01—Abstract
Summary
Summary of the 10-Q filed October 27, 2023. Cited figures are marked; the original filing is the authoritative source.
L3Harris Technologies, Inc. (LHX) reported a strong third quarter and first nine months of 2023, driven by significant revenue growth and strategic acquisitions.
Total revenue for the quarter increased by 16% year-over-year to $4.9 billiona, and for the first nine months, it rose 13% to $14.1 billion. This growth was largely fueled by the recent acquisitions of Aerojet Rocketdyne (AJRD) and Viasat's Tactical Data Links (TDL) business, which have expanded the company's capabilities and market reach, particularly in missile solutions and communication systems. Despite increased interest expenses due to higher debt levels from these acquisitions, the company maintained solid profitability.
Net income attributable to L3Harris for the quarter was $383 millionb ($2.02 per diluted share), a significant improvement from a net loss in the prior year's comparable quarter. For the first nine months, net income was $1.1 billion ($5.61 per diluted share). The company's strategic focus on integrating these acquisitions and managing operational efficiencies positions it well for future growth, supported by a robust backlog of $31.8 billion.
02—Key points
Key Highlights
- Revenue increased by 16% to $4.9 billion in Q3 2023 and by 13% to $14.1 billion for the first nine months of 2023, primarily driven by the acquisitions of Aerojet Rocketdyne (AJRD) and Viasat's TDL business.
- Net income attributable to L3Harris for Q3 2023 was $383 million, or $2.02 per diluted share, a substantial improvement compared to a net loss in Q3 2022.
- The acquisition of Aerojet Rocketdyne (AJRD) was completed on July 28, 2023, for $4.7 billion, creating a new 'AR' (Aerojet Rocketdyne) segment focused on missile solutions and space propulsion.
- Goodwill increased significantly from $17.3 billion to $20.7 billion, largely due to the goodwill recognized from the AJRD ($2.3 billion) and TDL ($1.1 billion) acquisitions.
- Total debt increased substantially to $11.5 billion from $7.0 billion, primarily due to financing the AJRD and TDL acquisitions through new debt issuances and term loans.
- The company maintained a strong backlog of $31.8 billion as of September 29, 2023, with approximately 55% expected to be recognized by the end of 2024.
- Despite increased interest expenses, the effective tax rate for the first nine months of 2023 was 6.4%, benefiting from R&D credits and other favorable tax items.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, L3HARRIS Technologies, Inc. kept $0.08.
- Revenue$4.92B100.0%
- Cost of revenue−$3.61B73.4%
- Gross profit$1.31B26.6%
- Operating costs−$828.0M16.8%
- Operating income$479.0M9.7%
- Interest, other & tax−$96.0M2.0%
- Net income$383.0M7.8%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed October 27, 2023Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $4.92B$4.25B | +15.8% |
| Cost of Revenue | $3.61B$3.05B | +18.2% |
| Gross Profit | $1.31B$1.19B | +9.5% |
| SG&A Expenses | $828.00M$742.00M | +11.6% |
| Operating Income | $479.00M— | — |
| Net Income | $383.00M-$300.00M | +227.7% |
| EPS (Basic) | $2.02$-1.56 | +229.5% |
| EPS (Diluted) | $2.02$-1.56 | +229.5% |
| Shares Outstanding (Basic) | 189.30M191.30M | −1.0% |
| Shares Outstanding (Diluted) | 190.10M191.30M | −0.6% |
05—Questions
Frequently Asked Questions
How did the recent major acquisitions impact the company's financial performance?
The acquisitions of Aerojet Rocketdyne (AJRD) and Viasat's Tactical Data Links (TDL) business significantly boosted revenue. AJRD contributed $455 million in revenue and $56 million in operating income to the new AR segment in Q3. TDL acquisition contributed to the growth in the Communications Systems (CS) segment. While these acquisitions increased debt and interest expenses, they expanded L3Harris's capabilities and market position.
What is the current debt situation, and how was it impacted by the acquisitions?
Total debt increased substantially from $7.0 billion at the end of 2022 to $11.5 billion as of September 29, 2023. This increase is primarily due to the financing of the AJRD acquisition ($3.25 billion in new debt and borrowings under a term loan) and the TDL acquisition ($2.0 billion draw on a term loan). This higher debt level resulted in increased interest expenses in the current period.
How is L3Harris managing its goodwill and intangible assets following the acquisitions?
Goodwill increased significantly by $3.4 billion to $20.7 billion, mainly from the AJRD ($2.3 billion) and TDL ($1.1 billion) acquisitions. Identifiable intangible assets also increased substantially, with significant amounts recognized for customer relationships and developed technologies, primarily from the AJRD acquisition. These assets are subject to amortization, impacting operating expenses over their useful lives.
What is the outlook for L3Harris's backlog and future revenue given the current geopolitical environment?
L3Harris maintains a robust backlog of $31.8 billion as of September 29, 2023. The company expects to recognize approximately 55% of this backlog by the end of 2024. The company's strong ties to U.S. Government defense spending, which remains robust despite budget uncertainties, and the strategic importance of its offerings in the current geopolitical climate, provide a solid foundation for future revenue recognition.
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