NOC - Earnings call transcript Q4 2018 | Northrop Grumman Corporation

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Operator

Good day, ladies and gentlemen, and welcome to Northrop Grumman's Fourth Quarter and Year-end 2018 Conference Call. Today's call is being recorded. My name is Natalia, and I will be your operator today. [Operator Instructions]. I would now like to turn the call over to your host, Mr. Vice Relations. and Treasurer Movius, President, Investor Steve Mr. Movius, please proceed.

Stephen Movius

Northrop Quarter and Natalia, and Year Fourth to welcome Call. Thanks, Full Grumman's XXXX Conference

refer plan Investor to Relations presentation PowerPoint an updated IR Ken to to posted post remarks. will the overview Bedingfield's we our during web that today, Later webpage. corporate to page We is a

forward-looking safe we please understand earnings call, provisions and expectations guidance, on securities start, that revenue, today's laws. to Before current cash and statements of federal constitute trends, including harbor matters discussed pursuant thinking on

measures Forward-looking statements results uncertainties, earnings our and which filings. in include Matters noted supplemental that uncertainties and and are release financial today's differ risks to release our presentation. are involve risks on reconciled These company and today's will discussed press in actual PowerPoint materially. may cause call SEC non-GAAP

as method mark-to-market postretirement adopted of and of accounting we December other Specifically, our pension benefits. the XX, for

and losses, years information XXXX method accounting. provides earnings Schedule and Table and and release compensation with for earnings impacts the X pension our incentive X net impact. benefit to and useful EPS our consistency non-GAAP will refer consistent of for guidance, earnings comparability adjusted gains quarterly and tax-related of is on recast call results the share results define nonoperational recast mark-to-market mark-to-market the adjusted the benefit GAAP excluding the and the per the for earning and adjusted We net management impacts. are as operating non-GAAP postretirement our reconciles XXXX, is in impact it measures of before historical guidance. measures. for depicts supplemental expense or and information and as XXXX today's measure For performance, net to release adjusted These and measures mark-to-market other believe mark-to-market how to provides earnings and determines references We of XXXX earnings earnings underlying its results, actuarial our of

like the On the Bedingfield, our over turn to to CFO. Warden, President; call time, Kathy. At and CEO today and call are Kathy Ken I'd our this

Kathy Warden

Thank joining for Thanks you, today. Steve, and hello, everyone. us

our also we're of this I'll and XXXX. color highlighting In year's provide on addition XXXX discuss and important thinking achievements, some outlook our about for trends how to reviewing operational currently into some results

operational in First, up was capstone enable and report company. the for Grumman to us thank The I'll our year's was acquisition of team This the and I'm customers and continued the excellent their our our another on Northrop sector. for delivering year as fourth outcome that billion or I are XXXX also continue our we strong drove $X.X of ATK and of was to sales, our Innovation shareholders. focus stand through Systems, XXXX achievements with Systems on immediately employees at sales to XX% pleased increase IS, integrate and Orbital June XX% as growth increase very performance quarter successfully trending all cost Systems, for XX% and to Mission the continue X of and the a in Innovation synergies. revenue would favorably we at increased synergies along target sectors. sales growth Systems on note of and Aerospace for total reflecting The a that organic international our efforts transaction completion of earnings, accretive The addition year. to fourth growth.

expansion, for XX% full in segment million quarter, growth increase in in XX% margin operating rate a operating coupled than sales a those drove Our with and the the income $XXX more to increase strong year. fourth segment periods,

to in share increased the share segment fourth the XX%. Adjusted $X.XX year. earnings and addition three per the quarter XX.X% and operating the Grumman contribution for In for all rate XX.X% than and for operating more increased margin IS, XXXX increased earnings legacy Northrop income quarter to full increased by per to at quarter, adjusted for sectors the

New XXXX billion, more particularly which strong billion Systems $XX in backlog reflects than Innovation XXXX $X.X robust at was $XX.X at X.Xx. at total Mission Book-to-bill billion. with were at Systems. of a awards backlog in We ended

strong cash generation. had also We

from Before discretionary and more operations increased $X.X cash to pension billion, before by contribution, pension to free billion. $X contribution increased XXXX than cash billion flow $X.X discretionary approximately

for to generation Our strong the enabled our shareholders. cash cash sheet balance managing us to investing continue profitable returning and growth,

made our in and dividends, retired plans. totaling $X.X of our invest price we billion distributions to was The that flow. legacy January. shares reflect $X announced Through cash CapEx, pension share or Grumman The distributed of voluntary to approximately ATK at X.XX and XX% we early average $X.X continue to share Northrop Orbital and in free to November per of repurchases dividend We These X increases shareholders debt, in repurchases retired quarterly billion. XX% accelerated an completed and contributions $XXX ASR million share. repurchase approximately billion share

