NOC - Earnings call transcript Q1 2021 | Northrop Grumman Corporation

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Operator

Good day, ladies and gentlemen, and welcome to Northrop Grumman's First Quarter 2021 Conference Call. Today's call is being recorded. My name is Mariama, and I will be your operator today. At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to turn the call over to your host, Mr. Vice Relations. and Treasurer Ernst, President, Investor Todd Mr. Ernst, please proceed.

Todd Ernst

our Northrop quarter will we XXXX morning, posted to and that call. start, first to welcome on constitute is to that we Good information XXXX I'd conference just forward-looking And remind securities Grumman's This PowerPoint this the presentation company's reflect web on like IR page. a call, you before refer guidance matters including beyond safe of to today's pursuant laws. time and based statements and available on harbor discussed call. federal the They our outlook for of at morning, judgment provisions

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

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

Kathy Warden

communities, we shareholders. continue a onset you, strong which One our morning, everyone. Thanks for our of want to to for customers, start has Thank of the congratulate the have deliver to us the results Todd. way suppliers adjusted pandemic, to year Grumman we team us after our today. enabled XXXX. to Northrop working support and and a joining new our Good our employees, outstanding I to very

performance. operating team, demonstrate our the and portfolio, our results of our our Our strength strategy

rates, and resulted sales growth in cash robust in solid Our strong excellent and organic quarter. wins, operational competitive the bookings performance earnings margin and

and We the divestiture segment services EPS and X% new of reflects successfully increased of IT sales and $XX.XX in gain booked the those highlights. awards EPS operating Elaborating Peraton. business, the increased quarter. closed GAAP transaction-adjusted income, XX% employees and on $X.X of grew services IT financial also billion, We programs to transitioned our XX%.

Using First improved executed the quarter repurchase cash balance sheet operating shares. by a year-over-year. X.X divestiture agreement accelerated that we initial than and $X billion share $XXX cash on million an retired million more proceeds,

$X.X share first including dividends We also early billion and quarter $X.X of $X.X deleveraging, $X.X repurchases, in Even which on totaled than sheet. with billion all debt, with redemptions we billion, -- the the balance exceeded billion. the ended of retired of cash more first we

additional January, we to of couple and least flow in over through As expect outlined the this at investment plans innovation to we robust to free repurchases our $X I billion dividends. deployment share include of drive and Based years, share capital the repurchases. to our shareholders majority on return continue and of affordability next what now cash year's see

remainder first quarter are of the we for strength sales With range a the our of the we will and $XXX the solid our transaction-adjusted We EPS a $XX.XX. are $X.XX raising by guidance. year in expect results, sales range. increase of $XX.X guidance and now confidence a EPS outlook raising portfolio, our prior $XX between billion billion, million to increase And to $XX.X to to and

long-term advanced the include weapons such for the fiscal intelligence, for deterrent, its portfolio its forward, capabilities technologies, China aligned year national several to security security and policy nuclear that maintain well efforts pressing as are U.S. security will capabilities framework the recent capabilities national remain and priorities. it long-range and These administration As we interim space, U.S. breakthrough signaled such as R&D challenge, technology In the and budget cyber. believe XXXX, that described security priority fires views has our look advanced the In we closely invest with aligned artificial administration guidance, and advantages. in modernizing with with leadership. most will early needed strategy, as our Biden national competition computing

in operational Turning highlights quarter. to the

of the On doubled business Space confirms our share build its investment two achieved revenue The first award as competitive prototype space. Space. quarter ability in examples: capabilities to our our competitive we and last weapons a XXXX sensor sensor; ramps the space in HBTSS, capture and tracking million prototype are next-generation the This SATCOM, Our good ballistic to from and each XX% capability up tactical quarters. backlog $XXX performance awards program; hypersonic of growth the rapid market satellite tracking protected and Three received capable in hypersonic nation in interceptor.

For proceed for prototype development demonstration award protected XXXX. payload of in expected with flight a ongoing selected we PTS were tactical a to follow-on down SATCOM, with our our

awarded long-range civil phase were fiscal through XXXX Missile a Space Opportunities with the rapid is next Defense a as interceptor, to Northrop $XX.X threats. billion performance extend also to is for contract next-generation Grumman X.X% Agency's commercial the a for XXXX interceptor flight requests test over against the complex of most level. of increase XXXX. space. and of and an contract the $X.X for known NGI, We This development also discretionary defend billion, designed enacted NASA's year period the

and budget provide provide this Logistics report I'm also the breakthrough technology the the Intelsat space to the launch of the now to services is And an Mars Halo, life provider to to satellite. that reshapes services MEV-X services industry Northrop Outpost works pioneer new way five remains provide for a that with satellite received years successfully mission. have satellites. The space, the and the before and human service recognizes supports years a and program. moving will this for another technology award. to enables Habitation in for earlier year of satellite and docked and month, request and the MEV-X come. Grumman of in extension field Intelsat our life continues the undocking on flight-proven efforts only pleased beyond. Importantly, satellite Support MEVX systems exploration via moon, NASA for award commercial of extension on

