Northrop Grumman (NOC) 29 Apr 202020 Q1 Earnings call transcript

Good day, ladies and gentlemen and welcome to the Northrop Grumman’s First Quarter 2020 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 today, Mr. Todd Ernst, Treasurer and Vice President, Investor Relations. Mr. proceed. please Ernst,

morning, XXXX Good to Grumman’s Northrop Thanks, call. everyone. quarter conference first Josh. Welcome

We a refer IR will to webpage to is this our posted morning. PowerPoint presentation that

XXXX on the federal Harbor available matters today’s discussed They Before this time provision securities information the pursuant constitute we based call, of forward-looking at start, statements including judgment company’s guidance of on call. the laws. reflect Safe to

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

measures to our Our contains earnings release GAAP operating a non-GAAP reconciliation results. of

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

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

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

address earnings, to Before impact. Northrop keep quarterly working first our the turning particularly to to us been also I employees. frontlines our like safe, I I healthcare to those want the those have responder and the want Grumman thank on COVID-XX thank who in to communities. would

unique faces each of dedication providing mission to the allowing our While us us and to challenges, our team’s services is products continue to customers.

Our first priority well-being team. is safety our health, protecting the of and

workspaces who who those those for enhanced so of and safety do in telecommuting can requiring are We come for to person. have the must work we

shifts, social face robust working in effort open facilities more to we measures monitoring, cleaning. maintain and healthy distancing, staggered These implementing remain condition. an and are extraordinary taking coverings include Our health

programs. and expanded have benefits In addition, well-being we employee

on and our a particular business our We are partners. suppliers with also small supporting midsized focus

midsized advancing approximately expect and exceed we suppliers payment and to payments are small $XXX advances week million. $XX will these We critical, per of million

our suppliers taken progress flowing fashion. full in increase to the payments, by of a Department with that addition, supplier we are actions timely benefit In the Defense to

have and not to a and opportunities supply to had local new are with continues chain our than are address material global others disruption, chain our engage we team communities. them some we more supporting and suppliers find actively While supply our issues being impacted help to

to to COVID-XX banks relief efforts, learning. service technology donating members, virtual involved first healthcare funds helping food organizations responders are for workers, We students frontline in providing access get supporting to and and

and We are in-kind also One assemble of initiative example providing shields hospitals. face a headbands to is donation. company-wide for produce thousands

company material a good Turning to solid performance, operating growth, our not experience our We and a pandemic the sales delivered strong efforts, in backlog. quarter first impact a X% quarter as with from employees’ did margin quarter. operating the a result operating of first

remainder of impact the to we adjusting it pandemic’s of today. year, our understand the our the to ahead guidance we Looking estimate reflect are as

updating sales are than guidance prior a $XX for than billion, our We guidance little less to X% the XXXX midpoint. between at $XX.X billion and lower

exposure expected markets. update COVID-XX impacts, sales at their commercial reflects guidance including Aeronautics, aerospace Our to primarily to related

our XX.X%. segment our margin margin range maintaining we and operating operating XX.X% are for to expect We and guidance will rate segment between continue

have a Although expect margin has rate rate. increase XX% Systems outlook. Mission an margin we approximately XX% expect Systems offset We been now at by AS, Mission this in will mid low of now to a

and items of between more impact will we range will these revenue expect our bond first of discuss result the now a impact, and quarter $XX.XX. quarter interest the related as offering, in to detail. each first And So, marketable securities $XX.XX Dave EPS

Cash and from were our flow is typical free as negative operations cash quarter the pattern. in

our we program after of the billion measures have capital With At $X.XX approximately in to delivered fuselages. Hawks Korea of X Triton employees, protect mid-March of quarter, will center the surveillance billion I of deployed range through shortly flow and $X.XX commanders to to the and after first cash quarter U.S. free Republic help to additional the provide Pacific maritime achievements. our and in the end XXX place quarter’s execute $X.XX two want AS to Aeronautics, our XXXX Hawkeyes expect F-XX to greater highlight we of a continue our on MQ-XC and delivered Global reconnaissance. military to EXD few spending We Japan between billion. in the end intelligence, to Advanced and was continue

including completed range AARGM-ER. subsystems, At program the design review EMD initial phase new CDR testing critical remains The and the we motor. track extended the rocket for successful Defense of on the of Systems, with

customers. effort DS now supported have radar in addition, page three about information Mission across received In over spread. upgrade Systems, webpages important SABR multiple systems providing XXX F-XX million SABR has by the XXX that pandemic response over CDC’s our expand. views XXX creating for the approximately contracts At continues COVID-XX for to program languages production

their Force XXX Command SABR the billion SABR contract. under recently performance XX reducing additional maintenance the while in of systems to Lot improvement X complete X Combat replaces establishes Air included Corps award. Air and system an X for Marine GATOR $X in its record Air a system, order costs. training, each February, legacy for active single their option logistics for which And mode, radars exercised systems radars The providing This as jets, IDIQ with GATOR of the ordered significant Force.

