With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

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The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

Industry included in sector is aerospace and defense.

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100 Best Companies 2021-81-L3Harris-Technologies

Though L3Harris enabled more than 20,000 employees to work remotely amid the pandemic, the defense contractor instituted thorough health and safety measures—including daily virtual health screenings, stringent sanitation protocols, and contact tracing—to ensure the well-being of those working on-site. The company extended grants to employees facing unexpected financial hardship through its “L3Harris Cares” relief fund and also provided its workforce with nearly 22,000 hours of backup child and elder care. “There’s an acceptable level of transparency, care, and concern that is genuine and much appreciated,” employees say.

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This year’s Fortune 500 marks the 67th running of the list.

F500-2021-163-L3 Harris Technologies

Headquartered in Melbourne, Fla., L3Harris works with a global base of clients to produce national security and civil service technologies.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-250-L3-Harris-Technologies

The merger of Harris Corporation and L3 Technologies in June 2019 created the sixth-largest defense contractor in the U.S. and the 10th-largest worldwide, with customers in 130 countries. The Florida-based company specializes in tech like the Falcon IV “multichannel manpack,” a communication system designed for use on the battlefield.

This year's Fortune 500 marks the 65th running of the list.

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Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

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L3Harris Technologies is a defense and aerospace company that provides advanced technology across air, land, sea, space, and cyber domains. The company offers products and services that support communications, surveillance, electronic warfare, and mission systems. Its customers include government agencies, commercial organizations, and international partners. L3Harris also supports modernization and sustainment efforts for defense platforms and infrastructure.

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Q4 2024

L3Harris Technologies (LHX): Company Profile, Stock Price, News, Rankings

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L3Harris Technologies

l3harris technologies

Good morning, ladies and gentlemen, and welcome to the 4th Quarter 2024 L3 Harris Technologies Earnings Call. At this time, all lines are in a listen only mode. Following the presentation, we will conduct a question and answer session. This call is being recorded on Thursday, January 30, 2025. I would now like to turn the conference over to Dan Gitzovich.

Thank you, Joanna. Good morning and welcome. Joining me this morning are Chris and Ken. Earlier today, we published our Q4 earnings release detailing our financial results and 2025 guidance. We've also provided a supplemental earnings presentation on our website.

Today's discussion will include certain matters that constitute forward looking statements. These statements involve risks, assumptions and uncertainties that could cause actual results to differ materially. For more information, please reference our earnings release and 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.

Okay. Good morning, everyone, and thank you, Dan. We delivered on our commitments for 2024 by executing our trusted disruptor strategy and making progress towards our 2026 framework. We ended the year with record backlog that positions us well for the future. 2024 was a pivotal year for L3 Harris as we marked the 5 year anniversary of the transformative merger between L3 and Harris.

The combination formed a new company that now operates differently. We're agile, nimble and fast, while delivering solutions that are trusted by our customers across all domains. We span the gap between the traditional primes and the new entrants, forming partnerships around critical capabilities such as AI and autonomy, allowing us to rapidly meet the evolving needs of national security and modern warfare. Domestically, national and homeland defense remains a key priority for the new administration with strong support for our programs in areas such as space, missiles, advanced electronic systems, cyber and resilient comms. Internationally, we saw strong demand for our software defined radios, night vision goggles and munitions, reflecting our commitment to supporting allies around the world.

Partnerships remain a cornerstone of our trusted disruptor strategy. In 2024, we advanced collaboration with Palantir and venture capital backed startups focusing on AI enabled solutions and emerging technologies. These partnerships are accelerating a culture of innovation and speed, enhancing our ability to meet customers' needs faster and more effectively. Let me highlight some of our key accomplishments this year. We won the NextGen Jammer competition, which establishes us as a long term jamming franchise worth 1,000,000,000 of dollars in production of airborne pods to support the F-eighteen fleet.

Our wins on the glide phase interceptor and next generation interceptor programs will drive growth in our solid rocket motor business for decades to come. Along with the propulsion content on the previously won Sentinel and Zeus programs, we are solidifying our position as a global leader in large solid rocket motor design and manufacturing capability. We won a $1,000,000,000 IDIQ award for the U. S. Navy to provide resilient communications technology to U.

S. And allied forces. Over the next 5 years, our broadband communications business will deliver software defined Link 16 terminals that are critical to enabling secure and resilient collaboration across air, ground, maritime and space platforms. By integrating Link 16 into space based assets, we are expanding its reach and utility, ensuring U. S.

