NOC - Earnings call 4 2023 | Northrop Grumman Corporation

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

Operator

Good day, ladies and gentlemen. Welcome to Northrop Grumman's Fourth Quarter and Year-end 2023 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. Investor President, Vice Ernst, Relations. Todd Mr. Ernst, please proceed.

Todd Ernst

Good Quarter XXXX Josh. a that's IR morning, we'll and Fourth Grumman's presentation website. our to Northrop to posted Conference to welcome refer Thanks, Call. morning, This

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

Warden, including our actual those GAAP and our to financial our results Today's our over At on uncertainties, CFO. in to Forward-looking earnings today's risks CEO in and the Kathy? Kathy. statements and include measures involve materially. and release noted SEC call time, turn Dave the reconciled and And to press risks President; I'd are to non-GAAP differ like are will call uncertainties company Keffer, our release. These Chair, that filings. may this cause Kathy call today results

Kathy Warden

Thanks, morning, us. you thank Todd. for everyone, Good joining and

our XXXX results, team a our thank work discussing their mission. to wanted hard important to dedication for moment and take to I our Before

complex, globe. advanced These geopolitical to customers workforce, over in talented now the continued . The grown to defend XXX,XXX in driving technologies day more capabilities increases aggression every world. most the strong landscape some deter Our the are around is used of global our continues security which deliver by and even spending. freedom has

through translated in growing us has market, positioned win Grumman. which strategy has growth accelerating line well into this to and compete top Our Northrop

midpoint our $X XXXX, ending original billion X% XXXX over above year, the by in more increased guidance. than of the Revenue

book-to-bill X.XXx. X-year line the for our That's In exceptional in was our addition, average. with year

exceeded cash strong. our absent flow record our performance free now end high is healthy of our guidance for backlog, As of we company our a $XX a charge. and that and sales a of the guidance strength, exceeds foundation We growth. which and provides comfortably The continued billion, this range, new EPS at achieved B-XX generated the we award result underlying range

conditions charge confident we're rate portion this performance on B-XX quarter that the for we in necessitated of proud assessment outlook, While our production also continues execute to the unparalleled B-XX the the program. the our ability to the program of which are disappointed aircraft unchanged. initial forward in company's remains development of team which deliver We're an of low

strategy, and we to prioritizing based delivery and To support strategy, customers in we our focus forward, capabilities. look core, on success. laser we we continue is performance a on technology execute and to billion differentiation, this invested capacity will and driving and R&D innovation business As In capacity at over CapEx, value investment support our shareholders. its which our mission to $X.X sales, continue are up XXXX, customer our of X.X% in for

shareholders We cash dividends of of also return billion a free share representing repurchases, over XXXX our $X.X delivered XXX% flow. and to approximately through

in Gem significant missions is And other confidence across quarter, first power of to the growth and ULA's in XXXLs few after our to So our portfolio helped now of progress GEM rocket important further Vulcan business. milestone ramp solid future. significantly I'll my bolster successfully Shortly we've Vulcan fourth our vehicle customers. of it supports years. this a that made for announced Amazon on GEM examples coming ULA XXXL close the Future capacity its XXs utilize Kiper propulsion will investment launch of production support booster an our highlight in the the additional because we mission. opportunity a providing

weapon. of supplier and propulsion increased continue. RGM systems, Global we're a the a business demand the supplier In grow this market, attack expect the we base a contractor international a and including customer we're this ER and both prime. company for systems air-to-ground of expect and total for XXXX, trend predominantly currently and demand than revenue to significant this fuses to prime highly Weapon of Stanton seeing, average in missiles warheads, faster future our expansion cannons a Systems across coming represents this weapon X% We're we diversified for portion customers. foreseeable based with on and approximately a from

above of Mission of our remains with all segments. exceptionally X.Xx, Systems In book-to-bill highest our strong a business, demand XXXX the

As restricted Mission portfolio of driver is growth. we've seen the years, recent of in Systems a meaningful

operate capabilities. the adversaries of pursue advancing them are that customers enable inside solutions potential also decision who loop our to computing As their

our helping secure ahead developing microelectronics, advanced are customers and by communications. stay processors We sensors,

faster of are advantage environment. cycles with positioning technology rapidly this product lines in modernization, decision customers our enabling Our advancing

And make phase Triad. the of strategic significant next-generation we EMD the on is continue Sentinel, which to progress leg land-based of the

estimates which new We a static fire are the in to triggered week, of be ongoing next program such risk, the of solid review for of the the X non rocket submitted Defense, McCurdy program, launches set cost earlier for month. several turn, Stage the achieving milestones this to by which the test Congress as to for the successful expect This mature a we months. a Department breach. of Last test Air Force and missile the including activities design Sentinel reduce the motor key

driven important explore estimates on the industry on work government phase construction EMD U.S. program quarter, our our past years. growth reduce of and team is the the are that is phase. partnership a and partnership the to flight military and beyond program the Force the test the procurement Grumman schedule B-XX the baseline the U.S. phase. And close for it the late the build-out, with the cost the and move to entered we'll milestone the with part perform close to the Force. by into to the with achieving when XXXXs team to major is credit in launch This opportunities continuing to several with Air of focus primarily program. a We the program And It's cost Northrop phases Command is facility fourth on note which for expected and and in a the within procurement its is over Air

