L3Harris Technologies Reports First Quarter 2025 Results, Updates 2025 Guidance

Highlights*

• Revenue of $5.1 billion
• Operating margin of 10.2%; Adjusted segment operating margin of 15.6%
• Diluted EPS of $2.04; Non-GAAP diluted EPS of $2.41
• Repurchased $569 million of shares
• 2025 guidance updated for divestiture, strong Q1 performance and a solid outlook

L3Harris Technologies (NYSE:LHX) reported first quarter 2025 diluted EPS of $2.04 on first quarter 2025 revenue of $5.1 billion. First quarter 2025 non-GAAP diluted EPS was $2.41. Reconciliations of non-GAAP results are detailed in tables beginning on page 10.

"We're building on our momentum with a strong start to the year, driven by solid operational execution and program performance, leading to continued expansion in adjusted segment operating margin. We continue to see demand for our solutions, reflecting our alignment with key national security priorities. Our capital deployment strategy remains clear, returning nearly $800 million in the quarter to shareholders through dividends and share repurchases, and increasing our dividend for the 24th consecutive year. As we work toward our 2026 financial framework, we remain confident in our ability to meet our targets and drive long-term, profitable growth," said Christopher E. Kubasik, Chair and CEO.

Kubasik added, "We are well-positioned to support the new administration's evolving defense priorities, with strategic partnerships at the core of our Trusted Disruptor strategy. Our partners recognize our speed and agility and together we are focused on rapidly delivering mission-critical solutions for our customers. Based on our first quarter performance and the completion of the Commercial Aviation Solutions divestiture, we are updating our guidance while reaffirming our free cash flow commitment."

SUMMARY FINANCIAL RESULTS*

Revenue: First quarter revenue declined 2%, reflecting the divestiture of our antenna business from Space & Airborne Systems (SAS) in second quarter 2024 and our Aerojet Ordnance Tennessee, Inc. (AOT) business from Aerojet Rocketdyne (AR) in fourth quarter 2024. Excluding the divestiture impacts, organic revenue was flat, driven by growth of 4% and 9% in Communication Systems (CS) and AR, respectively, offset by lower aircraft missionization volume and planned mission support program ramp down in Integrated Mission Systems (IMS), as well as continued challenges on classified development programs in SAS.

Operating Margin:

GAAP Operating Margin: First quarter increased 290 bps to 10.2% primarily driven by lower unallocated corporate expenses, including LHX NeXt implementation costs and amortization of acquisition-related intangibles.

Adjusted Segment Operating Margin: First quarter expanded 50 bps to 15.6% primarily driven by favorable high margin international mix in CS, improved program performance in IMS and LHX NeXt driven cost saving across all segments, partially offset by challenges on classified development programs in SAS and unfavorable mix in AR.

Diluted EPS:

GAAP Diluted EPS: First quarter increased 38% to $2.04 driven by higher operating income and lower interest expense from decreased short-term debt balances in first quarter 2025, partially offset by a higher effective tax rate.

Non-GAAP Diluted EPS and Pension Adjusted Non-GAAP Diluted EPS: First quarter non-GAAP diluted EPS and first quarter pension adjusted non-GAAP diluted EPS increased 7% to $2.41 and 9% to $1.99, respectively, from higher adjusted segment operating income and lower interest expense from decreased short-term debt balances in first quarter 2025, partially offset by a higher effective tax rate.

Cash Flow:

Cash Used in Operations: First quarter cash used in operations was ($42) million, better versus the prior year due to operating income growth and tax planning strategies, offset by working capital timing.

Adjusted Free Cash Flow: First quarter use of ($72) million, better versus the prior year. Adjusted free cash flow excludes the impact of cash used for merger, acquisition and severance payments.

SEGMENT RESULTS*

CS

Revenue: First quarter revenue increased 4% primarily driven by increased international volume on resilient communication equipment and sale of satellite communications terminal inventory.

Operating Margin: First quarter increased 150 bps to 25.5% due to favorable high margin international mix in Tactical Communications and LHX NeXt driven cost savings.

IMS

Revenue: First quarter revenue decreased 2% primarily due to lower aircraft missionization volume, planned ISR mission operations program ramp down, lower material volume on Maritime programs, partially offset by increased volume for airborne electro-optical sensors.

Operating Margin: First quarter operating margin increased 140 bps to 12.8% primarily due to improved program performance, favorable mix associated with higher margin airborne electro-optical sensors volume and LHX NeXt driven cost savings.

