NOC - Earnings call 3 2023 | Northrop Grumman Corporation

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to Northrop Grumman's Third Quarter Conference Call. Today's call is being recorded. My name is Josh, and I will be your operator today. [Operator Instructions] I would now like to turn the call over to your host, Mr. Todd Ernst, Vice President, Investor Relations. Mr. proceed. please Ernst,

Todd Ernst

good Third and and to welcome Thanks, XXXX morning, Conference Grumman's Quarter Call. Northrop Josh, everyone,

On the call that this morning, we'll refer on IR is to our website. posted a presentation

guidance federal reflect the safe statements judgment matters today's discussed time Before at information pursuant securities harbor company's for They of we beyond call, to this based start, call. including laws. and XXXX and available on of the on provisions outlooks forward-looking constitute

press including actual Forward-looking our release differ statements today's and noted and and cause uncertainties, filings. may those materially. involve company risks These SEC in risks to uncertainties results

Today's our call non-GAAP earnings that measures in to are reconciled will include release. results our GAAP financial

Warden, the and Chair, CEO Dave On Kathy President; today call our Keffer, are and our CFO.

to Kathy? to like call this time, turn Kathy. I'd over the At

Kathy Warden

Good you us. for Thanks, everyone. Thank joining Todd. morning,

We truly U.S. geopolitical are globe, in people continue allies steadfast and we'll ongoing war the across horrific security support that in Ukraine be in our these our including regions, for hope Israel. and can peace the of the attacks all global and safety pursuit established the stability. for significant in their and We in tensions witnessing the and

and next the outlook budget reviewing in this initial of program call, this And usual, see environment. quarter as our trends On quarter, year, provide for in at in time morning's our we third events I'll results and address addition I'll U.S. to important year. the the global

starting quarter. So with the

year-over-year Our business of growth X book-to-bill and across our in awards, our sales was with with increased X% billion X.Xx approximately $XX segments. all

also to have it strengthens billion. It's future reflect $XX the customers' new our the growth. and with strategy. stands continued priorities our and our we now the success business record, backlog at Our alignment foundation for continues of It a

year-over-year, free flow free nearly $X.XX, Strong quarter, X% million cash flow in OM to and in we quarter. per last Earnings X% track increased increased the cash to up $XXX year. target. earnings XXXX share operating income rose our were remain rate on over by compared and Segment last the achieve

to invest our cash billion remain investors capital dividends to flexibility cash year-to-date, continues returning XXX% including this we've billion of to flow approximately And our $X generation and Excellent while year, in provide to of repurchases. share capabilities the returning shareholders. over We free committed to shareholders capacity us to and in repurchases. returned $X.X

now to turning U.S. So the budget. defense

is a We're an be and priorities common are years, bipartisan year security appropriations under reached will to soon. recent national full XXXX. continuing for As start agreement hopeful federal encouraged in on government the fiscal operating is by resolution support year

urgent of in full for early weapon Our systems we and saw including guidance request is calendar continues by next and to last outlook to administration industrial-based investments Ukraine or make assume defense the passed supplemental year. end Israel and And this budget the a as readiness. year week, those include year needs, in

which also government federal The next its XXXX, to is submitted early plans Congress for expect year we to fiscal year. budget be developing

see they customers with navigate pressures well closely programs supported. to our capabilities plan future the ensure to working and are for fiscal our We remain

the particular now a we've was and for opportunity a growing this missile year, week, dozen than of announced. this We've capabilities. notable systems technologies portfolio just One demand increase military seeing in been with sale a weapon for received demand more have and interest we the example we international countries As our also for like throughout in increase seen product is IBCS discussing to line. AARGM-ER our an where are foreign Finland the defense

capabilities. to new provide working weapons are with also government We the U.S. advanced

with SAW, the $XXX the an million capability also the develop Stand ground strike to weapon, quarter, received United the we States as in defense weapon targets. Attack Force a second to contract known During from air mobile Air to

Our AARGM SAW missile, high-speed is which we with in builds production. on offering the provide our capabilities

to time, product developmental be we're F-XX fighters. of missiles choice other a mature the baseline, off These able expected cost air-to-ground reduce for the and Building weapon are the to the SAW and risk program. to

focused to In reality. our XX work With August, this fighter of satellites has now award, the technology, tranche on orbit constellation being tracking transport the $XXX from are layer, design us provides Space satellites tranche data to for a awarded SDA's strategy million XXX earth were of build focus contract the with satellites at for broad business, layer with In to on differentiated launch on of nearly X SDA's particular low new national applications the includes new space Space we enabled architectures for a our security build Agency's a This into that X our for of war portfolio vision customers. Development that building we we've and and remain space capabilities. and helping forefront along layer to constellation. architecture. solutions developed a proliferated we see turn technologies end-to-end the missions. We transport

highlight in space new domain. and within competitive win to markets compete highly our this the success area Our in ability dynamic and

