Greetings, and welcome to L3Harris Technologies Fourth Quarter Calendar Year 2021 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. . As a reminder, this call is being recorded. It is now my pleasure to introduce your host, Rajeev Lalwani, Vice President, Investor Relations. Thank you. You may now begin.

Thank you, Rob. Good morning, and welcome to our fourth quarter 2021 earnings call. On the call with me today are Chris Kubasik, our CEO; and Michelle Turner, our CFO. First, a few words on forward-looking statements and non-GAAP measures. Forward-looking statements involve risks, assumptions and uncertainties that could cause actual results to differ materially. For more information, please see our press release, presentation and SEC filings. A reconciliation of non-GAAP financial measures to comparable GAAP measures is included in the Investor Relations section of our website, which is l3harris.com, where a replay of this call will also be available. In addition, following our 8-K filed earlier in the month, we'll be speaking to our 2021 results and our prior 4 segment structure, and our 2022 outlook will be in our realigned 3 segment structure that also shifts pension items to the corporate level, furthering operational transparency. With that, Chris, over to you.

Okay. Thank you, Rajeev, and good morning, everyone. I'd like to welcome Michelle Turner to this morning's call. She is an experienced financial executive with diverse operational experience, including 2 decades in the aerospace and defense industry. She joins us from Johnson & Johnson. She was the CFO of their supply chain organization. I'm excited to have Michelle on the team and look forward to our partnership. So welcome to week 2, Michelle.

Thanks, Chris. It's great to be back in the defense industry and to be part of the L3Harris team. I've been following the merger, and I'm excited about leveraging my experiences to further our strategy of being a non-traditional prime.

Okay. Let's get started. This morning, we reported our 2021 earnings, and I'm pleased with the result. Our company delivered another solid year of bottom line performance, growing EPS and free cash flow per share by 12% and 9%, respectively. It wasn't, however, without its challenges as the pandemic stressed our supply chain at a time when budgets remain uncertain. Organic revenues were up 2% for the year, and our margin performance was exceptional as merger cost synergies, alongside E3 savings, enabled expansion of 110 basis points. Looking ahead to this year, we initiated guidance today that reflects current market conditions. Organic revenues are to be up 1% to 3% with steady to rising segment margins. And when combined with the share count decline, we expect EPS of $13.35 to $13.65, reflecting another solid year of growth. Our free cash flow guide of $2.15 billion to $2.25 billion incorporates current tax regulations, which requires us to capitalize R&D expenditures beginning in 2022 versus the prior practice of annual deductions resulting in tax cash payment increases. Excluding this impact, free cash flow per share growth would have been up by double digits. We'll provide more details on these figures later on the call. Our focus on both value creation and advancing our strategy of leading as a non-traditional prime has driven our success to date. Moreover, in recent months, we made progress in our focus areas of growing the top line, strengthening our operations and augmenting our disciplined allocation of capital. Let's start with the top line. With the integration of the company largely behind us, we're progressing on our efforts to grow the business through a 3-pronged approach: first, investing in our capabilities; second, bidding, winning and priming more programs; and finally, expanding our international presence. Our award activity throughout…

Thank you, Chris, and good morning, everyone. I look forward to my engagement with the analyst and investor community at upcoming events and conferences. I'll continue now on Slide 10 with our 2022 segment details and our realigned 3 segment structure as well as provide additional color on the 2022 EPS bridge and cash flow. Integrated Mission Systems revenue is expected to be $7.1 billion to $7.3 billion, up 2% to 4% driven by maritime expansion, classified growth in defense aviation and continued recovery in our commercial aerospace business. ISR aircraft timing from a tough compare is expected to drive a low to mid-single-digit decline in the first half with high single-digit growth coming in the back half of the year. Segment operating margins are anticipated to be within a range of 13.5% to 13.75%, with E3 program savings more than offsetting program mix impacts. In Space & Airborne Systems, we expect revenue of $6 billion to $6.1 billion or flat to up 2%, driven by our traction and responsive space, along with classified strengths in Intel & Cyber, which will be moderated by continued pressure in our airborne businesses as we transition to modernization over the coming years. Segment operating margins are expected to be within a range of 12.5% to 12.75% as E3 program savings offset mix headwinds from key growth programs within space. Communication Systems revenue is expected to be $4.4 billion to $4.5 billion or up 2% to 4% from modernization demand in Tactical Communications, with supply chain delays netting an expected mid-teen decline in the first half and strong double-digit growth in the back half of the year, along with recovering sales in Public Safety. Growth will be moderated by a flattish outlook in broadband and integrated vision solutions. Segment operating margins are anticipated to be within a range of 24.25% to 24.50% as our E3 program savings will more than offset inflationary pressures within Tactical Communications. Now turning to the EPS bridge on Slide 11. As Chris said, we expect full year EPS of $13.50 at the midpoint. Of this increase, operations will contribute $0.62, along with a lower share count for $0.60, overcoming headwinds from divested earnings and residual supply chain impacts as well as lower pension income and other items of $0.05. On cash flow, our outlook reflects a modest working capital improvement, $330 million in capital expenditures and no pension funding. We expect to deploy roughly 100% of our free cash flow to shareholders through $1.5 billion in buybacks, barring any strategic M&A. With that, I'll turn it back over to you, Chris.

