in decades. It was complex, competitive, and rapidly evolving. Speed and execution mattered. Against that backdrop, our workforce delivered. So thanks to them for our best year ever.

Speaker #3: There is no waiting for contracts or acquisition funding. The investment gives us the confidence to build today while the long-term contracts are being negotiated and finalized.

Speaker #3: Capacity is now the most important capability. Our actions are deliberate. We are leading the industry to meet the needs of our customers. We are strengthening the industrial base, reinvigorating competition following decades of consolidation, and unlocking value for our shareholders.

Speaker #3: In our industry, the year unfolded against one of the most demanding defense and security environments in decades. It was complex, competitive, and rapidly evolving.

Speaker #3: Speed and execution mattered. Against that backdrop, our workforce delivered. So thanks to them, we're our best year ever. We met our commitments to warfighters, to customers, who measure value in deliveries and not intentions, and to the DOW by strengthening the supply chain that underpins national security.

[Analyst] (Jefferies): We met our commitments to warfighters, to customers who measure value in deliveries and not intentions, and to the DOW by strengthening the supply chain that underpins national security. Delivering on our commitments resulted in record orders, solid organic growth, expanding margins, and strong cash flow generation. Doing what we say we're going to do is fundamental to how we run the company. Our portfolio is directly aligned with the fastest-growing customer missions: space sensing, missile defense, resilient communications, aircraft ISR missionization, and kinetic effects. That alignment is deliberate and informs where we invest, how we come to market, and how we engage with customers. Our mission relevance is seen in our record order book and strong organic growth. We executed on our programs, stabilizing challenging space programs, clearing delinquent rocket motor deliveries dating back to the time of our acquisition, and realizing efficiencies through LHX NeXT.

We met our commitments to warfighters, to customers who measure value in deliveries and not intentions, and to the DOW by strengthening the supply chain that underpins national security. Delivering on our commitments resulted in record orders, solid organic growth, expanding margins, and strong cash flow generation. Doing what we say we're going to do is fundamental to how we run the company. Our portfolio is directly aligned with the fastest-growing customer missions: space sensing, missile defense, resilient communications, aircraft ISR missionization, and kinetic effects. That alignment is deliberate and informs where we invest, how we come to market, and how we engage with customers. Our mission relevance is seen in our record order book and strong organic growth. We executed on our programs, stabilizing challenging space programs, clearing delinquent rocket motor deliveries dating back to the time of our acquisition, and realizing efficiencies through LHX NeXT.

Speaker #3: Delivering on our commitments resulted in record orders, solid organic growth, expanding margins, and strong cash flow generation. Doing what we say we're going to do is fundamental to how we run the company.

Speaker #3: Our portfolio is directly aligned with the fastest-growing customer missions: space sensing, missile defense, resilient communications, aircraft ISR missionization, and kinetic effects. That alignment is deliberate and informs where we invest, how we come to market, and how we engage with customers.

Speaker #3: Our mission relevance is seen in our record order book and strong organic growth. We executed on our programs: stabilizing challenging space programs, clearing delinquent rocket motor deliveries dating back to the time of our acquisition, and realizing efficiencies through LHX Next.

Speaker #3: These outcomes reflect disciplined execution, technical credibility, and our ability to deliver at speed and scale in direct alignment with evolving customer requirements. Undoubtedly, what stood out the most in 2025 was the pace and urgency of customer demand.

[Analyst] (Jefferies): These outcomes reflect disciplined execution, technical credibility, and our ability to deliver at speed and scale in direct alignment with evolving customer requirements. Undoubtedly, what stood out the most in 2025 was the pace and urgency of customer demand. Threat environments evolved faster than recent history, and expectations shifted just as quickly. Customers require advanced capability at speed and scale. We have the competitive advantage in this environment as the agile, trusted disruptor. We also deepened our role as a trusted international partner. We won key awards in Europe and Asia, leveraging a global supply base and investing in local industry to scale capacity. We have localized production across the globe, enabling us to meet customer needs during production and during the long sustainment tail. These efforts reinforce our commitment to strengthening global security through interoperable solutions and partnerships.

These outcomes reflect disciplined execution, technical credibility, and our ability to deliver at speed and scale in direct alignment with evolving customer requirements. Undoubtedly, what stood out the most in 2025 was the pace and urgency of customer demand. Threat environments evolved faster than recent history, and expectations shifted just as quickly. Customers require advanced capability at speed and scale. We have the competitive advantage in this environment as the agile, trusted disruptor. We also deepened our role as a trusted international partner. We won key awards in Europe and Asia, leveraging a global supply base and investing in local industry to scale capacity. We have localized production across the globe, enabling us to meet customer needs during production and during the long sustainment tail. These efforts reinforce our commitment to strengthening global security through interoperable solutions and partnerships.

Speaker #3: Threat environments evolved faster than recent history, and expectations shifted just as quickly. Customers require advanced capability at speed and scale. We have the competitive advantage in this environment as the agile trusted disruptor.

Speaker #3: We also deepened our role as a trusted international partner. We won key awards in Europe and Asia, leveraging a global supply base, and investing in local industry to scale capacity.

Speaker #3: We have localized production across the globe, enabling us to meet customer needs during production and during the long sustainment tail. These efforts reinforce our commitment to strengthening global security through interoperable solutions and partnerships.

Speaker #3: We secured awards that reflected the full breadth of our capabilities, and our ability to consistently bring the right technologies to the table, and translate them into customer-aligned solutions.

[Analyst] (Jefferies): We secured awards that reflected the full breadth of our capabilities and our ability to consistently bring the right technologies to the table and translate them into customer-aligned solutions. These wins underscore customer confidence in our technical depth, disciplined execution, and our ability to deliver integrated, mission-ready capabilities. All of this resulted in record backlog and order book this year, with an overall book-to-bill of $1.3 billion and backlog in excess of $38 billion. Let me highlight a couple of our key wins this quarter. At the start of the Q4, we secured a landmark $2.2 billion award from South Korea for next-generation airborne early warning missionized business jets. Also, during the quarter, we were awarded an international weather satellite program for approximately $200 million and multiple international tactical communications and software-defined radio orders in the quarter, totaling over $200 million.