Atlas support These Station V XX payload. we launch power X execute security ULA's under helped resupply XXth a launches as commercial notable will Vulcan rocket. contract. motors ULA launch we successfully had our events ULA's addition, X our future resupply include mission GEM rocket the to national continue in We to of In solid International NASA's continue quarter. the of to rocket launched And boosters Space to to

cases we're a year a few in review in For next-generation design for contract portfolio. These date. quarter, track just first the are we on strong of we performance set preliminary our fourth across more interceptor, focus manufactured than and the rocket earlier the original than the successfully program the examples have on solid of August, motor

our turn the Dave the color over outlook. to Now provide initial to details XXXX on like quarter, I to some more before call I'd provide on

X% latest XXXX now across X all we've growth approximately which growth of solid compared our X% sales our see with raised throughout by to continue year. the to businesses. guidance, $XXX million We to of

We X% outlook operating our expect our our also and the XXXX, to and business accounts in cash capabilities grow range in support capacity We $X.XX reaffirm free year-over-year. investment to of income grow to flow needed billion X% continued customers. billion which for $X.XX to by

in Northrop Grumman to So creation shareholders. for our summary, is well our positioned and drive customers value

We and deployment. are focused performance strategy, disciplined our on driving operating cash capital executing our generating for

details I'll over on So our Dave outlook. turn now it with segment XXXX to the guidance some results, provide that, more and to

David Keffer

everyone. Thanks, Kathy, morning, and good

positioned business delivering of As we described, that strong our well Kathy in is the customers' capabilities missions. segments quarter of address results. and The we're growing generated key another market,

backlog through cash improve, cash the headwinds flow a tax at great our consistent conditions and with we well create new to bolstered a pension a demand with strategy. Taking for And reverse substantial by expect $XX now result, awards. metrics, competitive have years, we record several ratio macroeconomic long-term over As we our of and Xx. value book-to-bill to over ended billion, flow year third next be shareholders the our growth, quarter a as few full look opportunity

Turning to top the line.

through growth overall chain. wins, our add supply new second in the momentum the on the third continued This in of continue continue manage as the pressures includes the talent first to all with straight and for year, We of build segments in growth X% X our sales up quarter half new teams from of our quarter. to ramp

GMLRS At XX%, continued on armaments by Network manned the higher [ restricted NGI, the posted aircraft defense top by Information a including and in segment their to driven rapid volume HAKM the OPIR like line programs. and GBSD, sales Space portfolios, grew sales double-digit Aeronautics continued on Mission level, again Solutions of growth several growth of and as continued growth delivered strength business, of IBCS, in DS Systems X%. ]. in on missile programs the In up restricted X% generate driving domain. sales result ramp their

margins. with Moving In these last third of bottom compared results pleased to line year. dynamic in total, the income by quarter a environment. We're operating to X% grew segment segment

year, an QX. to earlier OM expected, the As Program portfolio. expanding our incremental across remained in in XX.X% performance we we rate from quarters strong improvement segment this delivered

prior and program along to Our were portfolio. by compared retirements. performance strong margins improved efficient was and year. of Space more growth in Aeronautics with mix Diluted we've and QX. third to the share particularly shifted a generated execution favorable EAC rapid our count. space, quarter top performance, are given and the experienced, this margins efforts, execution In points as up priorities. segment risk increase driven higher volume sales The from that XX restricted X% their slightly quarter Defense healthy development businesses MS in backlog were lower a down cost-type adjustments $X.XX, through the EPS by basis

included prior net income X these sale the Australian we from with in Partially in the our gain We offsetting guidance. a investment pension on roughly also recognized quarters. share, and that lower described was a consistent first an minority nonoperational per impact of $X QX calls of items

this $XXX QX free was year-to-date basis, year. last cash where flow, at million cash On time $XXX generation cash nearly nearly strong million. to a of with brings of well period flow a were free this for we us ahead of

remain in these in to across we in accounts managing capital, disciplined We company working improvements saw our continue the QX. and

our taxes on items, XXX tax lowered is expenditures recently amortization original to is on tax guidance additional development we cash lower cash returns, XXX tax estimates. unchanged. With and IRS that applicable taxes, not forecast in R&D multiyear below roughly is our of XXX provision. tax change respect Offsetting net result This guidance estimates were finalizing that upon interpretation of code. But based an increase our the of the the did the for provided research which our the other cash taxes a of Section under the Section XXXX costs

few Moving to estimates begin Slide a shown our with on in deck. our guidance. earnings updates I'll to X as XXXX segment

