L3Harris Technologies Reports Third Quarter 2021 Results

Orders and revenue

Orders of $4.5 billion; funded book-to-bill of 1.07

Revenue of $4.2 billion, down 5% versus prior year, and down 1% on an organic basis; impacted by global electronic component shortages

Margins and earnings

GAAP net income margin of 11.3%; GAAP earnings per share from continuing operations (EPS) of $2.39, up 20%

Non-GAAP adjusted earnings before interest and taxes (EBIT) margin of 19.6%; non-GAAP EPS of $3.21, up 13%

Cash flow and capital deployment

Operating cash flow of $484 million; adjusted free cash flow (FCF) of $673 million

Returned $1.5 billion to shareholders

Updated 2021 financial outlook

MELBOURNE, Fla. - L3Harris Technologies, Inc. (NYSE: LHX) reported third quarter 2021 revenue of $4.2 billion, down 5% versus prior year, and down 1% on an organic1 basis. GAAP net income was $479 million, up 11% versus prior year. Adjusted EBIT2 was $830 million, up 4% versus prior year, and adjusted EBIT margin2 expanded 170 basis points (bps) to 19.6%. GAAP EPS was $2.39, up 20%, and non-GAAP EPS2 was $3.21, up 13% versus prior year.

The L3Harris team delivered solid bookings, margins, and bottom-line results in the quarter, overcoming revenue headwinds due to supply chain delays and award timing. And in spite of unprecedented global supply chain disruptions that are reducing our organic revenue growth guidance for the year, we're positioned to meet our earnings and cash flow commitments, said Christopher E. Kubasik, Vice Chair and Chief Executive Officer. We ultimately view these pandemic-related impacts as temporary and remain focused on creating value for our stakeholders over the long term.

Summary Financial Results

Third Quarter

Year-To-Date

($ millions, except per share data)

2021

2020

Change

2021

2020

Change

(GAAP comparison)

Revenue

$

4,229

$

4,463

(5%)

$

13,464

$

13,534

(1%)

Net income

$

479

$

430

11%

$

1,358

$

902

51%

Net income margin

11.3

%

9.6

%

170 bps

10.1

%

6.7

%

340 bps

EPS

$

2.39

$

1.99

20%

$

6.64

$

4.27

56%

(Non-GAAP comparison)2

Revenue

$

4,229

$

4,463

(5%)

$

13,464

$

13,534

(1%)

Adjusted EBIT

$

830

$

798

4%

$

2,561

$

2,416

6%

Adjusted EBIT margin

19.6

%

17.9

%

170 bps

19.0

%

17.9

%

110 bps

EPS

$

3.21

$

2.84

13%

$

9.65

$

8.47

14%

Organic revenue1

$

4,229

$

4,282

(1%)

$

13,464

$

13,163

2%

Funded book-to-bill3

1.07

1.02

1.06

1.08

Third quarter revenue decreased 5% versus prior year primarily due to strategic divestitures, ISR aircraft award timing in Integrated Mission Systems, and supply chain-related constraints within Communication Systems, which also contributed to a 1% decline on an organic basis. At the segment level, the organic revenue decline was driven by Communication Systems and Integrated Mission Systems, down 5% and 3%, respectively, partially offset by 3% growth in Space and Airborne Systems and 1% growth in Aviation Systems. Funded book-to-bill3 was 1.07 for the quarter and 1.06 year-to-date.

Third quarter net income margin expanded 170 bps and adjusted EBIT margin expanded 170 bps to 19.6% versus prior year. GAAP EPS increased 20% versus prior year driven by e3 performance, integration benefits, cost management, and a lower share count, along with lower acquisition-related amortization, net of supply chain impacts. Non-GAAP EPS increased 13% versus prior year driven by e3 performance, integration benefits, cost management, and a lower share count, more than offsetting supply chain and divestiture-related impacts.

Segment Results

Integrated Mission Systems

Third Quarter

Year-To-Date

($ millions)

2021

2020

Change

2021

2020

Change

Revenue

$

1,336

$

1,372

(3%)

$

4,281

$

4,073

5%

Operating income

$

222

$

213

4%

$

691

$

638

8%

Operating margin

16.6

%

15.5

%

110 bps

16.1

%

15.7

%

40 bps

Funded book-to-bill3

1.04

1.08

1.05

1.22

Third quarter revenue decreased 3% due to timing of aircraft awards in ISR and product deliveries in Electro Optical, partially offset by a ramp on key platforms in Maritime. Third quarter operating income increased 4% to $222 million, and operating margin expanded 110 bps to 16.6% versus prior year from operational excellence, integration benefits, and higher pension income.

Segment funded book-to-bill was 1.04 and 1.05 for the quarter and year-to-date, respectively.

ISR received several key orders that strengthen its domestic and international presence, including:

Approximately $400 million in orders for advanced capabilities across incumbent platforms, such as the Rivet Joint reconnaissance, National Command Authority, Compass Call and classified aircraft, further solidifying the companys position as a partner of choice with the U.S. Air Force

$173 million, five-year, sole-source IDIQ contract to operate and sustain airborne sensor equipment for the U.S. Missile Defense Agencys High Altitude Observatory aircraft, with an initial $23 million task order

More than $120 million contract to design and produce an integrated mission system for the United Arab Emirates B-250 aircraft

More than $100 million in follow-on orders to provide additional ISR aircraft to a NATO customer

Within the Maritime business, key awards solidified its position as a leading provider of global solutions, including:

Approximately $400 million contract for the design and installation of the U.S. Navys Undersea Warfare Training Range Increments II / III program, following successful execution on Increment I and maintaining L3Harris prime incumbency on the program

More than $30 million follow-on award to provide subsystems and system integration for the U.S. Navys Constellation (FFG-62) class frigate, with significant follow-on opportunity

Multi-million-dollar contract for in-service support of the i

LINK:	https://www.l3harris.com/newsroom/press-release/2021/10/l3harris-techn...
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