Following this the is were in fourth first underway. and [indiscernible] the awarded production milestone, now plot quarter, we

take moments a time Let with talking detail we little this the to of started provide a on about more the few at me charge, B-XX which possibility last year. you

global industry, team in significantly production our As XXXX. know, assumptions which like cost lots made have all meets are suppliers and you recent different conditions, [indiscernible] from from of the pressure the bidding experienced macroeconomic when we

profitability And charge we now quarter phase that of The regarding it Albert of be higher in program. in XXXX, on after-tax the During again be costs funding over at impact the to program projected is updates a these on disruptions spread mitigate we driven the related years. Albert of manufacturing phase the to recent [indiscernible] our of fourth the negotiations largely each a the and first experience by and our a X the of of The is cash believe change our will supplier impact will reflect macroeconomic probable, aircraft. the assumptions completing performed number loss. lots reviewed estimated first

not years. have flow the Importantly, and growth have we several for we over this our free changed next effect, absorbed outlook cash

are This that to over in executing decades. also a and will value focused shareholders game-changing the on capability the our way that a be great delivers value of to is program we coming our nation,

our space environment. now to for investing as remain defend Turning due security the spending alignment differentiated customer strong, capabilities to priorities, the weapons. against and and the U.S. Demand is Triad, allies to national and to Global our budget and including deter increasing capabilities aggression. portfolio

U.S., a environment. Congress And gives constrained Department outlook U.S. budget programs the and franchise us our in well supported in this remain confidence In even our by of the Defense.

are enact that we're that provides have place an spending, NDAA to We support soon. defense for appropriation continued will pleased hopeful Congress in and

have frame. not we're Our CR, time so guidance March full progress far by appropriations or tapping a year encouraged in assumes and a the seen shutdown we we've the towards will

industrial monitoring this expanding and and on funding, increasing we opportunities munitions we supplemental progress in see in Additionally, request. pending are production the base

be and expect needs defense aircraft, increasing our their with also to growth. are alignment systems additional of allies weapon spending, systems an Our for and mission we their source

the to right long-term on we deliver our outlook. as the future, team to have we and look portfolio So

growth, sales and Segment as rate range operating represents estimates, to XXXX. initial XXXX. Our organic greater X% rate XXXX are than charge which since EPS and EXX XXXX. in for of annual to dollars a calls guidance provided continued guidance the $XX.XX X% in excluding the to our And $XX.XX grown XX% our in at the compared sales margin grow have same at to X% growth roughly X% roughly expected EPS of we growth our midpoint at XXXX

and outlined remain place. year's we the our headwinds, structural blocks cost earnings and macroeconomic in expand of favorable implementation future in building that dissipating call, savings addition, shifts mix margin to productivity initiatives, XQ In including last

We are flow drive laser-focused years. free rate expect bid continue to our a and cash grow the discipline to margin expansion. at over And on coming importantly, performance to double-digit we

and the a billion our reaffirming at of are we've XXXX flow cash XXXX XXXX outlook free We and introduced outlook also midpoint. $X.X

generate With the customers businesses generating and considerable value flexibility we shareholders. deploying capital for in have significant to cash flow,

priority and remains again invest sales to our R&D. investing XXXX expenditures expect top X% we in and over Our capital support to of strategy in business

an to of our Directors our to share increased capital authorization remaining month, time, At authorization $X.X returns by and a continue our of the ended additional billion. $X.X we billion, year same the repurchase we'll provide strong shareholders. Board Last with

that XXXX, coming at liquidity This year. the includes ASR which billion we this share our entered initiate with expect we to based a on billion. $X increase $X to the plan For strong least in we position days to repurchases

and sustainable recipe couple when get declining those top robust for and So factors, cash come. lower for these flow you with margins, with projected we a growth growth cash years capital line expanding to intensity take taxes,

forward So Dave? the to now you XXXX over and provide details more I'll results, guidance Dave the segment to it outlook. turn on