on high sales First, our in expect based we in business $XX to will modestly a in quarter on a return after LRIP this the flight. year earlier that and our year the growth the awarded year-to-date fourth represents expected, now B-XX to Aeronautics range. assume higher at to program strength mid- than be This AS, first first the results, billion we continues lot of the

baseline Conference, schedule. ground testing, year-over-year and top with new enter expect the we're We The at September XX%. line And progressing increasing billion, again which XXXX we line represents Space approximately segment this AFA in through are our of in wins $XX program expectations year of track the on Force sales this testing are flight our strength on Air and based we in continued to growth business. sales now for said

now and margin unchanged. sales are At line. segments XXXX projecting to of the reflect their billion. by represents slightly rate, level, another growth $XXX Other guidance For rate million increasing This of trend at year-over-year MS operating operating enterprise roughly expect margin our we're lower a we're sales $XX approximately year-to-date X.X%.

our We of are the income. our towards half indicate and operating reaffirming EPS for trends guidance that and range, cash segment Year-to-date free we're for estimates flow. maintaining would figure lower

accelerated build and XXXX, on of in expected segments Sales Kathy's outlook. we I'll business all growth continue Next, on growth sooner our at than X we our next project comments XXXX year. has to

improvement We XX% the we low we margins range, environment, from improvements. as over time benefits segment mix our see in expect business efficiency initiatives, project stabilizing macro our cost and and continue the to

consistent flow top before at XXXX returning And remain to to of our to cash year. free roughly sales next continue beyond. deployment, cash a We XXX% in as XXXX shareholders will priority CapEx free least and of a for flow percentage returns be including shareholder in declining anticipate

in Given provide to like financial our update a the also plans. pension the I'd on markets, volatility quick

capital continue cash above the to as us Our now and of next as And discriminator for our funded affordability the supports expect This competitiveness optionality. required several as contributions XXX% well our we of years. end minimal a is status that over QX. is deployment

per earnings provided sensitivity income, we by share last table Slide pension year, net GAAP affected pension did our a have for we are that on income X. Given as XXXX

predicated and rate XXXX a roughly on of early X.X%. returns X.X% discount forecast of Our was asset in

EACs they pension roughly result income of EPS outlook from in basis in in benefit XX slide, to GAAP movements X%. XXXX pattern. rates nature. would Through our on but provide of cash FAS be year-to-date mind of net led Keep downward this initial compared roughly projections. to pension on which a X% to results net year's financial January. This and our in increased are and market XX, discount with noncash in recoveries quarter modest asset to income our estimates highlighted CAS could FAS the Based return the impact that provided an prior on have to $X.XX increase modest the in combination September would updated, impact point reduce sensitivities would the CAS have is a a flows Higher consistent a

we see following cash Speaking XX% years. next continue of than in the path a year flow, to CAGR XXXX a at through cash and expansion our to greater grow with flows further

As long-term outlook capital flows multiyear free flow is expansion value provide for the our from the practice, free through deployment latest We cash January and we'll earnings on of decade. the our the in remain opportunity disciplined confident call. creation rest cash

With open call that, the questions. let's for up

Operator

Our with Bernstein. Instructions] comes [Operator first Harned Douglas question from

Douglas Harned

legacy better. declined. you're getting many had with guidance. this. Dave, you programs of about this for we've line valley things as talked I you kind mean, Aeronautics, raising this that subject your are about In But top forecast Kathy, year talked revenues times, the

the appear able forward? maintain the XX% path the still see you given mix, you be and what do here that to a on is coming Aeronautics So And margins growth starting years? puts are takes going in to

Kathy Warden

Doug. Thanks,

F-XX, the that Global So is takes rate production. through And large comparison about and include is our factors Those that we sustainment; to continue anticipate constant. to we've significant expected B-XX, What programs this which materialized in and the is programs we E-XD stabilizing is it have are of Hawk, puts we biggest in is start year ramp that and fairly as factor the declining to Triton, and expected. which generally year-over-year was we contributing and contributing other were look not growth that remained largely that. have stable that still then The talking now. forward, as But still been so growth. is

we near about. we've margin As those that be we categories, that expect mark and been We contribute that we've that will talking same the at of program AS. major profile to see contribute. will in they how gone categories and forward, growth look those do rates again, portfolio And XX% through, that

XX% of is production B-XX planning mature contribute that margins course. margins, will, whereas Our tends about the as our of and into move assumption, above X That's have we production. portfolio production, the on XX% the contributed lower to and has

portfolio And the entire near to that so it's mix the approximately midterm. us brings to of toward expectation that XX% that

Douglas Harned

the margin no income. to X% increase margin And in increase just guidance then you how you when said know really X% X% implies look going you're in today, I forward forward? expansion that sales, XXXX, in mean to you XXXX. X% overall operating thinking talk I into progression and about in Can about that