we At X but contracts. significant were awarded DARPA Space Systems, small, strategically

to Glide and develop glide at an boost component lightweight demonstration for program is interceptor weapons to very first long range. a Breaker, R&D defeat hypersonic The

spacecraft. geosynchronous This the of satellites in to of mission and the time in for two extension second orbit establishes discussed the and services the extension have commercial to Intelsat next being DARPA laid Northrop our the satellite. are award, between first servicing generation a orbit. provided for partnership a satellite satellite groundwork accomplishment first remote which geosynchronous life DARPA previously time that Grumman We the docked of successful the docking XXX This marked first vehicle

Northrop use. This for aggregate. disruptive advanced the multiple agreement, Systems to with competitive spacecraft, provide of the commercial technology Under DARPA the the also provided expand services. spacecraft. will significantly could and billions include dollars to capability totaling payload Space an orbit restricted Under in In agreement, servicing we will contracts prime awarded integrate retain on Grumman robotic quarter, IP the was payload robotic

While we focused are keenly nation and of the to we on COVID-XX, national continue myriad threats. defeating the address also security must other

systems. in hypersonic missile continue customers’ defense, for budget investments and our closely proposes national portfolio fiscal President’s advanced is the deterrence, for request space year network, cyber the defense increased and XXXX, Our weapons, to priorities. aligned with be long-term evident strategic This which strategy funding and

customer, seeking of other XXXX fiscal will which this IBCS interceptor. budget OPIR is weapons, robust debate our for opportunities and year. later space investments The DoD increasing be subject aligned programs, funding, generation supports the current Department primary request including of Defense, capabilities, while advanced in missile congressional our future E-XD, defense also our next investments, with programs and funding CX, SABR, B-XX, Jab like including and GBSD, The

first remains quarter for totaled competitive for Turning amounts, offering this Combining remain we to met retired April, dividend, maturing debt sheet expect a year. repurchases to retire the the we $XXX shares. priority quarter April deployment, target and approximately we balance $X XXX,XXX In bought fall. our We in and repurchase million billion to a the have $XXX first million addition de-leveraging approximate in million. capital repurchases under approximately with shares X approximately program, established share we an committed

In value closing, we to remain well-positioned create forward. going

fortunate first that have are disrupted. our through the been not quarter, operations We materially

later the award continues of robust year. this impacts on an have pipeline future we including GBSD, While uncertain, track pandemic for which remain a of opportunities,

We also continue for to lay the foundation future. the

than more We recruiting we first people for than the are included hires actively more positions XX,XXX hired which new X,XXX in March. and quarter, X,XXX in open

most government’s the the COVID-XX Act, our remain has commitments including recovery presented progress Despite the related challenges shareholders to of accelerated through the talented and appreciate timely designation. dedication we through every for meeting our and investing our for and value workforce, support vulnerable future, to and our for increasing essential COVID customers our of cost all the individual, payments, the to stakeholders. We delivering action that and award businesses, committed business work to support industry’s CARES

Now, I Dave. over turn it will to

Thanks, and morning, Kathy good everyone.

call our certain that X-K I alignment. new your to our reflect my attention filing sector I to of XX-K recast comments, Before Form would begin sections XXXX this morning’s

sales of the each a earnings our that provided in also in by release in income recast operating sector years XXXX. schedule and provides quarters We last X the for

comments highlights My quarter on with begin first Slide X.

increased of $X.XX. first Earnings X%, totaled in space, $X.X total Excluding were X% particularly results Awards the impacts were Segment and backlog all line businesses. the OM X%. awards growth quarter our about pandemic, net per of where at strong at was increased XX.X% Sales our four reflecting to expected. share were as top solid billion. up

first and EPS Slide a X quarter EPS. XXXX bridge first between XXXX provides quarter

largely we our as losses impacts did the earnings. impacts securities in material in reduced not on related have as quarter and QX performed earnings expected, first volatility operational the markets tax capital and While marketable year’s COVID-XX this did impact businesses

a quarter manned volume Hawk restricted and completion. I B-X offset on the with as autonomous Global aircraft. and X% the review both drove higher Slide DMS partially begin those X. ramp-downs by volume increase were programs of results up for in Aeronautics sector sales will programs AGS systems on at NATO Higher near and