We secured awards that reflected the full breadth of our capabilities and our ability to consistently bring the right technologies to the table and translate them into customer-aligned solutions. These wins underscore customer confidence in our technical depth, disciplined execution, and our ability to deliver integrated, mission-ready capabilities. All of this resulted in record backlog and order book this year, with an overall book-to-bill of $1.3 billion and backlog in excess of $38 billion. Let me highlight a couple of our key wins this quarter. At the start of the Q4, we secured a landmark $2.2 billion award from South Korea for next-generation airborne early warning missionized business jets. Also, during the quarter, we were awarded an international weather satellite program for approximately $200 million and multiple international tactical communications and software-defined radio orders in the quarter, totaling over $200 million.

Speaker #3: These wins underscore customer confidence in our technical depth, disciplined execution, and our ability to deliver integrated, mission-ready capabilities. All of this resulted in record backlog and order book this year, with an overall book-to-bill of $1.3 and backlog in excess of $38 billion.

Speaker #3: Let me highlight a couple of our key wins this quarter. At the start of the fourth quarter, we secured a landmark $2.2 billion award from South Korea for next-generation airborne early warning missionized business jets.

Speaker #3: Also during the quarter, we were awarded an international weather satellite program for approximately $200 million. And multiple international tactical communications and software-defined radio orders in the quarter totaling over $200 million.

Speaker #3: At the end of 2025, we strengthened our leadership in space-based missile defense with the award of an SDA contract valued at approximately $850 million to deliver 18 satellites for the Tranche 3 Tracking Layer.

[Analyst] (Jefferies): At the end of 2025, we strengthened our leadership in space-based missile defense with the award of an FDA contract valued at approximately $850 million to deliver 18 satellites for the Tranche 3 Tracking Layer. Building on a proven track record as the only company awarded contracts across all four tranches, this milestone reinforces our alignment with national defense priorities and underscores our ability to deliver trusted, resilient, integrated spacecraft architectures. The continued technology maturation for this contract, as well as production synergies, positions us very well for the HBTSS award. Following the quarter, we were selected to deliver multi-aircraft special mission business jets for an international customer with a potential value of over $2 billion. An initial order of over $700 million will be booked in the Q4 of 2026.

At the end of 2025, we strengthened our leadership in space-based missile defense with the award of an FDA contract valued at approximately $850 million to deliver 18 satellites for the Tranche 3 Tracking Layer. Building on a proven track record as the only company awarded contracts across all four tranches, this milestone reinforces our alignment with national defense priorities and underscores our ability to deliver trusted, resilient, integrated spacecraft architectures. The continued technology maturation for this contract, as well as production synergies, positions us very well for the HBTSS award. Following the quarter, we were selected to deliver multi-aircraft special mission business jets for an international customer with a potential value of over $2 billion. An initial order of over $700 million will be booked in the Q4 of 2026.

Speaker #3: Building on a proven track record, as the only company awarded contracts across all four tranches, this milestone reinforces our alignment with national defense priorities and underscores our ability to deliver trusted, resilient, integrated spacecraft architectures.

Speaker #3: The continued technology maturation for this contract, as well as production synergies positions us very well for the HBTSS award. And following the quarter, we were selected to deliver multi-aircraft special mission business jets for an international customer, with a potential value of over $2 billion.

Speaker #3: An initial order of over $700 million will be booked in the first quarter of 2026. Our 2026 guidance exceeds our ambitious targets for revenue, margin, and free cash flow that we laid out at our last investor day in December 2023.

[Analyst] (Jefferies): Our 2026 guidance exceeds our ambitious targets for revenue, margin, and free cash flow that we laid out at our last investor day in December 2023. Our record backlog and robust order outlook underpins our 2026 industry-leading 7% organic growth. We also exceeded our LHX NeXT $1 billion savings commitment one year ahead of plan. Many doubted our ability to meet these targets, but today's guidance exceeds the 2026 financial framework and is a result of our relentless focus on leadership, talent, accountability, culture, operational excellence, and disciplined execution. Our 2026 guidance that Ken will take you through momentarily is the foundation for a new 2028 financial framework that we will announce at our upcoming investor day in February. With that, I'll turn it over to Ken.

Our 2026 guidance exceeds our ambitious targets for revenue, margin, and free cash flow that we laid out at our last investor day in December 2023. Our record backlog and robust order outlook underpins our 2026 industry-leading 7% organic growth. We also exceeded our LHX NeXT $1 billion savings commitment one year ahead of plan. Many doubted our ability to meet these targets, but today's guidance exceeds the 2026 financial framework and is a result of our relentless focus on leadership, talent, accountability, culture, operational excellence, and disciplined execution. Our 2026 guidance that Ken will take you through momentarily is the foundation for a new 2028 financial framework that we will announce at our upcoming investor day in February. With that, I'll turn it over to Ken.

Speaker #3: Our record backlog and robust order outlook underpins our 2026 industry-leading 7% organic growth. We also exceeded our LHX Next $1 billion savings commitment one year ahead of plan.

Speaker #3: Many doubted our ability to meet these targets, but today's guidance exceeds the 2026 financial framework and is a result of our relentless focus on leadership, talent, accountability, culture, operational excellence, and disciplined execution.

Speaker #3: Our 2026 guidance that Ken will take you through momentarily is the foundation for a new 2028 financial framework that we will announce at our upcoming investor day in February.

Speaker #3: With that, I'll turn it over to Ken.

Speaker #2: Thanks, and good morning, everyone. Turning to the financial results for 2025. Revenue was $21.9 billion, up 5% organically, with growth in all four segments.