Kathy Warden

Absolutely.

this So at They year, are wanted outlook. is as in provide to an ranges. point broad the we normal,

gives more and So planning precise X% characterizing as the opportunity the operating margin, of provide to us we'll sales and to for becomes it that and do further clear, both January. in budget X% guidance more

is the We and trends in in that reflected What for year, I the trends labor And operating would operating fourth QX improvements, are on are in have move spoken are margins. of we say quarter, margin. track is we for into guidance as still cost, XXXX that see that They improvement we we inflation, again, next for expect largely opportunities continued in there performance. improvement productivity. to related sequential macroeconomic over our

And we time might look concrete under so bit before what we'd get about more like. get to our a like that improvement little belt

this improvement rate expecting into some we QX next So have modest margin we year. as outlined for are of year

be is historically to growth also I have for there, the also headwinds real earnings that just the that want understand, flow have free sure talk challenged to we'll while investors XXX, in today's Section cash talked our on to we about about free point fact the point growth that couple -- cash dissipating. a us call time. I'm flow are last more will which over years, and headwind We've the decreasing is on of

year-over-year looking headwind something important pension since We in even the growth. robust our also growth spend flow free see at then, course, CapEx on an focused But starting delivering. milestone we very us. cash XX% And flow we're is of for XXXX, really curtailing. cash more and free reduce

Operator

America. comes Our Epstein next of Bank with from question Ronald

Ronald Epstein

a from of up lot on and chain thing forth. industry, been capacity and in the popped One discussions of just discussion of the Across solid motors rocket that's labor constraints, a constraints. availability there's so missiles for about lot Yes. is so supply

And getting at how I Northrop is Northrop post demand in to going? are mean that, Kathy, it broadly, has that? Just a supply handle I is and handling? where surge chains a tough kind mean, doing of tough. You're and how labor all time what's COVID been

Kathy Warden

rocket XX that last had increase Ron, to in we the we for particularly quite forecasted has systems aircraft and broadly but been as but production demand the demand, seeing solid in our mission elevated. why CapEx across of the got not capability demand, the degree business, up our months, ramping ahead It's increased has the an motor we've in of been board. satellites,

foremost, is to both first and what's now necessary, prime And support it's and are so us our able allowing support coming And demand. be to our at invest workforce us our and that to did and facilities that in we customers for that what's who capability. direct to

We plans XXXX some why do provided. outlook are and place we going we continue have to reflected that's in robust that, for CapEx the in to still

causing to but we our pre-pandemic We more rate in to of we than terms labor labor that Certainly, hire, seeing levels workers the saw retain. ability are we back inflation get escalation are to able is pre-pandemic, need.

chain. on in all We've instructions are has That too, And invested materialize been little in productivity productivity. technology, which we've in supply there now a enabling slower training. standard workforce. in with focus of our work is invested Our our digital to

remove resource suppliers, productivity to them. an as to have industry, be well. we constraining and them improve as we we'll, capacity spending Northrop able a bottleneck, our I no longer be with co-locating Grumman with And factor. are think once helping our to that so And of lot

looking supplemental of international with the demand demand, which all at But that growing continue and we're equation. and said, now add to a to

So to it lay XX in we a because are going generally new to a does still to take support catch-up mode months bit in to XX demand. capacity be that

Ronald Epstein

on a LRIP? something -- thinking it. any the on us of always Is that's give for Got kind And there then it. you're you update about that's B-XX Dave. Because Got can maybe follow-on mind. everybody's how

David Keffer

It's Dave. Sure.

of part now our first with first that consistent So the we the we described call in contract LRIP that continue on our And throughout as to any anticipate, expectations program evaluate the not quarter. to LRIP the awarded during will each estimates contract and between upon quarter. award. continue performance earlier we That's fourth significant the that to third phase the and our that and for in noted did of quarter the we've the reliant be year and flight our outlook changes LRIP occurring phase make

as time over everyone update updates. have to we continue we'll So

Operator

Sheila question next Our Jefferies. comes Kahyaoglu from with

Sheila Kahyaoglu

story Kathy, free moments you growth that cash few is ago highlighted a flow here. the real

I it. you do growth? you the So networking focus income past. Can net in mentioned CapEx to cash about how multiyear about you flow biggest tax talk -- think on But done so line You've perspective? a drop-through drivers from since free want top that the

