Northrop Grumman (NOC) 22 Oct 202020 Q3 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Northrop Grumman’s Third Quarter 2020 Conference Call. Today’s call is being recorded. My name is Natalia, and I’ll be your operator today. At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to turn the call over to your host, Mr. Vice Relations. and Treasurer Ernst, President, Investor Todd Mr. Ernst, please proceed.

is everyone, to call. Northrop you, presentation morning, Natalia. third welcome morning, Good that PowerPoint a conference Thank Grumman’s website. and quarter refer to on posted our we’ll This XXXX

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

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

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

us you Todd. Good you, Thank are well. your joining morning hope and thank you and families for today. everyone, We

all As pandemic. the of in midst continue operate to global we a know, you

on remains delivering communities. and of and our our safety our customer focus Our commitments and on supporting suppliers the wellbeing people,

continue, foundation earlier strengthen employees. help we deliver to operating under As future. the commitments customers helping our year to continuing these we preserve results, the also our instituted and us strong operating pandemic are that in the protocols And wellbeing are while our to the for of to meet

Louisiana, and persevered made Jones, two he they experienced seasoned last especially and system has want support and to products employees CXISR Tom Despite returned critical And Grumman, and of Grumman to & for Systems. on in personal In the Lake employees hardware to Northrop to many locally two natural unwavering I leads aerospace years will who to want be XX January through have Networks I experiencing will retiring congratulate President spirit we’re large the U.S. years our results, COVID-XX, summer. Sensors System. mission recognize addition of Also, of who devastating have discuss national software Mission to our delivers work he Tom is Janis experience, In loss, the as in I succeed opportunity including months. Northrop his we Janis continue before embodies currently sustainment and Charles, business, This disasters hurricanes have defense solution. scale, our at I Aeronautics with through XX a aircraft. business Northrop as critical more this it the JSTARS his quarter’s airborne to who to fortunate contributions customers. and Air significant thank want take commitment Pamiljans, leadership than employees X. executive resiliency Grumman of through to everywhere. this business complex Their aeronautics. Force in Airborne leading in Tom continues platforms, with is and security deliver to Aeronautics

and shareholders. quarter year. dedication thank we customers year-to-date strong based on had our delivery I We employees our third to our for on the for for and their focusing Now raising a to quarter, guidance results, third our are want results,

the grew and quarter XX% Earnings all per in year-to-date, our third the growing XX% growth Systems in and in Space, generated and sales the and income delivered X% sector. the segment quarter XX.X% sectors periods. margin operating Strong Space Systems at sales sales quarter our Mission Our in and be growth X% with performance rate growth XX% from X% fastest an second year-to-date, and driver most robust of third we share on driven of with to X% X% our and operating quarter year-to-date, grew segment Mission continues by year-to-date. Aeronautics. increasing both

XX% well increased after XX% the solid $XXX flow capital performance, to cash billion, Year-to-date, benefit the spending as increased cash to reflecting free million. operational flow as $X.X to quarter of $X.X base. has of free billion, Third actions industrial support customer

again awards highlight. are Our new a business

quarter do totaled sales, than captured year-to-date we’ve or bookings and billion to brings X.X times which $XX billion business, $XX year-to-date X.X. book-to-bill more Third our and

and and highest security end total demonstrate advanced Northrop weapons, of control. including the record XX% electronic the new space, As mission, awards This the command nuclear domain from of and stood at than year for our a alignment our increase with $XX Grumman. priority quarter, more backlog global year’s million, nation’s new deterrence, warfare, all end portfolio’s a

well Space. contract of for with years the of our I’ll force certification, their team congratulate manufacturing as replace system on administration, next a Deterrent. begin of engineering development to program. a across competition. and air fielded more nation’s awarded the phases sector of evaluation program. Strategic This the Northrop members to expect we EMD includes ICBM, Based Grumman, XX award program Turning to and of the Ground presidential were nationwide the Minuteman culminate for our works the weapon phase In early two III of tested production qualification, I September, nuclear work The this and billion the than which it in exceptional series as planning highlights, design, XXXX, want $XX.X first phase for

awarded, GBSD Now ramped quickly. EMD phase been the that has

billion contribute For XXXX, Space of GBSD nearly $X we at growth Systems. incremental to expect

award company. the looks deterrent development as lesser by a type to Space size impacts team nuclear to mix cost of delivering An nation. Our business percent capability a to secure, sale, at reliable work entire increasing a nationwide of extent effective our this particularly forward and and