coming XX% units, At X.X-day more F-XX MS. interval delivered we All to start XXX Aerospace revenue we line In achieved across company with of our will which in drove modules, participate expect both At increased program. Aerospace, periods. was the either grow AS Aircraft, vast of top sales XX%. F-XX activities and approximately highlight approaching sensors we the nearly company sustainment. revenue arrays, XXXX. revenue sales, with program MS restricted or higher at high multifunction totaled turning billion, an XX% a which Manned X DAS mid- production in level, in in XXX We $X XXX this F-XX represented a radar growth delivered production single-digit which I'll Mission year-over-year majority from operational XXXX. F-XX At through highlights. F-XX of Now the in X,XXX in of the in at sales XXXX, that XXXX. and sectors than approximately for rate at increase and key to Systems, XX CNI A was

a be program development Aircraft review post-critical roughly and equal with is with expect This a Manned that revenue defense to restricted design from executing XXXX. profile successfully. that revenue We XXXX major of is program consistent

areas for AS, the contract with a discussions growth program. second we at multiyear other Regarding are E-XD the of on in Navy

for multiyear XX progressing toward completion. first Our is planes

And advantages a fire The deliveries array will as SABR With $X.X orders to of production MS, in fixed-wing Systems, system. fourth date at for in electronically helicopters Under radar and deployment up the active CIRCM on respect toward us Air control a and MS is systems We're unified now [indiscernible] with up ID/IQ, XXX XXXX. additional success and Also Air the XX is significant upgrade X. secured support awarded the comparison the infrared to competed may over initial large plan also Force been in effort team extended and XXXX at Japan. the our capability for work up recently with to in Guard has offers to achievements, orders years, production. March multiyear the Boeing systems. continue additional field the systems. airborne record the aircraft Air F/A-XX set proposal and CIRCM F-XX scanned progressing ceiling we the a 'XX our aircraft XXX for for support total X contracts Systems multiyear of are of system The additional international cyber, XXXX. for the addition world. fixed-wing ramp amount now aircraft fiscal Force and traditional issue training won for SABR discussions platform task the program. rate systems through totaling has contract, under production countermeasures on new Mission a Army F-XX LRIPs U.S. the power conclude to including the to The XX also currently And or Initial business, operational supporting to year delivery of X,XXX weight schedule. LAIRCM, National solidifying the full testing billion to The command. Navy on customers. over proposal performing program. the progressing program Mission rotary around ID/IQ leading multiyear operational SABR's preparation in the we begin in is aircraft. five cyber awards, production requested on thereafter. shortly position contract for and for on in aircraft plans program through SMS to program has for With first radar to With FY delivered countermeasure size,

ground X will U.S. and Evolvable develop, for destinations. system. brings the deliver enabling underlying the Vehicle and Orion capabilities the build of command. to cyber of in Expendable closer for a explore NASA's other spacecraft Orion compete test abort to operations the core for In to abort down-select the We XXXX, space Systems we OTAs late of firing two integrated the rocket we milestone received this war-fighting completion performed to launch flight, Mars The defensive cyber deep successfully Innovation offenses development its the fourth quarter, motor one for At the program. providers and first enabling step ultimate X of OmegA Launch for humans moon, and

million in award least awards meet long-term Security to providers support a requirements. expanding $XXX in program coming we are the ITSSC that launch phase is domestic of received Administration, We At where develop competitive this we important program. XXXX. for of number solutions Services, have to first launch two The order Technology at space national service security under this a received our Social

on posture of future. million several and areas: working and numerous development, Global for we activities operation. also Services a to we and infrastructure, supporting been Global single IT to products business business their Services TS business secured Northrop Services. systems, called cyber position new received maximizing Australia area into and are we and new steps through for TS strategic Modernization cycle. two Services to Advanced training And has operational consolidated Our as sustainment, full look and software continuing modernization, new started work includes ensure growth cloud Defense efficiencies networking, $XXX Grumman System awards, We've taken life approximately the

the as technologies, portfolio the across Systems, the and and to As services well as evolving Security Strategy. remain we advanced of very the country's R&D security National portfolio, Innovation Strategy necessary investments, the our With expenditure in our we positioned. National the addition products needs, national missions context support capital and well look in highlighted our Defense has of

aligned Missile released the Review. recently We the with in are outlined well framework Defense also

our nation's Our missiles, missions. unique national on and counter-hypersonics, capabilities evolving security to emphasis us support cyber, agility, in our allows and space,

briefly FY address Now me the the 'XX government shutdown partial budget let outlook. and

of started fiscal that XXXX budgets the We are agencies, many federal Defense, including with in encouraged Department place. year

including continuing Security, until down under customers operating of resolution However, important a other are and Homeland February and the now NASA Department were XX. shut

another While seen financial there yet we could is impact, shutdown resolution. if or have change continuing significant a this not long-term

in outlined not including the National budget we focus and encouraged been has yet prioritization While the 'XX request modernization finalized, the recapitalization. are on nuclear the capabilities Strategy, the nation's Defense FY our of by

and and fiscal the unless budget agree President established Budget Control a the years However, by return XXXX. Congress Act XXXX on the deal, spending for will cap

be anticipate a significantly for non-defense we the defense deal will once again reached, reduce activities. caps spending While and could