All right. Thanks, Michelle. Well done. So to sum it up, 2021 performance demonstrated our ability to deliver strong bottom line results in a dynamic environment, with our 2022 outlook reflecting growth in all key metrics. With that, Rob, let's open the line for questions.

. And our first question is from David Strauss with Barclays.

Thanks. Good morning, everyone. And welcome, Michelle.

Good morning.

Chris, could you maybe touch on the budget outlook, what you saw in the fiscal '22 authorization markup. And if that becomes approach, what that might mean for you guys? And as well as what you're assuming in terms of CR? And then last one, a little bit more detail on the individual buckets within SAS in terms of what you're expecting for each of the individual businesses relative to that flat to up 2% for the overall business?

Thanks, Dave. Let me start with the CR, the continuing resolution. We're assuming a half year CR. Meaning, by April 1, we'll move forward. And I just look at the fact that the President State of the Union speech moved to March. So I'm assuming he wants to have a budget at that point in time. So that's what we factored in. Obviously, I think like others, it is a full year CR, will provide a couple of hundred millions of top line headwind, which is not unexpected. Relative to the budget, I think we were all pleased to see the markup. I think that could be a good foreshadowing of the future. We don't have a fight up yet, but we continue to think aspirationally that mid-single-digit growth is something that we can achieve. As I've said before, I really like our portfolio, the fact that we're in all these domains. And as I laid out in my prepared comments, we continue to invest hired to grow. We're working with some of these new commercial entrants. We're priming and bidding more, and international has been a good story. So that's how I see the budget rolling out. Look forward to more information there. When go to SAS, the components of SAS, there's focus on the key sectors. We see -- continue to see space growing in the mid-single digits. We were probably a little more bullish back in October, but there continue to be delays in contract awards, either directly or indirectly related to the CR. So Space, I see mid-single digit this year, Intel & Cyber is one of our hot businesses, continuing to grow high single digits. So that's maybe a little better than what we had told you in October. Mission Networks, which we moved from AS into SAS as we collapsed the segment, has been and always continues to be in that low single-digit growth, mainly doing work for the FAA. But what we're seeing the decline is in our air sectors, Mission Avionics and EW combined. And that's really almost entirely tied to the F-35 program. As you know, the TR3 development is rolling off and production is ramping up. So as I quantify it, I think I've said before that 2022, we're going to have about $150 million decline in revenue just attributed to the F-35 program. We'll see that start to return to growth in '23. But this is just a roll-off of development on TR3 and then moving into production on the 3 components that we provide to that aircraft.

Our next question comes from the line of Peter Arment with Baird.

Welcome, Michelle. Chris, maybe you had $0.18 at least baked into your '22 guidance for the supply chain adjustment, and that's obviously better than the $0.29 in '21. So maybe just your confidence around the supply chain? And what kind of visibility, what's baked into the $0.18? And then just also, Michelle made a comment about just modest working capital improvement. Maybe you could just discuss a little bit what's behind that?

