L3Harris Technologies Reports Strong Full Year and Fourth Quarter 2025 Results, Initiates 2026 Guidance

Key Terms

book-to-bill financial

The book-to-bill ratio compares new orders a company has received (bookings) to the products or services it has invoiced or shipped (billings) over the same period. It matters to investors because a ratio above 1 means demand is outpacing fulfillment and the company may grow revenue or build backlog, while a ratio below 1 suggests slowing demand and possible future revenue weakness — think of it as new customer orders versus what the company actually sold.

non-GAAP financial

Non-GAAP refers to financial measures that companies use to show their earnings or performance without including certain expenses or income that are often added back to give a different picture. It matters because it can make a company's results look better or more favorable, but it may also hide important costs, so investors need to look at both GAAP (official rules) and non-GAAP numbers to get a full understanding.

adjusted free cash flow financial

Adjusted free cash flow is the amount of money a company generates from its operations after accounting for essential expenses and investments, like maintaining or upgrading equipment. It shows how much cash is truly available to grow the business, pay debts, or return to shareholders, helping investors see the company's financial health more clearly.

operating margin financial

Operating margin shows how much profit a company makes from its core business activities after paying for costs like wages and materials. It’s useful because it tells you how efficiently a company is running—higher margins mean it keeps more money from each dollar of sales, which can indicate better management or stronger products.

MELBOURNE, Fla.--(BUSINESS WIRE)-- L3Harris Technologies (NYSE: LHX) reports full year and fourth quarter 2025 results.

Highlights*

Full Year

• Orders of $27.5 billion; book-to-bill of 1.3x
• Cash from operations of $3.1 billion, up 21%; Adjusted free cash flow of $2.8 billion, up 21%
• Revenue of $21.9 billion, up 3%, 5% organically
• Operating margin of 9.7%; Adjusted segment operating margin of 15.8%
• Diluted EPS of $8.53; Non-GAAP diluted EPS of $10.73

Fourth Quarter

• Revenue of $5.6 billion, up 2% versus prior year, 6% organically
• Operating margin of 7.0%; Adjusted segment operating margin of 15.7%
• Diluted EPS of $1.59; Non-GAAP diluted EPS of $2.86

“2025 was a clear inflection point for L3Harris. Our portfolio is directly aligned with the most critical national and global defense priorities, which drove record orders and strong organic growth, margins and cash flow. Throughout the year, we saw customers move with greater urgency, and our investments and agility allowed us to deliver on their missions with speed and scale,” said Christopher Kubasik, Chairman and CEO, L3Harris.

Kubasik added, "As we look to 2026, our investments in technology and capacity along with a record backlog and strong demand signals give us confidence to deliver strong results. We remain disciplined in creating value for shareholders while continuing to invest in the business via capex and R&D."

_____

*Organic revenue, adjusted free cash flow, adjusted segment operating margin and non-GAAP diluted EPS are non-GAAP financial measures defined on page 19.

SUMMARY FINANCIAL RESULTS

		Fourth Quarter										Full Year
	($ millions, except per share data)		2025				20241			Change			2025				20241			Change
	Revenue (see Table 5 for organic revenue)
	Communication Systems	$	1,483			$	1,437					$	5,673			$	5,459
	Integrated Mission Systems		1,716				1,712						6,630				6,618
	Space & Airborne Systems		1,739				1,728						6,946				6,869
	Aerojet Rocketdyne		763				694						2,845				2,580
	Corporate eliminations		(53	)			(48	)					(229	)			(201	)
	Revenue	$	5,648			$	5,523			2%		$	21,865			$	21,325			3%
	Operating income
	Communication Systems	$	369			$	326					$	1,432			$	1,324
	Integrated Mission Systems		191				237						812				826
	Space & Airborne Systems		238				186						852				812
	Aerojet Rocketdyne		5				73						270				307
	Segment operating income		803				822						3,366				3,269
	Unallocated corporate items (see Table 4)		(410	)			(253	)					(1,256	)			(1,351	)
	Operating income	$	393			$	569					$	2,110			$	1,918
	Operating margin		7.0	%			10.3	%					9.7	%			9.0	%
	Segment operating income	$	803			$	822					$	3,366			$	3,269
	Segment impairment of goodwill and other assets2		85				24						85				24
	Adjusted segment operating income2	$	888			$	846					$	3,451			$	3,293
	Adjusted segment operating margin2		15.7	%			15.3	%		40 bps			15.8	%			15.4	%		40 bps
	Tax rate
	Effective tax rate		21.5	%			6.4	%					16.9	%			5.3	%
	Effective tax rate on non-GAAP income2		16.7	%			8.5	%					14.0	%			8.0	%
	EPS
	Diluted EPS	$	1.59			$	2.37					$	8.53			$	7.87
	Non-GAAP diluted EPS2	$	2.86			$	2.60			10%		$	10.73			$	9.70			11%
	Pension adjusted non-GAAP diluted EPS2	$	2.32			$	2.17			7%		$	9.05			$	8.01			13%
	Diluted weighted-average common shares outstanding		188.2				190.6						188.4				190.7
	Cash flow
	Cash from operations	$	1,962			$	1,129			74%		$	3,106			$	2,559			21%
	Adjusted free cash flow2	$	1,863			$	1,033			80%		$	2,814			$	2,319			21%
	Repurchases of common stock	$	156			$	42					$	1,154			$	554
1 2024 segment financial results recast to reflect strategic realignment of the Fuzing and Ordnance Systems (FOS) business from Integrated Mission Systems to Aerojet Rocketdyne, effective in 2025. See Table 9 - 2024 Segment Recast in our EX-99.1 Earnings Release for first quarter 2025. 2 Refer to Key Terms and Non-GAAP Definitions on page 19.