continues B-XX ground-based the its deterrent U.S. a strategic the be strategic capabilities, the supplier GBSD; two deterrent, to are or prime we as and the for the contractor bomber; key These modernizing As and initiated as on Both third to TRIAD: well administration, to reduce legs of proud decade. risk leg. cost. the are programs, use end the and B-XX GBSD expected in of digital are filling this Obama begin benefiting tools modernization which were innovative at from of our technical The

the our cycle. program milestone noted, GBSD Force two processes on and the in our test at much Air B-XX been this in production than capability As by are reviews XXXX. to point, to the completed initial systems aircraft an field unique have validate major that other us sooner successfully has mature more allowing development has And remains program operating life been track

Force this GBSD has earned four Force, and industry the high engineering sectors of agile the needed Air critical use the software E-Series digital with The our cutting-edge priority closely lines working and teammates transformation. as to development to system. U.S. reduce investment we are time digital designation superiority. are development program's affirming partner areas the to All Air program the shorten modernize risk We and aligned to from military approach to maintain

to first can that we quarter, additional $XXX developing upgraded totaling ensure to for technology platforms orders enabling modernization existing are have their best our systems received approximately Sabre and fighters be the In F-XX. new addition the counter modularly million to we radar In platforms weapon systems, of for the the evolving platforms war threats.

approved threat to and for warfare ensure agile a advanced U.S. full F-XX an With now our initial rate its countries, F-XX systems as U.S. production upgrade procurements approximately to during contract in modern these and Air F-XX upgrades well Force, Kirkham operational our under fleets. for following the to the for successful system, jet against future were for quarter, for on the selected next-generation threats. sole production Air and the FMS offer protection six test evaluation additional the of and helicopters. EMD provide in orders, down as capabilities we U.S. a of the the Guard month Reserve we're as And highly produce support Also new on XXX electronic fleet upgrades path X Force, Army

and We can to platforms to demonstrate all and joint connect also or domain sensors control continue how command we enable JADCX.

the on XX in in will Exercise May. featured generation Northern Our platforms be connectivity Edge fifth solutions multiple upcoming

demonstration and systems. maturing ammunition We participate our of exercises our conducted successful are fires showcased capability The this UAS project IBCS to we're data months, requiring responding the to next digital including management. where the X, next-generation priority, unmanned proximity expected and secure X fire the demonstration several and live expect counter Convergence, quarter. Army's Class XX over ABMS featured. integrated investment defeat we X to and And solutions weaponry And We infrastructure in be other is connectivity advanced its finally, our a aerial long-range processing, to capabilities.

consecutive In motor, successful tests addition, of successful for had two a nine tests preparation motor in upcoming the rocket AARGM-ER static flight tests. marketing

the of for U.S. successes quality our national these benefits technology and and All security of team in of investment support our our recent the allies. to new reflects the

need. growth are We continued delivering on our enable winning the the and programs affordably and that capability focused competing customers

another our Dave? financial guidance, over the strong a maintain the This now trends. of and to returns our more discussion quarter for demonstration call of results Dave growing detailed turn I'll was to business. cash commitment while flows and

Dave Keffer

of bridge QX on Thanks, comments as Kathy, XXXX. first our between services can reported million XXXX for Slide which to everyone. team approximately We quarter IT you growth approximately an My to provides of another performance. our quarter sales. X, also quarter see, And like $XXX thank a morning, I'd outstanding quarter and good sales with QX of and of was begin sales first first the X%. growth divestiture headwind

across the in more first timing an tailwind In fewer days QX XXXX. purposes. view three we due X% of XXXX. benefit sales for of we purely convention, days of QX XXXX segments than in our three fourth timing result additional as it four calendar have in your accounting as normalizes than quarter in in XXXX our in quarter all the this the when approximately of modeling working to We the addition, first days The will of to quarter had

the QX. working the for Adjusting offsetting these growth X.X%. and extra for divestiture was at So days largely two are revenue consolidated items, level,

quarter increase transaction the divestiture-related equity The XX% markets up on which programs items, hub represented the Defense production decreased quarter on of $X.XX, the last expense adjusted year-over-year in this marketable the XX% million securities, in offset on certain sales X% performance, the GAAP AARGM to sales share quarter, to compared the review lower as markets volatility the lower bridge At Recovery impact. EXD, basis. a earnings sector state services sale. Referring organic I reflecting contributed Slide our and XXXX. organic near primarily per were to roughly first earnings higher Manned the quarter. When GMLRS Higher the expense closeout and activities, As the to Aircraft on an between programs sector due share which first only by share that IT refer sales to quarter of in provides of X% for due $XX.XX, sales earnings on divestiture. X. we equity Aeronautics March. per and amortization organic are to we X period. our generated favorable volume global helped $X.XX. growth, Corporate Systems reflects Slide Autonomous the gain to reflect and especially completion. partially offset tax increased first strong our up due a to improvement. lower of per or segment primarily results, earnings restricted in XXXX adjust headwind Systems for on Lower $XXX Systems, sales results $X.XX City I'll stronger to Lake experienced adjusting drove sales for unallocated