And allied forces have seamless connectivity and situational awareness across all domains. As a testament to our trusted disruptive strategy at work, a team led by L3 Harris partnering with venture backed startups was selected by the Defense Innovation Unit to prototype a command and control system capable of operating 100 or even 1,000 of swarming autonomous assets. This project advances the DoD's Replicator initiative by integrating advanced commercial technologies to enable collaborative autonomy in all domains. Our open system architecture supports rapid integration of 3rd party algorithms, providing unmatched scalability and flexibility to meet mission demand. By combining these capabilities with our expertise, we are shaping the future of warfare, ensuring U.

S. And allied forces maintain a competitive edge in contested environments. As you saw in the press last week, I recently took steps to strategically align our leadership team to drive sustained profitable growth. Ken has been appointed President of Aerojet Rocketdyne effective Monday in addition to his responsibilities as CFO. With his extensive defense sector experience, Ken will drive operational excellence and continue our strong performance.

Sam Matters' role has been expanded to lead enterprise strategic collaboration agreements to further elevate our focus on partnerships while continuing to head the Communication Systems segment. We've also elevated the LHX Next organization, which has been led by Heidi Wood for the last year and achieved excellent results. She will report directly to me as we continue to drive cost savings, while accelerating enterprise wide transformation. Lastly, I want to thank Ross Niebergall for his contributions to L3 Harris, first as CTO and then as President of Aerojet Rocketdyne. His leadership has been instrumental in positioning Aerojet Rocketdyne for long term success.

After a distinguished career, Ross has chosen to step down to focus on his family's health and enjoy a well deserved retirement. I'm also pleased to have been elected Chairman of the Board of Governors for the Aerospace Industries Association, the leading voice for the industry. As our country navigates an increasingly complex global threat landscape, maintaining our technological edge has never been more critical. I look forward to partnering with my industry colleagues, the incoming administration and Congress to leverage the ingenuity of our world class U. S.

Talent and drive innovation that strengthens our competitive advantage. Looking ahead to 2025, our priorities remain clear to drive profitable growth while meeting our customers' evolving mission critical needs. I will now turn it to Ken to provide details on our financial results.

Thanks, Chris, and good morning, everyone. Let me recap full year 2024 real quick. Revenue was $21,300,000,000 up 10% and 4% organically. Segment operating margin was 15.4%, reflecting continued cost savings and strong execution. Non GAAP EPS was $13.10 Free cash flow grew to $2,300,000,000 representing an increase of 14% driven by earnings growth and effective working capital management.

For the Q4, revenue was $5,500,000,000 up 4% organically with a segment operating margin of 15.3%. Non GAAP EPS was $3.47 and free cash flow came in over $1,000,000,000 Turning to our segment 4th quarter results. SAS delivered revenue of $1,700,000,000 down 4% year over year largely reflecting the divestiture of the antenna business. Organically revenue was down 1% primarily due to lower F-thirty five related volumes as our TR-three mission computing hardware transitions from development to a more gradual production ramp. Operating margin was 10.8%, up 20 basis points primarily due to LHX next cost savings and partially offset by challenges on some of our fixed price development programs in space that are in the later stages of completion.

IMS delivered strong results with revenue of $1,800,000,000 dollars up 9% and margin of 13.4 percent expanding by 150 basis points. This performance reflects strong program execution and a favorable mix. We're pleased with the momentum at IMS and feel confident in the strength and resilience of this business as it continues to perform. CS achieved revenue of $1,400,000,000 up 5% driven by demand of software defined resilient communications equipment. Operating margin was 24.4% driven by a heavier mix of deliveries to U.

S. DoD customers. We are seeing particularly strong demand and international momentum winning key programs with NATO allies and expanding into other international markets. But I'd remind you international and domestic mix fluctuate based on quarterly delivery profiles. Aerojet Rocketdyne grew 5% with an operating margin of 11.5%, up 40 basis points, supported by progress on solid rocket motor production and offset by lower volume in space propulsion.

Now let me turn it back to Chris to cover some operational achievements for 2024.