manufacturing supply in not pressure factor will I facilities. did guidance. employee this particularly in we talk and about volume cover later at begin related March to attendance, quarter results, in when certain While first COVID-XX a significant the see more in chain we

volume to program by higher sales growth were Readiness training Management an drove rose higher at business. Higher for volume airborne Systems, business Systems X% programs, due on and marine products. Defense sales programs. international its Part grew systems restricted higher higher volume missile and both Systems sensors X sales and including Higher due higher an and and other to X%. also At Maritime/Land was volume AARGM, F-XX and airborne radar in higher Sensors sales Systems volume Mission networks Missile on on SEMA, Systems Mission program. GMLRS, driven Battle also sustainment SABR areas. and Mission aircraft sales up volume in for sales our reflect

the programs space programs in by offset volume other in due ground-based lower next-generation Space Systems program. and GBSD Risk on sales and X% and the and lower like Defense Arctic strategic the SLS program. volume in and reflect launch Satellite volume Technology programs space hypersonic business to Increases by Reduction for Broadband rose OPIR Trends partially that higher Midcourse Maturation offset missiles. Mission in activities restricted booster were partially increases program

difficult by operating operating favorable income rose X% Sensors the offset and at manned mix performance segment Slide on of X.X%. systems as sensors ammunition as adjustments Lower targeting XX% to XX.X%. contract well as income a income on the adjustments comparable programs. EAC caliber for improved F-XX operating decreased at the Higher rate year networks margin prior Systems, retirements Maritime/Land programs. was timing well Aeronautics Systems reflects operating small navigation, rate Defense operating declined were At higher declined in to and operating rate basis and drivers Mission X% comparison Systems and contract at Aeronautics. risk positive autonomous we of XX.X%. on year’s and in reflects Operating as and the X, rate partially Systems income points rose and had in increased at programs trend operating to mix income margin survivability operating which margin retirements programs to to income quarter timing and primary Turning programs last XX.X%. declined XX sales This aircraft risk income to operating of airborne the margin and X% certain Space net trend

In space XXXX. timing the reflects sales, certain negotiations of addition also contracts commercial to income on operating in higher favorable

productivity areas. that and risks impacts you volume The chain supply X, our Mission in at are can see Slide with projecting Systems. to AS we certain and attendance Aeronautics aerostructures employee and we customers, guidance associated changes have for Turning commercial are in updated in

areas, financial March expect the we in impacts to employee supply production of QX. chain COVID-XX be impact that towards attendance began the in particularly certain and performance end to our see that will We of enough significant

expected of X% We planning been demand. are about guidance impacts company impacted travel demand has at aerostructures aerostructure pandemic. now related AS. and weakened commercial the company global total the Commercial has revenue decrease sales total in as declined by The also for represents is COVID-XX by driven

$XX due manned activities billion would pandemic. offset that sales aircraft in in I Aeronautics. growth low our also expect to continues F-XX partially contemplate in We growth lower in note restricted the now at by to guidance range the

Mission margin do XXXX XX% AS expect the at range rate Regarding be We performance mid we return guidance, XX% plus much approximately QX XX% at low in Aeronautics. and half strong of we margin on margin of expect the to a offset Based our decline will rate Systems, XXXX will now margin year. rate rate currently this range the the of Aeronautics the to expect to year. second in their in

Systems for guidance rates Defense margin prior Our Systems unchanged. is sales and Space and

on to consolidated to sales we the reflects Slide guidance discussed. Moving the have impacts guidance X, update AS

reaffirming to XX.X% We AS. better largely operating our XX.X% are segment rate as pressure performance at will at expect margin offset of we margin guidance MS

We range, to to unallocated also XX% the rate in no items. XX.X% continue to expect change in margin total corporate with expense other operating

expect and $XX.XX you mark-to-market we of change between the end rate $XXX for $XX.XX. aware, Based results now count. in expectations of issued expected remainder weighted we million. adjusted debt average As are to share billion and the in No range to expect on expense and $X.XX or interest we quarter EPS tax March first year, year

on X COVID-XX our Slide impacts outlook. expected our summarizes

can pandemic, our quarter other COVID-XX and COVID-XX of margin XXXX. other related pace assumes future year. the of the means assumes expect of It we cost no second will impacts offset be are there and than by reductions. second the sales able to While second This as that supply greatest and half to the the assurances chain impacts currently rate that recovers labor the more costs also guidance are quarter quarters in in be the higher with we impacted related factors operational that

to we said, customers free timely prime payments. guidance flow as continue our will are assume other Kathy we our make government maintaining contractors As and cash