While at offset year’s through and performance to across pressure rate program Space, will those we margin cost next the work mix will management. company pressure expect we shift this

multibillion the scheduled to or Program volume, center opportunity. in for nation’s manufacture that pace Extremely successful the to milestones launch Space also the the GBSD, MEV-X continuing and F-XX extending to at cybersecurity included XXth our will we critical to to and Cygnus XXX to of to with secure they third fuselage first level. designed quarter, we ESS and end is addition dollar shortly payload in In quarter, was satellite awarded enhanced strategic deliveries mission seamlessly represent competitive quarter the and we’ve are one effort third achieved will to the Through a communications infrastructure now to prototype the addition This of quarter strategic Space the capabilities. interoperate Launch Satcom system. booster the Frequency evolved in with of captured International rapidly a F-XX resupply System replace to delivered communications higher Artemis Station. of High and three our restricted ESS award units a be And delivery. an August. eventually spacecraft program resilience tests our with sector, launched; expect after supports our recover end Space Aeronautics NASA’s rocket complete the At the Advanced entire

we’ve continue now would XX that for E-XD it’s XX aircraft program, approved identify under Navy the opportunities international now plane U.S. also record On working be increase additional delivered program E-XD the to and to contract. to promising. note The been of funding of I aircraft. that this XX has for

the France the Navy and coming decision E-XDs January, to led in Taiwan an are May. addition procure to and to E-XDs, expected in Guam deployment Japan’s In by in inaugural Systems, years. occurred Triton’s early XX In Autonomous to operational

replacement Maritime and MQ-X pressure an opportunities, becoming Command. likely the our we milestone, Skyborg is Following and invaluable among Patrol quickly have Seventh Triton beyond in including asset critical Reconnaissance the the health of Despite this on a autonomous promising these portfolio set year, Fleet budget future others.

weapon support U.S. of Hawk flight program. of to environment to data DS are for data test our proceed And qualification major to maintain we Turning meet and demonstrated the IBCS carry our initial ability A captive toward quantity. by ability Systems. architecture, targets the track engaged U.S. multiple power In from track test conditions hypersonics, Systems. Defense demonstration contested completed customers’ live on to Air also multiple are system and domain the join fire value IBCS Force underlying new and are platform DARPA part free we and sensors our successful sensors. the successfully third in test continuous now low motor, production which across XXXX. all first despite targets. of exercises our is and With milestone quarter, And live we of in plans of share prime to Mission as platforms flight These the of the the testing, and environmental legacy of increases our the to Army a conducted completed successfully to AARGM-ER’s user and system. significant extended applicable test, rocket contractor, fusing finally in system’s range rate tests operations limited manufacturing fire establishing first conducted test and motor

radars awarded the environment and to databases Rapid-repository for is data Mission intelligence the MARS military for seeks the or Systems and continue data exceed F-XX environments. information current chipsets, And build up-to-date rigorous for with Agency’s strategy program the quarter, the DARPA intelligence existing flexible program. delivered intelligence that and TALOS on chipsets and XX% environments. program. an DIA, Gamebreaker deliveries We transforming In a artificial $XXX MS operate Defense improve a million contract meet and order effort its effort Machine-assisted intelligence XX the GaAs to valued optimization, and and contract big This of XXXX by expected into third develop warfighters. Gamebreaker community year-over-year delivered This real-time to XX%, at discovery The a evaluate multidimensional, create products MARS, consistent received focuses System, new CNI for technology accessible XX and opportunity and XX to Intelligence also to the respectively. develop planning, game. increases system. apply including task quantities to flexible year systems artificial us prior innovative of gives dynamic for MS

now capabilities customers we as and positioned support intelligence ahead, in way requirements. broadly machine require systems, and is the Looking Grumman cyber integrated emerging and customer believe is same to in learning its well Northrop artificial resiliency products our required will

and of our I the early workforce has want and April. demonstrated We’re extremely rebound productivity recognize third proud March to our results and for quarter since And team’s the late year-to-date.

which near of cash $X.X billion flow billion billion, expect $XX is X% to and And midpoint. EPS $XX.XX which should at $XX.XX, now grow free the the we XXXX also between the sales over and look and ahead the operations productivity, XXXX $X.X we at at between we assumptions, Based expect of top as reflects customers increase As XX% suppliers, $XX.X a billion, or strength X% to on strong line levels. results growth growth to of is now midpoint. team’s increase as for remain to at It the a that the guidance of midpoint. also to our quarter. year, our well remainder fourth year-to-date our assumes expectations our and current current our the

deployment, sheet we capital cash on will dividend. and of shareholders, all flow our Regarding of value focus which strengthening balance calls reduction and cash that investment, by balanced through cash strong maintaining our debt these to allow we a do will and a robust funding opportunities. of continue to plan us strategy We returning address share competitive pension creating and to repurchases for resuming believe deployment current balances the