David Keffer

forward strong guidance. elaborating Kathy, then our everyone. and We and favorable with finished start us build good reaffirm I'll on morning, the year XXXX upon our by momentum, details additional Thanks, results and enabling on provide outlook. to our

ended side, billion . demand our onetime a segments ratio with the our X full over year book-to-bill for over backlog, of sales. we All in generated $XX new record company. On XXXX a

among were sales We not demand XXXX. even X% only than QX up backlog new line seeing programs, strong with guidance. of line year our and to also environment results we're strong on were at expand by roughly $XXX to quarter stronger, also by compared over fourth workforce our sales. top higher the the latest X% into enabled ramp or These our ability customers, of but results convert our million our $XX.X Full billion, to top up deliver sales continued billion $XX.X

year, the returning growth segment XXXX. growth previously in to generated in Aeronautics results. earlier businesses We than sales to our for Moving of up were expected. sales each X%

microelectronics And from programs. business double-digit and volume As space defense in coming by our top on posted weapons rest driven growth, came programs systems quarter Nearly programs also higher that more restricted with X%, another by volume driven with offset higher our growth portfolio. than from sales on of sales for marine portfolio. NGI the on of programs. X%, and growth volume year. missile approximately DS on broad restricted was sales Space the line growth higher production advanced led declines Sentinel Systems XX% and the higher up XX% posted by Mission the sales were mature of up

around the program. confluence a by our production and As primarily higher cost disruption margins of described, macroeconomic B-XX was projections. for charge the Kathy The segment assumptions driven included lower charge funding

pretax effect $XX a contingent the was including to million reduction liability lowering has of remaining adjustment, have the been $XXX as The of our segment to booked because majority While million margins, the yet charge QX only EAC an as the a be had awarded. full recorded lots sales.

these Absent deferred have includes per also our prior a an pension The a shows results, expense per $X.XX benefit to of our guidance with we EPS of XXXX our provided unallocated earnings in range a million the we our from October. unfavorable exceeded over from and from $X.XX in in state share taxes. stemming adjustment to charge the impact comparison B-XX Diluted corporate Slide share Continuing items, X plans led end $XX charge. reduction would by high the mark-to-market guidance EPS $X.XX. the

to pension generated adjusted headwind total, XXXX. included in income In $X.XX Our share compared a XXXX pension significantly mark-to-market EPS net also costs per less XXXX.

Next, to discuss moments cash flows. our I'll few take a

cash cash of our is free As outstanding QX, flow. $X.X billion had we generating pattern, historical quarter an performance in in

represented end and the free For cash range our high the to billion. cash flow full of flow $X.X was near year, was of cash operating This was XX% result our guidance billion, flow our and compared $X.X free XXXX. growth

results, ahead in returns discount FAS Turning asset our XX% strong declined points XXXX, XX rate to assumptions. of roughly to The basis of by long-term X.XX%. roughly pension we generated

this expense summarizes Netted our pension next X pension X years. together, a in data, Slide the mark-to-market results. million generated along with GAAP updated our Census of earnings our estimates in $XXX deck for

continue we expect the to levels, of We FAS pension expect current providing driven to level to and from coming years a CAS nonoperating less flows, income our but XXXX. increase asset our strong recoveries projections cash than in higher in prior slightly a by returns benefit

and In superb several minimal continue remains cash over to years. total, pension nearly our project contributions status the we funded XXX%. And at next

other sales Aeronautics off driven the our strong earnings XXXX. we top X Slide the $XX includes Turning in guidance. low is to results a level as in on prior billion, QX, expect AS, which estimates modest deck Building now and XXXX our line flat in segment our such and sales than XXXX. programs B-XX E-XD. on higher growth F-XX reflected in growth This and for by

of on Higher dollars up slightly in estimates. $X to mentioned strong sales as And a netting similar to defense capabilities. corner for the result also expectation single DS the mid-X% billion, now volume XXXX. compared from a really demand margin roughly out B-XX we low prior through missile lower the digits growth to AS sales expected for are on QX project which has DS in rate be and weapons turned call, we margin

convert which in expect this growth business. modest training into and to declines partially in these optimistic we sustained in time, be to We portions over by are business the sustainment offset of our ability the opportunities

space, in in to mid-$XX billion low growth Mission of CAGR for XX% now segment mid- margins projected are than since the that program in portfolio. with the by is expected XX%. which a expected to expected range roughly Margins DS growth range. remain in Space margins. rate $XX at sales strong X%. year margins offset are reflects in mid-single-digit to declines in other XX% space sales higher at expanding of The sales are moderate growth parts due range In space restricted with low priority, billion to more Systems with XXXX government XXXX, than in of of another are a in approximately high after greater shifts mid-single-digit to growth the the

the reflects growth top ROI opportunity even measured in charge years, guidance expansion a At provided more we the margin sales an Having October cash and growth segment delivering call, in along Space our margin our upside between tremendous has backlog QX. built X% consistent and after recent on generation. and in X%, with now B-XX the to absent strong level, outlook deliver with through company line

little year we the with expect to a full around estimate. our book-to-bill We another sales years, similar XX% throughout less than year a Xx. solid year over cadence bookings And our to last few expect of sales of first the quarter ramp with

advantage issuance for as interest for new also coming guidance, well market purposes of $X.X also income in be as environment. expect days. and corporate due support will initiate this the billion XXXX. rate January debt expense ASR to debt the part and of coming of repurchases, line XXXX used our soon as from contribute issuance The favorable to in $X including proceeds it of issuance we in in EPS share in interest billion that refinancings plan debt the we'd intend the We've general notes the are reflected to to the in to did We be to take