progress of tax COVID-XX currently interest impacts higher expense. and impacts anticipated benefits positive payroll higher payments and the offset expect to We related

the XX bridge represent revenue January guidance COVID-XX impacts Slide today’s expected and decline. provides our a year by related outlook. $X.XX EPS between Operational full driven approximately

suppliers higher that assuming offering by the result The debt expected our and company support in are And long-term. loss our as to customers, add a to the pandemic another and $X.XX. reduces flexibility of interest recent should to our give approximately us year the is position $X.XX. and expense We marketable employees EPS QX for securities offering our debt some additional the during well carries through

cash early billion upcoming this $X utilize debt have and We million including these. $XXX excess to expect and to year XXXX we later maturities, retire in

significant year. In closing, of QX COVID-XX potential current while our experience impacts outlook of in estimate we for didn’t the the our balance impact contemplates the

with Overall, priorities. continue is will well to our monitor closely. the We portfolio customer situation aligned evolving

shareholders continue to to execute to continue We our the future. the in managing COVID-XX deliver we risk value and invest for while

ready With I that, Todd, open think we Q&A. are to the call up for

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

with proceed question. may You your

Thanks so morning. much. Good

Rob. Good morning,

in if A on question a has flow some might bit sort years? does of there was impact move been this your this wondering in I contract, Air quicker any awarding Force later may material have the in this on or I make that results XXXX GBSD, through you. Thank talk really

been the be is program that happens. the a don’t award it But with of extent acceleration we more to XXXX, more we a would getting Force us the on in award. quarter prepared have the that started it along or program. a IOC We is path anticipate but Rob, be quickly to modest able and this the likely the for see month are taking meeting two to those if XXXX Air impact only negotiating we to allows already working dates material would de-risks actions expect Force And certainly through are acceleration have if of the milestones now. some to for We year we confident accelerate this be Air acceleration. to the and was the contract what planned yes, So, and move

That’s great. Thank you.

you. Thank

with Raviv Citi. Jon from comes question next Our

morning. good and you Thank

a kind about understanding big here. only guys Just with be and How the going positioning to elsewhere government align do – with you in sort lot products maybe have are your recent spending current the business weeks, CDC, environment, a you current thinking where still capabilities forward but to example, not national is picture would you how environment of on By you the for going of defense you aligned of strategy future you aligned put going mentioned about that’s what think line priorities, anyway, where the forward? you requirements. how work

our few we environment. the for Presidential the a advanced I the see remaining demand strong certainly, budget we Well, by threat And seeing areas reflect primarily and driven areas hypersonics product missile are for ‘XX Jon, in noted that’s increases where weapons. other like space, significant and defense,

the across happening continue well the to triad. of nation expect has we areas as our those modernization legs as obviously focus strategy in which of triad all on so And be depends the three deterrent and to

strength continue portfolio, of to both importance So as near demand at are going those be to term. areas of we our long but look areas areas in and

never previously, we’ll that are information dealing do to work a pandemic about of supporting CDC doing decisions We and that share work. be continue has and government we it’s increasingly I the while pleased has the globe that and and been amount relevant noted is We’ve something important very people in the areas today. relevant, spread is how are we’re very we’re for to of years that as able And the become certainly work spread pandemic. to it been to number it proud informed the doing that been with other of reduce that the in around very this to as proud for make of. that help we’re the currently

Thank you.

you. Thank

Credit question Spingarn comes next with Our Suisse. Robert from

how the if out on fact and you touch least I could your be that procurement Triton we’ve the just at of might from a and they’re zeroed specifically, and doing from quantity hill it, that the had in Kathy, perspective? about now a what wanted program you budget that hearing you ask morning. terms programs was to and Good question high-level

Thanks, Rob.

pleased we budget So are the request. overall with ‘XX

budget and pleased As we with see noted in priorities of were that I well question, previous the certainly areas are to there aligned increase significant our are that.

that comments, a We E-XD, of my opening well-supported also of well-supported SABR, number in certainly have are I in well. programs F-XX to few noted those the like a areas be as budget. continues

had where production at see intent the Triton we resources provision on As request R&D our pause being example, saw anticipated the look budget what of putting new in areas toward sensor. an And the we some we we that. with programs, is on in

somewhat of the be will it in production So offset do R&D. the that pause, we’ll the works an to

have bridge can And which Triton some in aircraft We the added as work sale provide production as well. US will continue also course budget we Congress get those two quantity that to to if determine with back. pause the on we the deliberate they of

to some taking This So more robust. platform that we the those that it not program we’re continued are make the is but Triton, to production of investment program additional and the is with sensors the [Phonetic] make the just a in pause. actions and see do commitment the

Okay. Thank you.