PRESENTATION OF FINANCIAL RESULTS*

Financial results are described on a full-year basis, with additional detail provided for notable fourth quarter activity.

Revenue: 2025 revenue increased 3%, 5% organically, reflecting organic growth across all segments, including new program ramps and increased international deliveries. The government shutdown resulted in delayed awards within the fourth quarter, impacting fourth quarter and 2025 revenue, primarily in SAS.

Operating Margin:

GAAP Operating Margin: 2025 increased 70 bps to 9.7%.

Adjusted Segment Operating Margin: 2025 increased 40 bps to 15.8%.

2025 GAAP operating margin increased driven primarily by higher monetization of legacy end-of-life assets aligned with our transformation and value creation priorities and lower unallocated corporate items, including lower LHX NeXt implementation costs, lower amortization of acquisition-related intangibles, and lower merger, acquisition, and divestiture-related expenses, partially offset by higher business divestiture-related losses in 2025.

Adjusted Segment Operating Margin for 2025 increased primarily due to higher monetization of legacy end-of-life assets aligned with our transformation and value creation priorities and LHX NeXt driven cost savings across all segments, partially offset by impacts from the higher margin Commercial Aviation Solutions (CAS) divestiture at the end of March 2025.

Diluted EPS:

GAAP Diluted EPS: 2025 increased 8% to $8.53.

Non-GAAP Diluted EPS: 2025 increased 11% to $10.73.

GAAP Diluted EPS and Non-GAAP Diluted EPS for 2025 increased from higher operating income and adjusted segment operating income, respectively, lower interest expense from decreased average outstanding short-term debt balances during 2025 and higher FAS pension income, partially offset by a higher effective tax rate.

Cash Flow:

Cash From Operations: 2025 increased 21% to $3,106 million.

Adjusted Free Cash Flow: 2025 increased 21% to $2,814 million.

Cash from Operations and Adjusted Free Cash Flow for 2025 increased primarily due to the favorable impact of tax planning strategies and tax reform, less interest paid primarily due to lower average outstanding short-term debt balances and an increase in net income. Cash from operations was additionally impacted by less cash used for merger, acquisition and severance.

*Adjusted segment operating margin and adjusted free cash flow are non-GAAP financial measures defined on page 19.

SEGMENT RESULTS*

Communication Systems

		Fourth Quarter										Full Year
	($ millions)		2025				2024			Change			2025				2024			Change
	Revenue	$	1,483			$	1,437			3%		$	5,673			$	5,459			4%
	Operating margin		24.9	%			22.7	%		220 bps			25.2	%			24.3	%		90 bps
	Impairment of other assets		—	%			1.7	%					—	%			0.4	%
	Adjusted segment operating margin		24.9	%			24.4	%		50 bps			25.2	%			24.7	%		50 bps

Revenue: 2025 revenue increased 4%, primarily driven by increased international deliveries for software-defined resilient communications products, as well as the Next Generation Jammer Electronic Warfare program ramp, partially offset by lower volumes related to our civil communication products.

Operating Margin:

GAAP Operating Margin: Fourth quarter increased 220 bps to 24.9% and 2025 increased 90 bps to 25.2%.

Adjusted Segment Operating Margin: Fourth quarter increased 50 bps to 24.9% and 2025 increased 50 bps to 25.2%.