have negative X-year over other potential a legislation next XXXX, they're items. we've billion. results unique an Similarly, adjustments. a book effective mark-to-market tax amortization could forward current And number any the with in to of We're any of closer as years as in IRS, interpretation the have our audit experienced not changes open R&D over factored projected excluding on to impact a with appeals tax taxes consistent few on such into conclusions and the approximately approximately or our last cash of of which law include and resolved we does and the outlook. R&D rate couple $X our adjustment coming from years, reminder, of and range tax We project XX% guidance not the processes effects positive

they to provide shares matters track as XXXX million outstanding. In total, will and our We approximately continue these with updates to progress. XXX.X and on be we carefully weighted expect between per share $XX.XX earnings $XX.XX

between said $X.XX and expenditures XXXX. flow consistent XXXX earnings an our are in XXXX beyond. moderating elevated in free to as deck Moving free $X.XX include in And provides expected billion long-term cash update expect flow cash with to capital before we've XXXX prior to we our XX and before, billion outlook outlook. remain to Slide cash, our

double-digit additional flow second more We decade. cash half free several to continue growth grow expect rate the at our to a with for years of the in

be This and lower into driven and growth recoveries by higher operating cash generating a years those strong structural in business, levers lower expand converting in expansion coming Meanwhile, rapid our at flows provide spending the cash additional capital volume taxes, rate. will margin cash. profits of our sustained levels to CAS

with latest ranges B-XX the charge. include impacts estimated these Importantly, cash the also associated

We the with XXXX cash the flows in to expect through of following charge remainder XX% the affect years. roughly

to we that, the let's closing, to provides strength to cash as the In entire and to contributions free of are And programs open our execute term, opportunity call of confident with flows team up and visibility their the from flows year. another Q&A. us Longer deploy thank B-XX The the Grumman for delivering cash we great and continue Northrop robust franchise our deliver strategy. portfolio on cash able want beyond. XXXX absorb in we'll be I to while excellent to headwinds

Operator

comes [Operator with Stanley. Instructions] first from Morgan Liwag Kristine question Our

Kristine Liwag

B-XX, the very you've And relief there the on on you clear is program. still offset to pressures Ultimately, [indiscernible] macro and this how customer future of relief? the much been extend portion. Kathy, pressures possibility did about to a

Kathy Warden

So Air billion continue. allocated But Force in on disclosed procurement Kristine, Lot have what we conversations we've working be year, that inflation in this for $XX customer. And been with may Congress the last work we advanced to for through million noted, the and And as future X that appropriated program. lots. XXXX, relief to we $X.X yet about the that of

and said, expectations we -- as course, relief. we've through and environment, of lowered have, inflation for the budget updated actually the our assumptions We tight conversation

this program And focus opportunities on at continue on the work any so the our see there the point, to is performance finding executing government we if this and inflation program opportunity. in with while relief to

Operator

comes from Global, may question Richard with next you Our Safran Seaport proceed.

Richard Safran

the So on you're level taking been importantly, opening the of right I at but are about to a more to you talk going questions about B-XX, you're program Sentinel. know remarks all the program on thought we've lot support bit expand for headlines program I'd get about might track. thought actions on on your government's risk now? ask a back I you what you the what And seeing? think and the seeing is you the How the guess, given I I

Kathy Warden

Rich. Thanks, Yes.

of Defense. times the program nuclear So by and administrations, Sentinel for the be review. leg expect the priority we numerous the Department of this a land-based top triad, The as is for validated to outcome latest that been has multiple of requirement the

number construction in industry our reported, the helping [indiscernible] and estimate That's assumed phase the estimates that's the the the Force a phases would driving are on estimate. update military of the XXXX, note of . I'll cost plus than since on procurement this Force that at been we said, and factors is work significantly there's [indiscernible] breach. inflation better phases later Air largely of reach cost Air what Air triggered EMD EMD those program, and not because the segments captures that and is is costs phase to the that inflation the for on a And program. executing has the due their currently their they of the cost Force later time. the these design as the increased, learning have to important time and in cost was of all the have program also last know higher due team the what's we the growth cost growth As did to

made has So our that that mean reflected with cost tested pleased I'm call. over the of on on some really earlier asked that we've while We've produced been said, design. EMD on seeing to these of matured the critical the hardware outlined X the about I though, also system, system report phase. the in program, We've team thousands what as you're engineers. missile onboarded in the years is the you performance progress latest and and estimates. We've executing our last on I've

reduction, helping which with fields detailed Friday, at is inform phase why also And We've future have the the met launch also which part of the this committed Force planning while visited brought one and who engaged in this program. missile have modernization done I facility for this to cold, the mission. risk I doing all myself, to I is we've [indiscernible], Air the I've last themselves important of actually, got back. was I,

how for deliver is our this to nation. Force, So help Air to going them important essential know all in. we're with this capability and partnering closely is we're our We team the