David Keffer

business. as that color happy a call we And expansion provide Sheila, continue should do there. expect and talked underlying that to sales you well. of it's earnings growth flow we've our we growth some XXXX leading as our expectations We Dave. to anticipate long-term about, on sales opportunity I'm provided expansion. in profile free see the cash near-term to margin give for today the sense additional a updates The

to free so expectations. flow are multiyear of foundational And growth our cash both those

all grown period we the to capital XXXX consistent as past in for talked our peak the Large clarity about of of number well over years of is and capital that, decade. be the XXXX a a peak now contributed intensity sources that On have right programs of as the decline the a new we've couple the of had and of have years would wins significantly middle our of we've years expectation. that couple so that top last with period have on for intensity had current business, backlog of that that we've

we expect XXXX in so alleviating intensity capital And to beyond. that be and

Working at not there. the And headwind or with meaningful to a continuing capital deliver performance a changes, point. to even among tailwinds the anticipate in class be is driver from this pay headwind best really we able of stable progress performance, capital modest working

few items And get projected X then CAS years. recoveries you next mentioned Kathy the earlier, pension to higher currently modestly over the

Of -- other based fluctuate course, on are changes well. those primarily possible continue returns, asset to actuarial will as on but that

on free cash that for the side, noted, we've been a from several amortization get for anticipating by pretty period we've the for then of X as And we largely as driven stable over Section -- over and is the declining tax previously, cash cash the outlook taxes XXX these outlook movement what through next years years. taxes

number a most tailwinds margin and all, opportunity in of critical all is in the key So of growth continued course, of expectation of the which, business.

Operator

question next Myles Our Wolfe Walton with from Research. comes

Myles Walton

hopefully growth you that profile bit rates year? complexion And space on on a out relative a comment next to off bit pretty wildly, deeper could a at expand might from which the playing just backlog, backlog just as expansion here? minimum the margin in dig for play little of maybe how continues to the segments a Kathy,

Kathy Warden

Yes, Myles.

similar So expect pressure year, upward for growth about, businesses systems. into air the we're missile we X% spoke you weapon around we likely profile next more year, the demand segment, defense will growth moderate globally next particularly DS projecting at around that is to mid-single-digit will on as growth growth still this if we fastest-growing and long, space tightly but year will saying I we year have be for DS be our as the to in profile experiencing enterprise and that to say that the the range, more been although due MS clustered, go be X X%. all and some will, across rate

as XXXX. push And growth higher talked in territory, AS modest still about, into but that growth then be DS' into continues, we've will would be that to will growth expectations XXXX. even it continue If

we for Space, tier. that particular, last approximately you sense doubled it's business So relative And that just that in in the a on gives order been have we a X of growth see. tremendous years, while so the

very margin that performance said, deliver the still you backlog and much now the we pathway are that expansion, in focused on XXXX. We is ensuring as and very of that our can,

Myles Walton

And negative can these you just margins, there going now off to and were Is clarify we've you EACs there have to, running still underlying profile? that on within X programs we're Are could point space. the quarters. margin seen -- for why okay, that's are to this expansion and say,

David Keffer

is been this much Kathy's X programs that to the these On And pressure expansion not backlog EAC driving new one, years, those programs. earlier point, has EAC share of programs it's over newness examples gains. our the It's that so development you're number in negative seen adjustments referring programs majority Dave. given so And any plus. are a that the year has last Myles, there really of broader. many market there strong or last the there space across to of been those business we've X over been few particular of

wouldn't off soon. anytime And them falling as so I characterize

that Kathy described. the a production programs, we to years, more see business Space programs including transition opportunity point which couple the our margin expansion of over phases of to important phases anything, number of those is for If to opportunities in next broader mature

see what pressures maturity that of of years as factors up. couple underlying those I we continued have for an see of years couple coming past is macro the here we margin stabilization think the programs industry-wide over the growth the really So same of those over continued and opportunity been

Operator

Liwag comes Morgan question Stanley. with next Kristine Our from

Kristine Liwag

indicated Weapon this Kathy, drives particular Stand your and you you've this win, provide on risk/reward the in your on risk edge bid decision not competitors program. elsewhere, as that color prime? with to tolerance on like pursuit the competitive the profile Attack demonstrated a in some NGAD how of on as strong the wasn't Can more

Kathy Warden

you. Yes. Thank

AARGM-ER, AARGM a each range, technical of the and fact that award off comments, products that product, We've of now those mature my the building line the product I and to So have. is in extended base with SAW the talked alluded AARGM we about baseline. are a or

As talked reduced item it to and reached to a what thinking is appropriate our where product. that where fixed item we take about risk either price, fixed said or will about that have I know design an maturity to the That maturity I've often it's a price product better of deliver reduce been risk approach met us commercial Because price. have Force Air AARGM and SOL have to of and, line bid then to risk we a for us requirements cost forward, fixed course, of able having bring schedule the to allows are to that the tolerance management. has

that. And is found the are there factors, advantage comes And a specific gotten that that's I competition, in there line, company that with in competition. we situation when with recognize but many a SAW has ourselves and that invested product in natural the mature