Kenneth Bedingfield: Thanks, and good morning, everyone. Turning to the financial results for 2025, revenue was $21.9 billion, up 5% organically, with growth in all four segments. Adjusted segment operating margin was 15.8%, up 40 basis points, reflecting continued cost efficiencies and strong program and product delivery execution. Non-GAAP EPS was $10.73, an increase of 11% over 2024. Adjusted free cash flow grew to $2.8 billion, representing an increase of greater than 20%, driven by earnings growth, effective working capital management, and the benefit associated with favorable tax planning strategies and tax reform. For the Q4, revenue was $5.6 billion, up 6% organically, with a segment operating margin of 15.7%, up 40 basis points. Non-GAAP EPS was $2.86, up 10% year over year. Turning to our segments results, for 2025, CS delivered revenue of $5.7 billion and margins of 25.2%, 4% growth, and 50 basis points of margin expansion.

Speaker #2: Adjusted segment operating margin was 15.8%, up 40 basis points, reflecting continued cost efficiencies and strong program and product delivery execution. Non-GAAP EPS was $10.73, an increase of 11% over 2024.

Speaker #2: Adjusted free cash flow grew to $2.8 billion, representing an increase of greater than 20%, driven by earnings growth, effective working capital management, and the benefit associated with favorable tax planning strategies and tax reform.

Speaker #2: For the fourth quarter, revenue was $5.6 billion, up 6% organically, with a segment operating margin of 15.7%, up 40 bps. Non-GAAP EPS was $2.86, up 10% year over year.

Speaker #2: Turning to our segments results. For 2025, CS delivered revenue of $5.7 billion, and margins of 25.2%. 4% growth and 50 bps of margin expansion.

Speaker #2: In the fourth quarter, CS delivered revenue of $1.5 billion, up 3%, driven by increased international deliveries for software-defined resilient communications, as well as next-generation jammer program ramp.

Kenneth Bedingfield: In Q4, CS delivered revenue of $1.5 billion, up 3%, driven by increased international deliveries for software-defined resilient communications, as well as next-generation jammer program ramp. Q4 operating margin increased to 24.9%, up 50 basis points. CS margin benefited from LHX NeXT. In 2025, IMS delivered revenue of $6.6 billion, 8% organic growth, and margin of 12.2%. In Q4, IMS revenue was $1.7 billion, up 11% organically, due to ramping activity on classified ISR programs and our airborne early warning and control aircraft for the Republic of Korea. Q4 operating margin was 11.1%, down 270 basis points, with the reduction largely reflecting the CAS divestiture and unfavorable program performance in maritime. For 2025, SAS delivered revenue of $6.9 billion and margin of 12.3%.

In Q4, CS delivered revenue of $1.5 billion, up 3%, driven by increased international deliveries for software-defined resilient communications, as well as next-generation jammer program ramp. Q4 operating margin increased to 24.9%, up 50 basis points. CS margin benefited from LHX NeXT. In 2025, IMS delivered revenue of $6.6 billion, 8% organic growth, and margin of 12.2%. In Q4, IMS revenue was $1.7 billion, up 11% organically, due to ramping activity on classified ISR programs and our airborne early warning and control aircraft for the Republic of Korea. Q4 operating margin was 11.1%, down 270 basis points, with the reduction largely reflecting the CAS divestiture and unfavorable program performance in maritime. For 2025, SAS delivered revenue of $6.9 billion and margin of 12.3%.

Speaker #2: Q4 operating margin increased to 24.9%, up 50 basis points. CS margin benefited from LHX Next. In 2025, IMS delivered revenue of $6.6 billion, 8% organic growth, and margin of 12.2%.

Speaker #2: In the fourth quarter, IMS revenue was $1.7 billion, up 11% organically, due to ramping activity on classified ISR programs and our airborne early warning and control aircraft for the Republic of Korea.

Speaker #2: Q4 operating margin was $11.1%, down $270 basis points, with a reduction largely reflecting the CAS divestiture and unfavorable program performance in maritime. For 2025, SAS delivered revenue of $6.9 billion, and margin of 12.3%.

Speaker #2: For the fourth quarter, SAS revenue was $1.7 billion, up slightly, primarily driven by increased FAA volume and mission networks, partially offset by lower classified program volume in space and intel and cyber.

Kenneth Bedingfield: For the Q4, SAS revenue was $1.7 billion, up slightly, primarily driven by increased FAA volume in mission networks, partially offset by lower classified program volume in space, intel, and cyber. The government shutdown delayed awards and limited additional revenue growth in the quarter and the year. Q4 operating margin increased to 13.7%, up 290 basis points, reflecting stabilized performance on classified space programs and LHX NeXT benefits. For 2025, Aerojet Rocketdyne delivered 12% organic revenue growth, with revenue in excess of $2.8 billion and margin of 12.5%. For the Q4, AR delivered another strong quarter with organic growth of 12%, marking its third consecutive quarter of double-digit growth. Performance was driven by higher production volumes across key missile and munitions programs and the continued ramp of new awards. Q4 operating margin expanded by 130 basis points to 11.8%, benefiting from higher volumes and LHX NeXT.

For the Q4, SAS revenue was $1.7 billion, up slightly, primarily driven by increased FAA volume in mission networks, partially offset by lower classified program volume in space, intel, and cyber. The government shutdown delayed awards and limited additional revenue growth in the quarter and the year. Q4 operating margin increased to 13.7%, up 290 basis points, reflecting stabilized performance on classified space programs and LHX NeXT benefits. For 2025, Aerojet Rocketdyne delivered 12% organic revenue growth, with revenue in excess of $2.8 billion and margin of 12.5%. For the Q4, AR delivered another strong quarter with organic growth of 12%, marking its third consecutive quarter of double-digit growth. Performance was driven by higher production volumes across key missile and munitions programs and the continued ramp of new awards. Q4 operating margin expanded by 130 basis points to 11.8%, benefiting from higher volumes and LHX NeXT.

Speaker #2: The government shutdown delayed awards and limited additional revenue growth in the quarter and the year. Q4 operating margin increased to $13.7%, up $290 basis points, reflecting stabilized performance on classified space programs benefits.

Speaker #2: and LHX Next 2025, Aerojet For Rocketdyne delivered 12% organic revenue growth, with revenue in excess of $2.8 billion and margin of $12.5%. For the fourth quarter, AR delivered another strong quarter with organic growth of 12%, marking its third consecutive quarter of double-digit growth.

