L3Harris shares the plan for its other major integration

L3Harris Technologies can say it is the product of almost 200 acquisitions over the past two decades including the big merger in 2019 to create the blue chip defense company that it is today.

For the current iteration of L3Harris' strategy, its estimated $4.7 billion purchase of Aerojet Rocketdyne over the summer will be the one that investors watch post-close to see how that business integrates into its new owner and performs over the long-term.

The company's other big-ticket acquisition and integration exercise was a major point of emphasis for its investor day presentation on Tuesday, where L3Harris' executive team including CEO Chris Kubasik detailed the company's newest three-year blueprint and financial goals.

Six months before the Aerojet closure, L3Harris acquired a secure communication product business from satellite network operator Viasat for close to $2 billion.

The so-called Tactical Data Links business centers a bulk of its work around Link 16, a network used by the U.S. military and NATO partners to move data between soldiers and systems.

As L3Harris' Communication Systems Segment President Sam Mehta told investors, critical and sensitive information is often conveyed across that global waveform and via the nearly 20,000 platforms on it.

"Despite being in operation for several decades, Link 16 is still under continuous development, adding new capabilities," Mehta told analysts. "Recently the DOD (Defense Department) announced that they sent and received their first Link 16 transmission for space, opening up this incredibly important and growing domain to that Link 16 franchise. It was our equipment that helped enable those transmissions."

During that Nov. 21-Nov. 27 exercise, the Space Development Agency sent data from ground radios to satellites flying in low-Earth orbit and within the territory of an unnamed U.S. intelligence sharing ally. SDA's long-term goal is to connect Link 16 to the future military "space backbone" constellation the agency calls the Proliferated Warfighter Space Architecture.

Link 16's wide scope is a big reason why L3Harris wanted more of a footing in that program, which Mehta told analysts is in constant iteration.

"This acquisition of Tactical Data Links allows us access to those platforms, to be able to provide additional capability for waveforms and software that we've developed in the company, and to work alongside that Link 16 capability," Mehta said.

TDL is poised to end the year on a total backlog of $600 million, but that is merely the starting point for L3Harris with respect to how it sees that franchise fitting into the portfolio.

L3Harris is mostly a hardware-defined company, as Kubasik highlighted to analysts.

"The way we're going to really move the needle is through the software upgrades, whether it's in the waveforms as we upgrade Link 16 or in some of our other products," Kubasik said.

Organic growth will be how L3Harris looks to move its overall needle over the next three years with acquisitions being halted "for the foreseeable future," Kubasik said.

L3Harris expects to end 2023 with revenue of $19.2 billion-to-$19.4 billion on a segment operating margin of 14.8%. The company's initial outlook for 2024 has sales of around $21 billion and a margin of 15%, while the 2026 framework has a top-line goal of $23 billion and a bottom line of 16%.

Further divestitures will continue to be on the agenda for L3Harris in the wake of its board of directors' move to stand up a business review committee charged with evaluating the overall company, including the portfolio and operational performance.

"We already have some ideas in process here that we'll review with them, probably in January, and then we'll exit product lines that don't move the needle and aren't strategic to us," Kubasik said.

L3Harris has already lined up a private equity buyer for its commercial aviation solutions business in TJC, which will pay an initial $700 million in cash and potentially $100 million more under an earnout clause. It sure sounded like L3Harris said to stay tuned for more announcements like that.

Below is the full investor day presentation.