Operator

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

Ronald Epstein

there's it maybe have it is, this? for so the about could forth. tendency cash as about Charges -- just on should do positive we become X on we and to mean, positive, back and positive time. And actually so does we a way. forward? bounds the this thing. LRIPs some like when the Is it tend NPV is think program there one then maybe how They go jumping flow How LRIPs, B-XX. many to what over don't programs So think And I be? go accumulate NPV last if to first the how and other

peel just on program. the back could you onion If the

David Keffer

can started address if raised. number questions we I a you with can ahead go get of that. And see and Sure.

we future, note, than the with in to terms at important update have quarter we the our the we'll year, having ground do today production information first it's did large our continue programs. the as phase of every to more of lot First we this projections last test But all time of in aircraft. completed of all, a .

of remaining with We stages suppliers in of now the the contract advanced under negotiations. also majority the have

We have our learning on estimates believe and latest for productivity we based historical appropriate our reasonable are curves experience. that

But under Of course, of the one well. have we'll critical continue lot we time of the lots now we'll those, and quantities provide we're a customers. X track over well. to past have most capability a is next course, stabilized performing still year, over for contract, on bit and as this finalize our economy as continuing the time program, to and inflationary factors perhaps importantly, well which over

we company our to for long-term also important over customers that's will lead the NPV, time, time, should, our of think deliver that is most value from and that value over terms the the get the and In great We'll thing aircraft. shareholders. them

Operator

with Harned Our next Douglas question from comes Bernstein.

Douglas Harned

to are, back the the you've I well. But understand understand wanted Sentinel Force breach. to with that purview potential be the McCurdy requirements things They're the go in of things this customer? what talking -- you also you to that due is and in think that a talked delay described government others, to but I and look is a how in changes breach A going a those where about couple -- is what also X-year commentary EMD bit, wanted much under including little IOC, may program. came that at that when because versus about out better. sense, your I headed under they're it on to Air is this And Non of when potentially

Kathy Warden

Yes.

you Nunn-McCurdy there delay is though note, cost as a for the IOC, reason the is So the to breach growth.

the contributor. delays the deployment each you the affects not scheduled of Air program, noted, that add in and command the particularly decisions, Force and launch facilities silos. the as in the that to to primary costs that design It is, is the requirements has oftentimes launch So related

cost And working [indiscernible] and reduce are and so yet to process Air costs this Air the and procurement a that inform they're that is we Force outside Force to they is amount of if significant the alternatives review during team's what discussions are will and inform on those decision to ways those execution. those estimates, process. But nonetheless, include of help ongoing we industry

Douglas Harned

have for does does on the outlook much overall . your profitability the in right And delay the effect now program. the this of timing,

Kathy Warden

Doug, near-term not, to profitability of as relative both as program well our impacted. materially the of does on It ramp assumptions the not sales are program the the

Operator

Our Sheila Kahyaoglu Jefferies. from next question comes with

Sheila Kahyaoglu

maybe guidance you're or could CAGR. the free talk Kathy the about if Dave, just with flow you that cash sticking XX%

$XXX Just the said think drivers over positive Sentinel is of working the a through line think XX% cash in Is million terms contributor? I about right? B-XX, capital, of Section and we that XXX, impact of top 'XX. Dave, as you that And do

David Keffer

happy question, the of the we dig think free into the The really Sheila. cash today. that. our as flow strength I'm highlights for report of to Thanks outlook Sure. of one

correctly in a And cash the XXXX happy more detail. I perspective. into so heard dig with period from to is associated charge that that And XX% you through of flow the think

to of performance, that really the in to flow, the forward. the that pressures. programs capital our build those outlook And enabling to I importantly, what adding base strong XXXX maintain the year we to for confidence that finish for at continue the free next that's going in a working our a levels double-digit and ability growth other across that serving our confidence expect XXXX to of think broad several similar is us great and offset years. cash in continues had strength build strong multiyear . We is outlook perform ability trajectory to we're including business seeing to

for that results and showing we've lot proud recent 'XX free that of factors the of our the capital cash for clearly their company, and a of is all the beyond. outlooks returns performance a strong performance efficiency, on up along on 'XX, effect on investments driving We're a cash and the with all efficiency, net 'XX put of 'XX. on and focus unchanged in outlook cash capital in of And QX of these working and As flow is in on sectors.

convert that underlying out. the is, force I'd in that at how not growth end forward? given top drives assumption will essentially operations you strong margin in margin which to the stable through we Certainly, that we of with really rate the as our volume, line for of to were terms We're highlight leads an point dollar first as at strong working opportunity continue capital foremost, growth the What's in efficiencies outlook. strong line and is well which what going additional just the the performance XXXX. the cash for expect into significant a of business looking

And as noted factors over help to with next decline structural and earlier, the few we cash should projected then as CAS period. slightly is over tax pension are years well reimbursement other growing that that there same

will those the beyond. all strong of essentially, cash several outlook years growth So next to lead strong -- for factors flow free and

