10-QPeriod: Q3 FY2023

L3HARRIS TECHNOLOGIES, INC. /DE/ Quarterly Report for Q3 Ended Sep 30, 2022

Filed October 31, 2022For Securities:LHX

Summary

L3Harris Technologies, Inc. reported a net loss of $300 million for the third quarter of 2022, a significant shift from the $481 million net income in the same quarter of the prior year. This loss was largely driven by substantial non-cash impairment charges of $802 million related to goodwill and other assets across various reporting units, including Broadband, ADG, and Electro Optical. Revenue for the quarter remained relatively flat year-over-year at $4.25 billion, but for the first nine months of 2022, revenue declined by 7% to $12.48 billion, primarily due to business divestitures. Despite the quarterly loss, the company generated positive operating cash flow of $1.38 billion for the first nine months of 2022. L3Harris also continues to return capital to shareholders through dividends and share repurchases, although the pace of buybacks has slowed compared to the prior year. The company announced a significant subsequent event: a definitive agreement to acquire Viasat's tactical data links product line for approximately $1.96 billion, which is expected to close in the first half of 2023 and will be funded by debt.

Financial Highlights

52 data points
Beta

Revenue

$4.25B

28.1% Gross Margin

Net Income

-$300.00M

-7.1% Net Margin

EPS (Diluted)

$-1.56

Total Assets

$33.38B

Cash & Equivalents

$529.00M

Free Cash Flow

$524.00M

Financial Statements
Beta
Revenue$4.25B
Cost of Revenue$3.05B
Gross Profit$1.19B
SG&A Expenses$742.00M
Net Income-$300.00M
EPS (Basic)$-1.56
EPS (Diluted)$-1.56
Shares Outstanding (Basic)191.30M
Shares Outstanding (Diluted)191.30M

Key Highlights

  • 1Reported a net loss of $300 million for Q3 2022, compared to a net income of $481 million in Q3 2021.
  • 2Recorded significant non-cash impairment charges totaling $802 million for goodwill and other assets during the quarter.
  • 3Revenue for Q3 2022 was $4.25 billion, largely flat compared to Q3 2021, but nine-month revenue decreased by 7% to $12.48 billion due to divestitures.
  • 4Generated $1.38 billion in net cash from operating activities for the first nine months of 2022.
  • 5Announced a definitive agreement to acquire Viasat's tactical data links product line for approximately $1.96 billion, expected to close in H1 2023.
  • 6Reduced share repurchases significantly in Q3 2022 ($171 million) compared to Q3 2021 ($1.15 billion in the quarter and $2.88 billion YTD).
  • 7Maintained a strong backlog of $21.4 billion at the end of Q3 2022, with expectations to recognize 59% of it by the end of 2023.

Frequently Asked Questions

The net loss of $300 million in the third quarter of 2022 was primarily driven by substantial non-cash impairment charges totaling $802 million related to goodwill and other assets across several reporting units, including Broadband, ADG, and Electro Optical. These impairments were influenced by factors such as reduced sales volume in specific business areas and rising interest rates.

For the third quarter of 2022, revenue was $4.25 billion, largely flat compared to $4.23 billion in the same quarter of 2021. However, for the first nine months of 2022, total revenue decreased by 7% to $12.48 billion from $13.46 billion in the prior year. This decline was mainly attributed to the impact of completed business divestitures.

L3Harris maintained $529 million in cash and cash equivalents as of September 30, 2022, and had an available $2 billion revolving credit facility. The company generated $1.38 billion in operating cash flow for the first nine months of 2022. Management believes its current cash, operating cash flow, credit facility, and access to debt/equity markets are sufficient for anticipated needs for the next twelve months and the foreseeable future. However, the company notes potential impacts from U.S. Government budget uncertainties and the state of global commerce.

A significant strategic development is the definitive agreement to acquire Viasat, Inc.'s tactical data links product line for approximately $1.96 billion, expected to close in the first half of 2023 and funded by debt. Additionally, the company announced an additional $3.0 billion share repurchase authorization, bringing the total authorization to $4.5 billion, indicating a continued commitment to returning capital to shareholders.