Turning security we see in expect bipartisan national budget the to the U.S. future. support strong environment, continued to for

billion XXXX appropriation. by for indicated As FY the $XXX targeted

security a are national avoids missions. next Congress if resolution GBSD supports disruption funds the through continuing agreed to programs, I administration continuing the note even is in will and into including We government and year. that that resolution XX, extended the And our the pleased early of execution December resolutions funding that under critical continuing

that to portfolio that to and We our defense for spending national defense well-aligned strategy. support believe support bipartisan is will continue our endure

various political we both driven we effectively spending defense. Emerging warrants parties committed threats. and is threats a budget plan environment While are today’s for to are scenarios, threat largely countering defense these intensifying, threat strong and believe

growth most While there foundation are a and necessary nation’s challenging many to capabilities has our Grumman external the people Northrop strengthening uncertainties, problem. address for and

of our the meeting commitments delivering our for customers, our to and future, investing stakeholders. are all to and shareholders value We our

over sector’s Dave more results, well trends guidance XXXX to in now updates, preview Dave? a turn I’ll to XXXX. certain So our as of detail as on it provide

by increasing $X.XX sales to of and on free cash I and unallocated, review These quarter Aeronautics the to Thanks, would state decreased well EPS, as bookings, earnings third by Sales EPS a operating drove X. related for the thank last sales, this and segment I’d Autonomous the contributed guidance in a QX Kathy their the growth both higher in Manned bridge with also of sales assumptions million contributed net corporate highlights and excellent was for also Systems Slide operating X% was we’re and year-to-date Slide our items. that employees activities which X. and the also and increase pleased and quarter were strong year-to-date. interest Higher as quarter year. provides $X.XX. in F-XX and reflected other restricted between quarter E-XD flow performance volume My Kathy the in I’ll begin income to the like sales COVID-XX for good offset for driven and cash. federal sector with articulated. quarter were expenses current higher. be morning quarter. higher year-to-date are our income We Slide in a And third third taxes, and Aircraft comparable our XXXX sales a primarily X System share. expense, quarter sales periods, XXXX Defense comments $XX on are delivered income, begin pension higher in per rose to that taxes increase. X% everyone. X% results XXXX results. and Net note partially sales, positives for

included and of Hunter the Mission Lake Systems, Third on those Management sustainment weapons lower program UAV City at as international volume Battle activities Readiness quarter lower an in nears reflect completion. quarter both volume XX% Systems trends growth. program third for & neared the completion. third as sales areas Year-to-date four And contributed Declines these were similar up and GMLRS were areas business Mission and trends. on reflect higher by sales partially X% to All in sales offset year-to-date. quarter AARGM. program in quarter’s this MS results volume Missile

XX% growth Space F-XX XX% programs quarter programs MESA Systems volume restricted space self-protection Third on quarter higher volume strategic both other on periods. systems, results marine programs due vehicle drove sales systems in targeting sales avionics system, airborne restricted sales and third and marine and the self-protection, and for and like generation launch Year-to-date periods. for the sales volume volume volume next self NASA reflects higher rose higher airborne programs. G/ATOR. and in contributed higher and on radar higher volume in higher higher on areas, missile volume to higher hypersonics and both in and programs, reflects radars, Artemis and year-to-date, targeting both business in OPIR to Stronger programs launch

Slide improved Now government basis third operating lower the Operating both in in results quarter increased & the X. performance Missile turning favorable X% second to rose than performance benefit. programs. increased million rate XX net year-to-date. Mission and EAC margin to by points XXX Systems quarter were in income accounting Systems rate lower segment year-to-date. more to XX.X%. operating increased income in quarter the In and and by both At X% margin on rate the Defense XX%, income rate AS Aeronautics Year-to-date at positive income Management EACs due and periods is overhead in and were the quarter, year-to-date. $XX Systems recorded periods helped year-to-date increased by adjustments. offset X% points Margin operating margin X% basis in X% Operating is to rate expansion XX.X% quarter Battle AS