Operator

Our next question comes JPMorgan. from Seth Seifman with

Seth Seifman

B-XX. I guess question X-part a about

while to ultimately here. in in will this would a than a lots? better First while. losses budgets anticipated And how lot lots assess progression then maybe for of the EAC that quarter, how for we think loss worked be of on come the guess, anticipated entire and was extent and $XXX various little X the and do and you the under the million a not the the fact in do XXXX that guess on charge the contract XXXX not be includes is bit that second, I I opportunity about on

David Keffer

that, on Sure. I can start Seth.

not and you've $XXX think awarded, does EAC into I Lot adjustment one been with X properly adjustment. an awarded form the million is the that take of having EAC read yet other the

to B-XX, and million that's, minutes the $XXX on current I that that million a of of sizes headwind into get average. Over currently because the implication line an quantities through a of modest involve while I is cash been right amount progression we the the details. much thinking think the this average on classified are So in on of X few projecting. a our time, lot -- future way after-tax hundred couple would X able and we've as there's the to is future from can't strength a of And growth other the detail business. to ago, lots referred would rest the mitigate that indicate lot Clearly, our from impact dollars that we projections lot and you're year

term. In of drive point opportunity in core outperform your efficiencies a with the successful continue outcomes long team to terms about suppliers. to our curves, learning negotiations is that over to of Clearly, focus of it the our

relief, as mentioned partner the opportunities earlier. understand program with to continue funding impacts on and We customer our and Kathy of macroeconomic engage address for to

you we'll so all rest opportunities. of in something we'll is And to those the This the time. on continue update address Street over of

Operator

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

Cai Von Rumohr

loss you quarters had couple of so the a of the ago. kind didn't on B-XX loss like anyway, So it look

tranche specifically X your more on is had with loss reference changed satellites be clearly were because Halo. second you how to the you X strategy is there on Have you on X. You've This Tranche where on contract, proving of and you an and tranche risk. were fixed bid not environment to tracking price regarding your

in aware terms there changing risk not how would have we're are bidding? And that you your of your before changed strategy you bid you're any still of contracts that today? strategy have So that

Kathy Warden

insightful question Cai. as always, Very

that when XXXX, a not It's into you in on mature we as changed of meeting the a where passed the to balance we . did RFP yet put have the contracts view customer And have knowledge, not fixed that we forward of risk result standards. our not again. and done some design. have, And future. a the did [indiscernible], programs certainly price high-profile my when bidding look of point committed our to to we bid we options have So back on

customer we're a offered the we've that and chose These with going disciplined. and programs to additional we've very which looking the like happen to some different in have of that we SDA certainly was recent are thought to price and further -- if us. going at negotiate are reasonable those approach as remain Halo, and we have price, have forward. we case decided We move bit lessons to X learned customer a Tranche on some applying where price fixed taken or the a And note things either not firm you fixed in we go fair are bids, declined

in opportunity of plenty this have grow. We to company

that a have we're strong risk/reward We believe of have right And with pipeline strong we a the pipeline pursuing. opportunities balance industry. of opportunities

Operator

Our next Parsons question with UBS. comes from Gavin

Gavin Parsons

charge following on they Maybe as just supply the have it current Ron's B-XX some consideration conditions Does macro or contemplate question. are? uncertainty Does for future in chain?

Kathy Warden

know the what conditions of we we do B-XX out based included, into our to project today future. our all EACs, With on best

to said, period that with term that's longer is. of do that performance Now difficult

greater we're So looking years. case, in over this than out X

more out a for get as incorporate So but we we everything material in labor do that's bit our and pricing to expectations years, learning. productivity from changes into those speculative,

Gavin Parsons

around put Dave, possible IRS process. And Any impact that? to appeal mentioned range on Understood. you the Okay. the a cash way

David Keffer

No, to have those We're disclosures know, resolved update a forward the resolutions open range tax I'd get there. of tough and on more we any looking forward for current we'll disclosures, come or be our those all and that lot fronts. any of put processes, as detail on a looking as there, through refer reasonable you differences to to to years enough tax reserves from It's getting you to around to book you have IRS things. from working those than with yet we to

Operator

next Bank. Our Scott Deuschle from comes Deutsche with question

Scott Deuschle

negotiation? open of give fixed you to LRIP a have been still can Dave, across the sense the for that what's versus us X proportion supplier lots costs now

David Keffer

Sure.

for supplier negotiation ago, remainder. LRIP with As costs suppliers across various majority now we the that a phase. And of fully negotiated the noted stages the have a few we're at moments we're of been in

we area even in and were one that's process learn progressed where ago or ago. more a our a where quarter compared have to we . year So

Scott Deuschle

follow-up, business? just Okay. And more inventory to does Great. from any left the that come And in now? as space in there gone commercial of the 'XX? come EBIT then a is Or mostly headwind where that is

David Keffer

including question. of Sure. the in space business. the commercial We elements had offsetting effects in XXXX, QX Thanks XXXX rather, the and for

to are know, in lines of core related product address Those As you in quarters security those see elements we market. in We the those those you In to you commercial newer through are commercial tangential much the occasionally such smaller burgeoning the both did things market case those. of that were space national than opportunity space investments government in have. of to various as some and inventory with kind business the modest write-downs, the and make 'XX types go write-downs associated new investments. of