Yes. Thanks, Peter. No, relative to the supply chain, we think we're doing a pretty good job over the last maybe 6 or 9 months, as I mentioned, with getting more visibility into the second, third tier supply chain. We've invested in tools that give us that visibility. So we've talked previously about a $200 million revenue headwind in '21. We see that continuing in the first half of 2022. And I think where we've been maybe a little more conservative than in October as we see that recovery bouncing back in the second half of '22 and then also in early '23. So think of that about a $100 million headwind each quarter in 1 and 2, and then maybe getting 100 back in the second half and 100 back in early '23 from a revenue. And of course, that brings along the related operating income. So that's how we see it. But it's a dynamic area. It's mainly been focused on electronic components. But we're monitoring it and managing it at all sectors and all segments. And it feels like we've turned the corner, but we'll keep you up to date kind of quarter-to-quarter as things change. So relative to working capital, as we try to get to the guidance, we ended the year at 52 working capital days. We'll bring that down a couple of days as we go to that $2.8 billion to $2.9 billion guide. Michelle?

Yes. And just to add a little bit more color on the working capital. If you think about it, we built smart inventory at the end of 2021. And so we expect Tactical Communications comes back in the second half. We'll leave some of that down. And then there's also an advantage from an ISR perspective on advanced payments that we're anticipating at the end of the year as well. So it's going to help free cash flow within 2022.

And I'll just throw in, Peter, just our definition of supply chain is pretty broad. We're throwing into labor, we're throwing in material and we're throwing in inflation. So all that contributes to the $0.18.

Our next question comes from the line of Doug Harned with Bernstein.

In Communication Systems, there you've clearly been hit by around COVID, supply chain, we've also got inflation, that would be hitting fixed price -- commercial fixed price contracts there. If you were to think of 2022 without these headwinds having been there, what would you see Communication Systems looking like in terms of growth margin? And is this something, given that it's -- there's been -- there's a headwind there, is this something that we should see all coming back when we move out to 2023? Or is there just going to be some lost demand and margin here?

Yes. Doug, that's a great question. Something we spend a lot of time looking at. I don't see any loss. I think this is just a timing issue. And as we were looking through the business, just the other day, I mean it's had a great book-to-bill in 2021. Now some of that is due to less revenue, but we have a record backlog, an all-time high in backlog, which is an indication that we continue to win new business. And I mentioned just the marines recently, which is a winner-take-all competition. So we're very excited to have won that $750 million IDIQ. And throughout '21, I think we were pretty clear in all the head-to-head competitions we won the majority share. So the demand is there. The modernization is happening that's in our backlog. And everything indicates quite -- to be doing quite well. What we would have had without supply chain risks probably would have been 300 basis points or 400 basis points more growth as these things slip into '22. And as I mentioned, potentially '23, depending on how the supply chain plays out. So at a high level, that's kind of how I see tactical. You asked about Communications Systems in totality. So the PSPC business, a lot of that is tied to state and local municipalities. As we said, that ought to rebound as the budgets get back in place. And we had some key wins last year, but we expect that to continue to grow. BCS, our Broadband Communication Systems in Salt Lake. A lot of that is still tied to the next-gen jammer start-up and some new opportunities that they're pursuing. So we feel pretty good about our communications. I've got, for the full year '22, Tactical up mid-single digits, maybe even a little better. BCS and IBS are kind of flattish area and PSPC should bounce back with the budget improvement. Operator Our next question comes from the line of Sheila Kahyaoglu with Jefferies.

Hi, Chris, and welcome, Michelle. Maybe I wanted to bridge that growth from 2022, the 1 to 3. Chris, you've talked about it in a bunch of moving pieces, some of the CS softness, Airborne and F-35, you mentioned versus the mid-single-digit growth profile you have. And then maybe just a follow-up on the SAS growth, perhaps being softer. What are you seeing there in terms of trends longer term?