Speaker #2: Performance was driven by higher production volumes across key missile ammunitions programs, and the continued ramp of new awards. Q4 operating margin expanded by $130 basis points to $11.8%, benefiting from higher volumes and LHX Next.

Speaker #2: Great results by each of the segments. Now, I'd like to highlight key terms of the Department of War's planned investment. This is a $1 billion preferred security invested directly into the missile solutions business.

Kenneth Bedingfield: Great results by each of the segments. Now, I'd like to highlight key terms of the Department of War's planned investment. This is a $1 billion preferred security invested directly into the missile solutions business. The security converts at a 20% discount to the IPO price, plus 3% detachable warrants priced at a premium. We are planning for an IPO in the second half of 2026, and the DOW is expected to hold a single-digit equity ownership stake. As a reminder, missile solutions will remain a consolidated segment into our financials following the planned public offering. This business will continue to be a part of LHX and will take advantage of our enterprise services and support structure. Turning to guidance for 2026, we expect revenue of $23 to $23.5 billion, representing organic growth of 7% at the midpoint.

Great results by each of the segments. Now, I'd like to highlight key terms of the Department of War's planned investment. This is a $1 billion preferred security invested directly into the missile solutions business. The security converts at a 20% discount to the IPO price, plus 3% detachable warrants priced at a premium. We are planning for an IPO in the second half of 2026, and the DOW is expected to hold a single-digit equity ownership stake. As a reminder, missile solutions will remain a consolidated segment into our financials following the planned public offering. This business will continue to be a part of LHX and will take advantage of our enterprise services and support structure. Turning to guidance for 2026, we expect revenue of $23 to $23.5 billion, representing organic growth of 7% at the midpoint.

Speaker #2: The security converts at a 20% discount to the IPO price, plus 3% detachable warrants priced at a premium. We are planning for an IPO in the second half of 2026, and the DOW is expected to hold a single-digit equity ownership stake.

Speaker #2: As a reminder, Missile Solutions will remain a consolidated segment in our financials following the planned public offering. This business will continue to be a part of LHX and will take advantage of our enterprise services and support structure.

Speaker #2: Turning to guidance for 2026, we expect revenue of $23 to $23.5 billion, representing organic growth of 7% at the midpoint. Segment operating margin is anticipated to be in the low 16%, supported by strong program execution and investments to drive continued transformation and cost structure efficiency.

Kenneth Bedingfield: Segment operating margin is anticipated to be low 16%, supported by strong program execution and investments to drive continued transformation and cost structure efficiency. Free cash flow is expected to be $3 billion, driven by growth, higher profitability, and disciplined working capital management, even as we increase our CapEx to approximately $600 million. We are transitioning our diluted EPS guidance from a non-GAAP to a GAAP basis now that we have completed the implementation portion of the LHX NeXT program. Our GAAP diluted EPS is expected to be in the range of $11.30 to $11.50, solid growth even from our non-GAAP diluted EPS in 2025. Our guidance reflects appropriate risk posture early in the year and the dynamics associated with administration priorities.

Segment operating margin is anticipated to be low 16%, supported by strong program execution and investments to drive continued transformation and cost structure efficiency. Free cash flow is expected to be $3 billion, driven by growth, higher profitability, and disciplined working capital management, even as we increase our CapEx to approximately $600 million. We are transitioning our diluted EPS guidance from a non-GAAP to a GAAP basis now that we have completed the implementation portion of the LHX NeXT program. Our GAAP diluted EPS is expected to be in the range of $11.30 to $11.50, solid growth even from our non-GAAP diluted EPS in 2025. Our guidance reflects appropriate risk posture early in the year and the dynamics associated with administration priorities.

Speaker #2: Free cash flow is expected to be $3 billion, driven by growth, higher profitability, and disciplined working capital management, even as we increase our CAPEX to approximately $600 million.

Speaker #2: We are transitioning our diluted EPS guidance from a non-GAAP to a GAAP basis now that we have completed the implementation portion of the LHX Next program.

Speaker #2: Our GAAP diluted EPS is expected to be in the range of $11.30 to $11.50, solid growth even from our non-GAAP diluted EPS in 2025.

Speaker #2: Our guidance reflects appropriate risk posture early in the year, and the dynamics associated with administration priorities. It includes a full year of space propulsion and power systems business, as we continue to work towards closing the transaction expected in the second half of the year.

Kenneth Bedingfield: It includes a full year of space propulsion and power systems business as we continue to work towards closing the transaction expected in the second half of the year. Consistent with prior practice, we will update as necessary upon the transaction closing. At the segment level, space and mission systems, or SMS, formed primarily from IMS and SAS, delivers critical multi-domain defense solutions in a traditional prime business model. SMS revenue is expected to be approximately $11.5 billion, driven by strength in ISR aircraft missionization and space solutions. Operating margin is expected to be in the mid-10% range. Communications and spectrum dominance, or CSD, brings our former CS segment together with our WESCAM sensor business, and other EW programs from across the company to deliver primarily commercial products at commercial margins.

It includes a full year of space propulsion and power systems business as we continue to work towards closing the transaction expected in the second half of the year. Consistent with prior practice, we will update as necessary upon the transaction closing. At the segment level, space and mission systems, or SMS, formed primarily from IMS and SAS, delivers critical multi-domain defense solutions in a traditional prime business model. SMS revenue is expected to be approximately $11.5 billion, driven by strength in ISR aircraft missionization and space solutions. Operating margin is expected to be in the mid-10% range. Communications and spectrum dominance, or CSD, brings our former CS segment together with our WESCAM sensor business, and other EW programs from across the company to deliver primarily commercial products at commercial margins.

Speaker #2: Consistent with prior practice, we will update as necessary upon the transaction closing. At the segment level, Space and Mission Systems, or SMS—formed primarily from IMS and SAS—delivers critical multi-domain defense solutions in a traditional prime business model.

Speaker #2: SMS revenue is expected to be approximately $11.5 billion driven by strength in ISR aircraft missionization and space solutions. Operating margin is expected to be in the mid-10% range.

Speaker #2: Communications and Spectrum Dominance, or CSD, brings our former CS segment together with our WESCAM sensor business and other EW programs from across the company to deliver primarily commercial products at commercial margins.