higher or saw business its third as higher on quarter strong XX% revenues four Systems, Mission continues last Sabre and due on the and an ramp-up on and including warfare volume programs restricted in we XX% Sensors, on volume GBSD diversified targeting primarily NASA's survivability to and to programs programs, programs. strategic MS higher Networked the Multifunction our growth, XX% for volume be due had marine sales all up business an organic restricted with Solutions principally well a with we quarter, sales. basis. JCREW growth sales as fastest-growing organic Organic sensors to in continues electronic driven by Sales higher to sales in targeting segment, systems. systems XX% on volume higher by its in Artemis G/ATOR sales Navigation, sales ramp higher land next-gen both portfolio driving the on up program LITNING. Meso program, continued Information radar double-digit Turning were higher or were on momentum driven launch the were including restricted revenue and Space programs, Airborne as volume on basis. from OPIR missiles. higher programs, areas, with increased of In consecutive and systems Maritime Space up year. increased were program. programs areas and the

Slide of to benefit Segment operating X. reflection income approximately approach rates, overhead from cost lower $XXX a operating million affordability. income on to Turning disciplined QX our and includes of a

includes on pension last that This projected reduction mentioned CAS the in quarter's benefit quarter's costs call. we

more due higher While our budget driven rates. decreased costs in operating XX% and increased driven benefit by income increased increased divestiture, rose solutions favorable to partially Higher as differentiator a EAC recognized margin in EAC due XX.X%. operating battle to to Higher rate sales rate reduction in modest adjustments volume. performance due margin to At operational rate by XX Solutions. the performance driven the segment points forward, by Mission primarily a income Operating well to IT the net operating level, going Operating income income income overhead lower lower by business rate basis EAC improved a operating be systems that the operating Space favorable XX%, Defense operating margin Information to operating income rates, largely cash XX.X% primarily affordable, at headwind as making improve reduced principally operating margin CAS and higher Systems company rates. margin XX%, services due rate At the at and lower the our Network driven present and increased to the revenue IT XX.X% favorable do they XX.X%. competitive QX, well rates, XX%. The was Systems net reflects and which income overhead to overhead more flattening increase XX%, missile offset competitiveness offset sales adjustments AS, adjustments, at higher as increased higher operating XX% programs. margin flow favorable increased by in by total will environment. services and rose to in due overhead sectors, reduced was increased Systems' to and rate net divestiture. from base than operating key management as

to sector Turning guidance on X. Slide

guidance the NGI robust guidance does growth of at our are in business $XX four recent the Sales increasing DS win and as we rate approximately remains result a AS, of continued Space sales and to unchanged As a sectors. program, guidance MS, for Space billion. operating margin all

X guidance, Slide our guidance. a divestiture bridge the consolidated as our overall improvement outlook. to to well as of the effects Moving the provides reflecting updated operations on in

at revenue the equipment comparison in sale AS increase the to $XX.X sales million days of transaction prior million fourth $XX.X strength that our between working guidance are headwinds EPS of now and adjusted raising fewer range guidance. will first XXXX reflect and quarter results. quarter We sales Keep year-over-year the to expect our divestiture. XXXX to will $XXX $XXX a in billion mind We include billion, addition and

updated guidance deferred unallocated by expenses tax services driven the costs. corporate gain on IT reflects transaction on is and the and benefits Our net favorable state lower other also unallocated

Our operating from divestiture. margin and corporate the includes rate lower unallocated the both guidance benefit expense the

Moving to taxes.

the and estimated impact is see unchanged. effective divestiture, the underlying tax from can the tax rate our reflects You rate

guidance count shares average year-end has to the Our diluted reflect weighted been ASR. reduced

bridge between guidance. January Turning our to Slide today's XX transaction EPS. provides a adjusted and guidance

$XX.XX. We to a range $XX.XX our from of prior $XX.XX transaction of adjusted are increasing to range our EPS guidance to $XX

average as higher lower performance favorable trends lower pension weighted well reflects strong shares outstanding. expenses, Our and as guidance unallocated segment corporate

want to take about talk Lastly, to moment a cash. I

strategy obtained to and Act XXXX. balanced in to further through is a Rescue agencies returning count. deployment sheet, business, rating program balance cash Plan capital investing from The to the expected the our We repurchases continue delevered credit improved pension to dividends in our and ASR quarter, ratings and that American managing first we CAS the two reduce affecting share the includes recoveries balance executed passed shareholders In recently begin our pursue sheet. share

cost But had to note our further already actuarial projected CAS other these continue equal, legislation our assumptions Asset will I'd else lowered recoveries. returns being we would performance primarily influence January to asset a and also reduce our the in years. reiterate pension level pension outlook, we expect numbers. due all minimal that CAS over to that contributions in I'd low outstanding relatively XXXX. cash several next the