Fourth quarter and 2025 operating margin increased due to LHX NeXt driven cost savings and the absence of a prior year non-cash impairment of other assets related to the Tactical Data Links acquisition, partially offset by unfavorable mix associated with a higher proportion of domestic development volume. Adjusted segment operating margin increase excludes the impact of the prior year non-cash impairment of other assets.

Integrated Mission Systems

		Fourth Quarter										Full Year
	($ millions)		2025				2024			Change			2025				2024			Change
	Revenue	$	1,716			$	1,712			—%		$	6,630			$	6,618			—%
	Operating margin		11.1	%			13.8	%		(270) bps			12.2	%			12.5	%		(30) bps

Revenue: 2025 revenue remained flat. Excluding the impact of the divestiture of our CAS business, organic revenue increased 8%, primarily due to ramping activity in our ISR business on multiple classified programs and our Airborne Early Warning and Control aircrafts for the Republic of Korea Air Force.

Operating Margin: Fourth quarter operating margin decreased 270 bps to 11.1%, driven by the CAS divestiture and unfavorable Maritime program performance. 2025 operating margin decreased 30 bps to 12.2%, primarily due to the divestiture of our CAS business, unfavorable program performance in Maritime and the resolution of a legacy contract matter, partially offset by the monetization of legacy end-of-life assets aligned with our transformation and value creation priorities, favorable mix impact from higher airborne electro-optical sensors volume and LHX NeXt driven cost savings.

*Organic revenue and adjusted segment operating margin are non-GAAP financial measures defined on page 19.

Space and Airborne Systems

		Fourth Quarter										Full Year
	($ millions)		2025				2024			Change			2025				2024			Change
	Revenue	$	1,739			$	1,728			1%		$	6,946			$	6,869			1%
	Operating margin		13.7	%			10.8	%		290 bps			12.3	%			11.8	%		50 bps

Revenue: 2025 revenue increased 1%. Excluding the impact of the divestiture of our antenna business, organic revenue increased 2%, primarily from increased FAA volume in our Mission Networks business, partially offset by lower volume from program timing in our Space Systems business and lower classified volume in our Intel and Cyber business. The government shutdown resulted in later award timing that delayed expected fourth quarter and 2025 revenue.

Operating Margin: Fourth quarter operating margin increased 290 bps to 13.7% driven by stabilized program performance on classified space programs. 2025 operating margin increased 50 bps to 12.3%, primarily due to stabilized program performance, monetization of legacy end-of-life assets aligned with our transformation and value creation priorities and LHX NeXt driven cost savings, partially offset by unfavorable mix.

Aerojet Rocketdyne

		Fourth Quarter										Full Year
	($ millions)		2025				2024			Change			2025				2024			Change
	Revenue	$	763			$	694			10%		$	2,845			$	2,580			10%
	Operating margin		0.7	%			10.5	%		(980) bps			9.5	%			11.9	%		(240) bps
	Impairment of goodwill		11.1	%			—	%					3.0	%			—	%
	Adjusted segment operating margin		11.8	%			10.5	%		130 bps			12.5	%			11.9	%		60 bps

Revenue: 2025 revenue increased 10%. Excluding the impact of the divestiture of our AOT business, organic revenue increased 12% from increased production volumes across key missile, munitions, and space programs, as well as development program ramps.

Operating Margin:

GAAP Operating Margin: Fourth quarter decreased 980 bps to 0.7% and 2025 decreased 240 bps to 9.5%.

Adjusted Segment Operating Margin: Fourth quarter increased 130 bps to 11.8% and 2025 increased 60 bps to 12.5%.

Fourth quarter and 2025 operating margin decreased due to a non-cash impairment of goodwill related to the Space Technology disposal group¹, partially offset by favorable mix and LHX NeXt driven cost savings. Adjusted segment operating margin benefits from higher volume and LHX NeXt driven cost savings.

*Organic revenue and adjusted segment operating margin are non-GAAP financial measures defined on page 19.

1Space Technology disposal group is defined on page 19.

2026 GUIDANCE¹

Beginning in 1Q26 and reflected in our 2026 guidance, we reorganized our business structure to three business segments.

On January 5, 2026, we announced the sale of a majority stake in our Space Technology disposal group²; the financials of this business are included in our 2026 guidance. We expect the transaction to close in the second half of 2026 at which time our guidance will be updated.

We are also transitioning our diluted EPS presentation from a Non-GAAP basis to GAAP diluted EPS.