Speaker #2: CSD revenue is projected at approximately $8 billion driven by growth in EW programs and communication and airborne EOIR sensor products, with operating margin of about $25%.

Kenneth Bedingfield: CSD revenue is projected at approximately $8 billion, driven by growth in EW programs, communication, and airborne EOIR sensor products, with operating margin of about 25%. Missile solutions, or MSL, combines Aerojet with critical missile systems, including air-launched effects, IR seekers, and other advanced technologies, creating a focused, high-growth business underpinned by scaled capital investment. MSL revenue is anticipated to be approximately $4.4 billion, with margins in the mid-12% range, supported by continued growth in solid rocket motor production. And for modeling purposes, this would convert to EBITDA of approximately $620 million. Our capital deployment strategy reflects our commitment to investing in the business while delivering value to our shareholders. Our approach to dividends is unchanged, and the number of shares outstanding is expected to be relatively consistent with year-end 2025. With that, I'll turn it back to Chris.

CSD revenue is projected at approximately $8 billion, driven by growth in EW programs, communication, and airborne EOIR sensor products, with operating margin of about 25%. Missile solutions, or MSL, combines Aerojet with critical missile systems, including air-launched effects, IR seekers, and other advanced technologies, creating a focused, high-growth business underpinned by scaled capital investment. MSL revenue is anticipated to be approximately $4.4 billion, with margins in the mid-12% range, supported by continued growth in solid rocket motor production. And for modeling purposes, this would convert to EBITDA of approximately $620 million. Our capital deployment strategy reflects our commitment to investing in the business while delivering value to our shareholders. Our approach to dividends is unchanged, and the number of shares outstanding is expected to be relatively consistent with year-end 2025. With that, I'll turn it back to Chris.

Speaker #2: Missile solutions, or MSL, combines Aerojet with critical missile systems, including air-launched effects, IR seekers, and other advanced technologies, business underpinned creating a focused high-growth by scaled capital investment.

Speaker #2: MSL revenue is anticipated to be approximately $4.4 billion with margins in the mid-12% range, supported by continued growth in solid rocket motor production. And for modeling purposes, this would convert to EBITDA of approximately $620 million.

Speaker #2: Our capital deployment strategy reflects our commitment to investing in the business while delivering value to our shareholders. Our approach to dividends is unchanged, and the number of shares outstanding is expected to be relatively consistent with year-end 2025.

Speaker #2: With that, I'll turn it back to Chris. Thanks, Ken. Our results and actions position us for the next phase of growth. We are more agile, and we're able to allocate capital dynamically partner strategically and adapt our portfolio as markets evolve.

Christopher Kubasik: Thanks, Ken. Our results and actions position us for the next phase of growth. We are more agile, and we're able to allocate capital dynamically, partner strategically, and adapt our portfolio as markets evolve. We are strengthening our foundation for long-term performance by transforming our company, evolving our operating system, and adopting AI. Most important, our actions ensure that we remain a trusted partner for our customers and continue to disrupt with a focus on long-term value creation for all stakeholders. Tiffany, let's go to Q&A.

Speaker #2: And we are strengthening our foundation for long-term performance. By transforming our company, evolving our operating system, and adopting AI. Most important, our actions ensure that we remain a trusted partner for our customers and continue to disrupt with a focus on long-term value creation for all stakeholders.

Speaker #2: Tiffany, let's go to

Speaker #2: Q&A. We will now be

Operator: We will now be conducting a question-and-answer session at this time. Please limit to one question per person. If you'd like to ask a question, please press Star 1 on your telephone keypad, and confirmation tone will indicate your line is in the question queue. You may press Star 1 if you'd like to remove your question from the queue. If you have an additional question, please press Star 1 again to get back in the queue. For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. One moment, please, while we poll for questions. Thank you. Our first question today comes from the line of Kristine Liwag with Morgan Stanley. Please proceed with your question.

Speaker #3: conducting a question and answer session at this time. Please limit to one question per person. If you'd like to ask a question, please press Star 1 on your telephone keypad and confirmation tone will indicate your line is in the question queue.

Speaker #3: You may press Star 1 if you'd like to remove your question from the queue. If you have an additional question, please press Star 1 again to get back in the queue.

Speaker #3: For participants that are using speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. One moment, please, while we poll for questions.

Speaker #3: Thank you. Our first question today comes from the line of Kristen Levog. With Morgan Stanley, please proceed with your question.

Speaker #4: Hey, good morning, everyone. Chris and Ken, thank you for the additional color you provided on the missile solutions business this morning. Considering the strong demand for this product, should we continue to see long-term agreements similar to what was announced on PAC 3 and FAD, or is this satisfied by the IPO plans with the US government?

[Analyst] (Morgan Stanley): Hey, good morning, everyone. Chris and Ken, thank you for the additional color you provided on the missile solutions business this morning. Considering the strong demand for this product, should we continue to see long-term agreements similar to what was announced on PAC-3 and THAAD, or is this satisfied by the IPO plans with the U.S. government? And also, a follow-up to that is you've called out double-digit growth for this business, but demand is very strong. In the next three to five years, it may be too premature to think about it like that. But is this something that could grow 3 to 5x larger? Thanks.

Kristine Liwag: Hey, good morning, everyone. Chris and Ken, thank you for the additional color you provided on the missile solutions business this morning. Considering the strong demand for this product, should we continue to see long-term agreements similar to what was announced on PAC-3 and THAAD, or is this satisfied by the IPO plans with the U.S. government? And also, a follow-up to that is you've called out double-digit growth for this business, but demand is very strong. In the next three to five years, it may be too premature to think about it like that. But is this something that could grow 3 to 5x larger? Thanks.

Speaker #4: And also, a follow-up to that is, you've called out double-digit growth for this business, but demand is very strong. In the next three to five years—and maybe it's too premature to think about it like that—but is this something that could grow three to five times larger?

Speaker #4: Thanks.

