Greetings and welcome to the L3Harris Technologies First Quarter 2023 Earnings Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this call is being recorded. It's now my pleasure to introduce your host, Mark Kratz, Vice President, Investor Relations. Thank you. You may now begin.

Thank you, Rob. Good morning and welcome to today's call. Joining me are Chris Kubasik, our CEO, and Michelle Turner, our CFO. During our discussion, we may reference our Investor Letter that we published on our website yesterday. We're listening to investor feedback and have made some enhancements. Given the detail on this letter, this call will primarily be focused on answering questions. We may also discuss certain matters that constitute forward-looking statements. These statements involve risks, assumptions and uncertainties that could cause actual results to differ materially. For more information, please reference the Safe Harbor provision found in the Investor letter and our SEC filings. Lastly, we will frequently discuss non-GAAP financial measures which are reconciled to comparable GAAP measures in the Investor Letter. Before moving to questions, I'd like to turn it over to Chris for some opening remarks.

Okay. Good morning and thanks, Mark, and welcome aboard. We've been focusing on execution under our Performance First imperative and I'm pleased with our results. The first quarter was strong in many respects as we continue to build momentum with our trusted disruptor strategy, resulting in record orders and record backlog. Improving macro trends serve as a positive backdrop, including the President's 2024 budget request released to Congress in March. We are well aligned with the priorities in the National Defense Strategy, which is reflected in robust funding and major areas for us, including space and joint force capabilities as well as missiles and munitions given our pending acquisition of Aerojet Rocketdyne. Our goal for Q1 was to grow the top line, meet the EPS number, and have positive cash flow. The team rallied and delivered on all counts. For a third consecutive quarter, we had top line growth, a 9% increase with each segment growing. Operating income was up in two of the three segments, despite the usual headwinds. However, we came in line with where we thought we would be to begin the year. This resulted in EPS of $2.86, and we anticipate building from there. Free cash flow came in at over $300 million, a significant improvement from a year ago, and we also front-loaded our share repurchase commitment for the year. We received a second request from the FTC in March, which was followed by the Aerojet Rocketdyne shareholder approval vote the following day. Both of these outcomes were expected and we are responding to the FTC. We still anticipate the deal will close later this year. First quarter results are differentiated winning strategy and the overall business environment led us to reaffirm our 2023 guidance with the recognition that record orders and strong revenue growth to date could support a bias towards the higher end of our revenue guidance range should these trends continue. We still have work to do on profitability, but with abating macro headwinds, operational improvement initiatives and accelerating sequential growth in product-centric businesses, we remain committed to our full year EPS guidance. So we're off to a strong start and I'd like to recognize our employees for continuing to prioritize Performance First in everything they do. With that, let's open the lines for questions, Rob.

Thank you. We'll now be conducting a question-and-answer session. Thank you. And our first question comes from the line of Matt Akers with Wells Fargo. Please proceed with your question.

Hey, good morning. Thanks for the question. I wanted to put maybe a finer point on the Rocketdyne timing. Have you I guess substantially complied with the FTC's second request you had? If not, sort of how much is left there? I think that's what starts the clock for that review.

Yeah. Matt. Thanks for the question. We're gathering the data as you would anticipate. It's usually about a three to four month process. So we got the second request mid-March. So that would kind of suggest a June submission both for us, and I know Aerojet Rocketdyne is doing the same thing. I have a feeling they'll probably submit a little earlier than us, given they've already done this once. So, you know, the reason I'm confident in the 2023 close really comes down to the FTC's evaluation of this transaction. And, you know, when we look at it, we do not compete with Aerojet Rocketdyne. I mean, plain and simple, they make rocket motors and rocket engines, and we do not. And that term is known as horizontal competitiveness. And there is none. We are not a customer of theirs. They are not a customer of ours, which is the term of art the FTC and lawyers use for vertical competition. So I look at this and say, if there's no vertical competition and no horizontal competition, we'll submit the data, we'll certify the information, and we'll let the process run. You know, I think I'll just take a minute since I'm not sure I'll get any more Aerojet questions today. And I just think there's an incredible amount of confusion, mainly in DC, whether it's the DOD, the FTC, or members of Congress, and there are three terms that are used interchangeably that mean completely different things, and that is consolidation, merger, and acquisition. And consolidation, in my opinion, is when two companies with similar capabilities combine. I think back 25 years to McDonnell Douglas and Boeing when they consolidated, and nobody can dispute that after that transaction closed, there was one less commercial and military aircraft provider. And that's not what we're talking about today. A merger, I think a good example is obviously L3 and Harris. Two complementary companies came together, which is now why we have capabilities in space, air, land, sea, and cyber domains, significant revenue synergies, significant cost synergies over $650 million of cost savings that we shared with our shareholders and the DOD, resulting in a stronger company, in this case providing more competition within the defense industrial base. And then Aerojet Rocketdyne is an acquisition. It's about 10% of our enterprise value. It's all cash. It's putting us into new markets that I mentioned already that we believe are growth markets as highlighted in some of the recent budget decisions and fills in a gap in our portfolio. So I just felt I wanted to clarify that point, and that is what gives me confidence that this deal will close in the second half of '23.