Kristine Liwag

the a of standoff question flight I testing the had award? budget the follow-up Does B-XX. in timing D.C. current impacts or on the LRIP

Kathy Warden

not. does it No,

flight expect Force this first year. look are have still at is before, And to that we we happen LRIP As the to achieve on we before anticipating and a Air year. award, said, they we track first the about Dave flight as as this award, talked is still timing make that the looking of that milestone

Operator

Stallard with from Robert Our next Vertical. comes question

Robert Stallard

get I DoD your putting in to we this follow I'm cuts the commentary wondering of plans start budget craziness in place case as at arbitrary if in you're any just a budget contingency wanted Kathy, of Congress. up the result call. on

Kathy Warden

my Responsibility challenges discussions Fiscal at they at our significant passed numbers seeing pressures we time, this timely But our to So Rob, see, rate. are line we have working XXXX begin monitor And they have a in that moving will such of and see as to bills run requirements looked just not look progress. -- growth to a pleased Congress the House fashion through it accordance and expect as there I the as the portfolio to mentioned where to top would might that and those as us with we in we very minimal be We're look are any risks have irresponsible we that they not continue some with of customers Speaker risk. see with in getting any we Act budget not now. that should but as even result a or navigate into to appropriations to either commentary,

Robert Stallard

be Yes. demand Northrop investments. on mentioned And a follow-up, at then moment. there export other overseas wondering was market or as there, companies making acquiring could strong either the any if the Grumman I the you opportunities capital defense deployment

Kathy Warden

are already and that support missile armaments. We capital making in demand growing that investments defense

talked And about lines. so over our have XXXX, as CapEx investments those years our support planning product last international and forward several into do the we

not We in signal increase significant yet. demand a anticipate we that that seeing are would

are several bit monitoring growth through but CapEx that supplemental, baked in already product good we've accounted a years. the for it planning our next both in over we've We of the line

so I providing don't this on at And point upward in CapEx. time, see pressure more that

Operator

TD Cai question next von with comes Our Cowen. Rumohr from

Cai Von Rumohr

Yes.

think for the if defense, at go there I for with back And Doug's to go you've that I opportunity question, there. munitions the mean, basically space be recent up, year. you've more Kathy, some flat you're in about the moving up. Certainly, made of kind point I looking to look opportunity to next should basically margins made So margins point quarters,

year. which comparison base easier MS brought this target next an suggest for would You've for year, the of down

talked you've as Aero roughly about think being flat. I

would the flat there face and of up look to for that those for portfolio, as is to year? opportunity at next margins that which And the if margins opportunity But risk the are which move greatest so, sectors improvement down? ones be perhaps margin greatest have that you your

Kathy Warden

to what is can just for the Yes. me I to is the improvement. of and ourselves year. And thinking. the exactly I QX factors key investors the are that margin see And and segments we those each path the team the greatest and touch way call, on our also opportunity. drive amongst with It's discussing challenge tie me let like out you're that improvements then how laid do where in I the associated next it

on call. the already I've factors, macroeconomic For those about talked

secure this in are time. a seeing be had point inflation We than we hoped bit at

that return factor. is incorporating levels ability forward profitability of but are it into impacting our our higher to to We estimate,

That just upside area are flattish to we not a company, but within next improve another opportunity. would is year. chain. our is That to our working productivity, look where supply be Productivity

is as that also year. has we margin modest indicated, and some mix, then a systems the gradual don't mix systems shift. factor are year. going expecting for notable the of Although, been What and in mix improvement a significant this into I mission we years, look over year. rate couple both very is particularly base It at see mission last for next a We shift next

they -- that still shift production the X business pieces the more so margin And feel to will until rate can pressure those some of portfolio. in

moment. margin most at uncertain has well top come demand Systems supplemental. our As as both the through the as growing Defense you as result note, we upsize the see Those line business could are domestically, what and that the international of particularly

our source in of are of those But factor a upsize. portfolio. we do plan, course, entire we across managing risks be but then, the that So could

together, looking are improvement out to And at point rate in of modest what we we've and with some laid that expectations. do striving year, set put so all at as really we're the a this into very next But comfortable of better. when we year

Operator

Markets. Our with RBC Capital comes question next Herbert from Ken

Kenneth Herbert

Kathy, we of much 'XX, 'XX? not impact think bookings to think been margins help as strong that up or you this that and the year. about as just And quantify much have how And maybe international Can maybe on accretive maybe follow set of could out of about I is or sort to could this being call wanted growing growth I importantly, international in slightly opportunities, margins? international next see maybe more year guess, how but I could into you so how much international?