Speaker #2: All right. Christine, thank you for the question. Yeah, look, everything is tracking as we've been talking about. We were excited to hear this morning that Lockheed Martin reached an agreement on FAD, as you know, we're the only provider of the propulsion and DAC systems for FAD, and obviously we're going to be glad to support Lockheed Martin and the end customer.

Christopher Kubasik: All right. Kristine, thank you for the question. Yeah, look, everything is tracking as we've been talking about. We were excited to hear this morning that Lockheed Martin reached an agreement on THAAD. As you know, we're the only provider of the propulsion and back systems for THAAD, and obviously, we're going to be glad to support Lockheed Martin and the end customer. So absolutely, this is what all of industry has been discussing with the DoD over the last half year or so, and we're starting to see these transactions take form. Yeah, once we get the $several billion and start with the facilitization, building an excess of 60 factories over 1 million sq ft, ordering the equipment, and our supply chain doing the same, I think there's a lot of upside and potential.

Speaker #2: So absolutely, this is what all of industry has been discussing. With the DOW over the last half year or so, and we're starting to see these transactions take form.

Speaker #2: Yeah, once we get the several billion dollars, and start with the facilitization, building in excess of 60 factories over a million square feet, ordering the equipment, and our supply chain doing the same, I think there's a lot of upside and potential.

Speaker #2: As you would expect, we'll file form S1 as part of the IPO process later this year, and it will provide a lot more information and details and highlight the potential upside.

Christopher Kubasik: As you would expect, we'll file Form S-1 as part of the IPO process later this year, and it will provide a lot more information, details, and highlight the potential upside.

As you would expect, we'll file Form S-1 as part of the IPO process later this year, and it will provide a lot more information, details, and highlight the potential upside.

Speaker #2: Yeah, I'll just add, Christine, as Chris mentioned, we're absolutely excited about the framework agreements that have been signed between the Department of War and Lockheed on both PAC 3 and FAD.

Byron Green: Yeah, I'll just add, Kristine, as Chris mentioned, we're absolutely excited about the framework agreements that have been signed between the Department of War and Lockheed on both PAC-3 and THAAD. We are working closely with our customer as well as the end user to make sure that we're very closely aligned, in particular, those customers that are working closely with the Department of War on the acceleration, the scaling, and getting the agreements signed. We've been investing and, again, working closely to modernize production lines for THAAD and PAC-3. We'll continue to do that, and we'll take some of the lessons learned from that to scale across all of the MAC, munitions acceleration programs.

Kenneth Bedingfield: Yeah, I'll just add, Kristine, as Chris mentioned, we're absolutely excited about the framework agreements that have been signed between the Department of War and Lockheed on both PAC-3 and THAAD. We are working closely with our customer as well as the end user to make sure that we're very closely aligned, in particular, those customers that are working closely with the Department of War on the acceleration, the scaling, and getting the agreements signed. We've been investing and, again, working closely to modernize production lines for THAAD and PAC-3. We'll continue to do that, and we'll take some of the lessons learned from that to scale across all of the MAC, munitions acceleration programs.

Speaker #2: We are working closely with our customer as well as the end user to make sure that we're very closely aligned in particular. Those customers that are working closely with the Department of War on the acceleration and the scaling and getting the agreements signed.

Speaker #2: We've been investing and again, working closely to modernize production lines for FAD and PAC 3. We'll continue to do that, and we'll take some of the lessons learned from that to scale across all of the MAC, munitions acceleration programs.

Speaker #2: And as we look at this, I don't want to put a number out there on tripling, but we do think that this business, as we combine missile solutions, is one that can grow at a double-digit CAGR for some period to come.

Byron Green: As we look at this, I don't want to put a number out there on tripling, but we do think that this business, as we combine missile solutions, is one that can grow at a double-digit CAGR for some period to come. We've studied the market. We've studied the demand. We've had some outside parties come in and do an independent look just to make sure we're looking at it correctly. We do see this business as able to grow double digits for the foreseeable future.

As we look at this, I don't want to put a number out there on tripling, but we do think that this business, as we combine missile solutions, is one that can grow at a double-digit CAGR for some period to come. We've studied the market. We've studied the demand. We've had some outside parties come in and do an independent look just to make sure we're looking at it correctly. We do see this business as able to grow double digits for the foreseeable future.

Speaker #2: We've studied the market. We've studied the demand. We've had some outside parties come in and do an independent look just to make sure we're looking at it correctly.

Speaker #2: And we do see this business as able to grow double digits for the foreseeable future.

Speaker #3: Our next question comes from the line of Miles Walton with Wolfe Research. Please proceed with your question.

Operator: Our next question comes from the line of Miles Walton with Wolfe Research. Please proceed with your question.

Operator: Our next question comes from the line of Myles Walton with Wolfe Research. Please proceed with your question.

Speaker #5: Great, thanks. First one was on CAPEX. It's obviously higher 2.5% for the 26 sales or thereabouts. Is there a much bigger step up happening in the future to give us a smaller step up than it would have been expected for the multibillion dollar investment required in missile solutions?

[Analyst] (Wolfe Research): Great. Thanks. First one was on CapEx. It's obviously higher, 2.5% the 2026 sales, or thereabouts. Is there a much bigger step-up happening in the future to give us a smaller step-up than whatever expected for the multi-billion-dollar investment required in missile solutions?

Myles Walton: Great. Thanks. First one was on CapEx. It's obviously higher, 2.5% the 2026 sales, or thereabouts. Is there a much bigger step-up happening in the future to give us a smaller step-up than whatever expected for the multi-billion-dollar investment required in missile solutions?

Speaker #2: Yeah, Miles, I can take that one. Yeah, we're stepping up CAPEX in 2026 to about 2.5% of sales, or $600 million. I think that's something like a 35% or 40% increase from 2025.

Byron Green: Yeah, Miles, I can take that one. Yeah, we're stepping up CapEx in 2026 to about 2.5% of sales or $600 million. I think that's something like 35% or 40% increase from 2025. As we do that, we're still holding to our 2026 free cash flow guidance of $3 billion. Looking forward, I'm not going to put a number on 2027 CapEx at this point, but we're certainly thinking about it in terms of, as we capacitize to deliver, how will we be able to pull cash on some of these new production programs to be able to offset some of that CapEx that we're needing to invest upfront? We'll certainly be working with the entire supply base to make sure that we're going at this together.