Thank you. Our next question is from the line of Sheila Kahyaoglu with Jefferies. Please proceed with your question.

Thank you. Good morning, Chris, Michelle, and Mark. Welcome to the call. Chris, good seeing you on CNBC last night. I know they let anyone on these days. So nice that they got an upgrade with you. But in all seriousness, good quarter. And you called out space in addition to Aerojet on that segment. Your space business, $1.5 billion of new prime space awards. What types of opportunities are you seeing in the market? And has there been a shift in the competitive backdrop given some of the moves to smaller space systems? And then where do you think LHX is gaining share? And tied to that, there were a number of international awards within Space. Is there a shift in the dynamics that you're seeing just given space has become more open to the US working with allies?

Okay. Well, thank you, Sheila. I was actually in Clifton, New Jersey all day with our electronic warfare team. So just a short drive to get on TV. So thank you for that. You know, let me kind of kick this off and then I'll ask Michelle to give a little more detail. I really want to step back and think of space and the space domain and how it aligns with the strategy that we've been talking about since the merger. So a few fun facts that, at the date of the merger, there were actually zero L3Harris or legacy company satellites in orbit. Today, there are seven that we have built, obviously, as a prime, and we have 33 in backlog as a prime that will be launched over the next couple of years. So when we look back, we saw this as a growth market several years ago, which it is. We invested in R&D and capital and facilities and tooling to position ourselves for growth. The discussion aligned with what we've been saying for several years was to move up the food chain and become a prime by providing disruptive technologies and alternatives to our customers. And I think as we sit here today, we can see that that strategy, that investment is starting to pay off. We're probably best known recently for the work we're doing with the Missile Defense Agency and the Space Development Agency launches that will be coming up in the next year or so. But we're also a market leader in weather, ISR, and also space exploration. I appreciate you highlighting the fact that we're growing internationally as well. You don't always think of space as an international growth opportunity, but the team has a global reputation of delivering on time and having quality products, and we're seeing that being recognized around the globe. So, Michelle, do you want to maybe give more detail?

Yeah. So I'll add some color in terms of our strategy and action and some of the numbers, Sheila. So thanks for highlighting this. Over the last six months we have submitted over $7 billion in space proposals, booking $1.5 billion within Q1. So we're super excited about this book-to-bill over 2.0 within this sector. Kelly and her team are doing an amazing job in terms of recognizing the current environment within the US. But also to your point, Sheila, around expanding the aperture in terms of international exposure as well. Half of the $1.5 billion in bookings are international in nature. When we think about margins within this space, this is where Kelly and the team are thinking differently in terms of leveraging our domestic footprint to be able to drive shareholder value in a different way across the globe. We're excited about this double-digit growth from a revenue perspective, and we expect this to continue to be a tailwind for us within '23 and beyond.

Our next question is from the line of Kristine Liwag with Morgan Stanley. Please proceed with your question.

Hey, good morning, Chris, Michelle, and Mark. Chris, on the supply chain. It's encouraging to see that the market conditions for electronic components are improving. Your critical parts shortage is declining and alternate parts are increasing. So is this tracking better, worse, or as you expected? And if we continue to see the supply chain improvement accelerate, could we see upside to your full year guide beyond the upper end?