So or of the story growth space core to business. current the not future again,

Operator

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

Kenneth Herbert

high follow wanted earlier key outlined you regarding comments on level, the to up Maybe, Kathy, a year. at I your margin drivers of sort last

about the opportunity in more how efforts seeing of are on you how year see mix think more should cost into and 'XX? And we this about the beyond. productivity the opportunity now of much and incrementally think Specifically on those now and side, more as versus sort benefit maybe 'XX on a we absolute perhaps we

Kathy Warden

year company, go for a tailwinds of actions fixed into that we cost as from to top for some We the line the Ken. where out with and see of the really type XXXX is macroeconomics, of in are why really We've growing provide will shift latter gradual which in throughout tailwinds price, 'XX We bit longer-term type, in coming cost about a is laid rates are productivity in stabilization that and first some in of 'XX. this decade. fixed was to mix a proposition it a but half talked with us. cost shift shift expect the And that of mix X and very being this we price high more which Thanks, our that certainly watermark layer the taking we on our in that for opportunity in we last drivers, with improvement being 'XX, we seeing margin year. that

growth we other significant what step do particularly in a mix and based And is expect U.S. weapons that international be That of rate but outside a international we in XXXX. margin pipeline sense on to expect our you where then demand XXXX, strong will to the win. the don't the up gives tailwind

Operator

comes Our Wolfe Myles with next Walton Research. question from

Myles Walton

make wondering, flow sure And of still expansion just free Kathy, further margin little Or absorption time? on want to do slope Dave, business? was effectively down previously to doubling you've that's in XX% charge the glide in table, you done target $X then Aerospace, maybe, we talked billion still I cash or in to 'XX. a Kathy, that into 'XX, a have bit margin a is I despite period that on specific about the what the XXXX, 'XX.

David Keffer

question, Thanks for Myles. the

that outlook we billion. question the the level doubling that projecting think for because XXXX. target going too off reaffirming I that Yes, cash is to appreciate that which guidance, were our the midpoint kick XXXX XXXX $X me Let free on number. the forward. with essentially billion was core at of are the flow And $X we I

XXXX. Of about much by million top Certainly, of the exceeded for in talked that in course, line. drivers growth $XXX our we are growth that final of we've result The what already.

of of the to the opportunity margin XXXX. exceed to drivers growth of margin opportunity rate dollars an our which As noted, having expansion leads Kathy top rate just some line through

period. And same importantly, during moderate that will CapEx

intensity beyond. same as that of and tax noted during capital to be in of that And 'XX 'XX period. 'XX serve continues with these will pension tailwinds So declines that our years and and we've outlook peak then

outlook number. would if the you that $X billion to leads that slope at the numbers and billion 'XX toward by that So the to we've and 'XX 'XX you glide you I get look add that for And today in same range, reiterated cash XXXX. upward our $X think number free push you'll

and So we those are to the there. get building the way plan blocks

Kathy Warden

now on we top we AS dollars And at putting is up being margin stronger bit consistent but where they rate, projection. noted be It line. is would growth mid-Xs AS of had margin Myles, basis, is our into on Dave a on anticipated looking for guide than therefore, are a earlier B-XX that and stepping as remained though some are AS more rate seeing, pressure even exactly coming margins, had the XXXX, on we with what dollar we're a anticipated,

rate and terms into coming those out the programs. As you on happens programs on which it's AS B-XX rate other book absorbing the more happens lower what portfolio go at over less what time, we in that will of new dependent and

and you So year beyond. insight provide as more towards that over the look we'll we XXXX into coming

Operator

comes question Research. from next Spingarn Our Melius with Robert

Robert Spingarn

had now? sense give ago, in program signals strong minutes 'XX is some and few little bring bit, how that let's dig to from demand to revenue a up us it's years or I because it maybe customers how could into big might a say, alluded -- international IBCS of 'XX? from And in be, how it you wanted X a large or thought Kathy, international and you

Kathy Warden

as by deploying an certainly It also area is of as in Army and the U.S. a on We've Poland, team portfolio. our follow-on opportunities the performance we result. Poland see We've are and strong in throughout strength that also, course we of program in growth additional XXXX, program the countries the drive we of and XXXX interest frame. what number to as about time pipeline, in have the in I who added seen would that's the the a anticipate expressed

small rapid off growth. the of portfolio. a to have is of relatively noted, about part and weapons of rate, And you expect sales. well. course, but As but XXXX $XXX system the million Part that as of The is grow, And for pipeline we annual the some contributor not course, we it's major enterprise itself IBCS growing program a international of demand. fairly in that I aircraft that at line a is of in international for then, strength is mentioned mission