Let me start with our portfolio. We completed the integration of the Aerojet Rocketdyne and Tactical Datalink acquisitions and we also divested our antenna products and Aerojet Ordnance Tennessee non core businesses. We further strengthened our leadership position in space, delivering 4 satellites to orbit for the SDA and 1 for MDA. Our progress in satellite systems and space superiority continued to gain momentum in 2024, reaching a record backlog of 40 satellites in just 5 years, a noteworthy achievement considering we started with no satellites as a prime. A significant highlight in our SAS segment was successful completion of the customer's engineering design review for 18 space vehicles under the SDA's Tranche 2 tracking layer program.

This milestone confirms our advanced space vehicles equipped with infrared payloads to detect, track and target hypersonic threats meets the rigorous requirements of the program. Completing this milestone in just 11 months reflects the speed, agility and expertise of our team. These satellites are part of the Space Force's LEO constellation providing global missile tracking and defense. With 38 satellites awarded across tranche 0, 1 and 2, including those already on orbit, we continue to support the efforts to advance integrated deterrents. With the tranche 3 opportunity on the horizon, we are well positioned to expand our role in building this critical layered missile defense system.

Furthermore, this capability positions us well to support the evolving defense needs of the U. S. And aligns closely with the Trump administration's recent executive order directing the development of an Iron Dome missile defense shield for our homeland. We've also made significant progress on our LHX Next initiative. In 2024, we exceeded our gross cost savings target by 2x reaching $800,000,000 This strong performance provides confidence in our ability to accelerate and exceed our overall cost savings target.

We are now expecting to achieve $1,200,000,000 in cumulative cost savings by the end of 2025 exceeding our $1,000,000,000 commitment a year early. This initiative is driving margin expansion, operational efficiency, facility rationalization and enhanced supply chain management. At its core, LHXNext embodies the same principles as Doge, tailored to drive greater speed and efficiency to allow data driven decision making. We are driving improvements across our operations and supply chain, simplifying and streamlining internal policies to eliminate inefficiencies and monetizing end of life assets to sharpen our focus and unlock value. This program enables us to respond more effectively to evolving customer needs while creating value for our shareholders.

Turning to guidance for 2025. We expect revenue of $21,800,000,000 to $22,200,000,000 representing organic growth of 4% at the midpoint. Our guidance includes a full year of our Commercial Aviation Solutions business as we continue to work towards closing the transaction. Segment operating margin is anticipated to be mid to high 15% supported by continued LHX and X cost savings, strong program execution and reflecting investments to drive continued transformation. Free cash flow is expected to be $2,400,000,000 to $2,500,000,000 driven by growth, higher profitability and disciplined working capital management.

Our guidance reflects appropriate risk posture early in the year and the dynamics associated with the new administration. We assume a continuing resolution through March of 2025 and no other funding delays or impacts. The administration has issued several executive orders that are still being assessed, but are not expected to have a significant impact on our 2025 results. However, as U. S.

Government contracting officers assess the impact of these executive orders on existing and new contracts, we could see an effect on our Q1 2025 bookings and revenue, particularly at CS, which can deliver product rapidly against order intake. Beginning in 2025, following comments from many of our investors, we are revising the reporting of non GAAP EPS to exclude adjustments for amortization of acquisition related intangible assets. This change aligns our reporting with peers and has no impact on our underlying profitability or cash. If this change had been applied for 2024, non GAAP diluted EPS would have been $9.70 reflecting an impact of $3.40 per share. Our 2025 non GAAP EPS is projected to be in the range of $10.55 to $10.85 representing growth of 10% at the midpoint.

At the segment level SAS revenue is expected to grow to a range of $6,900,000,000 to $7,100,000,000 reflecting budgetary constraints in the space sector that we expect to abate in 2026. Operating margin is expected to be in the low 12% range. IMS revenue is projected at $7,000,000,000 to $7,200,000,000 driven by increased demand in advanced electronics for space and munitions programs as well as maritime solutions with an operating margin in the low 12% range. TS revenue is anticipated to be 5.6 to $5,700,000,000 with margins in the high 24% range, supported by increasing demand for our software defined resilient communications equipment. Aerojet Rocketdyne is expected to reach approximately 2,500,000,000 dollars fueled by double digit growth in the Missile Solutions business.

Margins are expected to be in the mid-twelve percent range as we drive continued operational improvements. As we set our 2025 guidance, we want to highlight the varying number of weeks in certain quarters in 2025 that will result in some variability in revenue and EPS between quarters. In particular, Q1 is a short 12 week quarter and should be considered in your modeling. Our capital deployment strategy reflects our commitment to delivering value to our shareholders. We strengthened our balance sheet and ended 2024 with a net leverage of 2.9 times exceeding our target of 3.0.