Yeah. Thanks, Kristine. I believe the worst is behind us relative to all the macro headwinds we've talked about, supply chain attrition, and inflation. But to your question specifically on supply chain, you know, I'm proud of the team because these alternative parts just don't happen. We took a fair amount of talent and expense to redesign our products, if you will, design for availability. The team has done an amazing job. As we highlighted in our letter, we now have 1300 alternative parts that weren't originally designed into our products. That's been able to allow us to grow as you saw in the quarter and maybe position us for continued growth for the rest of the year. I think after the last few years, I hate to predict anything because it's hard to predict what's going to happen day to day or month to month. But I feel really good about the opportunities and the positioning. We referenced, you know, we've signed a strategic agreement with a major microelectronics chip providing company. The benefit for us is it gives us assured availability and kind of moves us up and out of the allocation process, which is always an uncertainty day by day. In exchange for that, you know, we're sitting down and sharing with them our technology roadmap and working collaboratively as we design new products, taking advantage of some of their more advanced technologies. So long way of saying we're happy with the first quarter. We have good visibility for Q2 and beyond. If we continue with this momentum, it's possible we could see outperformance.

Thank you. Our next question is from the line of Scott Deuschle with Credit Suisse. Please proceed with your question.

Hey, good morning. Michelle, can you lay out what drove the softer margins in IMS and CS this quarter and then walk through the factors that unlocked the implied margin improvement in the second half? And if you can touch on the dynamics with backlog repricing, that would also be very helpful. Thank you.

Yeah, absolutely, Scott. Good morning. How are you? So we're getting a little bit of garbled feedback, Scott, but I think what you're asking about is IMS margins and back half improvement for the overall enterprise? Yeah, that's right. Backlog repricing. Thank you. So before I jump into the margins, I just want to kind of set the stage in terms of how we set the expectations for our team within Q1. We really had three objectives. One was to grow top line. The second was to meet our EPS, and the third was to improve on our cash position from last year. We met all three of those. To your point, Q1 margins did come in light. They were aligned with expectations, however. I think it's important to go back to what we talked about in our last earnings call, where we talked about having a more balanced plan this year. In terms of revenue and EBIT, the expectation was revenue would be balanced, with our first half margins being lower and accelerating in the second half, really driven by two things. One is around our higher-margin product deliveries. As we see supply chain constraints continue to ease, we expect that our product deliveries are going to continue to improve, which is going to drive margins in the second half of the year. The second is related to our fixed-price backlog, and we talked about this a little bit in Q4, but aligned with the macro headwinds that have been experienced across the industry and the higher inflationary environment. We experienced this particularly acutely within three of our sectors, which we talked about in the letter: EW, IVS, and ISR. We expect that this is going to continue to dissipate as we start to see some of the actions that we took at the end of last year start to pay dividends in the second half of this year. So we have a path to getting to the margins in the second half. One other thing I would note in terms of Q1 is our Q1 margins were a bit deflated by lumpy aircraft revenue recognition within our ISR business. When you look at this, it's about a 40 to 50 basis point impact within the quarter. So we expect as this normalizes, that's also going to help our EBIT in the second half, the EBIT margins in the second half of the year. To your question specifically, Scott, on IMS, there's two pieces there. One is the mix. For those that have been on this journey with us, you're familiar with our lumpy aircraft revenue recognition. So as I talked about from an enterprise perspective. In Q1, this dynamic played out for us. We did recognize the C3D order from the Air Force, and as a result, that aircraft revenue impacted in terms of lower margins within the quarter. We expect that that's going to continue to improve throughout the year as we work on the missionization of those aircraft. The second piece is related to the fixed-price backlog that I talked about. This was an acute impact within our ISR business. You may remember we talked about attrition concerns that we had in Q4 along with the macro headwinds. Where we sit today within Q1, we are seeing improvement and we have seen our attrition stabilize. This is good news in terms of seeing the light at the end of the tunnel. We expect that the attrition and the performance are going to stabilize, and we'll see less of those negative VAC impacts as we make our way through the year.