Yes. Thanks, Sheila. We had said in October that would be in the lower to mid-single digits, which best I can tell everybody is interpreting is 2 to 4 and now we're at 1 to 3. So it's a it's a close call there. And again, I'm the accountable exec here for given the guidance with Michelle and my team. But I really tried to look at the current market conditions. Everything I see from not having a budget, at CR and supply chain risk, it seems appropriate to guide. So I don't see this as a major change from 90 days ago, but I'm trying to give you the visibility. I mean, basically, the only thing that really changed -- and I know it gets a little complicated as we went from 4 segments to 3, but we can talk about that later. But we filed more than enough documents with the SEC and our trying to bridge it. But IMS and CS basically did not change from October. Those were kind of in the 2% to 4% range. As I said, the big changes in SAS, we can argue how big a change that was. But clearly, downward pressure on the top line. And as I mentioned in an earlier comment or response, most of that is driven by the air domain and F-35 specifically. The good news is that's a well-known program that everybody has visibility into. So we have confidence that as we negotiate lots 16 and 17, prepare for the cut in of our technology on Lot 15, that there's a lot of certainty and predictability in our revenue stream. So we do see '23, '24, '25 coming back. Longer term, just within SAS, I mean I really like what we're doing in the Space…

Our next question comes from the line of Robert Stallard with Vertical Research.

Chris, you commented about -- so you had a good year on the export side in 2021. I was wondering what your expectations are for 2022? Whether these are various tensions around the world, particularly in Eastern Europe could have some benefits for orders?

Yes. No, Robert, good point. I mean for the last couple of years, our international business has been growing double digit. And I think our strategy, which is somewhat unique, I think, compared to others. We have focused countries, 10 focus countries, where we have executives full time in the countries. And then we use our distributors and reps more for the product. So it seems to be paying off, and we've been able to see that grow. I mean beyond '22 and beyond, we're seeing mid-single-digit growth. But as you said, anything can change rather quickly, especially in the European area. So our Tactical Communications business is generally a quick turn business, and I think could be pretty opportunistic as well as our Night Vision business. So we're always available for quick turns when tensions get tight or there's new demand or requests. So I think there could be some potential growth upside that we haven't completely factored in. And again, a lot of our products that I alluded to are more on the defensive side. So ISR situational awareness has always been key. We've migrated to the biz jets and we've talked about the success of that strategy and programs in NATO and the Mid-East. And again, we have multiple other countries we're working with over the next few years. And then we also, being somewhat -- I hate to say, platform agnostic, but we're working with different parts of the world. We have King Air ISR capabilities. We have large aircraft and bizjets. So they're all working reasonably well. We'll let you know as things move forward in the international world, but optimistic for 2022.

Our next question comes from the line of Mike Maugeri with Wolfe Research.

Following on Peter's question from earlier, sort of taking a step from the '22 free cash guide out of a year. Is $3 billion or better what we should be looking at for 2023? And then is free cash growth in 2023 all earnings growth? Or where, if we can, should we expect to see you to continue to generate working capital efficiency out in '23?

Yes. Thanks, Mike. Let me take that in reverse order. We absolutely expect to continue to see working cap improvement. We've talked aspirationally of getting down to the low 40s. We ended the year at 52 for 2021, 52 working capital days. We should be able to take out a few more days in '22, which still gives us a long runway for '23 and beyond. So notwithstanding the R&D item, which everybody is confident will be repealed or deferred for 4 years, but haven't happened yet. So we figured we'd just give guidance, give you the pieces. But we've effectively kind of guided to a 2.8 to 2.9 for 2022, if you use the midpoint of the R&D 600 to 700. So that should put us on track to get close or around the $3 billion mark in 2023. Starting with top line growth, which will generate more OI in earnings. And then, of course, the working capital. I tried to look at maybe implied in your question, if we go back a couple of years or 2.5 years, we talked about getting to $3 billion in 2022. And obviously, coming up short. Just thought I'd hit that head on. I mean, clearly, we talked about some of the supply chain decisions we've made, which was a little bit of a headwind. At that time, we didn't know there'd be a stimulus bill that's affected social security payments. So many of us defer those payments back in 2020 for the rules, and now we're paying them back. So we have almost $100 million of social security payments that we have to pay in 2022 that's in our guidance. And we divested more businesses than we had initially modeled. So I continue to like to look at free cash flow per share. I went back to day 1. And while we don't really disclose or publish it, we had a plan of $14.50 on free cash flow 2.5 years ago in 2022. If you do the math today, I'll do it for you, we're at $14.80. So on our free cash flow per share, we're ahead of where we were kind of be 2.5 years ago, even though we're coming up short on the $3 billion. So hopefully, that might make sense and gave you all the answers to your question.

Our next question is coming from the line of Richard Safran with Seaport Global.