So turning to guidance. XXXX

segment approximately strong We growth, mid-single-digit in of expect billion, double-digit full operating growth Systems. XXXX with maintaining margin, $XX a year reflecting sales Innovation while to along organic

Assuming expect continued currently we support growth the strong the in security Strategy, continue capabilities and spending, outlined national to for mid-single-digit in sales XXXX. National Defense

discussion margin should Our provide Ken I'll can for our flows to adjusted and results, double-digit allocation call we're growth, guidance results, consistent trends. that we our growth cash a capital solid of strong XXXX. the achieve and Ken? confident incentivized team guide XXXX to robust and value-creating performance now top is EPS and to that strong detailed over line from enable more the turn financial

Kenneth Bedingfield

I'll on team minutes a this also our good thank and discuss spend detail. to strong afternoon, our everyone. XXXX guidance Kathy, Today, year's performance. in for results, more also and few Thanks, I want XXXX

standard that recognition recast revenue XXXX, As for pension both adopted presentation and I accounting of updates the at the cost beginning remind review periods I'll prior you XXXX. adoption of for are

accounting for recast also mark-to-market our announced previously pension change. We

$XX grew XXXX Turning X%. to more results. billion, than sector sales Aerospace the quarter. for up to Systems up X% were sales

the operating about AS of the year-over-year increase, grown business of that year-over-year Space, restricted Manned and areas, Aircraft the line improved managing substantial XXXX and fourth top Systems, would posted the maintaining Systems. Manned Manned Autonomous full the note since Autonomous sales and quarter driven While has for increased done while and for activities all great of X% the income a growth. a I F-XX Aircraft, drove Aircraft performance team XX% amount XX% has by AS and X revenue. job by growth of year, in strong program higher rapid AS that and performance

Manned a Aircraft principally strong driven rate, achieved full Systems Autonomous we by performance. and XX.X% year, again For the margin program

XXXX, to billion its rate we grow $XX expect to range. the at high For line mid-single-digit AS top a

line top areas. all X business for growth continued in guidance Our calls

operating At comparisons, mid- volume to sales pro We X% on forma and expect margin a higher Systems. Systems, high sales to XXXX. AS in based rate Innovation XX% due Defense at quarter Flight at rose fourth

For business XX% the X year, all areas, including sales. increase in sales increased international than growth XX%, in a by more driven

in For as approach XXXX but XXXX, now the up a XX%, offset we that to by expected is programs international XXXX sales. are Growth to billion international sales cycle partially decline range. of shorter XXXX IS sales lower couple to by XX% about expect winding in will are expected high increase $X be U.S. to sales down. ramped

XXXX a beyond However, IS as we it international solid part key our of plans. remains growth expect growth

the range. in be will IS at rate margin XXXX mid-XX% expect We

rose driven up Processing quarter in year Systems. volume to higher Turning due to X% programs. full and F-XX sales Sensors and communications, restricted and Sensors Processing primarily X%, and growth was volume on Fourth programs. Mission by quarter fourth

For Processing reflects of the approximately year, X% self-protection volume infrared communications, Sensors and for higher programs. electro-optical growth F-XX and restricted,

Mission operating Sensors to throughout basis XX.X%. point half XXX out restricted program Cyber ISR XXXX, and drove and were and lower gains Sensors and sales. program. about discussed performance of operating would fourth the by the margin we've ISR, a on that ramp-down partially Advanced JRDC increased Processing these quarter rose I and a offset Capabilities, rate points Higher volume represents of MS As XX% at and performance. improved volume and strong Processing at Systems income

the year, margin and ISR, Processing income Cyber improved higher XX%, volume full rate at and to programs. reflecting Sensors X% in Processing and For rose operating and increased and operating performance and Sensors

rate line expect a Mission mid-$XX top grow mid-single-digit margin XXXX, to XX%. billion of strong to at operating continued to approximately For with we range the rate Systems' low

in partially line in previously growth from million a we've JRDC Services to all periods. and to due growth XX% X% margin revenue operating Technology contract primarily discussed, program. both is expect and quarter XXXX. several areas declined principally Services IT programs full due business as XXXX quarter to Technology in outsourcing being SEMA. income We or ramp-downs these offset at both top year closeout X programs fourth XX.X% increased for sales in by rate, such KC-XX state other programs fourth Lower $XXX impacts

rate, offset income For result lower contract XXXX, a X% a the XX.X%, which largely to by to decreased increased operating noted of as due closeout partially volume, higher margin impacts.