This of transaction-adjusted free we from flow approximately expenditure million the guidance will improvement year. XXXX. employees $XXX reflects to the As services as not and more business IT closing, mentioned, cash increased quarter QX, our or paid first million and be changed of mentioning pleased over cash largely closed the federal first deliver state In divestiture with timing results while QX of capital for the we very in cash It's disbursements, $XXX operating are our worth collections Kathy continue taxes shareholders. and our flow year. for remainder and that have the of quarter customers, we than

Our portfolio's strong the to robust in our sustain in in value put business creation continued generation. momentum cash a shaping us and investment position and

Okay, Todd.

Q&A. we're ready for think I

Todd Ernst

ask enter the queue they Thank Mariama, you. please inform analysts and how the questions.

Operator

from comes question Research. first the Your Vertical Instructions] Stallard of with line Robert [Operator

is open. Your line

Robert Stallard

do you a to be very strong Space, have you but this here very new wins. tracking for forward? and clearly, see XXXX, this NGI year. another on got quarter in comparison obviously strong nicely up You're a But tough going Kathy, for against how going example,

sort what this could sustainable give for rate growth top I was us wondering if could So line division. be of you of idea some is

Kathy Warden

drivers major that some getting without we for outlook see. XXXX, the specific talk into Well, me let about of

we'll year of GBSD this a tougher to GBSD 'XX You year. 'XX noted have will full because compare a that have

GBSD budget $X The is XXXX. from continue fact to to another, to into 'XX However, I ramp shows going that point would billion increase expected to the approximately XXXX.

But Northrop So that there is that the to more is program program. escalation and highlighted, is of there have of Grumman you 'XX. growth as other you are that we those. can not still That's one going entire have budget. next profile activities that But see from all year. 'XX the importantly, for into NGI the anticipated underway growth a

The other today are mentioned others. two awards that to I

year. And XX% to is see when the that Space it at so grow. opportunity true It for business, last do continue we look we this to grew

are We year. again high-teen this projecting growth

robust very a continue for our be driver and are segment. But those to Space So our growth for potential business growth the do we see to rates. indeed, fastest-growing

Operator

of next line from Your with Suisse. question the comes Robert Spingarn Crédit

is line Your open.

Robert Spingarn

with on Space. you on MRO business? Kathy, a discussions but nice sticking bit with could a your Just as some MRO update longer-term And this be success on vehicle. the us Wondering the earlier how touched that mission customers satellite proven. you've can wondering technology logistics and trending prepared strong if really you little aviation opportunity a very are like recently with Space something to comparable little just extension satellite had if elaborate your ultimately remarks, and is now in recurring

Kathy Warden

transforming certainly pioneer had is with willing space. and started Because what to question, we us, We we of this in with way Intelsat, this we in companies satellite Intelsat, the And that's really the a for see and the life partner Rob. is. commercial that Thanks business extension. see about think course,

service satellite out bringing satellites. those Intelsat two fabulous back a is taking and is capability. of MEV-X, in able service. a kind capabilities remind company that you, noted, their it was to on of As And to extension this mission was the service. docked has mission currently And with life only partner of we're I'll a providing still been providing demonstrate MEV-X that satellite I being

a satellite, expect will disrupt can will we continue as moving the to demonstrate and do continue see we business I that with that providing those to customers that other And even service services, dock not So value. grow.

special the capability capabilities we also relies that defense upon, military customers, demonstrated our security opportunity, work to national bring We as our we systems clients. and see the with with to now have that commercial those

Operator

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

line open. is Your

Seth Seifman

and so that about into are Hawk? ask other of out go of come might Does forward? this that's cross to persist legacy called away that thinking in any end budget I by sort Global we wanted that I guess, into before. year? the you XXXX platforms there Aeronautics, be And autonomous, of on about the discussed something hairs you've should -- the Or headwind it headwind type going does

Dave Keffer

Dave. started it's Seth, I'll you. Sure, on get for one that

yes. So

QX. in As delivered sale year-over-year the exclude you growth Manned sector full noted, a the for AS from year, organic X% when you equipment rate in and strong the Portfolio unique Overall, does unmanned outgrew the project growth organic last year. the

are for when news updated to of Hawk portfolio strong has a Global the more terms current around months. I puts been the Hawk. Certainly, see In in the portfolio. the the see takes But of start in aggregate, long-term on no in AS unmanned. the there the and Global new opportunity budget pockets set XXXX healthy think opportunity and mentioned portfolio. weeks. coming we'll HALE we we you on numbers been about of the in business altogether unmanned headwinds have program the and And Certainly, HALE the in in There trajectory are recent it's

product we've past. some a sets on our side that other higher the portfolio I think flatter talked that's growth in than in manned the of general, about

as we'll you further and provide seeing least more this in into what that we sketch beyond gives guidance thumbnail again, we're a So get year. But AS. at 'XX on of