SAS

Revenue: First quarter revenue decreased 8%, reflecting the divestiture of our antenna business in the second quarter of 2024. Excluding the divestiture impact, organic revenue decreased 6%, primarily due to lower volume associated with program timing and challenges on classified development programs in our Space Systems business, in addition to lower F-35 related volume as TR-3 transitions from development to a more gradual production ramp in our Airborne Combat Systems business, partially offset by increased volume in our FAA safety of flight networks business.

Operating Margin: First quarter operating margin decreased 140 bps to 10.9% primarily due to continuing challenges on classified development programs in Space Systems, partially offset by LHX NeXt driven cost savings.

AR

Revenue: First quarter revenue increased 8%, including the impact from the divestiture of our AOT business in the fourth quarter of 2024. Excluding the divestiture impact, organic revenue increased 9% primarily from increased production volume across key missile and munitions programs and new program ramp, partially offset by production timing on space programs.

Operating Margin: First quarter operating margin decreased 110 bps to 12.1%, primarily due to lower net favorable EAC adjustments, partially offset by higher volume and LHX NeXt driven cost savings.

2025 GUIDANCE

Guidance has been updated to reflect recent portfolio actions. These changes include both a divestiture and an internal business realignment:

• Divestiture of CAS – We completed the sale of our last remaining commercial aerospace business, resulting in an approximately $525 million reduction to expected IMS revenue for the remainder of the year, as well as a reduction in expected margin.
• Realignment of FOS – The FOS business was transferred from IMS to AR to drive integration synergies and better align with mission sets. This shift represents approximately $300 million of expected revenue moving from IMS to AR.

SUPPLEMENTAL INFORMATION

Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of federal securities laws made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Examples include, but are not limited to: share repurchases; divestiture and realignment impacts; 2025 guidance; 2026 financial framework; anticipated LHX NeXt initiative costs and savings targets; supplemental information for 2025; projection of other financial items; and assumptions underlying any of the foregoing. Investors should not place undue reliance on forward-looking statements, which reflect management's current expectations, estimates, projections, assumptions and information currently available to management, and are not guarantees of future performance or actual results. Important risks that could cause our results to differ materially from those expressed in or implied by these forward-looking statements or from our historical results include, but are not limited to, risks arising from: competitive markets; U.S. Government spending priorities; changes in contract mix; inflation; tariffs and potential trade disputes; unilateral contract action by the U.S. Government; uncertain economic conditions; future geo-political events; supply chain disruptions; impacts of LHX NeXt; indebtedness; defined benefit plan liabilities and returns; interest rates and other market factors; changes in effective tax rate or additional tax exposures; pending and contemplated divestitures. These and other important risks that could impact forward-looking statements are described more fully in the "Risk Factors" in our Form 10-K for fiscal 2024 filed with the SEC. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are qualified by the cautionary statements in this section, and we have no duty to and disclaim any intention or obligation, other than imposed by law, to update or revise any forward-looking statements, whether as a result of new information, future events or developments or otherwise.

Non-GAAP Financial Measures

Management believes the adjustments to non-GAAP Financial Measures ("NGFMs") in the tables beginning on page 10 are useful to investors because the excluded costs do not reflect our ongoing operating performance. Such adjustments, considered together with the unadjusted GAAP financial measures, provide information that management believes is useful to investors to understand period-over-period operating results separate from items that management believes may disproportionately impact operating results in any particular period; however there is no guarantee that items excluded from NGFMs will not reoccur in future periods. Management also believes that NGFMs enhance the ability of investors to analyze business trends, understand performance and evaluate our initiatives to drive improved financial performance. Management utilizes NGFMs to guide forecasting and long-term planning and for compensation purposes. NGFMs should be considered in addition to, and not as a substitute for, financial measures presented in accordance with GAAP. A reconciliation of forward-looking NGFMs to GAAP is not available without unreasonable effort because of inherent difficulty in forecasting and quantifying comparable GAAP measures and applicable adjustments and other amounts necessary for a reconciliation because of potentially high variability, complexity and low visibility of applicable adjustments and other unusual amounts that could disproportionately impact future GAAP results, such as the impact of defined benefit plan performance, LHX NeXt, portfolio shaping activities, and the extent of tax deductibility.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250424368502/en/

Investor Relations Contact:

Daniel Gittsovich, 321-724-3170

[email protected]

Media Relations Contact:

Sara Banda, 321-306-8927

[email protected]