Kenneth Bedingfield: Yeah, Miles, I can take that one. Yeah, we're stepping up CapEx in 2026 to about 2.5% of sales or $600 million. I think that's something like 35% or 40% increase from 2025. As we do that, we're still holding to our 2026 free cash flow guidance of $3 billion. Looking forward, I'm not going to put a number on 2027 CapEx at this point, but we're certainly thinking about it in terms of, as we capacitize to deliver, how will we be able to pull cash on some of these new production programs to be able to offset some of that CapEx that we're needing to invest upfront? We'll certainly be working with the entire supply base to make sure that we're going at this together.

Speaker #2: As we do that, we're still holding to our 2026 free cash flow guidance of $3 billion. And looking forward, I'm not going to put a number on 2027 CAPEX at this point, but we're certainly thinking about it in terms of as we capacitize to deliver, how will we be able to pull cash on some of these new production programs, to be able—needing to invest to offset some of that CAPEX that we're upfront.

Speaker #2: We'll certainly be working with the entire supply base to make sure that we're going at this together. And, suffice it to say, I think that this is kind of a one-time capital investment to really and truly modernize how solid rocket motors are produced—at speed and at scale, and at a rate that, quite frankly, the customers haven't gotten to date out of the SRM supply base.

Byron Green: And suffice it to say, I think that this is kind of a one-time capital investment to really and truly modernize how solid rocket motors are produced at speed, at scale, and at a rate that, quite frankly, the customers haven't gotten to date out of the SRM supply base. And there is a lot of demand, and we're looking to help to fill that as quickly as possible to get that product into the hands of the warfighter. So we think there's a durable long-term benefit to this capital investment, but again, we'll certainly be working to maximize cash inflows as we look at those CapEx requirements in 2027 and 2028.

And suffice it to say, I think that this is kind of a one-time capital investment to really and truly modernize how solid rocket motors are produced at speed, at scale, and at a rate that, quite frankly, the customers haven't gotten to date out of the SRM supply base. And there is a lot of demand, and we're looking to help to fill that as quickly as possible to get that product into the hands of the warfighter. So we think there's a durable long-term benefit to this capital investment, but again, we'll certainly be working to maximize cash inflows as we look at those CapEx requirements in 2027 and 2028.

Speaker #2: And there is a lot of demand, and we're looking to help to fill that as quickly as possible to get that product into the hands of the warfighter.

Speaker #2: So, we think there's a durable, long-term benefit to this capital investment, but again, we'll certainly be working to maximize cash inflows as we look at those CAPEX requirements.

Speaker #2: '27 and '28. And I'll just

Christopher Kubasik: And I'll just add, Miles, as you know, we purchased Aerojet Rocketdyne two and a half years ago, and on day one, we started investing. So it has been well over a half billion dollars of CapEx spent at Aerojet over the past two and a half years. So when we made this acquisition, we knew it was a race. We started on day one, and we sure plan to win the race.

Speaker #5: Miles, as you know, we purchased Aerojet Rocketdyne two and a half years ago, and on day one, we started investing. So, it has been well over a half billion dollars of CAPEX spent at Aerojet over the past two and a half years.

Speaker #5: So when we made this acquisition, we knew it was a race. We started on day one, and we sure plan to win the race.

Speaker #5: race. Our next question

Operator: Our next question comes from the line of Noah Poponak with Goldman Sachs. Please proceed with your question.

Speaker #3: comes from the line of Noah Papanek with Goldman Sachs. Please proceed with your

Speaker #3: question.

Speaker #6: Hey, good morning,

[Analyst] (Goldman Sachs): Hey, good morning, everybody.

Noah Poponak: Hey, good morning, everybody.

Speaker #7: Good morning. everybody.

Christopher Kubasik: Good morning.

Speaker #6: Hey, Noah. Thanks. Ken, just a quick point of clarification. The comment you made about your expectation of the government or Pentagon stake in Missile Solutions—is that it would be a single-digit percentage of the enterprise value of Missile Solutions?

Byron Green: Hey, Noah.

Kenneth Bedingfield: Hey, Noah.

[Analyst] (Goldman Sachs): Thanks. Ken, just quick point of clarification. The comment you made about the expectation of the government or Pentagon stake in missile solutions is that it would be a single-digit percentage of the enterprise value of missile solutions. Just want to make sure that's what you meant. And then just as a second question, to your point on still doing the $3 billion with the higher CapEx, that implies your cash from ops is growing year-over-year quite a bit faster than your segment EBIT, if you could just break down the pieces of why that's happening.

Noah Poponak: Thanks. Ken, just quick point of clarification. The comment you made about the expectation of the government or Pentagon stake in missile solutions is that it would be a single-digit percentage of the enterprise value of missile solutions. Just want to make sure that's what you meant. And then just as a second question, to your point on still doing the $3 billion with the higher CapEx, that implies your cash from ops is growing year-over-year quite a bit faster than your segment EBIT, if you could just break down the pieces of why that's happening.

Speaker #6: Just want to make sure that's what you meant. And then just as a second question, to your point on still doing the 3 billion with the higher CAPEX, that implies your cash from ops is growing year over year quite a bit faster than your segment EBIT.

Speaker #6: If you could just break down the pieces of why that's happening.

Speaker #2: Sure. Yep. On the first question, yes, I did in fact mean a single-digit stake—a single-digit ownership stake—in the business. And on the second question, look, in terms of our cash from ops and our free cash flow, we're certainly laser-focused on ensuring that we deliver the cash out of the earnings that we generate.

Byron Green: Sure. Yep. On the first question, yes, I did, in fact, mean single-digit stake, single-digit ownership stake in the business. On the second question, look, in terms of our cash from ops and our free cash flow, we're certainly laser-focused on ensuring that we deliver the cash out of the earnings that we generate. As we look at 2026, we're very comfortable that we can accommodate the additional CapEx requirements as we look, again, at investing in the business to support our customers and to drive the needed capacity increases in our products. I should say that's really across the L3Harris portfolio. We focus often on solid rocket motors, but there are demands for a number of our products, as Chris mentioned in his comments.