Operator

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

Your line open. is

Carter Copeland

Kathy, about just the ask F-XX. if wonder, I I could briefly

how that, have going a program lots a and revenue own in versus business the us the we aircraft I of terms that it I wondered, and contractor. should we XX XX, on revenues, give that maybe recognition for from in to what timing little of thinking those about may I think in is And work just beyond of lots once bit guys forward? your get means your and own number step what know F-XX lead to those prime be planning see of that bit. some it the down you perspective on XX, the on a cost XX, go

Kathy Warden

think in from flat as Carter, So that the gotten based for that see you're and what we've us we volume. Aeronautics, at particular, few quote. asking demand production Lockheed years I they next look about primarily three volume its And, relatively pieces, in ask signal on at to the F-XX we

Now continues to the down our come contribute price to to of affordability do aircraft. as we the part

an So modernization those at that's At over a a when bit of the look other little growing sustainment, so the to of time, that you offset volume. same flat period program, pieces time. of and the are

so franchise our Northrop next And we all being see Grumman all, over in F-XX within flat years. relatively several the

Operator

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

is line Your open.

Sheila Kahyaoglu

think how you about remainder ahead you R&D, and guess, how about When divestiture portfolio? Great here? up? it's guidance. Maybe of first year, the what mix guys the of margins streamlined think XX% I headwinds think now whether profitability your of do we quarter, productivity post in sort margin And come the the that about opportunities you've do or

Dave Keffer

Sheila. Thanks, Sure.

So the costs mentioned, that rate the business, we're dollar ahead and and was start lower talked just at OM guide the rate to as the margin year of quarter. for of both I'd our benefit was which QX rest on cost you the rates the of CAS perspective, terms segment off XX.X% from first pension of and overcoming XX.X% volume That a is management in full really front, across of driven a lower about, note QX base portion which a strong timing as XX% a strong rate. we the such. by in from did divestiture the from really lower to overhead

in cost of management XXXX. So we're level we've with that the pleased already really demonstrated disciplined

the rest points continue last which XXXX we at year's performance, OM As XX.X%. project XX basis better to segment a is level that to strong year, than the we of XX was look to to XX XX points already of which rate, basis

and both to the obviously, Going deliver mix operationally to forward, way efficiency the we as we you're execute and the But of as strive program we'll continue as I one product, business. for drivers. the think the way right well think manage of the

much good having time. key of Our manage digital way the strong initiative, also really with the overall that's a efficiency to consistency we on we're over and and of drives that And continued looking of efficiency newer are certainly, parcel efficiency deliver part some that our as transformation business that again, efforts can and touted to cost example margins been affordability and as programs.

Operator

question next line Research. the Shapiro Your comes George from of Shapiro with

is line Your open.

George Shapiro

it that's If drop the projected you $XXX CAS like or million, the about you the QX. EAC in in could with looks consistent CAS benefit of

the how that from been a level assume there's pre-funding ARPU So current then no I of change time? -- also, from over play as for And ARPU result your what's And that. out CAS? does

Dave Keffer

provided last about EACs, benefits asset the call of driven limited QX in than impact terms the primarily business current which The the The the CAS it more under year. their is in year this performance ARPU level as to of earnings the adjustment to pre-funding and were just talked other actuarial billion, $X are in our we've was as we changes of XXXX outlook. broader first of by the when

CAS year, to down substantially I'd levels I projections already $XXX XXXX. is you of January call pension those $XXX we've think the to point reduced what million million in next in

So possible asset very influences number there And pension. other there's the include to on ARPU effects that limited be other much obviously, changes. from from ongoing returns reduction or will ongoing

the contributing it So one it's of rate. we've the modest quarters, margin QX, to the revenue margin But In strong headwind and cost obviously, strong talked we to was and healthy forward. driven the free a programming items more flow performance cash and to continue strong going a modest management rate for even project for the by full thus, the continued about. remaining year, to

Operator

of next Raviv Citigroup. question comes Jon from the Your with line

is Your line open.