you. Thank

with Our comes next JPMorgan. question from Seth Seifman

thanks if by implied mentioned could in and very Aeronautics you margins wondering Oh, about, guidance its little a was you well. talk the good and second half higher I bit much morning. as

confidence operationally talk kind X%ish half? So about more I the QX of gives what you gives after second kind what you could wondering virus, it like of the in challenging and more in QX, was confidence the little bit what if the that of, specifically will because be seems a you

The in that year-over-year see for that delivered that is and margins second long-term from QX. lot for get In the and the started total tough movement do one. in greater in risk quarter AS, rate of around saw COVID I’ll near half is first, than Dave. outlook in compare a On a that we it quarter the the business it’s the made to than timing for timing to margin compared business year-over-year, largely half, easing the both that AS particular margins a Our stronger of basis, related. of that the those the going Company we year some Seth, expect margins reductions, first impacts particularly for particularly of we forward to on – quarter. second F-XX because be in and Hey for opportunity

And half to the so, in we the materialize strength of expect year that kind in second of AS.

I program timing and see reductions the than of that the milestones risk largely likely half around key first. it more profit in driven as second coming think we

Okay, great. very much. Thank you

you. Thank

question Our Peter next Baird. from comes with Arment

and color little Kathy, to Dave. you started Yeah, these Maybe a bit thanks. more give just or disruptions, you supplier see some Good morning, a mentioned us of Kathy just kind kind from on of that COVID-XX. sources your supply the there through chain you around kind confidence of of assess assessment forward? audits whether the went alternative Thanks. or going is of impacts to what and your little

Yes. Thank you, Peter.

very for can chain our management those been supply our chain I strategies supply As active in team and mentioned, monitoring that mitigation has risk. risks counter

disruption time, practices to significant other seen trends unique in so where we to script. production through safety I this monitor distancing we a protocols. some to continue But supply lines. in I circumstances my enable to With as modest advanced disruption QX have program point, to we’re seen that own in help our sharing the in our and considerable time, payment not impacts but not others, social said, chain with disruption noted facilities have we them have at for worked in is impact we few are we every as the concerns seeing the by has nothing expect this with but liquidity most for operations the positive significant, suppliers. this addition, causing We And and supplier our is to see with best us at point continued in to point both We’ve interruption. have then,

facilities. We more to in the are to absenteeism starting see and people coming work reduce production

had pause that resuming businesses their short operations operations. small period for time to a seeing of are We

I that uncertainty ahead. but is have positive, the trajectory would say so, still And we

you. Thank Appreciate it.

you. Thank

comes Our with Sheila from Jefferies. next question Kahyaoglu

Kathy, morning please. Dave. for Kathy a and good welcome question you Hi,

have the think given what budget? how restricted is year. outside business set growth with of trajectory that are of is and you Your overall to relative specific you this irrespective a about areas proportion grow at And happens in there do to restricted growth areas, peers, X% outlook, the of higher space X% confidence higher to the

for the our the quarter We restricted grow business. just portfolio. saw first indicator, Sheila, is X.X morning do question. our to and thank faster than the remainder And we restricted an This see in in good by largely good is know, you talked awards work significant the also space Aeronautics as business, We’ve past Systems. as that the space the we have driven was portfolio. restricted growing deal about a rapidly Mission across continuing restricted of book-to-bill in is you

it we at really that widespread And is that so, continuing, well as that restricted look And a we in anticipate that the remainder we are that we we the about programs we today. growth. as their as seeing business continue for as to opportunities and of even forward grow. restricted expect that year to higher. the XX% rate, to growth go have we now portfolio It’s to of up said, And previously share anticipate have

Thanks.

Thank you.

with Strauss Barclays. question David from next comes Our

Thanks. Good morning.

morning. Good

some couple of year. how years of going when become to that’s talked Can AXXX, comment so Thanks. course the from in bigger million to B-XX? over And the Kathy on than on revenue does you this give impact you on us that I then just all ask you you that? assume program the think aerospace. wanted ramp and about you, $XXX can on commercial that’s next I color GBSD, touch

start So the David, on commercial question I’ll about aero.

the of that will we different across efforts, by And the it but three impact is expecting all of aero persist. in QX, we in those efforts. which spread begin the commercial over largely the will Our And to AXXX. are largest see driven is It’s actually aero. demand commercial work

guide part is will why we expect Aeronautics engineering case to decline to next driving we than And what to know slight portfolio sector is be becomes is bit I E&P the a is program information it program be you for little over in wouldn’t label several B-XX. you But question, that I the peak start a address I could the a a do. that significant as our when tends the on phase specifically when adding be years. question a In of that contract, going more see will response year. very we larger but activities are be and GBSD gradual am driven to in to ramp, the that and the headcounts not trying as ramp will and give our the do have your B-XX there about B-XX. certainly, revenue in particular, than in while. GBSD so to the And contributing for we

thanks. Okay,

Okay. try. Good

Thank you.