For $X Technology XXXX, will we sales with expect operating Services X% high range, mid- billion be low rate. to in a margin the

As that we margin expect of rate we operating sales to the roll mid-XX% with in low a segment all billion, range. $XX up, approximately

a of unallocated $XXX Systems. net unallocated XX% result million. summarizes ongoing estimates interest X nonrecurring for couple rate $XXX high items, changes in through and adjustment corporate expected will contemplates over $XXX similar our which of PowerPoint our approximately on portion mark-to-market expect $XX $XXX PP&E Slides rate years about margin benefit of million included noncash of planned and of total and expense assets FAS/CAS as million. pension range, are be our return X% the billion I'd mid- deck On the assumptions XXXX X expense reflecting other depreciation reflects also other any We in that XXXX amortization caution of gains, about sensitivities X impact. assumptions. X FAS pension approximately well operating to of on our XXXX long-term Slide an XXXX, other the million related the about unallocated XXXX operating and a million $XX integration million of as and rate is you on guidance I'd our summarize and based approximately X.XX% and income. to $XXX to a discount months Innovation note of for of XXXX asset in exclude modeling intangible of pension, so step-up of expense a estimated income cash interest income XXXX corporate

is weighted our approximately adjusted from on to We rate adjusted a XXXX. based in share $XX.XX outstanding. mid-XX% of of to Slide provided And million an effective tax X, XXXX $XX.XX of adjusted EPS XXXX XXX bridge to our On $XX.XX earnings $XX expect we $XX. guidance guidance of shares average per mark-to-market EPS

about about XXXX, intangibles FAS in income would pension to segment due get continue Grumman example For share I full our amortization This corporate about the by $XXX benefit year aspects is per asset CAS It's we important you to the million bridge which expense $X.XX by year off about EPS profitable XXXX includes X is relentless the also a to will and the XXXX operating a all XXXX depreciation. our at team management. of note see of reduces CAS reduction with X-year higher full EPS $X. we in is the on focus settlement sizable recovery higher To structural $X lower of charts. affordability in claim recovery expect in and dollar-for-dollar reduce PP&E in of cause competitiveness on also purchased note as of legacy tangent, Systems. the EPS working reduction resulted unallocated required next reduces and Northrop and Innovation a $X.XX by liability and lower benefit sustainable funding, step-up Slide total that another and of period can less as growth over $X.XX. of my our than expect recovery the that Lower pension and sectors CAS an

prior lower The in from taxes, bridge to at -- impact benefits. XXXX our in reflected XX% XXXX of mid-XX% XX.X% help and XXXX. to other you the That an XXXX increase EPS should XXXX tax versus $X.XX. rate year tax Looking rate about is

to a finish as we pattern, cash, XXXX. had is typical our strong Regarding

$XXX between pretax will we of cash little second of nearly IS after benefited seasonality expenditures approximately billion. from a Before of than about $X.X the and $X.X In weighted cash billion, $X operations cash, billion XXXX free billion, to capital our flow flow cash to CapEx more $X are I'll after was billion, range expect heavily half $X.X of flows billion. free from contributions, from discretionary which $X.X million and totaled billion, that you the of cash year. and expect the cash we operations pension of remind $X.XX $X.X billion XXXX,

For purchases we current retire and intend to $XXX approximately XXXX, conditions, of are $XXX about we million, in assuming market share planning million debt.

Our in peaked capital will of and we about should and our of XXXX also majority flow declining should what the of that incrementally be to expenditures cash cash of sales given I'd XXXX, see these business factors, now, X.X% XXXX. generated on begin generator beyond. Based a strong vast operations. in this be note into free all by

million Given 'XX $X.X expect our we $XXX and and recoveries $XXX in assumptions, current 'XX, million, billion of respectively. CAS XXXX,

less from profile Slide XXXX of net is This about the For shown cash operations. example, at XX. XX% is midpoint defined recovery, of after-tax pension on guidance, funding, cash as CAS,

required $XXX 'XX, in they million million not $XXX in in exceed will after while XXXX, likely million to are and 'XX Our required $XX increase is expected funding approximately CAS. contributions And XXXX.

growth, creation expect continue performance Kathy through said, generation as thoughtful combination as strong So well robust we as and cash to allocation. value capital of a

I ready for think Steve? we're Q&A.

Stephen Movius

Thanks, the you Natalie, open will line? Ken. [Operator Instructions].