Jon Raviv

most going flow majority in shareholders to that that next years. few Kathy, the you over cash free or your seeing mentioned of you're prepared your remarks

free then Just within deployment other what's perspective see dynamic what on that developing moving how behind market you on of aware any of context, you're versus years be that here opportunity -- terms R&D preliminary kind tax cash in or big what's capital multiple And the opportunities like free of, flow and particular that year's how the thoughts should guide? over your dynamic? flow this about cash we payroll Any are? thinking talking the pieces about

Kathy Warden

we start the part which deployment have deploy, to of of capital the question, So why I'll will to your Dave sense talk we second give then with more the you strategy. and have don't

Dave Keffer

Sure. Thanks, Kathy.

year we've management talked call, cash So working billion on requires this start in QX some free already really pleased last capital flow our to for free to improvements XXXX. you as of capital guidance cash really our year-over-year for XXXX, from of delivered working we're gotten 'XX about XXXX. enhancements. And strong we compare flow $X the having the our on those to And see can $X.X with of QX billion off

feeling final us enter the we a gives that So good three the quarters as free for of year. cash flow

us efficiency have made on process, side, continuing we business, Over the year while our that points. base last insights we've the plus. foremost the I really in and the touched a capital next is years, and way accelerated coming our our few of base supply control, think in few more in manage maintain healthy for the management efficiency provide continued is collections and as right the the working supply a on first we'll what's obviously, the quarters. we Certainly, in But you strong to in over payable payments through now billing

mentioned in shortly the ago, then come as are expenditures if side. into us We Obviously, pension dynamics factors all on forward. expect on else a beyond -- which continue percentage is influence equal. do to and past. it the we've as overall be to those down -- get remains going should operational should what revenue, signaled capital be some CAS a of to critical I modest all have pension or the have And in headwind you asset of market and to returns CAS 'XX So conditions for seen

rate that to certainly we go would of And remove long-term possible us. progress. forward. existing tax we'll going could on corporate so see then the update for our place in R&D as favorable the new side, there be legislation year 'XX cash discussion amortization There's influence rules the you tax taxes to that And also the obviously in scheduled

operations is business. about So to to drive priority over cash really first for deployment. optimistic what the of can capital again, control, from flows Kathy, we're we and you continuing our the strong

Kathy Warden

Dave. Thanks,

And to strategy. couple last just the remained opportunity we've have so have see the the been that We've deployment our revenue the in capital in that have in come as down and starting outlined, shaping Dave and the invest of strategy pleased investments the our over set doing has continued with we Defense as and now alignment are active years. to signaled consistent. robust portfolio business, but percentage National We based XXXX, of portfolio its also that a been to we on and we CapEx

now focus a So position, therefore, we've repurchase. place been and using balance sheet mature proceeds be. dividends our our it And to for where is share cash we'd to on get in really a we're to and balance like to

next So we that that returning shareholders. here do years of my our the majority of to methods cash we will reflect as cash the couple comments expect to proceeds go over of those sit two really today,

Operator

next comes Barclays. the David Your of with line from Strauss question

open. is line Your

David Strauss

wanted I assume amount of cost-plus XX-some margins. a on up basis. Space percent touch being growth, were on a to fair They despite most I the that

I both on maybe, in think in QX. working sales additional your come start implied Space could from -- guidance. the touch why Dave, on QX came your you But had So I sales to -- you margins implied came you above on your know based for your in guidance? And well sales here touched down days guidance then

reverses anything the of or kind days back that in -- other working -- way other the quarter any pull sort goes So that than the forward of year? there go in was later the or

Dave Keffer

topics good touch there Two happy Sure. on. to I'm

executed performance benefit of First, it Space relates expansion really XXXX margin with segments both in Space strong manage their It was the programs quarter to margins. overhead a Space. that as there also efficiency the contributors a and their reduction which building of the rate base course, one really the contributor quarter. of The the a Space, the QX, which, strong is for on was quarter lifted as did they for and with rate operational business from which in their they well. were in

moving signal Space the the there. more of in around cost of strong have and operational XX%, past dramatic guidance towards change efficiency start due because any mix guidance with cost we to rest type margin full I development wouldn't For work, benefits part for the to those Obviously, the as the quarter. you in this rate the a mentioned, year but year, consistent of there obviously reflective EAC off and

for overall the there. topic revenue think, and mentioned year. It's, through there the talk are I profile an a moving important couple You pieces of to because days working the

key services some bit X% QX me as the now in working the you quarterly sector mentioned, a about a a of IT each include there. let business. of items the three benefit additional So days. for we've a did from sense of month divested give And

days timing in the items, In general, sale the be the in QX sector. as benefited rest remarks, XXXX or our in I would scripted year. QX, will terms will not did I tough of fewer that we across the particular quarter. of terms program businesses, last the and we Thinking call, AS. mentioned And on the a would equipment broad-based we mentioned the year, million benefit deliveries, say, any end one working other at $XXX the It of in of the have had four call than which by as about materials compare. prior of quarter strength of our

perspective, QX two top from on items. compare of unique other divestiture have revenue we'll a the those on So impact

with able QX consistent about we've perspective, a what QX, But solid of we those been organic As be growth expect will think offset GAAP those and deliver late. we to quarters, the course. continued sales the that to top From the again, of with of in divestiture, reflected guidance. of momentum in sales and in end million really that's guidance the particular, $XXX late, our bottom in and we provided our business And increase strong the in that range. by

further As of outlook business we and continues. year and eye and as to backlog our continue QX, have beyond, as year the QX an strength performance new the enter success evaluate progresses we'll on

Operator

question comes Cowen. from with next of von Cai Your Rumohr line the

open. is line Your

Cai von Rumohr

Yes.

large additional Because so. capability amounts from like stacks. there's the -- capability you or increasing and aspirations to and lots Do space into of So launchers proliferation guys any with new of smaller builders the do these the satellite decreasing integration any commercial access been Kathy, rocket kind Space it smaller looks you forward cost satellites, of for LEO have have builders of to commercial a of getting ventures?