Our DeNardi next question comes with from Stifel. Joe

just that you. Orbital what optimistic about excited for Kathy, doing, work longer that morning. Thank for looking think you what’s was term. opportunities little servicing milestones of bit Are was you in-orbit about good Hey, talk the just the a pretty there considering program then are I and are not eventually? can that certain that are a there we kind you the like scenario for could look

And what award we noted, will with to this to And capability continue mission. in the first we as do from that opportunity. received add about I DARPA excited Yes. quarter we be can servicing the now that

doing point, extension we on other provide operation, first the to with are robotic us are at the So our but able this satellite functionality. servicing XXX as do allow life servicing to Intelsat we will

well. So that it to opens but be up not regard indicator as service only would commercial, satellites government able in the clearly potentially market that and an we is

much milestones look we a robust accomplished to would market satellite through succession is believe and Intelsat something to life are servicing the be this kind with market, accomplish that continue bullish, set can missions of and growing first is us we the certainly of to extensions lead at feel cautious when we march that the want that we have comfortable that already broader servicing we and which for we this will us. So of a but

Thanks.

you. Thank

question from with next comes Harnett Our Doug Bernstein.

I the organization what understand then how through integration, – in In the Yes. but would And actually see other are margins and still sides, in works years? say this as couple morning. also to structure next new one now the revenue the going in little working in a synergies we forward? now, should as the the at bit improve in costs other interested am ability in on that what look Thank on those Good you. structure two of the I and you you words, of terms benefits

that cost are through that the integration continued targets this more important ATK. beginning successfully met revenue with and of those the clear we for the new structure, was year say certainly this year I next reduction programs. realignments our other cost synergy beginning we ability opportunity at would integration the of doing Doug, sector see that had realigning for alignment the is And we the we logical and sector of for the is that So Orbital at already we took doing, and on have capture objective a the the of step to one that execute the that

other in anticipate expect protocols, we company we increased as offset COVID-XX do some have reduction the but year. there objective is that And a that sector does can new guidance are the as safety we alignment, for why our So year and said the as we the our progress matter cost through at related was as that help social we certainly, the making primary with measures we distancing this more of reason part of reduction also have we we those fact cleaning, fully took this a as we of am costs that pleased team. taking look I cost

we the some the this would looking not anything actions we ahead Dave, like new sector only and add? cost as is take opportunities. in but to that continue you will allow operate us are structure will So reduction to realignment, sector that else believe

important ourselves one which realigning of process around we further systems I is the are But we now side given and standard both of in that through improvements you Kathy in, as the the As timely think bigger the that are realignment around and find business kind line going synergy picture top enables XXXX. well those rate the on cost management forward administrative and environment the the realignment. mentioned, as the such mentions going in pools is Doug,

you. thank Okay,

Thank you.

UBS. Our next Myles Walton comes question with from

you XX,XXX about made and comment wondering were quarter. I’m which X,XXX growth Thanks. jobs net as hires hone as hiring be wanted you Kathy, to look speed a that in of first was of actually, use morning. XX,XXX calibration in Good as to and revenue Thanks. on posted On the employee unfilled a much we that going XXXX? into should a this growth, is base, the just how to I

Myles. Thanks,

look to So, support both existing as awards. we at of positions hiring, we also a business, of future open number anticipation but our have

we tell awards forward. I hiring that we we look indeed So only would get that do as if you those

particular, hires direct So, will ultimately that make. year open at year around with look go necessarily this we we the correlation positions of as assumption we are attrition. number not And to in a an a into

was the labor us and that very at year. the market tight of to net So gets head, beginning this

dropping we’re two that expect scarce. through As working seeing other as becoming last the opportunities are as months, attrition we might is you more are

going are process what in looking present, that for of so, and forward. we both at challenge And us the opportunity may it’s

hiring expect we on I plus and March, you to hiring X,XXX and working to of saw that hires in April And noted. were virtual accommodate are pandemic the we’ve with the so, where as as as strong being of continues even hiring. might be moved actively very successful we dealing challenges Still to most we also in

a we as this of we half have, do wouldn’t this growth year net on volume as And significant headcount the well of forward, the because year. latter the look expect so, anticipated head, increases the we program it, the awards as I put that sales number growth in but

thank you. Okay,

Thank you.