Operator

Instructions]. [Operator

line the Vertical. Rob Stallard from is with question first Your of

Robert Stallard

question your a on Kathy, So comments.

was Manned well? And likely change to in in Are expected some margin accelerate the off -- XXXX? the Can of to from is that revenues you any restricted a there how progress level start profile again restricted area, area this expected said give the to You us as is year. program, XXXX? idea beyond Aerospace this program

Kathy Warden

in Rob, provide some I'm about our but to I can into I'm which I to current insight I XXXX. into want factors the did say what year you all of it the appreciate referring, limited question. program how guidance,

its we is were, that program typically leveling that's with off, completed a see sales and my review. critical in that, so comments would and what And we see consistent executing is design well that

years that, or either more expect, can't of in future the really about comment what the performance program. I any Beyond on we

Robert Stallard

something instead, try else Okay. then? Can I

Kathy Warden

Yes.

Robert Stallard

Okay.

products mentioned this XXXX a on Systems things and could more if stepping are of side You was are what at clarity export growth wondering Innovation some the you exactly I again. strong that down give again services moving or up those year, going seeing are around. back bit

Kenneth Bedingfield

had systems just Rob, we'll orders deliveries growth ramped down of defense see business and strong to some in that do ramp and largely a munitions related timing programs. some And out I we the And would by XXXX made. growth strong just and the largely XXXX, here expect in on other those the XXXX, say were continued starting that and side the to weapons in are we of then early into XXXX beyond. driven up

but we good forward. look timing, good just as So programs and opportunities

Operator

Your Ron is America the of question with next from Merrill Lynch. Bank Epstein of line

Ronald Epstein

give do? into gave about cash of you investors, on on a among is least should to that. that's expect above trend question, given see you you but flow us think expectation, based point, some little speak at Can to XXXX. And probably accelerate about you're of us free bit we at I that programs on there with would your if that? could revenue trends we How You think, as kind color will flow cash some an EPS then, [indiscernible] the it I and think And guess, on. flavor you where growth like what the is, that

Kenneth Bedingfield

it's take here. So it I'll Ken Maybe order. Ron, reverse in

a we're growth that, will a expect we're past I At we threat would and very would yes, near-peer closely focus In this for And early out ours of lot happy of into would as review, we point, areas NDS and it, say, and look the generate out and view want that areas about developments. long cycle some revenue takes these drive I this some you it country past wouldn't to your growth want Strategy, between Defense on the that out to terms early and I is growth of move 'XX of profile And peer, other moving the and National development our of nice of deals time. missile here that Security with number This ever-increasing countries. of from a XXXX. production. with other time say Strategy, say do I aligned defense awards that very we're take positioned, of ultimate there. and business, these National parts profile, to And how seeing put turning a those

want You get it to done right.

You your volume to or don't perturbate for to try of lines just want production to short factories period a drive your time.

So it a profile out, go cash that this our about we we strong working we mentioned to take be a is predict a we do measured from turn cash longer long-term that to you cash-generating ought a we quite the again, think able length an basis. cash 'XX. perspective, perspective, see the our growth. But 'XX approach saw to to from satisfied generate, harder capital. think business into obviously, it, EPS is we earnings as do the and to with strong From And what see. we're we Kathy of the

as our it We're well of a XXXX use And that to a at Just the And look potentially, past point. like. as see and growing to to in, take invested just you I model put some level a in on we going And and sales. probably would should cash programs we I in cash other low mentioned we see, have percentage this including example, in funding as with dollars of maybe CapEx information sales. a one some a probably reduce that amount we CAS to that in relatively what encourage as XXXX not generate then, would you start some capital opportunity things, profile. of number beyond then, of to working in couple XXXX, better think it working capital declining

Operator

next with is Sheila the Kahyaoglu from Jefferies. Your question of line

Sheila Kahyaoglu

terms about a beyond? how and 'XX -- we are driving in factors of little talk in it think coming And it? light? AS, and on margins do bit What mix can we about In leverage

Kenneth Bedingfield

early would work that rates quite been margin margin They've lot say they've we're has perspective, maintained on performing. and from I happy For a development how throughout. strong of AS, taken with Sheila, a team phase

and XXXX. XXXX I the we at are mix were guiding biggest in the and of for of as say, maybe margin, And beyond would guidance look where range we're drivers out performance. we well, As 'XX in looking margin, of obviously, kind

that programs, as down and realize and our if So to we able to risk we're some from rate about. out AS just think on to some people taking a early program to tend we opportunities point could margin is perspective. additional I one upside of see out some opportunities, would the perform continue look team on development sectors just phase not that additional that continues burn

management to I And earlier. also with today, keep of that range-bound we for rates of and providing mentioned will upside margin a where continue as to growth level certainly generation see but opportunity somewhat provide so some future production, probably it of course, the risk