Kathy Warden

companies been Okay, the I We you're portfolio, launch appreciate space. newer including and the with of that are on important working question. And right. our the the already entrants to reflection some providers, an that we've breadth are absolutely into partner

that can for be growth you are into to capabilities expertise as we'll our portfolio come we with in unique is can that Grumman's of expertise remains the today. and use continue or the working That's we where from really predominance space space. space are just And provide We expect products of our other of areas defense entrants But we our applications as in from But the security. that Security commercial companies look coming as space. company, to Northrop well Security today. that national communication do National investment our to growth build to the exploration capabilities areas a new and focus, National applied in feel as on like predominance

Operator

the from Morgan line of comes question with next Stanley. Kristine Your Liwag

open. is line You

Kristine Liwag

that, about and I Kathy, companies. seen is organically? to about XXX. seeing Lockheed you're there do they're following areas interested we're your are you invest your that think with these of ABL that guess question of in Cai's How your national expand Would on bolstering? space with in that offerings invest what pursue do and strategic And some HawkEye to and in starting Space? Raytheon peers partnerships strategic up partnerships. you portfolio new security M&A We've or

Kathy Warden

So space ATK they that did saw our well. our National brought to space, build we we're really as and Security commercial the civil you as out that exploration capability we with investment but space in big only as space pleased acquisition not with and Orbital know, portfolio,

investment spectrum And portfolio us in our to so space. across we're growth of that wide and quite that confident allows participate

aligned We the the We also but partnerships. through through companies, with of an advertise tend to in or the to exploration. that delivering. day, for bidding investment launch, we their look to the customers. complementary on our those they're see in. partnerships, new like entrants for that end have investment other that our in the is we're have, providing because they we solution-by-solution ours. business we partner not comms, are market as them, a And are us We that to at capability we combine system But relationships making that's best them capability aren't and partners oftentimes basis, and they always in the Look, areas and each

our partnership And so expect continue that to to be and been model. that's model, I partnership our

Operator

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

is line open. Your

Ron Epstein

are key heels or on that focused Kathy, important or the in had some in of you'd win What's and programs in out pipeline, down team like kind wins look NGI what the even recently. we to near-term key you the of When the term? So really areas GBSD, the medium looking select, the on at next? maybe

Kathy Warden

continuing focused continues faster to areas. grow that in lot take into to I are Defense important parts Strategic Space a ago, that market, I of missiles sit So and believe the other the about the there. an share we see those to on ourselves our with campaigns National area. to closely Space focus Ron where we the than to right we be campaign portfolio the able years the two company talked strategy and to aligned in being see believe We investment, for areas were grow desire continue and continue when to role,

Agency more in work as systems side as GBSD, on see on do we that to CBM, of Defense the now has that equation, domain. modernization the and well across [adversary] Our so down-select, stretching the Missile NGI, interceptor protective that against

tracking and in that capitalization to even a ability amount about talked hypersonics in the the free I have. tremendous Space, types, So we like see detect of and HBTSS award we new missile missile

still areas So more very of in in both that focus those. of strategic both and those we space complementary our terms growth of and see missiles, in

these were communications looks invest investment fortune process and for to of that it an fit have programs in data all of positions the being it architecture. and called company. is areas area are of Another leadership computing area artificial JADCX doing company provide needed on control. has all-domain office of in connectivity, before advancements intelligence. command to is shooters and focused in elements area, It in. the It really our And an elements for sort it that's to integrate and our and which that advancement was with has IBCS, key technical able which excellence continues that we've joint what we has government like and been sensors And

campaigns are good a execute see just and those few we So we examples of that continue XXXX success. the against in to outlined that

So working strategy. for execute is to we and legs, well no new that still which have into strategy, us future. believe, It's continuing the well

Operator

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

open. is Your line

Doug Harned

major on you've Northrop airborne also now, major position important Grumman's other you're electronic platforms. you're platforms. at look you to When -- systems But a of space player provider

and people ensure their systems then shot And been to tension those tried then own they've that been you it. on there's typically back a down where been competed get have have always have historically, separately. and platform this If go

is you see the So same? today, and to this Do do you be threat both when evolving, since Do how the on this, more ability do the people the technology stay way you're you going? you Where there'll you for platforms think way see evolving, competitive try is landscape? think sides of it systems? the at the integrate will vertically look and between