XX% Third year-to-date. year was rose and XX% XX.X%. quarter comparable quarter margin prior Systems operating at Space rate in XX.X% the was to and margin operating income year-to-date the

slightly quarter Third to and XX.X%, net to adjustments. operating improved due lower rates margin year-to-date to margin XX.X% declined operating rate EAC principally

additional margin year-to-date quarter. billion we in updated booked grow sectors lower to some related range, Turning than upside results. and may to expect Slide with now the At on middle current based to better at be sales all potential to the $XX we’ve that X, guidance fourth AS, our assumptions four expected sales

For Systems, to are we rate increasing Defense margin XX%. approximately

increase rate for also a $X sales We work We’re And mid to low margin for now with will the expect margin in increasing this rate at our expect Mission MS. based XX% we Space, year Systems. the the at margin guidance on rate sector, a billion at year. mid-XX% range the increase development

to X. Slide consolidated Moving guidance on

part guidance the XXXX range billion, at of of in free We’ve and or FAS/CAS a average $XX rate expected increased $XX.XX also We’re reflect federal that the million, to increase of of net mark-to-market the we No a and to to Based range pension on over expected total $XX.XX. change billion $XX weighted each year-end are by to third results, EPS prior year-to-date flow guidance, top the adjusted the count. share reflect updated with expectations between study XXXX demographics strength sales to year, year. sales, EPS million $XX.X our complete the for X% results remainder growth in line we’re cash to and our now tax raising $XXX of midpoint. adjusted increasing adjustment year-to-date quarter

billion flow, guidance the expect share about July’s X we of for EPS operational or cash and reflects a $X.X outlook. $X.XX the free at between For today’s between The billion and now $X.X provides midpoint. full-year quarter third year in guidance bridge increase $XX Slide improvement. per

Regarding totaled indicated we retired October $X billion as year-to-date that debt capital expenditures matured in XX. $XXX deployment, and million capital we on

we As more line Systems from four on to to sales expect awards. digit year Space, $XXX approximately restricted generate restricted million line growth, top is supported ground will continue Systems impacted due Space Mission City headwind percent be we volume have a expected XXXX the which to This down, more XX, transition new Lake low-to-mid Defense double and three and should top next over year. has this to backlog in than reflects including more had the programs. and sales originally mid-single of wind these should the trends in Slide XXXX. consistent radar and than top-line our than anticipated Defense Systems be look by of more a growth, that with as airborne, we Mission GBSD by – activities and robust higher year sectors, Systems a fact we that we teen growth will little contractor. than ahead next

XXXX comparable to DS this sales be expect year. We to

F-XX billion from HALE in likely lead budget factors an we to commercial experience will low-single at year. several will and this expect These impact begin In mid Aeronautics the to lead Regarding this defense deceleration we continue $XX portfolio Systems, will COVID-XX us factors XXXX, growth a to programs. growth. XXXX our funding to expectation of our believe will from mid-single-digit digit pressures. plateau Aeronautics year’s production range

expect these be in level Given at sector eliminations which range, includes of low-to-mid trends, the we will intercompany billion XXXX sales $XX company billion. approximately $X the

Looking GBSD will be we but at will Space, with at trends generally from expect rate segment the other performance margin rate consistent the pressure businesses margin margin three XXXX.

As program Systems performance we pressure to offset the Space reductions mixed and have said, cost opportunities at through across company. Kathy

expect We XXXX, segment these higher toward low-end We capture will and to range guidance will do dollars aggressively drive next XXXX XX.X% we to year’s of segment to margin the the margin continue expect opportunities. rate trend XX.X%. in of likely

levels. costs, related recovery the current our outlook pursuing of assumes COVID outlook include Our And actively recoveries. although we’re productivity does significant not

to reversal improvements payroll about in to $XXX related million offset be related capital. deferred opportunities year’s continue to headwind tax but a to cash, There have of that with working the we of half flow. Turning to will million this cash strong expect benefit, expect we to XXXX $XXX

about are expenditures XXXX expected billion. $X.XX capital be Our to

for expected X%. in items, the our rate and return, discount changes currently XXXX XXXX our is we’re Regarding addition long-term I the planned pension that rate which pension end returns, evaluating in at this of to year updates of including actual assumptions, would asset note

is million billion on million of XXXX For adjustment $X.X updates provided and pension $XXX our effect to pension we approximately annual billion versus effective your we and FAS/CAS these $XXX $X.XX XX. by purposes, both respectively, net estimates and to XX/XX in modeling lower likely XXXX other net the believe January of which

