L3Harris Technologies, Inc.

Greetings and welcome to the L3 Harris Technologies third quarter calendar year 2019 earnings call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Anurag Maheshwari, Vice President, Investor Relations. Thank you. You may begin.

Thank you, Michelle. Good morning, everyone, and welcome to our third quarter calendar year 2019 earnings call. On the call with me today is Bill Brown, CEO, Chris Kubasik, CEO, and Jay Malave, CFO. First, a few words on forward-looking statements. Discussions today will include forward-looking statements and non-GAAP financial measures. Forward-looking statements involve assumptions, risks, and uncertainties that could cause actual results to differ materially from the statements. For more information, please see the press release, the presentation, and our SEC filings. A reconciliation of non-GAAP financial measures to comparable GAAP measures is included in the quarterly materials on the investor relations section of our website where a replay of this call also will be available. To aid with year-over-year comparability following the L3-Harris merger, discussions also will be on a combined basis with prior year results as well as year-to-date and first half 2019 results reflecting combined L3 and Harris historical operating results as have the businesses that have been operating together during prior periods under the four-segment structure.

With that, Bill, I will turn it over to you. Thank you, Anurag, and good morning, everyone. Earlier today, we reported strong third-quarter results with non-GAAP earnings per share of $2.58, up 26% on 10% revenue growth. Overall company margin increased 210 basis points to 17.4%. and free cash flow more than doubled over Q3 of last year. These results extend our strong calendar 19 performance, with non-GAAP earnings per share over the first three quarters up 27% on 10% revenue growth and free cash flow up 73% to $1.6 billion. Funded book to bill was 1.13 for the quarter and 1.10 year to date, driving funded backlog growth of 10% versus last year, and setting us up for a strong finish to the year. So we're off to a great start as a new combined company, and we're executing well against our strategic priorities. I'll begin with an update on our progress on slide four, and then Chris and Jay will provide details on segment results and guidance. First, we remain laser-focused on integration and capturing cost synergies, and we're tracking well toward achieving $80 million of gross in-year savings and $200 million in gross run rate savings as we exit calendar 19, both higher than previous expectations and giving us confidence in exceeding our $500 million target in calendar 22. In addition to cost synergy projects, we're also making good progress on our second priority of developing and institutionalizing a new enterprise-wide operational excellence program called E3. Building this muscle will be essential to driving near-term organic margin expansion and set us up to sustain the benefits of productivity well beyond the three-year integration period, including in program execution, R&D efficiency, and working capital management. Third, we're building what we're calling a new performance culture as we pivot towards an operating company model, leveraging the power of the enterprise through shared services, shared resources, and shared best practices. At the end of September, we held our first technology summit, convening more than 200 top engineering leaders to cross-pollinate ideas, roll out our company-wide stage-gate development process, and detail our plan to manage R&D investments on a portfolio basis. We've also begun to institute enterprise-wide business metrics and a review cadence aimed at instilling greater rigor and accountability in our decision-making. Fourth, we're investing smartly and aggressively in technology to grow revenue and increase share, add content, and expand into adjacencies. And while it's still early, I'm encouraged by our progress and recent success in capturing potential revenue synergies. In just 120 days since the merger, we've already submitted 14 revenue synergy-type proposals, primarily in electronic warfare and space sensing domains. with a potential lifetime value of about $3 billion. One proposal is for the U.S. Air Force F-16 electronic warfare modernization program, supporting a fleet-wide 15-year upgrade cycle. Our offering combines proven EW capabilities from Legacy Harris with an innovative digital signal receiver from L3 to provide the customer a high-performing, low-risk solution that we could not have created separately. In September, we were one of two companies down-selected for the initial development phase, and if we ultimately prevail, we would double our addressable market and add the domestic F-16 fleet to our established international position. From another bid, we were awarded an early study project for space-sensing technologies that combined space optics and electronic solutions from the legacy companies with the potential to grow to over $250 million in value. So a few encouraging early wins and a growing pipeline of opportunities validating the strategic growth potential of the newly merged companies. Our fifth priority is to maximize free cash flow with shareholder-friendly capital deployment. In the quarter, we generated $618 million in free cash flow, up 123% over a prior year through higher earnings, tight management of capital spending, and a two-day sequential improvement in working capital. We've also improved the linearity of cash generation, with about 70% of free cash flow guidance delivered in the first three quarters of the year, compared to less than 50% for the same period last year. And in the third quarter, we returned $922 million to shareholders, including $750 million in share repurchases, which keeps us on track to buy back $1.5 billion of shares in the second half of calendar 19. And finally, reshaping our portfolio to focus on high-margin, high-growth, technology-differentiated businesses where we can win and generate attractive returns. While this is an ongoing process, we've begun marketing several businesses that we've assessed as non-core, and our plan is to announce transactions as they occur and use the net proceeds to repurchase shares to offset dilutions. So in summary, on the back of successful execution against our strategic priorities, strong third quarter performance and a solid backlog, we're increasing our second half guidance for non-gap earnings per share to $5.35 with revenue growth of 10% and free cash flow of approximately $1.35 billion, the higher end of the previous guidance range. And as we go into 2020, I'm assuming appropriations are enacted in line with the recent budget agreement. we continue to expect mid-single-digit plus revenue growth and expanding margins off a higher 2019 base than we anticipated in the S4, driving double-digit cash and earnings per share growth. So with that, let me turn it over to Chris to provide an update on operational and segment financial performance. Over to you, Chris.