			2026
			Guidance
	Revenue
	Space & Mission Systems		~$11.5B
	Communication & Spectrum Dominance		~$8.0B
	Missiles Solutions		~$4.4B
	Total3		$23B - $23.5B
	Segment Operating Margin
	Space & Mission Systems		mid 10%
	Communication & Spectrum Dominance		~25%
	Missiles Solutions		mid 12%
	Total		low 16%
	Diluted EPS		$11.30 - $11.50
	Free cash flow4		$3.0B
1 Supplemental information is provided in accompanying Earnings Presentation. 2 Space Technology disposal group is defined on page 19. 3 Net of intersegment eliminations 4 Free cash flow is a non-GAAP financial measure defined on page 19. Net cash provided by operating activities is anticipated to be approximately $3.6 billion and capital expenditures are anticipated to be approximately $600M.

Forward-Looking Statements

This earnings release contains forward-looking statements within the meaning of federal securities laws made in reliance on the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Examples include, but are not limited to: share repurchases; divestiture and realignment impacts; 2026 guidance; divestiture or investment transaction timing; an investment from the Department of War (the “Investment”); projection of other financial items; and assumptions underlying any of the foregoing. Investors should not place undue reliance on forward-looking statements, which reflect management’s current expectations, estimates, projections, assumptions and information currently available to management, and are not guarantees of future performance or actual results. Important risks that could cause our results to differ materially from those expressed in or implied by these forward-looking statements or from our historical results include, but are not limited to, risks arising from: competitive markets; U.S. Government spending priorities; changes in contract mix; inflation; tariffs and potential trade disputes; unilateral contract action by the U.S. Government or unexpected issues related to the Investment; uncertain economic conditions; future geo-political events; supply chain disruptions; indebtedness; interest rates and other market factors; and changes in effective tax rate or additional tax exposures. These and other important risks that could impact forward-looking statements are described more fully in the "Risk Factors" in our Form 10-K for fiscal 2025. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are qualified by the cautionary statements in this section, and we have no duty to and disclaim any intention or obligation, other than imposed by law, to update or revise any forward-looking statements, whether as a result of new information, future events or developments or otherwise.

Non-GAAP Financial Measures

Management believes the adjustments to non-GAAP Financial Measures (NGFMs) in the tables beginning on page 12 are useful to investors because the excluded costs do not reflect our ongoing operating performance. Such adjustments, considered together with the unadjusted GAAP financial measures, provide information that management believes is useful to investors to understand period-over-period operating results separate from items that management believes may disproportionately impact operating results in any particular period; however there is no guarantee that items excluded from NGFMs will not reoccur in future periods. Management also believes that NGFMs enhance the ability of investors to analyze business trends, understand performance and evaluate our initiatives to drive improved financial performance. Management utilizes NGFMs to guide forecasting and long-term planning and for compensation purposes. NGFMs should be considered in addition to, and not as a substitute for, financial measures presented in accordance with GAAP.

Table 1 - Condensed Consolidated Statement of Operations (Unaudited)
	Fourth Quarter								Full Year
($ millions, except per share amounts)		2025				2024				2025				2024
Revenue	$	5,648			$	5,523			$	21,865			$	21,325
Cost of revenue		(4,202	)			(4,126	)			(16,240	)			(15,801	)
General and administrative expenses		(968	)			(804	)			(3,430	)			(3,568	)
Impairment of goodwill and other assets		(85	)			(24	)			(85	)			(38	)
Operating income		393				569				2,110				1,918
Non-service FAS pension income and other, net1		132				79				419				354
Interest expense, net		(143	)			(161	)			(597	)			(675	)
Income before income taxes		382				487				1,932				1,597
Income taxes		(82	)			(31	)			(326	)			(85	)
Net income		300				456				1,606				1,512
Noncontrolling interests, net of tax		—				(3	)			—				(10	)
Net income attributable to L3Harris	$	300			$	453			$	1,606			$	1,502
Earnings per share attributable to common shareholders
Basic	$	1.60			$	2.38			$	8.57			$	7.91
Diluted	$	1.59			$	2.37			$	8.53			$	7.87
Weighted-average common shares outstanding
Basic		187.0				189.7				187.4				189.8
Diluted		188.2				190.6				188.4				190.7
1“FAS” is defined as Financial Accounting Standards.