Our Copeland Melius next Carter question Research. with comes from

of, cleared, that help a you morning. that portion a dealing sense like And growth you it? I us share. obviously might wondered just getting is personnel of briefly in give portion looks its the of given to of good clear just increasing is and the in Hey, what restricted wondered them hired Thanks. that speak us the with you XX,XXX expect kind expand the just is classified are you that understand folks business hiring. terms or either how It and getting if hiring the and challenge getting of you just on there could personnel work dynamic maybe I in then if cleared if on jobs mentioned,

of for don’t is a significant portion personnel. is always We cleared Thanks, Carter. already that individual hiring cleared. an who hire Yes,

are we a still we’ve actions through department that their We people opportunities been government clearance. shorter also getting that individuals, to actions while the clearance very have other those have have obviously take have the seen that taking. able those is on We And put they helpful. processing. accelerated the await And for period waiting it but is

and amount much have that’s for people and inordinate those And as already worked programs pipelining that relative their on work is, we and of through. both our programs can what once of years, well the business have work. And their well. our comes so, moving portfolio, through hiring costs restricted who driving with so directly an of because levels note those individuals as have has we both for classification through to doing this increased individuals levels, we clearance different do that restricted been clearances clearance I’ll is it intention classified as something required unclassified well of onto so do those we clearance that to not us, has it’s unclassified And step

Okay, thanks.

you. Thank

Our next Rumohr and Cowen with question von from Company. Cai comes

Thank Yes. much. you very

key little going you the there? give of color it Where could awards expected. classified by space quarter any are you in to quarter? end was of So, maybe some year the in bookings first backlog on total us the what a see for secondly, significant know, it stronger do terms drivers And and the first us get you than

terms if even expect GBSD, sizable without award Cai, we backlog above to of be the be in to Clearly So, we GBSD. year, a one anticipate for receive still it. we it

one. book would that so, well And bill above drive to

at while the and are or were they they have for, restricted the the what have awards look are, and the we but any said who book provide space than later been bill, that of first happen we anticipate one getting, time awards period in that did were large of had a for you As significant they working to most detail We our but ones year. did as that that we anticipated, to less did expected, competitive. we quarter, it noted. about have can’t we signals we we And value of they them,

very had the for our those contracts So and clearly to and plans for quarter. factored some pleased we to in the them are awarded we be extent selected year

much. you Thank very

you. Thank

next question Hunter comes from Keay Our with Wolfe Research.

Hey, good morning.

Good morning.

you. Thank

could margin out of could maybe to So quantify can even once or out me costs this take primarily you from rates? maybe Doug how and you’re Thank some you you the can the earlier. figure curious you conversation, we many wondering, you I’m – again, obviously of those if up trying to as that basically And you is about just better actually keep normal if I you was production keep before opportunity cost much wanted out – coronavirus out out, them specifically use an to out if resume maybe you potential, the of can taking follow examples how take had quantify with understand. costs Aerospace amount give to this you. kind exchange of if and those an

the been to an And that and reduces the past during driving those shows areas that then like declining increased tough happy year that near-term we’re is reduce throughout there efficiencies, Company hanging business. related start to costs out clear be at strong other that this possible find business, other and to harvest pandemic of to also trade that, business efficiency. Certainly, and permanent performance those fruit both about mentioned. naturally opportunity a and to basis Kathy low agile bureaucracy. I’ll It’s the taking specific volumes the being an But in and opportunity kind conferences one, that to and the cost travel as manage over of are we’ll of on has around So, moves quickly take cost you to quantify are on then, look year. of look rest around areas and savings the the Hunter. continue

in And on business a that’s at more a so, at level. levels The the the degree than that’s corporate segment. parcel will mix what and others nor any more we’re those look margin by at of At sector today all to than we’re impacts not looking depend taking and one part opportunities.

And greater but so, that those impact less margin take on more cost. for out cost-plus have impact, their look competitiveness opportunities of to have as we businesses the work

drive depending effort So a that those this are different to the broad on year. efficiency Company but segment, impact

Thank you.

Noah Poponak comes Thank question Goldman you. from [Operator Sachs. with Instructions] Our next

Hey, good morning everybody.