Kathy Warden

Yes, Ken.

the on all pulling you're So threads. right

materialize look that sales that we little up into bookings will year. for a And into as then plans, It that, Our in takes meaningful while a international our the this portfolio future are way. to trend we expect continue.

a will in international. of sales of come So terms gradual that we the overall see our shift from percentage

double-digit takes about awards. that XXXX these would ramp I talked XXXX, to a time necessarily sales achieving the but because We've of rate. on in growth into expect not it

that opportunities frame any expect time opportunity would working could also starting than in more time in also XXXX frame. upward that do margin but that they so so be now we those And you that materialize material XXXX, are actively

Kenneth Herbert

of helpful. about That's when lot real opportunities hear of think we to all after? sort are seeing into you're or international? you sense get with yet what how to a materialize environment, trying of about geopolitical think all expectation, -- actually of of you way of growing opportunity much as I'm any And obviously, there that the yet is a going with, sort just in in actually the transpire you're terms seeing this bid that to translate just

Kathy Warden

of We in signals seeing demand. are it

over I call I have product dozen XX So -- so that expected IBCS that that Today, we expressed expressed in noted in have our countries interest have AARGM. or last interest our mentioned line. on another

we're source now marketplace as I to a And I'd either expect forward, will supplemental that contracts time is XXXX would into talking U.S. programs. materialize. with to about working look be same those but signal stockpiles qualified we frame why new on be signals replenish expect I to time into countries more we look we seeing to material contracts, a As XXXX, translate of that, it for budget XXXX the in through that demand we're translate but we'll is supplier do And the us true that we expect frame or more to the second many say to that's the ensure be missile for demand domestic those time. being work where working takes or them to was

Operator

question with next comes from Bank. Our Scott Deutsche Deuschle

Scott Deuschle

there was that black that Kathy, entirely House, classified here? Do any in supplemental from expect? extended sense White for an for could CR Air box in procurement included $X.X as whether there's you might is the Force Or billion emergency help programs. we programs otherwise event a just the that have request your the support potentially

Kathy Warden

the comment ensuring with do on continue necessary regard have Force nothing make on Yes, B-XX Scott. work we that to that, to the with can we I to there's program really I resources Air successful. will simply say

Scott Deuschle

guide enough. XX.X% fourth something a MS margin quarter. on margin like And implies Dave, updated Fair Okay. the the in then

historically. assume you little seen you've commentary bit a above something about the XX% any talk if drivers Obviously, curious like But before on what done for could we've Just curious drivers. just so I there.

David Keffer

Sure. of business our A in couple year, more quarter of mature thoughts there. driven year One, strongest fourth of quarter you by fourth performance MS margin mix price sales fourth programs saw we trend its spike that that anticipate business last the tend with fixed in a in similar the with to We of the similar the quarter in year. predominance see a mix. this trend

lot by tends year contracts over been restricted driven phase of of growth with in growth to time. With in work been growth that more to this been portfolio fact most the back has There that for is need XX% In But to shift by this fixed opportunity year A cost-type execute has MS in MS that and towards to portfolio the aggregate, price the rest it in that its drove change and our QX, that continue margin on pressure of efficiency rate. margin that the with deliver work. we same and driven said, mix. dollar cost-type said, this has the well year-over-year in the With trend businesses on at a is the its critical work anticipate QX. growth to along margin life that really in result. for in guidance be perform MS in MS across cycle

Operator

question next UBS. comes Parsons from with Gavin Our

Gavin Parsons

is could some sizable, get would I into Section you recapture it if just like that you XXX was change more seem the given offset and has hoping be to detail little bit XXXX? a Dave, on go the what especially pretty from

David Keffer

into go to Happy that. Sure.

costs. that in of tailwind for that flow takeaway To than and of our discussed peers, for years. difference over have aggregate, come our fixed there, guidelines. cost unchanged, lower-than-projected reduction is best largely XXX remains our XXX-driven change due to That's particularly guidance largely XXX said, price appears the that applicable cash cash there. the R&D-related the tax is future our important we continue and forecast appropriate be in us will cost guidance to any down several clear these and next a our To on our around some and it to a free here expenditures that bit that taxes the apply to between less XXX-driven of costs applicable a think point, your I our others is, in the given the assess impactful have interpretation outlook guidelines, cost industry out type be interpretation issue that for that not continue the own comes latest in to outlook. to the in XXXX With the and

an impact of our than based for interpretation less So on others.

cash of every years disclose some business So an that as scale items takes and are downside with tax our largely upside a said, with a There in all and all some balance tax there puts quarter. in our XX-Qs of unchanged and are we is have, driving many of forecast. as across we this that clarity open

Gavin Parsons

Got it. front? relief for That's helpful. customers on Any Kathy, you with mentioned that stickier discussions on update inflation.