Michelle, welcome to the call. Once again, you're highlighting E3 as a tailwind in '22. I was curious as to how much runway you think you have left with respect to A3 cost savings? You've been reporting the E3's benefit to margins for quite some time. And I was just curious if you think longer term, you have continued room for meaningful improvement? In your answer, if you could get a bit more specific about where you think the additional benefit comes from?

Thanks. Great question. And the answer is obviously going to be yes. I think the system and the methodology we've put in place has been a success, and we expect it to continue. I mean to give you some -- historically, I think a lot of these continuous improvement programs start out focused on the supply chain, which is a good thing in direct labor optimization, and we do that. But we've taken a much broader approach, and one area is just the ability to improve our yield. So we're looking at our rolled throughput yield at all of our facilities. They come in different sizes and different flavors. But if we can obviously improve those, yields 5 basis points or 10 basis points, it just contributes to the bottom line. This year, we collapsed from 4 segments to 3. That brought us savings, any savings I get, I put under the E3 umbrella. But that brings about some savings. When we first merged, we had 19 sectors rolling up to these 4 segments. Today, we're down to 14. We might have sold 1 or 2. We collapsed a couple more. So we're getting synergies in the organizational structure. With the -- we've been investing in systems. We're putting in a manufacturing execution system in one of our large facilities that have a lot of manual and paper processes. Those are now getting updated, and everything is getting to be electronic. So I think that is already starting to show benefits, and the system is not even fully implemented yet. And we'll roll that out to other facilities and factories. We have a process that we call our perimeter cost, where we look at the entire cost of each and every facility. And we look where the big bucks are,…

Our next question comes from the line of Gautam Khanna with Cowen.

Hey, Chris, and welcome, Michelle. Wanted to just ask about capital allocation. So you've done a lot of divestments. Obviously, you're guiding $1.5 billion of buybacks. What's the appetite for M&A? Again, do you see any bigger opportunities presenting themselves? Or do you think it's going to be more of a tuck-in variety?

Yes, good question. Well, first of all, the 1.5 of buybacks is directly tied into the free cash flow guide. If the R&D matter gets resolved, that formally increase the free cash flow guide and bring up the buyback to $2 billion, just to be clear on that one. Yes, there's absolutely an appetite for M&A. We have a new leader in our strategy and M&A organization. And we've got a process where we've been looking strategically as to where we might want to make acquisitions. My -- you said big, it's always hard to quantify these adjectives. I mean, having come from L3, I'm probably not a huge fan of lots of little $50 million, $70 million, $100 million deals. It just causes a lot of challenges with integration and such. I think the multibillion, $5 billion and beyond, there aren't many targets, and that's a lot. So I'd say $0.5 billion, $1 billion, $1.5 billion type size to probably call those medium kind of makes sense. So as you know, there are a whole lot of opportunities out there, but we're in discussions proactively and reactively. Nothing on the horizon or foreseeable. I mean, if we make an acquisition in 2022, that would be great. If we don't, we don't. It's not like burning platform, but we're running a disciplined process. We initially started by looking at things strategically. Followed by operationally, if we were to buy it, what are we going to do? How are we going to integrate it? How do we keep the workforce? Do we move people to keep them separate? What are the synergies? I think with the big merger we just did, we have a lot of talent and skills in figuring out revenue and cost synergies. And then financially, working with Michelle, we'll figure out the hurdle rates and the cash returns and the more traditional piece. But that would be the order that goes in. I'll just comment. I think a lot of people have been asking about some of the recent news surrounding Aerojet Rocketdyne, and that decision's impact on the industry. And I know there's different commentary out there, but I'm not familiar with the details of that decision or the rationale, but it seemed to be specific to vertical integration. So relative to what we're thinking about, I don't expect any opposition or hurdles if and when we get to the point where we need to have approvals. And that's something we would consider and evaluate before moving forward. But I think it's business as usual from my perspective, for L3Harris relative to our portfolio, and the things we might consider down the road.

Our next question comes from the line of Ron Epstein with Bank of America.

It's actually Elizabeth on for Ron this morning. I just wanted to follow on to the last question, I think you hit on a little bit. But given what we've seen in the new administration, do you think in general, the environment for defensive M&A has changed? So you said not for you, but maybe just in general, do you think it's changed? In many ways, do you think big defense M& A is over?