Kathy Warden

doesn't of that and of it's as have put good integration on lot our Doug, right portfolio, vertical our thinking that a it's spend answer platform. systems we question you the bit does So strategically But opportunity. to about always a excellent know, because mean our that one an time

a aren't And the to industry onto that partner. integrator an where maybe increasingly, earlier technology Grumman, companies are Space, Security, be may we objective in focused look of new may take we when comes it with strong particularly capability that Mission from. and platform invest have point an so have that in And that would at the inside And the entrants Northrop National to have that competitor and best have a bear. platform very be on to means technology that to done I the able prioritize to and to technology also, but though, in point you successfully. we bring area, Systems that on being a winning a quite you that have being is and out

the our technology radar, to Mission to play I ultimate the to It's Systems at competitors we and platform deliver make full are provider. Systems working compete platform platform So the platform that go customer that's being technology. now fleet Systems to move of Mission Force our where the I our business we're the because capability meet and the capability. we look what team that And forefront has talked to now requirements. excelled Air is EW technology the a best And the unbiased the we force to we the with do about are the selected our on also good that best provide emerge but that best choices at to that so F-XX the is at of not put platform. a included, But there many will it's best integrate if time capabilities. by not not company's of want their would not incumbent and they work. And own have primes, why has kit upgrades self staying as deal own upon end cases even on be don't level. a that our out at to our and vertically where And our we've believe, day, their to technology if again, the would is the integrate, other compete selected choose, was seen it's Mission to fear it's time the because desire where another best to there they on a

Operator

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

open. is line Your

Mike Maugeri

budget little Dave, can a environment. you expense, that flattening help a in make competitive you lower more bit it CAS mentioned

just B&P want So the how budget point, contracting in think flattening a to or budget to you of I expanding? discipline light ask, and about when that do is environment relative

Dave Keffer

capital both conditions parts market that We across at business. make our expenditures, opportunities, really opportunity the see to Sure. in market and look of investment different the and decisions specific sets businesses we B&P, R&D,

With flattening, that business are the a quarter overall space coming we budget this over over XX% nearly still have years, and XX% quarter. flatten expected to grew last the

so be. And made has such is significant company set continues expenditures, for to right in the ongoing and clearly, investment the opportunity been that have capital there and B&P the R&D to decision

constrained. healthy very outlook Really the feeling a say wouldn't yet business, across I opportunity have there. we're We

investment markets continue dollars make buckets. in And see we at result. investments and with this of a point, returns each our in healthy look dollars, appropriate But so certainly, serve. And we a investment to at we to opportunity are we as the on those set careful

around X% be and healthy been us put level continues certainly in approximately over faster-growing last at of R&D B&P Our again, continuing the costs the are years, that budget. of we level in positioning the with that revenue, to reflective a for couple category, have parts I'd that's XXXX. the of same of

Todd Ernst

for question. have we one time more Mariama,

Operator

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

is line Your open.

Myles Walton

on slide $X.XX Dave, the unallocated. clarification, a called corporate deck, from out Maybe you

acquisition, corporate as at think I of much to is run Talent opposed Just or look so And more XXXX. rate workforce, as that then, the one-off? you grew unallocated X,XXX in Kathy, you how

'XX. end up market that might that pipeline? where that the business Given growing the you you're do at what having, number the think for end of of is pipeline And

Dave Keffer

Sure.

and more will items to On call mix I'd other that of the this that be unallocated, future lower years. in unique corporate a year sustained items

ongoing had costs that's we management mentioned, cost other this As bit that efficiency. In areas, tax and we anticipated. discipline year state to are careful than lower a the there's led

it a that I'd call So front. mix on

Kathy Warden

specifically and to we into But growth beginning year. you largely that, has slowed. on yielded the because we perhaps that's that up. noted, X,XXX We grow continue that our other new the hired market will about this strategy and year. headcount, And labor companies attrition could as almost last that Myles, expect Talent XX,XXX people go And tightening And expect. with and

of this need many how there. to with make to the parts attrition closely we're monitoring expect but another about we same net moving growth to we get hires So headcount the year,

Todd Ernst

Kathy it it Okay. to for We'll there. turn closing over I'll leave remarks.

Kathy Warden

Well, thanks, Todd.

heard, strategy you've is executing great We the foundation this is off of margins had the I to As strong sales and our and with their that outstanding growth in the robust recognize to our year a of And quarter. start new awards. the team strength want performance.

So team Grumman hard conclude let once for innovation and the again their Northrop by work. me thanking

concludes that thanks quarter next joining. to forward We call. So our and to for look you again talking

Operator

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

Northrop Grumman (NOC) 29 Apr 212021 Q1 Earnings call transcript