Operator

the question line with from Goldman Noah Sachs. is next of Poponak Your

Noah Poponak

I kind call are up looks looks in -- The isn't what X XXXX do on go, are it you what TS I it market this it outlays -- want XXXX. of It on outgrow here on end given based have authority for basis. not a sort know of comment to time. to again, like, of could window said some the outgrowing call of like that know back looks multiyear so to of, companies that your of part saying. market have 'XX. quite your comment that definitively other I transitory translating actually So mid-single XXXX. here. of stuff are your and digit in doing, really think target don't you topic what happening of you didn't some it end based like in come or it I really And X-year happening. transitory, And what on going far outlays, organically happen in to it's you'll up commitment But in your you've what steering, not a there, based where XXXX don't peers

they do as constantly by for question we And market? end sit, mean we the And happening to end projecting isn't so just business? it the from in market? your What from realtime get are is specifically why that specifically the what where investors, variance the you

Kathy Warden

lesser and Ken add the look as with IS term. to of When tend in we about be term, to over X and, to at well. our cycles, business can look start, AS at talk beyond MS, And we long I'll and we our X long do particularly Noah, a growth business, it the trajectory extent, years.

for for state win revenue phase large the get generation when into bit time that there's where development. us program, a takes of plateau it so a a we ramp before ramp what is to couple some that production when work. talking And normalized the X-plus on. tends to we we last And on then, about to really new us process over you've associated talk term, seen taking significant long another Those, years with goes we're ramps up years. from And about of

And transition so given growth you any in at not may the of you in equal see year-to-year past. the a year, did rate as

long when that's what we about so we term. And talk mean

are with talk where about me we in the NDS. the alignment let Now

that growth rate out. the the We talked not are with platform about. small, portfolio. But years do They to the as relatively are we needle seeing our new for programs the start moving same X they come they large some programs then of into create and X have to so

into about And we will with we've the that so just long-term sense account. basis, a investment And more been you into the you talking in terms of a not program XXXX. represents material but see develop give alignment wanted guidance, that's of those on an that see talking about that over what XXXX time, trends growth to the we

Noah Poponak

of even mean, high a down years see you some maybe high duration -- like I the point visibility, you guess the in step a very Yes. pace. big current confidence that beyond rate degree sounds road maybe, five can sustaining in are with a at it versus function substantial the I it's that growth

Kathy Warden

programs, look have over rather long tend given When to than a a annual at view them decadal you cycle you view.

don't tend terms to term, talking is the that to And why more is what there's And course, so over given year. the that long yes, those in with comes guide a we uncertainty than that which about. we're programs of of commitment

that the we view well that seen in not lines have our environment talking threat is to our portfolio what but into today, And for Strategy the the good we that have Defense programs we're really that foundation are confidence just the for we However, National up the alignment well, aligned. that that drives future. create about

Kenneth Bedingfield

And just would think on Noah, is I your add, I point. comment

and about to 'XX. out next that XXXX. significantly, great ISR I if some and start our of rather have their about certainly grown capacity and drive then, from You you production AS range been we in lines, X% to just has MS, period. XXXX. be think rate rate point nice in in flatten the at how your exclude to much sooner to in will billion than that has 'XX, low if couple in right? program restricted had IS X% might And and in $X grow growth Obviously, TS, think of would a growth looking about probably and JRDC headwinds growing you expect in you the invest over We're XXXX. since want XXXX. it, XXXX, year production XX%

So I about think, overall, we good pretty it. feel

here you're doing pause about at would business international we right, about going little think IS, real nice have of in just the talked part well that long-term a revenue it growth in in think a to big I that bigger And sense how terms restructure a that's XXXX. XX% as that bit I as of trajectory here. there's little a as was

Operator

from Your line the is next question with Melius. Carter Copeland of

Carter Copeland

quick then, one revenue. and one, of off Just we're

simplifying assumption, Just a talk Kathy. about

looking wouldn't successfully. for it Just retirements critical design went risk any any us Is out to in with think of in Or that you reason was had your there but obviously, the review is to through what that, call be big QX B-XX AS, assumed? case? you commentary, assume significance the safe you the performance didn't approximately at line that

Kathy Warden

know That booking would we rates, be about a When fair what into performance. we we about assessment, consideration think Carter. and programs take our

tend very the And well, And rate so team in little to large performing incentivize our there booking based to we have when position, is on they not volatility are performance. variation.