quarter outlook call our our items provide will in pension January. We detailed on fourth on

our our in our As to rate. and or programs changes to significant release support earnings our no discussed productivity, XXXX tax outlook fully guidance the and to our federal corporate for XXXX SEC more filings, assume our for for

backlog. In guidance in year-to-date awards we potential either our quarter particularly very well-aligned choose any we’re addition, pleased and reflect new discretionary do with not priorities. that and third our our closing, plan outlook is contributions and Overall, our with to make record may year. pension portfolio evolving In results, customer

continue to we for to think continue We and to invest With the the Todd, in deliver that value we’re I open Q&A. up call shareholders our future. execute ready to for

get to how and in everyone remind ask please queue the Natalia, questions.

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

much. Good you morning. Thank so

Good morning.

the XXXX. Kathy, just all because on thanks are there on about you some to environment. this this you year there topic, commentary, change staying how you. trough at you And comment administration as program a it confident XXXX of and was been on GBSD, could And the on relation program progresses, the be I about the detail tougher But wondering for be if or budget for has that, another could think track Thank in risk do margins? will space

process. the in that and again, by analysis look relied Every and It confirmed XXXX, evaluate the legs heavily of Nuclear when the include defense nuclear we have formal come military conventional happen one again have national or the and one note as conducted the have historically, the spending was which administration. the nation’s allies by an Nuclear global ensure has pressure, to the new to the administration. Thanks, But I’ll in the And the has But two strategic deterrence new Rob. conducted Posture the more B-XX. forces And even back, Posture administration. important. to I’ll Obama-Biden all XXXX, And budget with election conducted being they need after a note upon to working if our the of XXXX a and triad U.S. validated declined each has if GBSD triad most had Review play under that critically stability. And recent in was the that both posture for Reviews, of Trump-Pence was we security. and in reaffirmed. DoD Since three course also role the critical deterrent expect that triad administration

to think more that be from as exist. triad going we this is viewed perspective conditions if priority a So even budgetary important those

support for B-XX. we’re both that recognize and continue would So that new are the and efforts administration GBSD modernization confident value that underway a well to

from Your line of… the next question

before we you just move Natalia, question, on, to second a had the part Rob.

So let address that me quickly.

XXXX, weather I’ll You space from and would from year, mixed also pressure ready we the given remind mixed will level program. we’re pressure in company growth that into expect incremental persist. at next going Dave the for question. we’re about the reduction program to that XXXX of you. will asked we trough from as that working so we pressure costs And be the but you with GBSD commentary, offset growth margins performance. XXXX now are next have the and But Natalia, that his expecting strong Thank nearly billion noted $X significant GBSD

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

everyone. morning, Hey, good

Good morning, Carter.

in to big be if growth could terms Do that is XXXX think some expect Kathy, given XXXX so with I backlog and were of going can wonder opportunities you grow you backlog next that year? what tougher, Or you Thanks. strong the lumpy awards. about still compares? talk you given XXXX, in

continue We the backlogs year. see certainly next to opportunity to grow

would XDELRR called Interceptor, replacement Mission pursuing to we we’re Generation Also in across and in number SpeedDealer. NGI, a as of that the which the Next Mission opportunities be a in next jammer sectors. I’ll few have point as Systems, We all Space. Systems, well have

effect backlog of award and So just across as GBSD awards, starts business short color book-to-bill – look sales we of sectors. year year. book-to-bill to Systems won’t more book-to-bill this we could tends be we term these a And a look sales, aerospace strong don’t large provide a have awards on bit are a backlog as above that to Space, and singular of certainly that’s in to, expect at to look Aeronautics to quarterly are given on that that, about as examples little and with new that Defense at just the we run but and to Mission basis, on tend typical. next our we the robust a well the in But bolster backlog year, longer just equal few potential the of Systems. cycle we our a

strong So level. of we sectors continue build in backlog at to and our to all the company backlog opportunity see the

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

morning. I in are to where services for a trying get interested was headed. sense Good

had revenues some product see You’ve that the services from a And been that? really good top best. to sustainment very do sales, to F-XX why you could in at line significant flat is. you be expect of you about growth perhaps And have And grow talk here? but do expect services part

Thanks, Doug.

services growth F-XX question business, our through runs sustainment me note more and I’ll also some for that about team that F-XX. themselves, business, our contributor sustainment modernizations, our first, the as So that the start business to I’ll the with When sustainment of part of services. Systems businesses in done the growth aircraft by overall and let last our but F-XX then talk generally about that We is a the those Aeronautics talking necessarily products of the program through our Defense involved business. gets where spares we’re Systems and Mission the repairs, do produce not