Table 2 - Consolidated Statement of Cash Flow (Unaudited)
	Fourth Quarter								Full Year
($ millions)		2025				2024				2025				2024
Operating Activities
Net income	$	300			$	456			$	1,606			$	1,512
Adjustments to reconcile to net cash provided by operating activities:
Depreciation and amortization		311				326				1,224				1,289
Share-based compensation		30				21				113				97
Net periodic benefit income		(114	)			(71	)			(330	)			(286	)
Share-based matching contributions under defined contribution plans		53				65				253				264
Impairment of goodwill and other assets		85				38				85				38
Deferred income taxes		55				(46	)			206				174
(Increase) decrease in:
Receivables, net		131				(35	)			(343	)			128
Contract assets		17				178				(437	)			(194	)
Inventories, net		64				50				117				96
Other current assets		35				3				17				(29	)
Increase (decrease) in:
Accounts payable		568				(45	)			475				(90	)
Contract liabilities		90				276				181				126
Compensation and benefits		3				17				70				(128	)
Other current liabilities		72				96				(423	)			155
Income taxes		221				(125	)			365				(383	)
Other operating activities		41				(75	)			(73	)			(210	)
Net cash provided by operating activities		1,962				1,129				3,106				2,559
Investing Activities
Capital expenditures		(158	)			(118	)			(424	)			(408	)
Proceeds from sales of businesses, net of cash divested		(11	)			115				820				273
Other investing activities		39				(109	)			11				(128	)
Net cash provided by (used in) investing activities		(130	)			(112	)			407				(263	)
Financing Activities
Proceeds from issuances of long-term debt, net		—				1				—				2,827
Repayments of long-term debt		(4	)			(11	)			(618	)			(2,620	)
Change in commercial paper, maturities under 90 days, net		(725	)			(660	)			(515	)			(567	)
Proceeds from commercial paper, maturities over 90 days		—				—				—				688
Repayments of commercial paper, maturities over 90 days		—				—				—				(1,205	)
Repurchases of common stock		(156	)			(42	)			(1,154	)			(554	)
Dividends paid		(225	)			(221	)			(903	)			(886	)
Other financing activities		3				18				108				93
Net cash (used in) provided by financing activities		(1,107	)			(915	)			(3,082	)			(2,224	)
Effect of exchange rate changes on cash and cash equivalents		5				(26	)			23				(17	)
Net increase (decrease) in cash and cash equivalents		730				76				454				55
Cash and cash equivalents, beginning of period		339				539				615				560
Cash and cash equivalents, end of period	$	1,069			$	615			$	1,069			$	615

Table 3 - Condensed Consolidated Balance Sheet (Unaudited)
($ millions)	January 2, 2026			January 3, 2025
Assets
Current assets
Cash and cash equivalents	$	1,069		$	615
Receivables, net		1,371			1,072
Contract assets		3,566			3,230
Inventories, net		1,219			1,330
Income taxes receivable		53			379
Other current assets		431			461
Assets of business held for sale		884			1,131
Total current assets		8,593			8,218
Non-current assets
Property, plant and equipment, net		2,665			2,806
Goodwill		20,010			20,325
Intangible assets, net		6,509			7,639
Deferred income taxes		76			120
Other non-current assets		3,342			2,893
Total assets	$	41,195		$	42,001
Liabilities and equity
Current liabilities
Short-term debt	$	—		$	515
Accounts payable		2,461			2,005
Contract liabilities		2,262			2,142
Compensation and benefits		482			419
Other current liabilities		1,908			2,317
Liabilities of business held for sale		113			235
Total current liabilities		7,226			7,633
Non-current liabilities
Long-term debt, net of current portion		10,443			11,081
Deferred income taxes		1,114			942
Other non-current liabilities		2,777			2,766
Total liabilities		21,560			22,422
Total equity		19,635			19,579
Total liabilities and equity	$	41,195		$	42,001

Table 4 - Unallocated Corporate Items (Unaudited)
	Fourth Quarter							Full Year
($ millions)		2025			2024				2025			2024
Unallocated corporate items:
Amortization of acquisition-related intangibles	$	191		$	211			$	769		$	853
LHX NeXt implementation costs1		68			51				167			267
Business divestiture-related losses (gains) and impairment of goodwill1,2		65			(34	)			82			33
Change in fair value of deferred compensation plan liabilities		9			(1	)			57			40
Merger, acquisition, and divestiture-related expenses1		17			16				57			102
Accrued corporate charge1		30			—				30			—
Other unallocated corporate items		30			10				94			56
Total unallocated corporate items	$	410		$	253			$	1,256		$	1,351
1 Refer to Key Terms and Non-GAAP Definitions on page 19. 2 Includes business divestiture-related losses (gains) and impairment of goodwill reported at corporate.