Kathy Warden

awareness funds appropriated year, a this progress setting again available, some these year language funds and will good the in Congress making in we hopeful see of the that of flexibility, continue, with I'm we're address last Discussions and precedent issue. departments issues. once having the think give And both dollars I that having to

Operator

Seifman Our next Seth JPMorgan. comes question from with

Seth Seifman

be here to deep but I in left kind taxes, the Apologies the of what on weeds got now.

of guys wanted like just in XX%, that year, like just last was it I better so XXX And interpretation XX% their your paid payments and little Dave, you, and of paid I what your a to this. XX% ask at look IRAD to If understand IRAD. you of Lockheed

Section seem basis kind of the would it -- would XXX. seem the And guidance to IRAD that is like like very a of there So with different subject that's is interpretation. it idea what's the consistent

provide different so more bit maybe business. can just a if this, we -- know but what's little on about you I color your And about spoke

David Keffer

own interpretation in I to as of the clarifying a own assess I a the the that we'll differences based in guidance, get on common different as or peers. and view I we're interpretations assess IRAD provided broader the guidance it we say our guidance appreciate Seth. it's from peers. mentioned, to line with guidance would interesting it's and We're includes following I our our than question, place contract-driven to to and R&D When it of us discussion of of September. for know continue future different Section is an said, of not XXX, this well. open may So familiar With portion even time been future. comes in for topic. And the our interpretations probably us, isn't potential on

as others nearly for us in contract is for importantly, impactful them. said not interpretation a difference have is as it mentioned, as I But type

That it aggregate, this difference of hasn't than much And so lot the is to think a think, deployment. interpretation changed should the should is forecast recent has a past. for the more forward a tax the I it more tailwind relates a free us. focus. puzzle of important in And been I important a capital cash It's over strong less take to that these opportunity away for remains the for X optionality less of headline. be way meaningful any us leading us point to that's piece And for really that years, and in be next Street small growth going of focus our important in cash flow as

Operator

And from David Barclays. comes question our with Strauss final

David Strauss

and guidance sounds any at on your B-XX for Kathy, to next B-XX ask year. XX% margins that? AS incremental Are you specifically [indiscernible] Wanted like it assuming, on in -- inflation

Kathy Warden

at and it number the contract performance, we of terms. expectations expectations for So the look into our a EAC, our has incorporated factors

of that through into into for profitability. that that we the out what planning hard all to have And we we've expectations working and the ensure is achieve. laid to perform X I at are But what said we as that, are And a so factored consistently plan we B-XX. year, goes is

David Strauss

I XXX. Section to to go Dave, apologies, back And Okay. got

your are us, set stepping forecast level still XX% next roughly year? to Just and impact million -- you there year, from this XXX cash down are $XXX in you flow Section from free assuming

David Keffer

No, I question. appreciate clarifying the

XXXX XXXX, the formulated Section in and down have XXXX We to cost of annual and XX% XX-Q below our prior apply about of on in on with the our the that XXX, actual based effect have return. we calculated the tax impacts we've further of numbers estimates our for impacts stepped benefit we've terms of beyond that the as detailed

lower a that. it's bit So than

forecast As I year of our by in which next direction, mentioned, or that's for in other the this couple a factors leads cash the moving offset tax in aggregate, to of no change years. couple

So guidance. the flow cash element free no that change to of

Kathy Warden

David. Thanks,

our retiring want counsel in our quickly instrumental take to I in of And and to a trusted So our leadership concluding with just is the before to our been a company team. Counsel General and the company been years their to to has Sheila customers. provided contributions the XX the thank Sheila instilling the Cheston, particular, me for after for and to call, and partner want company. ethics thank she outstanding and moment has acknowledge a team them I culture strong Board and who

role. for Simpson is the our also years, brings of Counsel. expertise our She and wealth She's a and valued to with broad-based new team. General Kathy a strategic many been us legal member of is she

have So we're her. thrilled to

years. I'm our XX strength years transitions you sector, internal and largest future experience the looking going team the to which Strategic and want And space us notably congratulate of meeting has with and us also make with role across Space I working is that segment of the is company. Space you the for Fleming, business several the last Wilson Sector is Rob the see System think our years them our in entire period I these Tom depth for our them our development a And most extensive Systems recently to and our expand new help Rob to allows He his President growth. smoothly. his leadership division, team guiding complex tremendous space and new just running a now businesses taking thank to what company the led very Tom forward from enterprise. during of in capabilities business during who's

look we in call thank for call again joining forward and you quarter fourth So with you today, January. on our the speaking to

Operator

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

Northrop Grumman (NOC) 26 Oct 232023 Q3 Earnings call transcript