So across sectors noted. growth see the we company that and three I see to all that we the sustainment spread of contribute

seen Systems, last services that We our in we earlier business had the based business, of off on talked in But results. even wins some of our the flat. terms year. into couple award be program And about Defense that nice the a we’ve certainly of significant services have business our that relatively strategic – years been business running quarter. over we’ve headwinds growth we restricted slowed there within IT services to In also new in program XXXX and third that made about about large in decisions we’ve talked some seen the have pursue not

business we strategic on So in TS for talking our you know, just those And been CS headwinds that offset services we’ve we’ve been it’s as that repositioning growth, by years. seeing now several executing about. and are for

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

after your morning. the Northrop Thank the talked uncertainty, rate What there’s of prepared about what growth accelerate prospect you context to in growth. and excuse July X% good you, and but for you growth up, remarks really talked for XXXX, me, how X% but strengthening foundation in sustaining in as the unremarkable headwinds some I has – XXXX. foundation Lake City. Kathy, XXXX, programs to as is thinking And in for new growth? I ask to you about like strengthening XXXX in it, that just Aero in overcome know call about number ahead about ramp maybe, we point

that in to B-XX could GBSD, earlier, very visibility to in budget has as many to to the like see have but you of feel end And Thanks, note, the top the those Yes. years next are defense two field XXXX like And for on also flattening noted couple dependent positioned key the solutions into as environment, the U.S. in XXXX which we as our will on the given continuing the we expect really beyond. a support drive strong growth large building and budget we nice that potential Well, the year. see for early have portfolio’s outlook for result I and their will that year our acknowledge backlog our programs line lead building somewhat our are necessary to growth. most our the another ability threats. on do And strong of portfolio pressing Growth recent outlook, solid a threat budget and last will of but XXXX offer items, new for beyond high capturing well a question, what GBSD, governments be represents allies for of been being know backlog Jon. that but that for success beyond work as you fewer and to bipartisan nicely. starts, programs. B-XX, and least over of period. indicates our continue certainly priority seen we new at F-XX will key, that be But and for these we our to support profile have your outlook to continue I those response alignment go combination a XXXX. years We’ve growth and

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

morning. Good Thanks.

morning, Good David

still guess the ask and maybe Kathy about to of to going you’re about potential and the on the you’re like working from cash is thinking cash despite then your contributions full some going stepping thinking working here. thinking to you. fairly the about front-end have meaningfully I guidance first everything pension, benefit flow, load, XXXX? you’re your it here, here? that that out do it it, based on of want like cash down Thank balance last from And the you year or all this profile Does for capital profile, looks capital see looks Dave, you pension on And of part neutral. be in how CapEx the year, given the that then that free years, in I of pretty

the in look of Sure. years cash Thanks, at into and XXXX I’m David. as we happy dig flows pieces to beyond. those each

that for right the $X continue to billion certainly plan of October. cash I a of at the $X de-leveraging QX point debt do that enabled pay at about we’ve balance we us to that down of the We sheet. with balance this a end billion think gradual talked healthy in you’re earlier generated

capital to capital one Investing that’s – of element be So business strategy. the our hallmark certainly the continues deployment of our in strategy. deployment is

this a CapEx is gradual side of would sales anything year thereafter. there We you the next see On terms asked percentage this outlook as us remains in our about, share restarting competitive that decline XXXX, continuing to our repurchase that and Returning change dividend. point. anticipate unchanged, with earlier, a $X.XX outlook about And priority as we to a to a Kathy and maintain shareholders well. of billion cause in don’t program at do talked that cash

On in up the in look that are we pension anticipated side, to pick bit terms contributions pension the of timing something that is XXXX. it of at a

year we those but pension free or make to As are the opportunity years. into noted next, for contributions incorporated either in this possibility our earlier, guidance a of cash remains voluntary early those not flow

cash the line than it’s And on to the necessary. of have generated too years next So bit on to topic not over the important longer that XXXX of you our couple we over to is the look of should intent is at current question one deployment I a approach balanced for believe cash levels think for free last bottom and we for continue capital a to couple further, that think years is flow into us. the basis. Digging expect an sit multi-year nice I high a