Operator

George Our Research. comes next with Shapiro Shapiro question from

George Shapiro

B-XX, margin a ask the the the I billion was of to maybe just what around bigger I the But to kind faster that year? wanted that X.X%. you maybe is to $X.X And charge lot to on the since XX last few than reiterating X basis you had know be grow faster. caused BXX a drop to said points. got now growing minutes be by for would range ago, Kathy, alluded XX% it to specifically, you've been margin then the

wondering explore could just you was more. if bit I that a So little

Kathy Warden

Let and me start will question second. first of the with your Dave part cover the

to quarter As it on risk and deem basis. throughout There the the primary loss. year, we this quarterly we value it X that in changes led as year, well us the fourth probable as revisited identified we, a impacted that of noted, both were last loss

about to for as impacts, projections related times we've First, of funding we already. talked a significantly couple our reduced macroeconomic

to the impacts. status Although address assumptions. of believe we those reduce with these partner We current prudent the it's continue budget light to government to in

did we so that. And

we've is as second we've with our experienced internal about our production growth The cost negotiations projection, to the build aircraft continued suppliers. in costs talked through in both Dave

and learned in were those EAC, the learning have built that the have so that into We forward-looking estimates we the now factors.

did we point. very fourth at quarter have a had talked reflect an at actual data matured and to we've about, that on As EAC earlier detailed had look this we the and in did not

David Keffer

even up We way important compared it past about over we're and original of is nuance. follow they sales do expectations significantly the the XXs. based in them mid-tens 'XX off very in growth year part were the a modest exceed XXXX. a question to of scale Let all level. flat and in And 'XX on exceeded up to the talking projected me in ago now billions I now in low more in that where business it's into were The because XXXX our second an mid-XX your operating year, think the AS was in

low mid-X% to same margin XXs And margin as the that at so higher at mid- a rate. the a slightly high rate XXs is

across that that on flow and our dollars is in on margin operating from in We're cash focus. really business capital, invested return margin results it, focused core our in free driving that the volume growth it's the really and our dollar of Aeronautics business,

Todd Ernst

question. for Josh, one time more we have

Operator

comes Jason question Citi. final Gursky with Our from

Jason Gursky

for a clarification question you start. to just Dave,

were question I be? to a just of color maybe in all those mentioned I remarks the in deceleration the some might together provide there little here. from priorities to wrap what Kathy, an shifting was a space was and if bit a more business leading kind government growth. this shifting provide prepared priorities your You on of And that then open-ended bit could you you wondering that to wanted

execution see the of talk the opportunities broadly all on front and you about that you Just in risks side things. of

you and and record we we a we together, you're a of B-XX all know opportunities wrap this got highlight all could we details of And and you're the But have do more are maybe a portfolio risk little and overweight obviously here I'm those what here, seeing risk. wondering maybe if backlog to about bit issues. You've balanced maybe of than risk opportunity? the kind little dive doing address bit into what just just

David Keffer

Jason. questions, Great Sure.

portfolio. security question your me on ahead and with Let space original go national start the

of them. business, 'XX, a improvement in few space intensity their the top of given see to years. latest for the particular, noted, how very In that you customers invested of in having line. the all And mentioned, over domain, case we last space this budget on forward value in our particularly in now it grow this guidance that beyond. space. of and priorities. A guidance are built case, our you particular say continue look it's we prioritization, lot said, they've are And space in that the alongside lot they that we've in can there's path portfolios, in budget returns there margin and of or all growth in that. as guidance, grow declines capital rates the a with our capital not some XXXX starting programs our of in company to the the the given growth at in to portfolio you the much much anything programs shifts space, or various As including relates that sector, captures address much our lot in . With restricted and like is more mission for accounts creation foundation I lower as the when see about as and think understanding What's important case, program likely there therefore, across

Jason Gursky

Kathy?

Kathy Warden

stepped another opportunities really have see Jason, with being and with but risks appreciate wish the years I our the respectful consistent and simply role. question. portfolio I since seen I I hour and you, this that say to just I set recent of me in everybody's it have discuss had let And as into I time, of balanced what

the and top provided who industry certainly and couple turning X% on the to is the challenging rich, compound while each have space annual We're both I the at for that believe of last We which of basis internationally. we domestically the growth, X risks that in this see team And a leading a opportunity projecting this has more up stepped made pandemic is years. years. last the line have portfolio, again about We're year. that executing We corner.

Our overall and since and I've company, stronger at going. the been been has program performance that's not XX years

execute So B-XX risk, team confident and program. am the talking how I team have collectively about I we positioned. for look which to go what and can XXXX. fully place really feel And across has we been P&L and the good this proud about taken now feel this is the accomplished that of We in forward XXXX the into now disclosed we've have outlook

want also to for colleagues thank I in Grumman forward next that, earnings just our us their both look to I call to on with with you at thank So today, again dedication, joining and our want Northrop and you to country my company. our for we April. speaking

concludes call. So Josh, the that Thank you.

Operator

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

Northrop Grumman (NOC) 25 Jan 242023 Q4 Earnings call transcript