L3Harris Technologies, Inc.

Greetings. Welcome to the L3 Harris Technologies third quarter calendar year 2020 earnings call. At this time, all participants are in 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 call is being recorded. It is now my pleasure to introduce your host, Rajiv Lalwani, Vice President of Investor Relations. Thank you. You may now begin.

Thank you, Rob. Good morning, and welcome to our third quarter 2020 earnings call. On the call with me today are Bill Brown, our CEO, Christy Basick, our COO, and Jay Malave, our CFO. First, a few words on forward-looking statements and non-GAAP measures. Forward-looking statements involve risks, assumptions, and uncertainties that could cause actual results to differ materially. For more information, please see our press release, presentation, and SEC filings. For reconciliation of non-GAAP financial measures, to comparable gap measures is included in the investor relations section of our webcast, which is L3Harris.com, where a replay of this call will also be available. And to aid with year-over-year comparability following the L3Harris merger, the first half of prior year results will be on a pro forma basis. With that, Bill, I'll turn it over to you.

Thank you, Rajiv, and good morning, everyone. So two years ago this month, we announced the merger of L3 and Harris. And thanks to the hard work and perseverance of our employees, we've been able to deliver results consistent with or better than expectations, despite market volatility and unforeseen obstacles like COVID. Their efforts have led to another strong quarter and put us in a position to raise our 2020 guidance. The mitigation plans we implemented earlier in the year to manage COVID-19 have proven effective in keeping our employees safe and our facilities open. and will remain in place for the foreseeable future. We also continue to support our supply chain through accelerated payments, totaling over $200 million in the quarter and nearly half a billion dollars year-to-date, and we expect these advances will continue in the fourth quarter. Earlier today, we reported third-quarter results with non-GAAP earnings per share of $2.84, up a solid 10%. Company margins expanded 60 basis points to 17.9% on organic revenue growth of 4.5%. And adjusted free cash flow was $726 million. Our core U.S. and international government businesses were up over 7%, including double-digit growth internationally, partially offset by COVID-related impacts on our commercial businesses that were down largely in line with expectations. With another quarter strong execution under our belt, we're improving our outlook for the year and increasing margins, earnings per share, and free cash flow to the upper end of the prior range, while narrowing organic revenue growth to the prior midpoint of approximately 4%. It's worth noting that despite the pandemic headwinds, we're back to the midpoint of our initial 2020 earnings per share guide, a testament to the benefits of the merger and our earnings power. Integration activity continues to progress well, and in the quarter, we delivered net cost synergies of $50 million, bringing year-to-date savings to $165 million and well on track to meet our $185 million target this year. At this rate, we'll exit the year with $250 million in net cumulative savings, which positions us to deliver at least $300 million net in 21, a year ahead of schedule. Our E3 operational excellence program continues to mature and become institutionalized, and alongside cost synergies was a key driver of the 60 basis points of margin expansion in the quarter and 130 basis points year-to-date. With our strong performance to date, we're increasing our margin guidance to approximately 17.75% for the year, a 100 basis point improvement from 2019, and a solid base to build on over the medium term. As we look beyond 2020, we see three primary building blocks supporting mid-single-digit top-line growth. First, we have a portfolio that is well aligned with national security priorities, irrespective of the outcome of the elections. Our broad C5 ISR capabilities are essential elements in countering the near-peer threats identified in the National Defense Strategy. Resilient communications, open architecture command and control, offensive and defensive cyber, and ISR across all spectrums, electro-optical, infrared, hyper-spectral, RF, sonar, and all forms of intelligence, signals, comms, electronic, and image. We have leadership positions in many of these areas and operate in all domains, and we've realigned our R&D efforts to extend our position through investments in open architecture, multifunction, software-defined technologies. The security threats are real, and we anticipate that future defense budgets will continue to prioritize spending in these areas where we're well-positioned and we're investing. Second, we uniquely benefit from the revenue synergy opportunities created in a merger of two complementary companies that expanded our addressable market. This quarter, we received an additional 12 revenue synergy awards, bringing the total downselected proposals to 25 out of 37 for a cumulative value of over $300 million, an initial down payment on our multi-billion dollar pipeline. Two recent wins worth highlighting are the Space Development Agency's tracking layer, which leveraged legacy Harris' strength in space payloads and integration with L3's onboard space avionics solutions. The other is SafeSIM, a DARPA program to simulate and train for future multi-domain battle that addresses the challenge of secure data sharing of highly classified sensors. And third, we see upside in international, which at about 20% of revenue is underrepresented versus peers. With a now larger international footprint, we can better leverage our scale and extensive sales channels and capitalize on our domestic position to support global modernization efforts and extend our ISR leadership in the airborne, land, and maritime domains. And as seen with recent awards this quarter to deliver missionized aircraft to both Canada and the Royal Australian Air Force, we're making progress. Our top line and margin opportunities, along with our discipline around working capital and CapEx, support our free cash flow potential as well as our ability to return capital to shareholders. We're off to a good start to date and now expect to deliver free cash flow of approximately $2.65 to $2.7 billion for the year at the top end of our prior guidance. This performance, coupled with investiture proceeds, has enabled us to return over $1.3 billion of capital to shareholders in the third quarter, which puts share repurchases to date at $1.85 billion ahead of our full year 2020 commitment of $1.7 billion. For the full year, we now expect share repurchases to be about $2.2 billion, a pace we plan to sustain through next year. On portfolio reshaping, we're about a third of the way through our bottoms-up target of divesting 8% to 10% of revenues, and activity continues to be robust. Our criteria and strategy haven't changed as a result of recent events. We continue to be patient and persistent as we look to maximize value. And as previously stated, we will announce divestitures as they occur with proceeds primarily used for capital returns. So overall, we're executing well despite the uncertain times. And with our unique revenue, margin, and cash opportunities, we remain focused on delivering double-digit earnings and free cash flow per share. So with that, I'll turn it over to Chris to discuss segment results. Chris?