XXXX. – up flow – was XX% free So from up our cash cash XX XXXX

supplier XXXX XXXX, midpoint we about at deferral basis we related accelerations growth also which this from payroll from delays that XXXX a guide payment cash we’ve and calls benefits $XXX exceptional year, Our flow free then today have an million. $XXX from on million two-year $XXX the that provided And total headwinds to for XX% bit about payment growth year-to-date done some million in period. that so tax to the COVID-related changes. aggregate benefits over hire the progress

to continue suppliers. those support we So critical

XXXX, when guide all this XXXX free flow will from result have free at to payroll aggregate XX% cash potentially because about XXXX there. of can your but think create a continued tax to year. continued capital CapEx through be to bit work we’ll combination of do point XXXX working higher a factors. cash of that we’ll that look net we’ve the multi-year comparable deferral for that that, tailwind that of today And management cash of basis, XXXX, we provided strong we the on from we free you that like with below flow to That’s As related offset feel the amount. the and headwind But

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

little a talk very of kind wonder, how think more particular been the maybe maybe timeframe being the high-end about the good I and that to and on Skyborg Thanks much, cost a different up solution kind and and of you it’s has pick to of given starting terms traditionally? autonomous Kathy, – there. bit low the you mechanics of if that, a kind type guys program in portfolio focused about in more could of award and of And Northrop growth stuff morning. get that

to. Seth, happy I’d be Thanks,

start by combination of the in particular, Triton autonomous talking me Global our looking portfolio our about tail so and program. let Hawk current at So and

some about talked there. have We budget pressures

Triton the the Navy You next may the budget what discussed Navy’s pause be for has And is production for two is familiar currently years. request. that that programmed into the XXXX

Force Global and from Hawk, a Block they’ve for the the we the that pause forward. otherwise while this year. believe see that the and with largely with to sensors Congress the the vehicle for Australia, the in some the working do provided on next pause. committed with point. going to Navy XXs so some production we this Block that what regard really would entails reduction production all Air that they’ve for is that opportunity based wait gap of experience are We to government offsets integrated is would in also With fleet to in to that, at Navy made air We formal the program aircraft is production Navy contemplating not and direction long-term XXs actually vehicles see their a and signaled get But into terms is of that pause and statements

of and that look a other question that in force, being But case to analysis air Hawk. unmanned the systems the Skyborg years would navy next not more all note we the this the that about what by only services, and contribution projection, of a force. aerial and that strategic including don’t really particular, in Global we I significant we But plans, particularly Corps. will the those systems might will call leads that are for considered do but unmanned and by air pressures that to alternatives the color Marine have clear stronger add So on several the for over become asked like you more anticipate have

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

much. very you Thank

money are year? that Kathy, grow it opportunities increases get so new next other key could huge. but the a like are backlog could GBSD, mentioned look to there is You’ve backlog XXXX restricted already what big it would So looking coming? get just programs, there, to existing that the on take are in you the at Maybe in but doesn’t I’m you, your a you what elements the that higher gotten areas wrong

sectors. programs, I’m but will increment program next particularly year. as Cai just annual of across So get we awards year programs one anticipated in efforts smaller their of are foundation like sets, of or large next awards a and are expect have a will have referred flow sure new awards, But well just production there our just of new there that that course appreciate to that certainly business next I ability natural as of but the our another create of would contributing I that of noted an award. to many in that business the production, base to to are we few of book-to-bill to you few normal across lots a four all a significant lot some a F-XX And year, greater see awards timing the

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

Hi, good and Todd. Dave Kathy, morning,

Mission few years, in in XX% Tom of mission GBSD and given it sub-segment think contributor growth Jones growth we from outside because actual largest of Just most growth how Aeronautics, about drivers promotion significant Mission, quarter do your portfolio? the lead your the in your segment growth to this next over is of a

of it of thank a and businesses Systems, in the growth Sheila Sensors to the leadership its to growth growth has couple has been most Airborne Mission contributor Certainly for at significant inside & also Mission Mission year. inside Systems Tom But recognizing businesses very years. you note four of to all strong Yes, this contributed at Systems, would contributed Mission Systems that of his I the Jones for that. for Networks

pleased to see that the it So divisions of one we have that them driving isn’t just growth.

