It’s the integration of all the functions that are critical to our products with the overall goal of reducing the cost of our products. So there is an engineering component. There’s clearly a supply chain component, contracting and such. So that process is ongoing, but that’s where we’re going to get to next $600 million or so of savings. To your question on portfolio shaping, as you know, we have two that are in process. I’ll just give you an update there. The antenna business, which we announced, a couple of hundred million dollars that’s tracking to close the middle of this year, second quarter to be specific. And then our commercial aviation is going to be more in the second half of the year, that will give us $1 billion of proceeds. Relative to the rest of the portfolio, we’re just taking a hard look at that.
We’re going to be able to hit our leverage ratio based on these two. And to the extent we can get a good price for what we’ve identified as non-core, we’ll do it. But too many — too many of the offers are coming in low and people think we’re desperate to sell and I can assure you we’re not. So we need to get better valuations before we proceed on other transactions. Otherwise, we’ll keep and run the business and go forward from there.
Operator: Our next question comes from the line of Jason Gursky with Citigroup. Please proceed with your question.
Jason Gursky: Good morning. Hey, Chris, would you spend a few minutes kind of walking around the communications business and maybe give us some updated thoughts since you last reported out on the funding environment? We’ve had fiscal ’24 that got past, ’25 that got introduced. We’ve had some supplementals as well. And just kind of give us your take on how this plays out over the next couple of years and maybe offer up some comments on Link 16 and the expected refresh of all that hardware when that kind of hits. Just what have we learned here over the last couple of three months on the communications business? Thanks.
Christopher Kubasik: Yeah. Thanks, Jason. Let me start with Link 16. Again, we have a footprint on 20,000 platforms and then there is variations of Link 16 and other data links that we’ve developed that are going to be able to go into those platforms or footprints. So I think we’re starting to see that. Our ultimate goal was to get Link 16 into space. I can tell you for the SDA transport opportunities that are coming up, our team is going to be a merchant supplier. And as of now, it looks like we’re going to be on all the teams providing a Link 16 type capability in space. So we’re excited about that. Relative to the communication systems, I want to reiterate the opportunity that we won in Taiwan, $150 million for networking, which was a cross-company win, but led by our communications segment.
So that’s a big deal for us. And as I mentioned, it really supports the CJADC2 initiative that our country has been talking about for quite some time. Relative to the radios, I mean, this is just absolute good news. I know we’ve been talking about modernization, not only here in the US but globally. And as I mentioned, we have six FMS cases that are currently going through the process, through the system in Europe. The backlog is going to be a record backlog. Even in Q1, we were able to get the marine and the SOCOM radio orders booked. And there is a certain capacity and ability to deliver out of our Rochester facility. And it really comes to be honest how quickly we can get these supplemental funds under contract and approved and delivered.
And with our trusted disruptor strategy, our business model actually allows us to potentially deliver radios within a week of getting the contract depending on the configuration in the country. So the way I look at it, we have high confidence in the guidance we’ve given. We clearly have the second half ramp-up, but which countries will get — which radios will really be a factor of when the funding turns into a contract and those that don’t get signed and delivered in 2024, will clearly be 2025. So just feel better about the business in a huge way. And again, the products are in theater being tested daily and they’re working and exceeding expectation and the whole focus on resilient communications is paying off.
Operator: Our next question is from the line of Ken Herbert with RBC Capital Markets. Please proceed with your question.
Kenneth Herbert: Yeah. Hi, good morning.
Christopher Kubasik: Good morning.
Kenneth Herbert: Hey, Chris and Ken. Hey, maybe just a two-part question. First, on the Communications segment, you obviously did 24% margins in the first quarter. The guidance implies some slight ramp in the second half, but it clearly sounds like with international mix and maybe a little bit of a depressed second quarter, there could be some upside to that. Can you just talk about if there’s anything one-time in the segment in the first quarter and any puts and takes there we should think about as we think about the second quarter? And then just or in the second half of the year and then just at a higher level, obviously, international seems to be a growing business maybe faster than the US. Can you just talk about longer-term the margin impact of the international opportunity within the CS segment, but then more broadly? Thank you.
Kenneth Bedingfield: Sure, I’ll take that one. So the first part of the question on CS margins, we delivered 24% margin in the first quarter, which I think was great performance by the CS team. And that does reflect a higher domestic mix than we saw late in ’23 as well as a higher domestic mix than we expect to see in the second half of ’24. We did guide a low-to-mid 24% margin for CS for ’24. And I think what we’re trying to communicate is that we expect the domestic mix to be kind of consistent in the second quarter with the first quarter, solid performance could yield similar results. But in driving that margin up to the low-to-mid 24% for the full year, we are looking at some international opportunities to realize some additional margin benefit as we think about that kind of full year impact.
And I think so that’s what we’re trying to communicate on CS margins from a Q1 and full year ’24 perspective. And then from the international side, clearly, as Chris talked about in his prepared remarks and in the response to Jason’s question, a lot of international opportunity at certainly the CS segment. But as we look beyond that as well, we see international opportunity, in particular at IMS and certainly the other segments have international components to their business. We don’t necessarily track some of the ultimate end customers quite as closely in some of those. But the international margins tend to be stronger across the Board. In my remarks, I talked about an ISR program for a NATO country. We would expect that would have strong margins as we again think about how we make those deliveries to our international allies and our country’s partners.
And recognizing the different risks and challenges that come with those programs that should you perform and we expect to be able to perform will generate higher margins for the business. So we do see that continuing to move into the business. So I will comment, CS clearly is the kind of the quickest turn segment, the shortest cycle segment in terms of ability to take international orders and turn it into sales. So just an example, that ISR program we talk about will be a multiyear program and we’ll see that kind of move into the revenue over a bit more time. But with that, I’ll turn it to Chris for a few more comments.
Christopher Kubasik: Yeah, Ken, just as a reminder, we’re in the low 20% of our revenue comes from international customers and part of our margin improvement strategy is to grow our international business. And just as a reminder, about half of that is foreign military sales, which has margins consistent with the DoD work for the most part and the other half is direct commercial sale and that’s where we tend to have the higher margins. But as Ken said more international is synonymous with higher margins and that’s where our focus is. The supplementals are a big step in the right direction.
Operator: Our next question is from the line of Gautam Khanna with TD Cowen. Please proceed with your questions.
Gautam Khanna: Hi. Can you hear me guys?
Kenneth Bedingfield: Yes, we can.
Gautam Khanna: Terrific. Hey, thank you. I just had two quick questions. First, I was wondering if you could give us more granularity on the RF tactical backlog book-to-bill trends, you mentioned something on SOCOM. And if you could just talk a little bit about overall mix this year and perhaps next in that business? And then I had a question on IMS EACs. And if those have turned positive and if not what’s sort of still holding that segment back with respect to kind of the profit accruals? Thank you.
Kenneth Bedingfield: Yeah. From a tactical radio perspective, I would say, we’re — had a solid bookings order in the quarter. We’ve got a very solid backlog for that business at this point in time. Looking at a multi-billion dollar backlog in that business, and for a pretty quick turn, our shortest cycle business, that is a very robust backlog at this point in time. So we’re excited about the opportunities, I would say. The Marine Corps and SOCOM opportunity is a great one as we continue to expand that partnership with that very important customer for the business. We were also down-selected for the Air Force Next-Gen Survivor Radio, which is a great opportunity for that business to expand into a new market as well. And then clearly the supplemental, as Chris mentioned, and the international opportunities so I think a huge opportunity in terms of really strong backlog at the Tactical Communications business.