Kenneth Bedingfield: Sure. Yep. On the first question, yes, I did, in fact, mean single-digit stake, single-digit ownership stake in the business. On the second question, look, in terms of our cash from ops and our free cash flow, we're certainly laser-focused on ensuring that we deliver the cash out of the earnings that we generate. As we look at 2026, we're very comfortable that we can accommodate the additional CapEx requirements as we look, again, at investing in the business to support our customers and to drive the needed capacity increases in our products. I should say that's really across the L3Harris portfolio. We focus often on solid rocket motors, but there are demands for a number of our products, as Chris mentioned in his comments.

Speaker #2: And as we look at 2026, we're very comfortable that we can accommodate the additional CAPEX requirements as we look again at investing in the business to support our customers and to drive the needed capacity increases in our products.

Speaker #2: And I should say that's really across the L3Harris portfolio. We focus often on solid rocket motors, but there are demands for a number of our products, as Chris mentioned, in his comments.

Speaker #2: And look, discipline, working capital management, certainly working all aspects of the contractual deals with our customers as well as our suppliers to make sure that we can deliver the cash at $3 billion for

Byron Green: And look, discipline, work, and capital management certainly work in all aspects of the contractual deals with our customers, as well as our suppliers, to make sure that we can deliver the cash at $3 billion for 2026.

And look, discipline, work, and capital management certainly work in all aspects of the contractual deals with our customers, as well as our suppliers, to make sure that we can deliver the cash at $3 billion for 2026.

Speaker #2: 2026. Our next question comes from

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

Operator: Our next question comes from the line of John Godyn with Citigroup. Please proceed with your question.

Speaker #3: the line of John Godin with Citigroup. Please proceed with your question.

Speaker #8: Hey, guys. Thanks for taking my question. There's obviously a lot of excitement around missile solutions. But we do get questions on remain co. And what the revenue outlook for remain co LHX remain co might look like over the next couple of years and points of leverage to what could be a very large defense budget.

[Analyst] (Citigroup): Hey, guys. Thanks for taking my question. There's obviously a lot of excitement around missile solutions, but we do get questions on RemainCo and what the revenue outlook for RemainCo, LHX RemainCo, might look like over the next couple of years and points of leverage to what could be a very large defense budget on the horizon. I'm sure we're going to get more detail at the Investor Day, but I'd love to just kind of give you a chance to speak to what the revenue growth rate might look like, whether you envision it accelerating from here, and what points of leverage remain in the business even when you IPO the sort of most exciting, fastest-growing part. Thanks.

John Godyn: Hey, guys. Thanks for taking my question. There's obviously a lot of excitement around missile solutions, but we do get questions on RemainCo and what the revenue outlook for RemainCo, LHX RemainCo, might look like over the next couple of years and points of leverage to what could be a very large defense budget on the horizon. I'm sure we're going to get more detail at the Investor Day, but I'd love to just kind of give you a chance to speak to what the revenue growth rate might look like, whether you envision it accelerating from here, and what points of leverage remain in the business even when you IPO the sort of most exciting, fastest-growing part. Thanks.

Speaker #8: On the horizon, I'm sure we're going to get more detail at the investor day, but I'd love to just kind of give you a chance to speak to what the revenue growth rate might look like whether you envision it accelerating from here and what points of leverage remain in the business even when you IPO the sort of most exciting, fastest growing part.

Speaker #7: Hey, John.

Christopher Kubasik: Hey, John, thanks for the question. I appreciate the focus on RemainCo because that's a big part of L3Harris, as Ken said, and we've said over the last several weeks, we will continue to consolidate, own, and control MSL even after the IPO. So we're looking at solid mid-single-digit growth, a little faster, I think, than the rest of industry and hopefully faster than the market in total. As I said in my prepared comments, I really like our portfolio. We spent a lot of time realigning this over the last five or six years. I would look at our capabilities. I look at our capacity. We've talked about building new factories for space. The SDA win is a big win for us, four in a row. HBTSS is coming. A lot of classified work.

Speaker #7: Thanks for the question. And I appreciate the focus on remain co because that's a big part of L3Harris and, as Ken said, and we've said over the last several weeks, we will continue to consolidate, own, and control MSL even after the IPO.

Speaker #7: So we're looking at solid mid-single digit growth, a little faster, I think, than the rest of industry. And hopefully, faster than the market in total.

Speaker #7: As I said in my prepared comments, I really like our portfolio. We spent a lot of time realigning this over the last five or six years.

Speaker #7: And I would look at our capabilities. I look at our capacity. We've talked about building new factories for Space. The SDA win is a big win for us—four in a row.

Speaker #7: HBTS is coming. A lot of classified work. So when I look at what we have in space, what we have in the airborne domains, even maritime, maybe not as a prime, but supporting a lot of the new construction, I think we're well positioned.

Christopher Kubasik: So when I look at what we have in space, what we have in the airborne domains, even maritime, maybe not as a prime, but supporting a lot of the new construction, I think we're well positioned. The accelerant will be. We need to see the 2027 defense budget. The PBR, President's Budget Request, has yet to be submitted to Congress. I think sometime in March is what people are saying. And if that's, in fact, $1.5 trillion, I'll be as excited as everybody else in the industry, and it could even be further upside. 7% is the midpoint of a range. So I really like our portfolio. I love our backlog, and I think we're well positioned.

So when I look at what we have in space, what we have in the airborne domains, even maritime, maybe not as a prime, but supporting a lot of the new construction, I think we're well positioned. The accelerant will be. We need to see the 2027 defense budget. The PBR, President's Budget Request, has yet to be submitted to Congress. I think sometime in March is what people are saying. And if that's, in fact, $1.5 trillion, I'll be as excited as everybody else in the industry, and it could even be further upside. 7% is the midpoint of a range. So I really like our portfolio. I love our backlog, and I think we're well positioned.

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Q4 2025 L3Harris Technologies Inc Earnings Call

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