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there So growth the under I fully seen we’ve leadership. that continue expect that will their

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

guys. good morning Hey, Thanks.

well. about important to a that to the thing, follow-on of and black Northrop’s for become of such right classified it? as whole important Northrop, business Century kind all of that for kind present you to have there world And a an Series do of that’s the with to you. rapid reasons, The box. DoD bigger and does Kathy sort question piece wanting think because presumably want So, or a programs of guess prototyping the as more what NGAD in addendum I picture that, investors Digital do programs, opportunity for aircraft classified announcement How

Ron. Thanks

reviewing the for our as we things investors restricted to level about important foremost of to our work, have so need is know we the the I program, the is first are and governance want any them them into they that of cleared people performance one execute the other of understanding over those details same what do to regularly, perform providing So programs, those programs that appropriate resources program the classified the to company performance and and what our most successfully. and

on the to that the have for and that portfolio. part our restricted all pointing ability detail to where And as our In share have engineering make model, And portfolio. things your very But time and enterprise using GBSD review in that done our our partnership digital focused could the on actually in as entire being portfolio. delivered the were on GBSD programs performance role with risk our first was already, with we making digital to though, and can’t the a a maturation that to case. going artifacts not a going pleased of so in we are customer the the of GBSD start those force reality produced. digital program. we base unclassified size, program. enterprise to a for in fully-digital The I’d is documents investments actually done we’re goes they by the been for is to the the that Even disciplined are around transformation at work of phase under question digital that’s we’re with on the a environment. that executing continue be program that have forward, program tech important We where we of track second even This reduction utilized our community to much of this record where way air pioneering investor of across the our looking as environment in a

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line Your Global. from next Skibitski Pete question of is Alembic with the

radical know of enough touched a earlier give far maybe Kathy, and changes have you not exports export HALE changes Thanks. or question domestic a view to but I in was Thanks. about to just on Good market morning. on maybe discussion. don’t that us but on whether I or those updated there I been, to regarding follow-up made for talk Can but Seth’s there. competitors had been share MTCR, exports not policy? some you thought know seeded been you goes UAV HALEs general, there your help can regulation, how the has some UAVs, I around it just out given, Because Australia, think lot Yes. to

more changes No, they open they international customers MTCR potential encouraging I were think and the are up to will there access. have to very changes,

as more this it missile regime now tightly. of upon in technology Of up same because but technology, isn’t course, through favorable caught they looks still go the approval the it export process,

we processes opened for the when It worked before. the that take with is with of it U.S. together this some technology Defense possible. pleased not so process, engaging and are opening had make been Department eligible to of will And now that this the nations really are we them State it at requesting that in us has and time this work but of get to look through and them, Department door

So do unmanned develop ones up platform for might open expect us for which to but not in international over produce period, today, more systems we HALE we is we what future sales a including multiyear just overall, the

for Natalia we question. time have And one more

Myles last The the from is UBS. with question Walton line of

at virtually XXXX FAS only respectively and pension in. on move me CAS a Thanks, good thanks morning did Did or XXXX, changed? the growth deceleration And assumptions clarification and and XXXX. funding for cash squeezing your for Maybe year Space, to implied think Thanks. then more without ex-GBSD. why growth there than grew on I in you XXXX the this space XX% so no GBSD,

pension a on finalize have question. start there to lot I’ll still Myles, And internally. review the of We and assumptions

that’s the doesn’t this end have CAS rates fully so in lines, for It’s assumptions FAS it why before full-year up we well discount And of those to where into call. more detailed think be see we’ll review but be this asset able are the get as January think of don’t course as both of at make our a cover or those would this that performance of for possible we’ll line-by-line a and us update But there that talking those. they’re to the And year. phase change baked. movement the meaningful will and to result works, XXXX net as should being cash as on to a XXXX outlook. again, From of through we’re still a mentioned, have XXX in details I the perspective, to both that I sense you XXX

strategic of amount that as of of a transitioning pointed as say a growth those as there NGI, we’ll by and through GBSD And quickly, quite is with than GMD little growth from other tremendous into strategic a I’ll additional all ramped this growth of year just it’s saw XXXX many space more more in being we missiles, very in flatness not on to steady a state you get year. to, compare and bit strategic next seen the but this space, until see programs achieved we’ve throughout of much just year we And some offset XXXX. in side, as year-over-year

I in reiterating impressive don’t close conditions for this by another thanks and outstanding Northrop go team performance. light why of So the Grumman challenging we’ve especially that today’s ahead our of all year. call to the faced quarter It’s

that to quarters solid are with have continue year this and to strong executing strategy three We through successfully and the first a XXXX. well-positioned into momentum finish we’re on results our

late and XXXX for you joining look we’ll speaking to our you our provide We when forward guidance. year us to in thank again That report full call. results today. So January concludes

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