Table 5 - Organic Revenue Non-GAAP Financial Measure Reconciliation (Unaudited)
	Fourth Quarter												Full Year
	2024
($ millions)	GAAP				Adjustments1				Organic				GAAP				Adjustments1				Organic
CS	$	1,437			$	—			$	1,437			$	5,459			$	—			$	5,459
IMS		1,712				(163	)			1,549				6,618				(459	)			6,159
SAS		1,728				—				1,728				6,869				(76	)			6,793
AR		694				(15	)			679				2,580				(45	)			2,535
Corporate eliminations		(48	)			—				(48	)			(201	)			—				(201	)
Revenue	$	5,523			$	(178	)		$	5,345			$	21,325			$	(580	)		$	20,745
1 Adjustment to exclude amounts attributable to divested businesses.

Table 6 - Reconciliation of Effective Tax Rate to Effective Tax Rate on Non-GAAP Income (Unaudited)
	Fourth Quarter
	2025																		2024
($ millions)	Earnings Before Tax			Tax Expense (Benefit)				Effective Tax Rate			Earnings Before Tax				Tax Expense (Benefit)				Effective Tax Rate
Income before income taxes	$	382		$	82			21.5	%		$	487			$	31			6.4	%
LHX NeXt implementation costs1		68			18							51				14
Business divestiture-related losses (gains) and impairment of goodwill and other assets1		150			(7	)						(10	)			(5	)
Merger, acquisition, and divestiture-related expenses1		17			7							16				6
Accrued corporate charge1		30			8							—				—
Non-GAAP income before income taxes	$	647		$	108			16.7	%		$	544			$	46			8.5	%
	Full Year
	2025										2024
($ millions)	Earnings Before Tax			Tax Expense (Benefit)				Effective Tax Rate			Earnings Before Tax				Tax Expense (Benefit)				Effective Tax Rate
Income before income taxes	$	1,932		$	326			16.9	%		$	1,597			$	85			5.3	%
LHX NeXt implementation costs1		167			43							267				67
Business divestiture-related losses and impairment of goodwill and other assets1		167			(62	)						57				(13	)
Merger, acquisition, and divestiture-related expenses1		57			14							102				22
Accrued corporate charge1		30			8							—				—
Non-GAAP income before income taxes	$	2,353		$	329			14.0	%		$	2,023			$	161			8.0	%
1 Refer to Key Terms and Non-GAAP Definitions on page 19.

Table 7 - Reconciliation of Diluted EPS to Non-GAAP Diluted EPS and Pension Adjusted Non-GAAP Diluted EPS (Unaudited)
	Fourth Quarter								Full Year
		2025				2024				2025				2024
Diluted weighted-average common shares outstanding (in millions)		188.2				190.6				188.4				190.7
Diluted EPS	$	1.59			$	2.37			$	8.53			$	7.87
Significant and/or non-recurring items included in diluted EPS above:
LHX NeXt implementation costs1		0.36				0.27				0.89				1.40
Business divestiture-related losses and impairment of goodwill and other assets1		0.80				(0.05	)			0.89				0.30
Merger, acquisition, and divestiture-related expenses1		0.09				0.08				0.30				0.53
Accrued corporate charge1		0.16				—				0.16				—
Income taxes on above adjustments and other, net2		(0.14	)			(0.07	)			(0.04	)			(0.40	)
Non-GAAP diluted EPS2	$	2.86			$	2.60			$	10.73			$	9.70
Less: per share impact of:
FAS/CAS operating adjustment3		—				(0.04	)			(0.05	)			(0.14	)
Non-service FAS pension income3		(0.54	)			(0.39	)			(1.63	)			(1.55	)
Pension adjusted non-GAAP diluted EPS	$	2.32			$	2.17			$	9.05			$	8.01
1 Refer to Key Terms and Non-GAAP Definitions on page 19. 2 Fourth quarter 2024 amount updated to exclude adjustment of $1.11 per share and $0.23 per share for amortization of acquisition-related intangible assets and related income tax expense, respectively. Year to date 2024 amount updated to exclude adjustment of $4.47 per share and $1.07 per share for amortization of acquistion-related intangible assets and related income tax expense, respectively. 3 Net of tax effect.

Table 8 - Reconciliation of Net Cash Provided by Operating Activities to Adjusted Free Cash Flow - Non-GAAP Financial Measures Reconciliation (Unaudited)
	Fourth Quarter								Full Year
($ millions)		2025				2024				2025				2024
Net cash provided by operating activities	$	1,962			$	1,129			$	3,106			$	2,559
Capital expenditures		(158	)			(118	)			(424	)			(408	)
Proceeds from disposal of property, plant and equipment, net		45				1				54				1
Free cash flow		1,849				1,012				2,736				2,152
Cash used for merger, acquisition and severance1		14				21				78				167
Adjusted free cash flow1	$	1,863			$	1,033			$	2,814			$	2,319
1 Refer to Key Terms and Non-GAAP Definitions on page 19.