With that achievement, we will maintain a competitive dividend and are focused on repurchasing at least $1,000,000,000 of shares in 2025. Additionally, we had another solid year of performance in our pension plan with no significant contributions in 2024 and none expected in 2025. To further de risk our balance sheet, we are working to transfer approximately $1,200,000,000 in pension assets and liabilities to a 3rd party with little gain or loss and no impact on cash flow taking advantage of attractive funding levels and interest rate environment. We expect to complete this action by the end of Q1 of 2025 resulting in a reduction in non cash, non service FAS pension income which is reflected in our guidance. Considering our strong performance in 2024 and our growing confidence in the cost savings that the LHX Next program will continue to deliver, we are also updating our 2026 financial framework announced at our Investor Day last year and increasing the segment operating margins we expect to achieve to low 16% in 2026.

We are continuing to target $23,000,000,000 of sales in 2026, representing 5% organic CAGR and $2,800,000,000 in 2026 cash, representing a double digit CAGR with further upside on a free cash flow per share basis. I'm proud of the tremendous progress our team made in 2024. This year has been one of transformation, growth and strong execution underscoring the strength of our portfolio and the talent of our team. We have faced a dynamic and demanding environment, but our ability to be agile and execute with discipline has allowed us to deliver strong results. From achieving record backlog to advancing key strategic priorities, we have demonstrated resilience, the ability to deliver on our commitments even in the face of challenges and remain focused on delivering for our customers and our shareholders.

As we continue to build on this momentum, I'm excited about what's ahead. The opportunity before us is meaningful and our strategic focus on operational excellence and innovation positions us well for sustained profitable growth. With that, I'll turn it back to Chris.

As we look ahead, we remain steadfast in our commitment to driving innovation and delivering mission critical solutions that align with our national security priorities. As we navigate an increasingly complex threat environment, L3Harris continues to stand at the forefront of innovation and national defense. Our vision for the nation's next arsenal of democracy is rooted in the convergence of cutting edge hardware, software and AI technologies that ensure mission success in every domain. This concept goes beyond traditional platforms. It's also providing adaptable, scalable, open and interoperable solutions that give our war fighters a decisive edge, Whether it's in resilient communications, advanced munitions or space based capabilities, we are enabling the Department of Defense and our allies to stay ahead of evolving threats.

In my recent letter to the Doge, I outlined key recommendations to modernize the national defense ecosystem. These principles reflect our dedication to advancing efficiency, strengthening collaboration and ensuring that the U. S. Maintains a technological edge. We encourage others to come forth and submit ideas to the Doge Committee.

We are excited to work with the new administration to bring these and other ideas to life and continue playing a pivotal role in supporting the missions that protect our homeland and our allies around the world. The incoming administration's transparency and understanding of the defense industry sets the stage for disruptive change in 2025. We expect a period of unprecedented evolution in defense priorities and policies. With our agility, speed and commitment to innovation, we are well positioned to adapt. This new era presents a chance to redefine how we support the warfighter and we are excited to play a pivotal role in driving this change forward and seize opportunities that align with our nation's strategic objectives.

Our work is critical to empowering the war fighter who protect democracy ensuring that they have the tools to maintain global stability. With a deep commitment to innovation and collaboration, we are proud to play a central role in this effort. Joanna, let's open the lines for questions.

Thank you. Ladies and gentlemen, we will now begin the question and answer session. Your first question comes from Peter Arment at Baird. Please go ahead.

Hey, thanks. Good morning, Chris and Ken and Dan. Hey, Chris, maybe just to start where you kind of finished, which is you wrote a letter to the Doge leaders just before the inauguration and you recommended for, I think, policy recommendations. Have you heard any feedback or have you had any active discussions? And how do you think this is all going to play out with kind of Doge and the impacts on the DoD bureaucracy, which I think you've called out many times?

And just how you're thinking that? Obviously, it's been an overhang on the group. We've seen a lot of valuations compress. So be curious your thoughts. Thanks.

Yes. Thanks, Peter. I'm excited about the dose and I try to parallel the similarities what we've been doing this past year. And as I think as to how we've got as a nation, each and every policy and regulation is put in place to reduce risk and they're well intended. When you step back after a few decades, I believe the cumulative effect of all these risk reduction policies and procedures have actually created more risk than they've actually resolved or mitigated.