Yeah, I think I'll just chime in on Scott a little bit more. Look, none of us are happy where we are in Q1 with the margins, but it's exactly what we had planned. We clearly have a ramp to get to 15.5 by the end of the year, which we will. You know, we kind of teased out in the letter a little bit about our enterprise transformation. I just wanted to talk briefly about that. You know, it's actually been less than four years ago that we had the merger. What I call Phase One was our three-year integration, which I highlighted as very, very successful with over $650 million of savings. But that was really just Phase One, right? That was harmonizing the benefits, closing down headquarters, consolidating segments, taking advantage of the enterprise relative to supply chain rebidding contracts. You know, it's water under the bridge, but I'm still proud of what the team was able to accomplish, especially during COVID. The natural evolution under our continuous improvement mindset is to move into Phase Two. We've really looked at the success of our trusted disruptor strategy and how it's being embraced by our customers and suppliers, and we're applying it to ourselves. How do we disrupt ourselves and how do we get better and more efficient? We just completed about a ten-week sprint to highlight and confirm that there are opportunities for us, and we're trying to figure out how we're going to function differently and really rethink every function and everything we do. An easy example would be on real estate, especially as we've supported and embraced the remote and hybrid world. We don't need nearly as much office space as we used to, and there's a clear opportunity for savings. We're looking at functional costs. We're looking at what we do. We started using, as everybody I'm sure knows, bots to remove some of the manual labor and actually provide some savings and also our indirect procurement strategy, just to name a few of the things. Now that the sprint is complete, we're in the design phase of the program. On our next call, we plan to give you some actual tangible numbers and tangible timeframes to show how this is going to make L3Harris an even better company and contribute to our already industry-leading margins. The entire leadership team is excited about this project and I think we're off to a good start and more to come in, you know, 90 days.

Thank you. Our next question is from the line of Peter Arment with Baird. Please proceed with your question.

Yeah. Thanks. Good morning Chris, Michelle, and Mark. Chris, I wanted to ask on working capital and I'm sure Michelle wants to weigh in. I know you've kind of focused on driving the metrics lower over the last few years. Last year, you obviously built up some inventory. Maybe you could just update us. I know working capital was less of a use this quarter, but whether you think the 53 days that you kind of ended in 2021 is still something you can target this year? And ultimately, do you think you can get into the 40s? Thanks so much.

Yeah, Peter. The short answer is we expect to get back to the 53, 54 levels by the end of this year. What you saw in Q1, we were really proud of the teams. We saw working capital improve by about $300 million year-on-year. That's about an eight-day improvement from where we were at this point at the end of Q1 '22, really driven by receivables. I just want to highlight this is a great example of our Performance First initiative in action. So many thanks to our finance program management and contracts teams for implementing what we affectionately call Money Mondays, which is really focused on truncating our billing and invoicing processes to drive a more efficient use of our working capital. As a result, we were able to improve our DSO by two days from the same period last year. To your point about getting to the 53, 54 by the end of this year, we have to drive about $300 million of improvement between Q1 and the end of the year. This is predominantly going to come from inventory. It's almost equally split between our product inventory, which is going to be driven by the easing of supply chain constraints, ramping our deliveries in the second half of the year, but also around our performance-based milestones on some of the new program wins that we have. The space business is a great example of that, where we're negotiating and getting cash up front as a result of some of these new orders. Executing on those programs is going to deliver cash for us in the second half as well.

And Peter, clearly working capital is a top priority. It's something we briefed our board at each and every meeting. As we have our monthly reviews, that's something that Michelle, I, and the team look at. I don't think it was surprising to see it. The working capital days grow in the last couple of years. We were taking the approach, you know, to get all the parts we could pretty much at any cost, and that resulted in a buildup of inventory. We're much more confident in our ability now to plan and have alternatives to part. You'll see that contribute as we bring down the working capital days. If you recall, we were very aggressive and continue to be in negotiating performance-based payments versus progress payments and tying the receipt of cash to specific performance milestones. I view that as an opportunity. I think it's fair to say there are certain programs that are behind schedule, either due to our performance or our suppliers' performance. And, you know, that's fine. We've identified it and we're working it. That gives me even further confidence that we'll be able to hit our numbers as we continue to perform and tie the cash to those milestones. So thanks for the question, Peter.

The next question is from the line of Doug Harned with Bernstein. Please proceed with your question.

Good morning. Thank you. As you work through the process on Aerojet Rocketdyne, how are you thinking about divestitures at this point? Things stand out that light commercial aircraft, simulation and training, public safety. So how are you thinking about kind of the timing of when you might do a divestiture, what the size might be, and how do you decide what fits?

Yeah. Well, good morning, Doug. We've talked about the need to divest to generate cash to help fund the Aerojet Rocketdyne acquisition. We're not going to disclose what we've decided is non-core, but we have a regular process to review our portfolio and see as the company evolves, we're becoming more of a government or defense contractor. We want things that align with the rest of the portfolio, where we have synergies and the ability to share technologies and processes. We closed a real small one for $70 million, but for the larger ones, there's a process going on. We wanted to get through the first quarter right to update with current financial results and show that these are good if not great businesses. It's the usual analysis, you know, we have good businesses, and there are better owners for those businesses. We're not at all in a fire sale situation. We'll take our time and we're going to get the maximum value for those properties. I'd hope we could probably sign and announce something this year, maybe close one in Q4 or early 2024. We'll run a process. We get a lot of inbound calls, especially after something like this, where I say what I just said, but there's interest in our portfolio. I'll just leave it at that, and I'm confident we'll be able to get some proceeds. I think I've previously said about $1 billion of proceeds from this process, meaning two or three divestitures. So I'll stay committed to that number.