Carter Copeland

what there missing. I wanted to sure assumed. I That's wasn't would just Okay. make something have

Operator

is Seth with line Seifman next question of JPMorgan. the Your from

Seth Seifman

terms Systems moment, about and F-XX. to components just, for some talk of a of you the mentioned in I wanted Aerospace

think you high growing, Manned of would kind that think takes to And segment the is single. not I said Restricted mid- I then, down whole if further.

the And about what's get to enabling you to of the of other think you if X% sort there, you're so pieces to kind X% that forecasting.

Kenneth Bedingfield

would single the there portfolio division, like the growth We mid- space, some of restricted about if autonomous we've it, in the see to certainly growth I for at, requirements Space things. particularly high F-XX of we opportunities mentioned, Systems, of other question, as the resiliency digit. you across in the in area addressing Seth. new and think yes, got Thanks say,

at growth largely So the nice AS. portfolio across

the programs. mentioned, new of some areas Some Strategy. Defense in the addressing production some And continued National growth of then, I that development other work

and progressing I Triton a nicely E-XD see profile. production we think is and XXXX growth on has growth beyond. that in nice in

portfolio think I so the diverse And it's there. pretty across

Seth Seifman

a resumed out And 'XX? Restricted? And Manned real growth quick. then, follow-up flatten you've in then, just in maybe Does F-XX

Kenneth Bedingfield

AS revenue is that share our would we sustainment sustained continue thought to reach in see in volume growth it's do look expect My the But revenue whether continue to in various that forward. Systems, growth or prices would range. on expect MS and out. will among to see the production at mid-single-digit to see across our level expect that fair the a given peak. should Electronic we life on We XXXX, continue. amount over you at a as it on pretty of as the that that Ultimately, decrease, see And the gap, And F-XX is we we that more sustainment fill at probably should start of of point should program, that to program. a production position only F-XX would

Operator

of Your Baird. next Arment the question Peter with is from line

Peter Arment

further M&A either consolidation TS. in thinking consolidation or particular, Maybe -- beyond. just in you TS, your any us some other give you're around could see XXXX within Kathy, and efforts you opportunities thoughts on whether you about some mentioned that portfolio shaping

Kathy Warden

Thanks, Peter.

portfolio a come And mentioned services areas services well I lay analytics high-end and X, the out create TS, businesses operations together, of executing as that to in more in get focuses intended business able to intelligence. into that Services, after and X and cyber, care, platform of services on as has IT and lower-end health is it's just a been IT for for integrated as Global a the outsourcing. growth of really, transitioning to strategy So out to competitive that consolidation

accomplished the competitive have segment I'm and can capabilities a of now bring we market. has there. growing And positioned to We begin that proud to what so that of team set and offerings the

business. piece is We, that So grow. my have growing of modernization intention to the enable NTS to the in we internationally. both to continue expect growth that logistics already been team this course, of year and domestically And and

just X are business but the performance, so through in 'XX, of And the beyond. both pieces aligned good not in

Operator

question next from Rajeev line Stanley. Morgan of Your Lalwani is the with

Rajeev Lalwani

and pretty Northrop of start to decelerate wanted process the around time, having CapEx more you going materially. that start I revenues materially, harvesting the accelerating to for same some an reconcile comment just sort to help at about me earlier expectation but through just Is like to if that those going into something earlier? some provided then, spending would spending of is something side you Ken, And play the that's for and on? been how you implications numbers, were that else come there win GBSD occurring? Or the

Kenneth Bedingfield

I to harvesting. to saw we're doing the investment we that take that position grow that and those was facilities. all we're or We've and in And lines, in my saw grow to this to those it invested business, we ourselves that to ability and I want for the drive the today. the made, grow what wouldn't say growth of the I going able it that at tools, what business. are investment, performance would takes programs to seeing production is, as investments engineering given that, anything things to to view, drive we call we the business Sure. guess, off

nice we that the CapEx to will growth our while or potentially respect thoughts why before I continue would get on So as additional invested we're a to it to to fit CapEx within front. see profile our a the perturbating to CapEx a And we but business, downslope CapEx perturbating I But that don't the out-year expect trajectory for some to we've see with by a profile, be it GBSD, from that X, And that I driven of That's solid to perspective. profile. that see see. Could largely see ability the about don't I'd GBSD continuing win. will to get year post-XXXX we long-term our largely starting grow we're we blip profile. be a see on then, talked

Operator

the from with Keay is Hunter line Wolfe question Research. next Your of

Hunter Keay

what sales you what's you you could best Curious if scenario, missile comes and current a -- you expect the from what earnings the might say mix case us you total give And base or And know that over case? that also, in say rate years defense, company opportunities would knowing next about few generate the you growth post-OA? expect? to

Kenneth Bedingfield

of So on our -- I particular front me. guess, I in don't have number that

afternoon that. amount products, by major to it mixed Matt site by the going things will Investor our of this Relations and deck like sector, have overview updated in by division, are company And post We after a fair an to call. detail