Table 9 - Segment Recast (Unaudited)

Effective for fiscal 2026, our segments are re-aligned into three reportable segments with common capabilities and business models:

• Space & Mission Systems (SMS): will integrate satellite and payload capabilities, including missile warning and defense, with maritime, air special missions, and other global defense and civil government programs, which is comprised of the following sectors:
  • Intelligence, Surveillance and Reconnaissance (ISR): sector unchanged and previously reported in our Integrated Missions System (IMS) segment.
  • Space Systems: sector formerly reported in our Space and Airborne Systems (SAS) segment, excluding our Telemetry & Radio Frequency (T&RF) business.
  • Maritime: sector unchanged and previously reported in our IMS segment.
  • Mission Networks: sector unchanged and previously reported in our SAS segment.
  • Airborne Solutions: sector formerly named Airborne Combat Systems within our SAS segment excluding our Electronic Warfare, Agile Development Group (ADG), and Release Systems Antennas & Telemetry (RSAT) businesses.
  • Intel & Cyber: sector previously reported within our SAS segment excluding some international businesses.
• Communication & Spectrum Dominance (CSD): will combine all of the company’s capabilities in resilient communications and electronic warfare, which is comprised of the following sectors:
  • Mission Critical Communications: includes our Tactical Communications and Public Safety and Professional Communications sectors, both of which were formerly reported in our Communications Systems (CS) segment.
  • Spectrum Superiority: includes our Broadband Communications sector and the Electronic Warfare, T&RF, and related programs from our SAS segment.
  • Targeting and Sensor Systems: primarily includes our Targeting and Sensor Systems sector from our IMS segment.
  • Integrated Vision Solutions: sector unchanged and formerly reported in our CS segment.
• Missile Solutions (MSL): will unite propulsion, hypersonics and other advanced missile technologies, which is comprised of the following sectors:
  • Missile Propulsion: sector unchanged and formerly reported in our Aerojet Rocketdyne (AR) segment as Missile Solutions.
  • Advanced Effects: a newly created sector which combines our ADG air launched effects and advanced technology capabilities with the majority of our RSAT business, which includes weapons release systems. These businesses were formerly reported in our Airborne Combat Systems sector within our SAS segment. This new sector also incorporates our Space and Sensors business and other electronics capabilities, including precision navigation and timing solutions which were formerly reported in our Defense Electronics sector within our IMS segment.
  • Space Propulsion and Power Systems: sector unchanged and formerly reported in our AR segment.

The historical results through the date of divestiture of businesses divested prior to the end of fiscal 2025 will be classified within the “other non-reportable business” line item within the Company’s segment reporting.

The following business segment information reflects our results recast in our new segment structure for fiscal 2025 and fiscal 2024 is presented as supplemental information.

	Supplemental Recast Information
	2025
(In millions)	Revenue				Operating Income				Operating Margin
First Quarter
SMS	$	2,411			$	238			9.9	%
CSD		1,809				443			24.5	%
MSL		840				96			11.4	%
Other non-reportable businesses1		146				23			15.8	%
Segment operating income and margin						800			15.6	%
Corporate		(74	)			(275	)
Total	$	5,132			$	525			10.2	%
Second Quarter
SMS	$	2,770			$	289			10.4	%
CSD		1,861				458			24.6	%
MSL		925				116			12.5	%
Other non-reportable businesses		—				—			—	%
Segment operating income and margin						863			15.9	%
Corporate		(130	)			(292	)
Total	$	5,426			$	571			10.5	%
Third Quarter
SMS	$	2,803			$	299			10.7	%
CSD		1,935				477			24.7	%
MSL		1,008				124			12.3	%
Other non-reportable businesses		—				—			—	%
Segment operating income and margin						900			15.9	%
Corporate		(87	)			(279	)
Total	$	5,659			$	621			11.0	%
Fourth Quarter
SMS	$	2,727			$	229			8.4	%
CSD		1,961				546			27.8	%
MSL2		1,024				28			2.7	%
Other non-reportable businesses		—				—			—	%
Segment operating income and margin						803			14.2	%
Segment impairment of goodwill and other assets3						85
Adjusted segment operating income and margin						888			15.7	%
Corporate		(64	)			(410	)
Total	$	5,648			$	393			7.0	%
1 The historical results through the date of divestiture of businesses divested prior to the end of fiscal 2025 will be classified within the “other non-reportable businesses” line item within the Company’s segment reporting. 2 Fourth quarter MSL operating income includes a goodwill adjustment for the Space Technology disposal group. 3 Refer to Key Terms and Non-GAAP Definitions on page 19.