Hi, Noah.

size Aeronautics and understand be any to in move share the the Is Was would then them? to year-over-year F-XX change. terms the then, there Thank kind three where And that. charge pieces on of the mix. of fully Just each of to EAC the may cites to it in love some change make and one-time understand year-over-year years term the of those quarter. related years to commercial want have you. any five Just go out, profitability aerospace margin to sure I longer came could the want can if hear all fully pieces? moving it retirement from segment’s thoughts in that you much you that In risk possible release autonomous, how

specific on one that mentioned individually. no The I’ll be out you material enough to think Noah. even is two approximately to note is overall were Sure. important had size. get called program one. a started Thanks that, in buckets I What impact

few account upsides into the year-over-year, year. it this related, timing QX, a we quarter that and that we so pressures the of But of others a given look AS those might And were some as fewer at created see rest typically risk a timing compare much in to try compare. of tough QX in last take quarter, of programs, than a was on we given that tough for reductions there there was, the year’s on again in year’s is

on mitigate year, in expected COVID to through I think have given that’s in timing note challenges pressures our would QX QX, of of that other to more more pandemic those is we there in typical a impacts course, particularly the the short the volume AS. But thing important is, increasingly in opportunity to there we’re seeing QX see the QX.

QX provide. would than difficult year And so those that more a to makes mitigate typical it pressures

have we Certainly, where we think being a things term longer mix your naturally would five and And three than opportunity period. on because production have question improvement sit about equal, we create have some years development out margins today. margin we significant higher Noah, can Aeronautics years AS for all to the And that we go. as that to in today, program here during expect

Thanks very much.

you. Thank

Our George Research. with next from Shapiro question Shapiro comes

we or But morning. start over good much sales has year some to you point that’s way. next or Yes, quarter it the see hasn’t to to inflection the expectation better your growth I might people. several would to budget years? than decline grow know, others what that the or other point had better happened been going that than than to faster the sales wanted Can

our George, quarter, predict wouldn’t know, market. into I you performed see inflection to feel the do point because want well I don’t compared So, a peers to an like peers. which to try we’ve the have relative I insight we to at would

indicator our of We performance have and the that’s increased in strong competitive competitive a rate win marketplace.

we’re where this outlined anticipate and doing so. we sits have backlog our in a that backlog and also number improvement significant year, and it shown also opportunities with have that we’ve to build We of pleased

the is And weapons expect base, that exposure is positioned in this like will expect we good to we GBSD like, areas we’ve year, in this where ‘XX on And deterrence our the key the are today the we they we be programs answer but advancement area B-XX, yes, that impose. the certainly later – an looks defense globe. with of in case small how advanced around to the for is country and continue the this that a have what a areas significant we have looking are continue of of on regardless the now case President’s the demand in we forward, adversaries here believe what Do areas? Space, already aligned capabilities top do the will hypersonics of case of budget believe because to portfolio threats and the of demand. be well fastest those line portfolio which have the what In based in grow being of we and we is growing today budget and highest other and the off So, budget they what can that’s to we of regardless I really as of growth sit anticipate focus that strategic to awarded year. exposure captured,

based for that, successful growth. create shareholder portfolio So continue our into we growth, on about is that strong through and we And anticipate that that positioned value how feel earnings. can to positive we execution turning

one have for time more we Operator, question.

you. Thank

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

Yes, good morning everyone. Kathy…

Ron. Hi,

pushed There then about there has DoD you been in disruptions discussion the how in are suppliers you, the payments getting you down in you handling worry and and particularly those commercial that is that? who progress that impacting accelerating the base, about have when do industrial policy office your supply and about supply think chain. aerospace significant How businesses,

Ron. Yes,

the has down the seen to fashion. have of We payments Department benefit our full XX% And noted earlier that suppliers those And in timely we my in a in I as progress offered. to are increase supplier impact advance, that flowing that the paying we that, commercial the programs comments, programs. for both are particularly to in help to in and addition suppliers also aerospace we challenges some having, advances they are suppliers defense them with straddle because want doing

particularly those exposed monitor are daily that an we that situation them, we so that aero supported to on side evolving commercial today, a but suppliers us market. And the believe our on are by well because demand it’s for basis, that

is portion that are have contracts And suppliers payment to quickly through benefit. our sized that what to to and being peers that do we our of flow fewer some we progress of sure than their similarly would add I

on the to the we year. benefit well bond. interest mentioned of from as potential the benefits tax of customers you benefit when And our Grumman flow but we COVID payments net discussed increase the the new work have aggregate offsetting we upside include the have those, our Northrop guidance it impacts doesn’t on we that that the change So, to appreciate the progress call. as certainly for to cash some additional we benefit, The

same flow So, the range in we of that were that cash previously. projecting us keeps

you. Thank great. Okay,

comments. you. to Kathy thank Well, great. Alright, it closing for turn I over now

to very Todd. team these We remain am Dave the through challenges well-positioned through of have future. Northrop and and managing for the team Thanks, to lead helping pandemic. in I the Well, and being resolute the challenges pleased our on entire Grumman

to July. So, speaking you again we look then, in please until And forward with stay well.

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