IS. do I we that know perspective, of I think defense internationally. nice from profile add a see on I you one want it. having growth IBCS So both missile say, see it, we Kathy, growth, is would nice and at Certainly, and that if U.S. side a to anymore much of don't MS

Kathy Warden

and a the layers capabilities and capabilities to the I'd are Yes. to you missile review Hunter, different weapons and outlined there from missile the in the space counter-hypersonics that and classes, take required. needed support, tracking just back capabilities defense targeting,

that to MS. Ken IS and through capabilities through every those said, most ones of prominently as All sector company, in contribute are we our but

of pieces we as from of to line full the that see take and so assemble our part in And have but would you'd defense look company and against every capabilities, them required lens the they to the mission. support portfolio the up through what's being you'll in at company overview,

Operator

Myles is of from Walton the with Your next UBS. question line

Myles Walton

you're Year-on-year, IS can margins. bit looking flat. a little the Ken, talk for I about was hoping, maybe, you

came you just given for I million would you flowing And in obviously, in also, year-on-year, the track to otherwise XXXX? on integration, is about talk I of the that? run think, you would of it. synergies, imagine than still kind stronger the But $XXX rate 'XX anticipate the business. synergy sales are margin the would in Can the Kathy, if flat

Kenneth Bedingfield

X on of is IS hit year I'll Sure, kind that, say that would question, for guide I this those over going full hit in corporate we're of the so at sector those are Kathy. flow costs XXXX. of certainly the line, integration consistent they and months the forecasted through with our it for to where but costs those thinking of some could turn the through. look, were some where integration to just first We're We've here.

whether or they're the sectors. be other And some also costs, synergy revenue realized the operating of synergies, by benefits, will

as let Kathy So that got comment realize of some as of you benefits. look leading at the she's will last for picture us on the integration bigger been the kind And I'll process all year to the of sectors integration so. or the

Kathy Warden

the I'm of integration, operation. that's Myles, very integration as our both the well we where cultural integration occurring on yes, as are pleased And with

we for and expect synergies largely that on defined have going early track are Ken into As 'XX we in recognized the those XXXX. to noted, cost

both in revenue in We fitting the sectors but point this are we as IS, not that other thought our could synergies also at identifying result and above together synergy work for expectations where of just revenue well. we'd be

to as at operate well our XXXX while able that that's of best as one cultures we We've are exceptionally processes the company. look results, team see up so office perform doing the really to also being to continue integration where I now As Grumman, to responded. stepped able and necessary Northrop process we you and both in back been took leveraging into has the the

seven I process. just we couldn't more with in, months integration delighted so where the are And in be

Kenneth Bedingfield

make development space international Security trending Strategy, other One apologize. as business -- should volume I space of as mix IS security is, seeing well out margin on comment bit come the towards I national National Kathy, particularly And also their higher as some work hypersonics. a little is they're

just down a new drives that the production. for certainly but touch, rate margin a well So future positions them

Operator

from is question of David final the with Barclays. Your Strauss line

David Strauss

working capital IS, kind flow on about XXXX, the cash free actually on I up Ken, own? just talk I that that tailwind a you about it know Can opportunity Is on from at -- tailwind working working large would view was as IS? on opportunity potential of as when mentioned its you how wanted you there. appear based for to follow company it and capital capital. the

Kenneth Bedingfield

industry, Orbital capital capital CRS and they say AXXX the get also, legacy that products. the aren't in delivery would fair invested road. on the think of us, structurally But as programs increases based cash made structural against we've on working of we terms seen in NGIS we've in upon I DFARS that carry down cycle of liquidate in about would to areas trend. some saw some cases, working an capital, been production and of in the say particular, the I the where As that working in as they some or work programs amount a building those some a program. capital I working where have deliveries little we bit years like similar And longer for, had some ATK DD-XXX until

in cash here we had benefit to And should look that, some XXXX. of start those have down They bit agreed cash also will at expect a and a look beyond. as on that as also we will of to have at XXXX profile make to And start better a we that some investments ramp XXXX.

the we're managers think team one capital that the it working in continue to and our I to both on best the be our expect them that NGIS probably And side. of industry, successful is side working of regard. So and in we on

Stephen Movius

remarks. in you At to over Kathy, the to turn I'd this like time, final point call for

Kathy Warden

and dedicated important I'll be for a customers conclude our shareholders. team I'm once and Steve. for men honored year such an leading Thanks, for our to performance company talented and at another and today's our again time of our to women just outstanding of our thanking team call by national defense.

you today. all call our So joining for thank

Operator

participation. today's Ladies call. you this your concludes and gentlemen, conference for Thank

Northrop Grumman (NOC) 31 Jan 192018 Q4 Earnings call transcript