	Supplemental Recast Information
	Full Year
	2025											2024
(In millions)	Revenue				Operating Income				Operating Margin			Revenue				Operating Income				Operating Margin
SMS	$	10,711			$	1,055			9.8	%		$	10,186			$	1,046			10.3	%
CSD		7,566				1,924			25.4	%			7,272				1,670			23.0	%
MSL1		3,797				364			9.6	%			3,525				405			11.5	%
Other non-reportable businesses2		146				23			15.8	%			711				148			20.8	%
Segment operating income and margin						3,366			15.4	%							3,269			15.3	%
Segment impairment of goodwill and other assets3						85											24
Adjusted segment operating income and margin						3,451			15.8	%							3,293			15.4	%
Corporate		(355	)			(1,256	)						(369	)			(1,351	)
Total	$	21,865			$	2,110			9.7	%		$	21,325			$	1,918			9.0	%
1 2025 MSL operating income includes a goodwill adjustment for the Space Technology disposal group. 2 The historical results through the date of divestiture of businesses divested prior to the end of fiscal 2025 will be classified within the “other non-reportable businesses” line item within the Company’s segment reporting. 3 Refer to Key Terms and Non-GAAP Definitions on page 19.

Key Terms and Non-GAAP Definitions

Description		Definition
Business divestiture-related losses (gains) and impairment of goodwill and other assets		Includes gains and losses recognized in connection with divestitures and impairments of goodwill and other assets.
Merger, acquisition, and divestiture-related expenses		Transaction and integration expenses associated with the Aerojet Rocketdyne acquisition; external costs related to pursuing acquisition and divestiture portfolio optimization; non-transaction costs related to divestitures; and salaries of employees in roles dedicated to planned divestiture and acquisition activity.
Accrued corporate charge		Includes a non-recurring matter unrelated to segment activities and not indicative of ongoing operations.
LHX NeXt implementation costs		Includes costs related to workforce optimization costs, incremental IT expenses for implementation of new systems, third-party consulting expenses and other related costs, including costs related to personnel dedicated to this project.
Segment impairment of goodwill and other assets		Impairment of goodwill and other assets recognized in segment results.
Space Technology disposal group		Consists of certain product lines of our Space Propulsion and Power Systems sector, reported in our Aerojet Rocketdyne segment, and the space portion of our Space & Sensors division, reported in our Integrated Mission Systems segment.
Adjusted segment operating income and margin*		On a consolidated basis represents operating income and margin, excluding unallocated corporate department items and segment impairment of goodwill and other assets.
Orders		Total value of funded and unfunded contract awards received from the U.S. Government and other customers, including incremental funding and adjustments to previous awards, excluding unexercised contract options and potential orders under ordering-type contracts, such as indefinite delivery, indefinite quantity (IDIQ) contracts.
Organic revenue*		Excludes the impact of completed divestitures and is reconciled in Table 5.
Effective tax rate on non-GAAP income*		Represents the effective tax rate (tax expense as a percentage of income before income taxes) adjusted for the tax effect of items reconciled in Table 6.
Non-GAAP income before income taxes*		Represents income before income taxes adjusted for items reconciled in Table 6.
Non-GAAP diluted EPS*		Represents EPS (earnings per share attributable to common shareholders) adjusted for items reconciled in Table 7.
Pension adjusted non-GAAP diluted EPS*		Represents Non-GAAP diluted EPS, described above, adjusted for the after tax per share impact of the FAS/CAS operating adjustment and Non-service FAS pension income reconciled in Table 7.
Free cash flow*		Net cash provided by operating activities less capital expenditures, plus proceeds from disposal of property, plant and equipment.
Adjusted free cash flow*		Net cash provided by operating activities less capital expenditures, plus proceeds from disposal of property, plant and equipment and cash used for merger, acquisition and severance reconciled in Table 8.
Cash used for merger, acquisition, and severance*		Cash related to merger, acquisition and divestiture-related expenses (described above) and severance costs included in LHX NeXt implementation costs.
_____ *Refer to Non-GAAP Financial Measures on page 7 for more information.

 

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Source: L3Harris Technologies