Yes. No. Elizabeth, I would think these decisions and policies change administration by administration. So with the current administration, it would appear that, that big M& A, if that was considered big, is potentially over, at least until there's a change in administration at some future point who may or may not have new policies. So as I said, I haven't really looked at and probably won't have the time to figure out what the specific case was. But I think it's always a predisposition for more competition and less vertical integration. And when I look at the L3Harris merger, that went through relatively quickly. It was complementary. We're now in all 5 domains. It made perfect sense. It was just a very small business that did have -- wouldn't allow for competition. So it was divested. So I think you can look at these things pretty quickly and figure out if they're going to go through or not. And I continue to believe that there's -- from our perspective, there will be plenty of opportunities. I think at some point, there's a reluctance to have really big guys get bigger. So I kind of like where I am relative to the real big guys. So that's how I see it from my perspective. We're going to run our playbook and see what happens. And others either will or won't be in the game, but I like where we are.

Our next question is from the line of Robert Spingarn with Melius Research.

Welcome, Michelle. Two quick things. Chris, on the talent side, how difficult is it to get people? And what kind of labor inflation are you seeing? And how is that impacting fixed-price contracts? And then, Michelle, just on the tax situation, if you could give us the mechanics? We've been talking about this with everybody for a week. But what are the mechanics of this higher tax rate? Will you pay cash taxes at the higher rate quarterly until you find out what's going to happen and then if you could just clarify that.

Yes. So I'll start from an R&D perspective. And you're right, there has been a lot of fluidity in the calls this week. And so just to reiterate what we have in our guidance. So our free cash flow assumes with the $2.15 billion to $2.25 billion, that assumes $600 million to $700 million related to the R&D tax amortization. And I think it's important to note that this is the tax call that's in effect today, right? So as part of the 2017 Tax Cuts and Jobs Act. And so barring a repeal or deferment, this will have an impact on our results. And so for us, it's about $2 billion over 5 years, and then it goes away. So that will go down to 0. I think to the point about paying it, not paying it, that's certainly something that we're looking at right now. But just to give you a sense of kind of the fluidity you're seeing through the other primes, it really comes down to a couple of different things. One is, clearly, you have everybody understands what they're paying from an IRR perspective. But where the interpretation comes in is around the crowd. And then what you apply to the crowd in terms of overhead and fringe on top of that. And so that's where you're seeing the ranges across each of the different peer companies. And so we're going to work through in terms of what the cash payments will look like, and that's discussions that we're having internally right now. But I think what's more important if we were to take this back to a macro level, it's important that we continue to press on the real issue here, which is we need to get this repealed or we need to get it deferred. It is going to be a huge impact from an overall U.S. competitiveness perspective. And so ensuring that this gets delayed, it is important to continue to drive the innovation that we think about and keeping the U.S. at the cutting edge of innovation.

Thanks, Michelle. And Michelle and I have spent a little bit of time with the tax department in her first week. And it's just a world-class organization. And when you look at the metrics, whether it's our effective tax rate relative to others, if you look at our R&D tax credit, which is not what we're talking about now relative to others and the percentages, I think we just got a great organization there and we're seeing that in our financial results. So going to the talent question, which is a great question. Actually, in 2021, we hired 8,000 new people. And I talked about COVID earlier, and we opened the office and kind of got back to whatever the new norm was in December. And it was interesting because at that time, half of those employees, 4,000, have never even been to a L3Harris facility, with FedEx, on laptops and do everything via Zoom. So talking about a new -- kind of a new world here. But we've hired 8,000. We're probably going to hire another 8,000 this year. We're seeing a little bit of inflation or most of the inflation is at the entry level. We haven't really seen that at the higher levels or the executive levels yet. Maybe that comes later in 2022. But a lot of this depends on geography, and half our workforce seems to be in Florida and Texas. And those seem to be places that people enjoy living and working or moving to. So we've been a little more fortunate maybe just based on the geography. We get about 1,000 new college grads a year. We have a whole process as to how to recruit those through key schools, focused schools. And we've maintained our internship program the last 2 years, even during the pandemic. Unfortunately, those -- we're all remote. But I think I told you back in 2020, we extended offers, we honor those offers. All those things kind of contribute and pay off. And my goal and the team's goal is to have an engaged workforce that's excited to come to work every day and help with our mission. We do periodic engagement surveys to track that. So I think we're doing everything we can. A big believer in flexible work schedules. And we've got a whole variety of ways to have the workforce stay engaged and contribute. But clearly, a watch item. But so far, so good. I mentioned F-35 earlier and some of the challenges that, that program has had. We've been fortunate to have a highly engaged workforce holidays, weekends, over time and been able to maintain that staffing even through the pandemic and meet our milestones. So hopefully, that helps, Robert.