Our next question is from the line of Richard Safran with Seaport Global Research. Please proceed with your question.

Chris, Michelle, Mark, good morning. If it's okay, I'd like to return to the subject of bookings and the 1.3 book-to-bill you did in the quarter. I thought you might talk about full year bookings expectations. If we start to think longer term, I was kind of wondering if you believe that book-to-bill should be better than one in this growth period? Thanks.

Yeah. Thanks, Rich. We always set our internal goals and aspirations to be more than 1.0 on book-to-bill. It's hard to grow if you're not booking more orders than the revenue you're recognizing. I think the 1.3 was absolutely a great way to start the year. When we talked last time, this is the impact of a continuing resolution, right? Until the CR gets broken loose, which it did, we start to see the money flow. As I've said before, the only one who dislikes the CR more than industry is the Department of Defense. I think we're off to a really good start. The President's budget request of $842 billion is a 3% growth. When you peel it back, 4% on the investment accounts. You couple that with what we've been able to do internationally the last several years, the interest in the TCOM, the Space International, you would clearly expect that we'll be over 1.0 for book-to-bill for the year. Aspirationally, I'd like to be at least 1.05 and maybe even 1.1. But it's somewhat lumpy, right, as you know. It depends on, we only talk about the funded backlog. So that always has a little bit of a difference relative to other companies. But we're feeling really, really good. The key message here is, you know, this just confirms that our strategy is working and the customers appreciate and recognize what we're trying to do. Sometimes, we have more innovative solutions. The focus is on speed, schedule, and cost. We can mix those in, and they've been pretty aggressive in pursuing different markets and different technologies. I will also say that Michelle and I and the team spend a lot of time focused on risk management, and we had two opportunities in the quarter that were pretty exciting to us. When the final RFP came out, there were fixed-price development with fixed-priced options, and we chose not to bid those for obvious reasons. It's very hard to commit to a fixed-price development program when you don't know the spec. I think we all look back at all the write-offs and losses, and more times than not, they're tied to that. We will not be playing that game. We've elevated it to what I think is the highest levels within the Pentagon, and when the RFP comes out, we're not going to bid. Over time, I think others aren't going to bid. Ultimately, we'll go back to the appropriate contracting vehicle for the appropriate opportunity. Regarding the pending acquisition of Aerojet Rocketdyne, by all accounts, and it's not always easy to compare apples to apples, but the munitions line in '24 appears to be at least 20% higher than '23. We all know the need and the desire for these munitions for current threats, future threats, and in addition to refilling the stockpile. The acquisition in December made a lot of sense, and I think when you look at the budget, it makes even more sense. So I'll just leave it at that.

And Rich, just to add, international part of this: 30% of our $5.8 billion of record order within the quarter were international, and the book-to-bill was over 1.5 for international. That really speaks to what Chris was alluding to in terms of the strategies working.

The next question is from the line of Michael Ciarmoli with Truist Securities. Please proceed with your question.

Hey, good morning, guys. Thanks for taking the questions. Maybe kind of a number of things, Chris, but just to go back to Aerojet, pretty well publicized about some of the capacity challenges and production challenges they're having. They just got this award from the DoD for $215 million to enhance their capabilities in production. I guess one of the overhangs or concerns out there was how much cash you guys were going to have to invest in that business. So clearly this potentially alleviates your CapEx. But I guess I'm trying to figure out, when can you guys start working together? Do you have to wait for this to close? Because I would imagine you guys would want to have some strategic input in terms of how they're building out or investing into the facilities to ramp up production. And I guess, just also staying on Aerojet, you mentioned divestitures. I just wondered, do the big lower space engines fit in your portfolio? Or when you talk about these divestitures, can something fall out of Aerojet?