So to answer your question, we received lots of positive feedback from members of Congress. I was in the Pentagon last week, a couple of other classified meetings. I think a lot of people read the letter. I'm really just trying to start the dialogue. I think Congress plays a role.

I think the DoD plays a role. The warfighter plays a role. And I think it's important for industry to be part of this ecosystem and give their perspective. I know several others have started to write letters. And I threw out 4 recommendations.

There's probably better ones or different ones. It's really just trying to start the dialogue, get people to sit down and say, how can we go faster and get better capability to the warfighter quicker? And I'm excited about the future. And I think, as I said, there's going to be unprecedented change in 2025 and some will be able to adapt and take advantage of it. We plan to be one of those companies, and maybe others won't.

Thank you. The next question comes from Myles Walton at Wolfe Research. Please go ahead.

Thanks. Good morning. Ken, you've got about $150,000,000

of growth in free cash flow in $25,000,000 and then $350,000,000 at the midpoint placeholder for growth in $26,000,000 Can you flesh out what specifically accelerating? And then also on the increase in LHX next of $200,000,000 how much of that drops through to actual margin savings

Yes. I'll take that one. In terms of growth in free cash flow, I think it pretty well aligns with the growth profile that we've laid out. We're growing the top line 24 to 25, 26. It accelerated in 20 26 as we've mentioned on the top line.

There's a couple items that are resulting in some better opportunities for growth 2026 F-thirty 5 with TR-three, our hardware development ramp down and then the production ramp being a bit more still kind of climbing that ramp in 2025 but accelerating in 2026. There's a little bit of space budget challenges in 2025. We do see the potential to get some space awards pulled into 2025 that will drive 2026 revenue. And then a little bit of international opportunities as well at IMS. So a little bit of a better growth profile in 2026 and 2025, continued margin expansion from where we are today to mid to high 15s in 2025 and then low 16s in 2026.

And then I would say effective working capital management team will continue to do that. And I think if you kind of run that through it will support the growing free cash flow profile both in 2025 and in 2026. To the LHX next question, we're still holding to our target of about at least 40% of the savings will result in margin opportunity for the company. And as we look at that, there's obviously some timing of how that works. You got to factor in the percent complete on the various contracts that we've got in place at any point in time.

It was certainly a strong contributor in 2024 margin expansion. It will also be that in 2025. And then certainly supporting the 2016 margin expansion to low 16% margin rate as well. So we'll certainly work to try to see if we can drive some upside to that above the 40% cost savings into in the margin opportunity. I think the team is working hard on that every day.

But as of now that's kind of what we're seeing in terms of actual delivery of the opportunity to that target that we set.

Thank you. The next question comes from Douglas Harnt at Bernstein. Please go ahead.

Good morning. Thank you. I wanted to see how you're looking at the Communication Systems business. There's a lot of things that sort of lie in there that seem to allow some real margin upside, the software sales for new waveforms, more exports, commercial contracts with LHX Next that could flow right through. But your guidance for 2025 is still below 25% margin.

Where is this going to where is the potential in margin expansion here? Because it seems like you've got a lot of the ingredients in place to get above the 24% range.

Yes. Thanks, Doug. Appreciate it. As I mentioned, I'll just I'll point out a couple of things. As I mentioned in the prepared remarks, certainly as we're looking at 25, we've got to go and continue to perform in the business.

It's early in the year and we're certainly thinking about it from a risk adjusted perspective. CS team has demonstrated the ability to produce product to generate margins. So just in terms of looking at margins for 25 at CS, I would say a couple of things. One, we're certainly evaluating the mix between U. S.

DoD as well as international deliveries. From a software perspective, I think we've talked about that kind of comes in chunks here and there. So we've got to go continue to drive strong deliveries in terms of waveforms that are both integrated into the products and driving high margin product opportunity as well as waveform upgrades where we really see the opportunity for high margin business. And then from an LHSNX perspective, the CS team certainly has been doing a great job of integrating the cost savings for the margin compression that we saw in the Q4 really was related to the mix of U. S.

DoD deliveries versus international where we had higher mix in the end of 2023. So I think the team is doing a great job. I do think we'll continue to work to meet if not beat our segment guidance. And I know the CS team will be off and working on that. So, feel good about the opportunity and we'll update you later in the year.

I'll just chime in Doug. We're seeing finally more and more opportunities to bid and win C2 and C3 systems. So, the market is going beyond just selling the software defined radios and the waveforms that you said. So we're finally getting to more of a network and systems approach and I think that's going to give us some additional tailwind. I think of all the segments, this one probably has the highest inflation impact from the supply chain given all the electronic components.