Our next question is coming from the line of Michael Ciarmoli with Truist Securities.

Welcome, Michelle. Chris, I just wanted to go back, I think, to maybe Sheila's question on what really changed in SAS? And maybe even dovetailing in kind of programs that are being impacted by the continuing resolution. But I think you kind of called out the biggest, being the F-35. And it seems like that would have been a known sort of headwind, I guess, in October. So were there any other big specific programmatic changes or programs that you can't start up because of the continuing resolution that are weighing on that kind of growth rate?

Yes, good question. No, I mean, the F-35 is a pretty program, right? So we follow the prime -- and as quantities and strategies change relative to what's going to be retrofitted and what's not and such, and I'm talking about all F-35, which we have crypto capabilities. We have displays. We have bomb racks and of course, TR3. So it's a broad portfolio of just under $1 billion of revenue. So it changes on a regular basis. I can assure you. But it's a fair point. We didn't have it at 150 last time we talked. But relative to the CR, it's probably won't be a satisfying question. It's not the fact that I think just the fact that we have a CR has caused the contracting organization and our customers just to defer and delay making awards. So -- which is kind of an indirect impact. I mean there are programs that have been awarded that the follow-on work is limited to the prior year dollars. The new work can't get started. So these aren't getting awarded. And we just see a huge backlog of things that just haven't been awarded. So a lot of these are in the space of the classified arena. And most of the space work is domestic. They don't have a big international footprint as an example. EWs and electronic warfare and mission avionics, again, most of those programs we're supporting an OEM. So we need them to go ahead and get their orders before putting us under contract. So it just feels like a big delay. I think as soon as we get a budget, as soon as there's more certainty, things will kind of open up and then the floodgates will open. But until now, we're probably erring on the side of conservatism. But like I said, based on the current conditions, we're standing by this guidance until things change for the better. And if and when that happens, we'll update you accordingly.

Our final question comes from Pete Skibitski with Alembic Global.

Chris, I had a quick program question. I was wondering if you could update us on what the Navy and Air Force's plans are to replace the E6Bs, E4Bs? I think that was supposed to be a combined program at one point. I don't know where it is today, but I also know it's kind of right up IMS' alley in potentially a pretty big opportunity. So I was just wondering what your thoughts are on the timing and the sizing of that? And if that's something that DoD can actually fund?

Yes. Yes. No, it's right up our alley for the ISR IMS organization. But also those programs, as we do more and more cross-segment work involves BCS and some of the comms team as well. So the one thing I think we're doing a much better job on and what we've been doing since the merger is pulling in other sectors and other segments and looking at some of these things holistically. So yes, IMS will take the lead, but we'll be able to pull through. The E6Bs, I think that's one that we were hoping for last year, and it continues to slide. We'll have to follow up with you with the exact dollar opportunities. It's on our priority of pursuit list to get both of those programs. But I think it's a '22 program. But with all the things that I talked about, it could slip into '23. So -- we'll get you more information on that one, Pete.

All right. Well, look, before we sign off, again, I want to welcome Michelle. Obviously, she's hit the ground running. I'd also like to acknowledge the dedication and hard work and perseverance of our 47,000 employees worldwide. We've continued to perform well in a constantly changing environment. They've had to deal with different work schedules, locations, vaccine mandates, all while navigating through a pretty large merger of equals. So -- at the end of the day, we have a great team here at L3Harris. I'm excited about the opportunities ahead as our company enters the third year post merger. Look forward to meeting and talking with everyone over the next few months, introducing Michelle. And then we'll be back in April for our first quarter call. So thank you all for joining. Have a great day.

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