Let me try to address them. Yes, relative to working together, there are some pretty clear rules called gun jumping, and we're very conscious, as is Aerojet Rocketdyne, not to trip over those thresholds. We cannot actually work together and help them relative to the DPA money. We're aware of it. We have the ability to review the documents, but Eileen is running her company; I'm running my company. Until we close, we can't really change that. That's been around forever with all acquisitions, mergers, and consolidations. All the more reason to get this transaction approved in a timely manner so that we can start working on that. The Defense Production Act (DPA) has been around since the '50s. This is a pile of money, a bucket of money that the DoD has, and it's really there to help strengthen the resiliency of the defense industrial base. With the focus on manufacturing and capability of these key technologies, I was pleased to see that they received this money. I know the team has been working on this for probably a year there at Aerojet Rocketdyne. It's unrelated to the acquisition. It highlights to me the critical nature of these technologies and the DoD need for this company to be successful. This money, I view, as a little more tactical relative to increasing both the physical and digital infrastructure of Aerojet Rocketdyne. Our acquisition is more strategic; it will assure a strong industrial base, a more viable competitor. I think it's great news for Aerojet Rocketdyne and for the Department of Defense. I'm pretty sure they have pretty thorough plans and a competent leadership team on how best to spend this money to optimize both capacity, digital engineering, and moving a couple of production lines for the growth that we talked about. Regarding the divestitures, yes, everything I spoke about would be legacy L3Harris. So clearly, the space propulsion space fits into Aerojet once the deal closes.

Thank you. Our next question is from the line of Pete Skibitski with Alembic Global. Please proceed with your question.

Hey, good morning, everyone. Maybe Michelle on capital allocation, as Chris alluded to in his remarks, you guys went pretty heavy on repurchases to start the year, pretty close to your $0.5 billion target for the full year. How are you thinking about allocation now on the balance of the year? Because I know you do have some debt maturing this summer, I think. So do you look to address that? Or are you looking at other options? Thanks.

Good morning, Pete. We don't anticipate any changes to our previous commentary in terms of capital allocation. Longer term, we expect to have a fairly balanced approach, and we've added some color to this within our investor letter in terms of buybacks, dividends, and acquisitions. To your point about the Aerojet acquisition, we still anticipate that closing this year. As a result, our leverage ratio will get close to 4, with about $14 billion of debt. We are targeting over the next couple of years to bring that back down to below 3. For this year, we anticipate still the $500 million of share buybacks, so another $100 million to go based on the $400 million that we did within Q1, along with the dividends being consistent with what we previously communicated. In terms of the debt, we do expect to pay that down within June. You should see that play out consistent with what we shared before.

The next question is from the line of Robert Stallard with Vertical Research Partners. Please proceed with your question.

Thanks so much. Good morning. Hello?

Hi, Rob. Can you hear us?

I can hear you. Okay, sorry. Good morning, guys. Just to maybe wrap things up on the whole Aerojet topic. Let's assume things do get done, the deal is completed in the second half of this year, do you anticipate any further significant M&A in the medium-term time frame?

Yes. I think that's an easy one, Rob. Just picking up where Michelle left off, the answer would be no. We'll have close to $13 billion, $14 billion of debt. As we've said previously, we'll be using our free cash flow to reduce that debt to maintain our investment credit rating. So no, no is the answer. A couple of years down the road, we can relook at that. We want to keep a strong balance sheet and focus on execution. We really – going back to December, there were three things that were a challenge, whether reality or perceived, and that was how could you integrate ViaSat, fix your operational issues, and buy Aerojet Rocketdyne simultaneously. I'm pleased to report on ViaSat that the integration is going well. It looks like both the revenue and the cost synergies will meet or exceed our business case, so that is exciting. We're about six months ahead of schedule relative to consolidating facilities. We have a four-phase process. The risk of moving is reasonably low. We're in the middle of the first phase. We'll take the four major product lines one by one, and that could be done by the end of this calendar year, which again is ahead of schedule. The customer feedback and interactions have been exciting relative to these new capabilities. For the first time ever, Link 16 is in space based on some recent payloads that were launched. It might be early to say that ViaSat is done, but it's on a really good track. I think by the time the deal closes, the focus for my team and others will be on Aerojet Rocketdyne. In January, there were a lot of questions, a lot of uncertainty, and I think we're knocking these issues out one by one over a 12-month period. By the time we get to '24, we're going to have a lot of momentum behind us. I hope that helps. Maybe we have time for one last question or that was it. All right. No other questions in the queue. So look, I appreciate everybody participating and calling in and asking the questions. We look forward to engaging with you in the months ahead. Have a great weekend. Thanks.

Thank you, everyone. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.