So we have to absorb and offset that not only with LHX and X but our E3 savings. But the trend is positive and we're optimistic.

Thank you. The next question comes from Sheila Kahyaoglu at Jefferies. Please go ahead.

Good morning, Chris and Ken. Thank you. Maybe I'll follow-up, Ken, on the $1,200,000,000 of LAJEC's next or Chris. You raised it by $200,000,000 and if 40% drops through to the bottom line, it's about an extra 30 bps on top of your peer high margin. So where are you seeing that come through the most?

What's really driving some of those opportunities? And if you could just talk about maybe like KPIs that you track there?

Yes. I'll start and then let Ken. Yes, we're seeing it from a variety of places. Supply chain, I think we're finally had a pretty good year and not only getting into savings, but building the resilience of our supply chain, not only the indirect materials, which we probably did first and is a little easier. Now we're working on direct materials and subcontract management.

So, I think those are going to be big drivers. We're continuing to look at the facility rationalization and the org structure and roles and responsibilities. So, I think there's some additional opportunities, similar buckets to what we had before. But in parallel, we're also as I mentioned transforming the business as well and making the investments necessary to digitize the company to allow the employees to get data quickly and that is also factored into our guidance. So it's just not a $1,200,000,000 gross run rate cost savings.

We're reinvesting in the business, make it even better and more efficient place to work for the employees. So you net that down. And as you know, even 40% to 30 bps comes in over time, as Ken said, depending on the percent complete accounting and such. So I think it's been a huge success and amazing accomplishment. We will hit the 1.2 in 2 years and given the size of the company very proud of that.

Tack that on to the $650,000,000 we did right at the merger. We've almost taken out $2,000,000,000 of cost in 6 years, which is pretty impressive in my opinion. Anything else Ken?

I would just add Sheila that we certainly delivered on the cost savings in 2024. A chunk of that was some difficult decisions we had to make around labor, but we did realize some labor savings. That's probably the cost that results in the quickest turn into the savings turning into actual costs flowing through the EACs, working hard on some other opportunities. Chris mentioned supply chain facilities and then transformation some of the systems and how we work. And those take a little bit more time to flow through the EACs and into the actual realization of the savings.

So we're certainly tracking that. So in terms of your question on KPIs certainly the generation of the savings, but then also programmatically and through the businesses how do we track those through to actually delivering on the savings ordering against new agreements things like that long term agreements and that sort of thing. So I think we've got the right approach. We've got the right metrics. The team is fully aligned and delivering.

And I think it certainly continues to contribute to the margin profile 25% and into 26%.

Thank you. Our next question comes from Ron Epstein at Bank of America. Please go ahead.

Yes. Hey, good morning guys. Chris, how are you thinking about the environment right now with regard to M and A? That's to say with the new administration, maybe things change and Boeing's got some assets for sale. Is there anything out there that you're thinking about that could be a bolt on a new technology, maybe an investment in something like more venture oriented given the push towards some of the startups?

Broadly, how are you thinking about that?

Yes. Good morning, Ron. Great question. I do think this administration will probably be more favorable towards allowing acquisitions. As you know, we made 2 in 2023.

They made perfect sense for us strategically. They did not eliminate competition. And even in the prior administration, we were able to get 2 acquisitions approved. Relative to the way I look at it, there's we've really tried to take more and more of this partnership approach. AI is a hot market and I think we have some interesting partnerships and opportunities.

I've tried to highlight what we're doing with Palantir specifically. We actually have a couple opportunities that we will be bidding on competitively as a team in the next several months that could actually be awarded in 2025 that deal with next gen command and control and farming network modernization. Of course, we have to go win those. But it's easier in my opinion to find partners and work with them when it comes to AI and even autonomy. I think we own small parts of up to 40 different venture backed companies now.

So we're pulling that technology through. And the next step if we do anything would be a bolt on type acquisition to fill a niche or to expand a capability, but nothing has come our way yet. We continue to review and get lots of inbound calls and not many of them get a whole lot of traction. I like the playbook we have. We're transforming the company.

We're buying back our stock. We're growing the margins. In fact, when we hit our 2026 goals, we will have grown our revenue margins and free cash flow 4 consecutive years, just straight up operationally. No exceptions, no exclude this, exclude that. Just good old fashioned organic growth, margin expansion and free cash flow for straight years and hard to argue against that playbook and we're executing on it and proud of what the team has done.

