L3Harris Technologies, Inc. (NYSE:LHX) Q4 2022 Earnings Call Transcript

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Chris Kubasik: No. Absolutely, Seth. Yeah. I mean, Sam joined us at the beginning of the year. When I look €“ I know a few people were asking questions relative to Sam and the business. I mean, CS is a short-cycle business with a global footprint, a lot of Army and Marine business. And when I hired Sam, like I do everyone, I look first and foremost for someone who’s a leader versus a manager. And everywhere he’s been, he’s had success strategically, operationally and financially. Whether it’s Collins, Sikorsky, UTC, he’s led production. He’s led programs. He’s familiar with foreign military sales, direct commercial sales and a lot of experience globally. So I have no doubt he’s going to be very successful and add value to the corporation.

When I look at the medium term on comms, I don’t want to underestimate the significance of the ViaSat acquisition and the focus on €“ on JADC2 and the ability to connect the networks, which the customer has been talking about, it seems like, for a decade. And I’m sure there’s frustration on their part that we haven’t, as an industry, been able to €“ to get that across the goal line. So when I look at the tactical radio business, we continue to see growth in the low to mid-single digits, not only here domestically where the modernization is going to continue. Internationally, in the fourth quarter, we got another contract from Australia that has been a great customer of ours. So the visibility we see continues to look good as the modernization continues the need for resiliency continues.

And then I still think there is ability for the €“ more of a soldier as a system that’s been talked about, but never quite brought across the goal line. So we have the ENVG goggles. We have the radios. There’s connectivity that can happen at the soldier level and also networks at a higher level. So it’s a key part of our business. And I think anything, as I’ve said before, over the past year, you look at the war in Ukraine, the ability to communicate is critical to execute the fight of the future. And our resiliency and our capability is unique, and I think it’s going to continue to grow for the foreseeable future.

Operator: Our next question is from the line of Gautam Khanna with Cowen & Company. Please proceed with your question.

Gautam Khanna: Hi. Good morning, guys.

Chris Kubasik: Good morning.

Michelle Turner: Good morning.

Gautam Khanna: I was curious, Chris, if you could talk to where you guys are in the L3 kind of integration journey. Meaning a couple of years ago, you guys talked about $250 million of annual cost out for a number of years kind of moving from a holding company to an integrated business, et cetera, et cetera. I’m just curious where do you think you are on that journey? And then if you could just comment also on the supply chain and the pace of healing within it assumed in the guidance and what you saw in Q4? Thanks.

Chris Kubasik: Okay. Let me take the first part. I’ll ask Michelle to talk about the supply chain. As part of our E3 continuous improvement initiative, I’d say we’re never ever complete. We talked about a three-year plan to take out $500 million. We took out $660 million. We’re going to stop trying to call out separately the one-time costs and the savings as we move into the next cycle of acquisitions. But I can assure it’s an ongoing journey. I think we got the low-hanging fruit. We made a lot of progress. So, I’d say maybe we’re two-thirds of the way through the integration. And when I look at the IT systems, the ERP systems have come down substantially. I think we used to say there were about 100. By the end of the year, we’ll be in the 20s.

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