L3Harris Announces Financials for First Quarter of 2021
Friday, April 30, 2021 | Comments

L3Harris Technologies reported first quarter 2021 revenue of $4.6 billion, down 1.3% versus the prior year, and up 1.8% on an organic basis. Generally accepted accounting principles (GAAP) net income was $466 million, up 140% versus the prior year.

Adjusted earnings before interest and taxes (EBIT) was $862 million, up 6.7% versus the prior year, and adjusted EBIT margin expanded 140 basis points (bps) to 18.9%. GAAP earnings per share (EPS) was $2.25, up 127%, and non-GAAP EPS was $3.18, up 14% versus the prior year.

“Our first quarter results demonstrate continued strong execution by the L3Harris team in spite of the pandemic, which provides us confidence in delivering on our increased guidance for the year,” said L3Harris Chair and CEO William M. Brown. "Our ability to perform exceptionally, along with the differentiated capabilities highlighted at our investor briefing, position us to continue creating value for all stakeholders over the long term."

First-quarter revenue decreased 1.3% versus prior year primarily due to divestitures and COVID-related impacts within the commercial businesses. Organic revenue increased 1.8% for the quarter as 4.8% growth in U.S. and international government businesses, excluding commercial aviation and public safety, more than offset the anticipated COVID-related decline. At the segment level, revenue growth was driven by integrated mission systems, space and airborne systems and communication systems, partially offset by a decline in aviation systems primarily due to COVID-related impacts. Funded book-to-bill was 1.10 for the quarter.

First quarter net income margin expanded 600 bps and adjusted EBIT margin expanded 140 bps to 18.9% versus prior year. GAAP EPS increased 127% versus prior year driven by a reduction in charges for impairment of goodwill and other assets, operational excellence, integration benefits and a lower share count, partially offset by COVID and divestiture-related impacts. Non-GAAP EPS increased 14% versus the prior year driven by operational excellence, integration benefits and a lower share count, net of COVID and divestiture-related impacts.

First-quarter revenue for the communications segment increased 1.6% versus the prior year and 2.9% on an organic basis driven by growth in tactical communications, primarily from the continued ramp in U.S. Department of Defense (DoD) modernization, which also benefited integrated vision solutions and global communications solutions. This growth was partially offset by anticipated lower demand within public safety due to COVID-related impacts and lower volume on legacy unmanned platforms in broadband communications. First-quarter operating income increased 12% to $281 million, and operating margin expanded 240 bps to 25.3% versus prior year from operational excellence, cost management and integration benefits. Segment funded book-to-bill was 0.92 for the quarter.

Tactical communications received several key orders that strengthen its domestic and international leadership, including:
• A $72 million follow-on production order under the U.S. Special Operations Command's (SOCOM) $255 million next-generation tactical communications (NGTC) multichannel manpack IDIQ contract
• $42 million in orders from the U.S. Air Force for multichannel Falcon IV handheld and man portable tactical radio equipment
• A $36 million order from the U.S. Marine Corps for advanced two-channel Falcon IV manpack radios
• $68 million in orders to provide Falcon III products in support of force modernization to Germany and a country in Central Asia

Key awards in broadband communications included a $57 million award for ROVER 6S transceivers for the U.S. Army, supporting situational awareness and surveillance. In addition, the company received $28 million in orders from the U.S. Navy to provide SATCOM terminals on surface warships under the Commercial Broadband Satellite Program (CBSP), enabling resilient communications.

In global communications solutions, the company received multiple orders totaling $24 million to deliver its Hawkeye III Lite very small aperture terminals (VSATs) in support of the U.S. Army's SATCOM modernization program.

In the first quarter, L3Harris generated $630 million in adjusted free cash flow and returned $909 million to shareholders through $700 million in share repurchases and $209 million in dividends.

As previously announced, the L3Harris Board of Directors approved a 20 percent increase in the company’s quarterly cash dividend rate from 85 cents per share to $1.02 per share and a new $6 billion share repurchase authorization.

In addition, L3Harris signed definitive agreements to sell its military training, combat propulsion systems and voice switch enterprise-related businesses for a combined total of approximately $1.5 billion, increasing the total gross proceeds from completed and announced divestitures to approximately $2.5 billion. Each transaction is subject to customary closing conditions, including receipt of regulatory approvals, and is expected to close in the second half of 2021.

L3Harris updated 2021 guidance as follows. Revenue is expected to be between $18.5 billion to $18.9 billion, excluding the effect of divestitures. Adjusted EBIT margin is expected to be 18.0% to 18.5%. Non-GAAP EPS is expected to be $12.70 to $13. The previous guidance was $12.60 to $13.

Adjusted free cash flow of $2.8 billion to $2.9 billion is expected along with about $2.3 billion in share repurchases, excluding use of divestiture proceeds.

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