Thank you. The next question comes from David Strauss of Barclays. Please go ahead.

A couple clarifications, I guess. On CAS and that divestiture, I think you mentioned it, Ken, but what exactly how much of revenue is assumed there? And I guess what is taking so much time for that deal to close? That's the first thing. And then EACs, what they were in the Q4 and what you're assuming for 2025?

Yes. Thanks, David. From a CAS perspective, there's we're working through some regulatory and other processes in 2024. There are some different joint venture aspects to that and just getting all the parties in the same room and in agreement on that. We do anticipate that that transaction will close in 2025.

From a guidance perspective, 2024 kind of felt like we were opening a close and it didn't. We kept having to update. So we thought rather than having to update each quarter we would just include it and then we can obviously just back it out once when it closes. So we thought that was kind of the easiest way to reflect that business. In terms of the timing, I wouldn't predict it.

We do think it's going to be in 2025 and the revenue of that business is somewhere north of $500,000,000 $600,000,000 in terms of how that business looks. No major impact on trends at the company level from a growth perspective or other. EAC to your question on that one, we did deliver positive EACs at the company level in the Q4. As well we delivered positive EACs, positive net EACs for the full year of 2024. So when we file the 10 ks, I think you'll see somewhere $40 ish million of positive EACs for 2024.

And I think even in the face of some program challenges, we've talked about a couple classified programs in our space business that are seeing some issues as we work through integration and test type activities. These are kind of legacy programs that have been around for a while. And as we've moved into prime positions, we're just working through some of the I and T aspects of those types of programs. But even with that, we were able to work hard, generate strong program performance and see positive EACs in 2024. As we look at 2025, we don't really project or predict positive EAC performance.

So our guidance generally assumes that we would have flat EACs in 2025. And as we're able to perform on the programs and hopefully generate strong performance and net positive EACs in 2025 that will be upside to our guidance and our performance for the programs and across the segments. Chris did you want to comment on that?

I just want to David emphasize what Ken said on these EACs. And we have literally thousands of programs and what we do is complicated and nothing is easy and nobody is perfect. But this team finds a way to deliver on its commitments. And occasionally there's tens of $1,000,000 challenge or a couple of 1,000,000 here and it just adds up. But we take our LHX next savings.

We take our other innovative and creative ideas and we meet our commitments. We don't make excuses. We don't back stuff out. What you see is what you get and these margins are inclusive of all the good news and all the bad news. And we're going to continue to run the business that way and find a way to deliver.

And I think that's the culture we've built and that's what the team wakes up every day focused on.

Thank you. The next question comes from Seth Seifman at JPMorgan. Please go ahead.

Thanks very much and good morning. Maybe just to follow-up on that on the space charges. Should we think about the magnitude there being kind of the difference between the guided margin and kind of where things landed? And then I think you mentioned in the materials that those programs were nearing completion, kind how close are we to completing those programs and how much risk remains?

Yes, Seth, from a space program perspective, I guess at a high level, I would say we've got a couple of classified programs we're working through. We are, as I mentioned, at a significant percent complete. We do expect those programs to we'll continue to monitor them through 2025. We'll continue to manage risk through 2025. During 2024, we did realize probably about $100,000,000 of negative adjustments or negative EACs across a couple of those space programs.

And clearly as to Chris' comment as the team works hard we were able to largely offset that. So that's kind of the way to think about it. I do expect we'll for the most part get that risk behind us in 2025 as we think about some customer milestones early in 2026 and given the nature of the programs I probably can't comment any further than that. But we'll continue to work. I know the team's got a good approach.

Data's coming in and working through those things and we're very comfortable with what we've guided for 2025.

Yes. And I think it's the same story you hear from everyone. A lot of these are fixed price there's only a couple, our fixed price development programs some going back 7, 8 years pre merger. And I think I've been pretty clear on my views on these high risk fixed price development programs. So we have to run through these.

And you shouldn't assume in all cases that we're the prime. So it even gets a little more complicated when you have to integrate with the prime and such. So Ken said, we're in the we're kind of in the red zone to use a football analogy and we just got to get these things in the end zone and continue to grow the missile tracking business, which is sequentially profitable each and every order and focus on the SDA TR3 win later this year.

L3Harris Technologies (LHX) Q4 2024 Earnings Call Transcript

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