Northrop Grumman (NOC) 27 Jan 222021 Q4 Earnings call transcript

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

that morning, welcome conference web to you, our PowerPoint We'll at Natalia, like based Grumman's The page. discussed call. forward-looking and XXXX laws. go good and time presentation a beyond, start, to XXXX of Thank But including Northrop including on this before our on guidance judgment I'd federal everyone, company's available call, fourth through of outlooks this a morning posted today's we matters is on refer They the just IR call. to quarter comments statements the safe here. of pursuant securities information reflect harbor and constitute to couple provisions

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

business Thank continued us. and of our you, XXXX growth Todd. year thank Good in morning, joining delivered for We in positioned everyone, and another you for solid performance XXXX. operating

made business executing grow capital in and executing our margin and are value. and reduce strong We in deliver this XXXX. the the create today to rates future, to progress again strategy, to is excellent We costs which into strategy maintain performance our significant deploy

was for growth year Our organic X%. sales the

grew to more strong, cash was points our flow. margin a transaction increased by with and of EPS We and generated an adjusted $X.X than performance operating XXXX which X% transaction COVID-related basis XX.X%, headwinds. billion free mixed segment adjusted Our exceptionally XX offsetting compared

debt XXXX. and dividends $X.X shareholders $X.X during announced million the We rating create our a record technologies retiring of share we that strengthened $XXX $X.X capital over returned of through continue process. our capital billion accelerated a with deployment, billion sheet, share November repurchases, achieving balance programs. Regarding we to increased repurchase and including in credit billion support an to to in year invest And business new expenditures franchise in the in we and over

System to to programs. add continue and as With like portfolio programs hypersonic well interceptor. as sensor also franchise next-generation tracking on ballistic We Command competitive and of or our the Integrated wins IBCS Battle space

beyond, past portfolio strong know we'll growth and sales we is robust weeks, forward strongly we cash reflects built years we performance XXXX. believe we customers. with and more organic our threat our President's growth Further, and we've our free we coming over 'XX growth through request aligned double-digit margin our the investment performance. our environment and broad of about as strong in to strategy, expect several will business XXXX in well the continued As budget portfolio as our look the priorities XXXX to And that growth. as confidence guidance the expect deliver from into the to continue new our the continue win backlog convert while and ability flow key

economy, As last and particularly supply present the of delays year. the availability, to shipping reported, pandemic parts half COVID labor to second challenges continued in the across

challenges these supply our the at felt effects chain labor and have We and availability. own our both

in just for Dave employees year details provide our both the quarter, to best factors guidance business. to looking We the minutes. more will to remainder forward, we such is current and full our address of and a know to risks, take the the continue our year. covered few the proactive on guidance estimate our And steps and reflect going our today

end Turning budget a fiscal Congress XXXX to February The Defense several also of billion remain optimistic resolution In funding the Negotiations that continues the increase by run request, continued the administration's Authorization president Triton, including And weapons priorities received space, through appropriation advanced NDAA, that is incremental growth we first the agreement a an in federal and we year on government to we defense represents The programs, year, $XX compared under mutual XX. now fiscal be contained to finally, areas National in our operate the year of continuing of budget Act in And there the expect for FY above quarter. others. Congress such currently this to President's the the missile our bills and environment. defense, March F-XX, that to budget deterrent. appropriation bill. reach delivered among as budget expect supported support Systems, GATR, be XXXX, to programs to E-XD this which are continuing. will F-XX X% and 'XX reflecting Mission the

the Northrop web, the on now in to partnered with have and exciting with on the world the Stars moments honored observation web-based and of and Focusing launch of the quarter, we're December of our ushering is revolutionary telescope prime formed, understanding one new Grumman were universe. our provide West XX. more expanding an the than for contractor proudest era past of with highlights NASA space in will XX.X when technology. NASA the the to on billion appear Galaxy's into this years first

the developed the the also NASA's built we're and supporting to quarter, the woman $X.X billion In the Artemis system, moon. web, sector largest vehicle X. X the to missions for support rocket addition producing Artemis award to fourth solid send man space is space launch a ever received motors to through by first mission In next which being

see spacecraft HBTSS we the were for to prioritizing In MS that our fourth track passed quarter, Defense fourth the by Systems their prime Army's development Mission be centrepiece of the Systems of our Agency These Missile domain. the for battle awards for example in next-generation milestone U.S. is sector. a It's important announced are and million, is how new service of the accelerated and competitively review. of hypersonic track of area defense. support we source, effectiveness capabilities its space in position approximately are and Defense and to awarded phase quarter, missiles. the will many control in will SABR’s detect selected a planned survivability in full million. quarter, regardless strategy the missile legacy our hypersonic of This as glide $XXX which or hypersonic This increase part Another of defense In in examples we satellites assets customers us command several and our the helping and the continue network data that one command program all-domain and we quarter, of of sector, the and the JADCX our design received capabilities $XXX help in and design critical systems. missile that Also F-XX In control. well to a technologies our of against to defend between missile share systems, and quarter for of vision. multilayered modernization regional defense, approximately award customers we was air a had interceptor customers year In IBCS to improve of integrate milestones systems had threats. an ballistic as missile for

total for for Air received X,XXX as in have Force several as radars We awards of and international support Guard now contract customers. the program near this National U.S. well

and for in area high-performance customers our received will In business award growth computing portfolio with billion addition, XXXX. approximately strategic $X delivers for the be on portfolio Systems this our a we Mission significant helps Network processing advanced microelectronics additional which security, driver connectivity MS of within Information next solutions. segment This Systems in it anticipate processing for years, solutions. few awards expect and and We in the focused

market aircraft their Finally, customers some in as programs legacy in a transition our investment aeronautics. focus is divesting undergoing The while next-generation platforms. military

we our manned exciting well number aircraft unmanned are maturing are in announced. there U.S. experiencing also which recently new But as Kendall that emerging. are As This as Aeronautics Force certain discussed systems headwinds. portfolio Secretary and next-generation a includes Air at opportunities new of opportunities, programs

on for delivering these addition remain to focused programs In our pursuing longer-term customers. and executing our we opportunities,

Index of is sustainability were S&P that future an released in America for Sustainability Index growth were is strategy our quarter, customers in long-term and the Dow our social creation play a fourth global sustainability. in corporate for in shareholders, year, Jones World Dow time. for scores, and Grumman sustainable, ranked we the strongly its governance with percentile. Another and We In believe the and and We XXXX. important North value greenhouse company's conservation our leader consecutive activity programs Jones Sustainability XX included the reduction environmental, our XX% a included we assessment for important on profitable the aspect sixth role Northrop in since employees. first the emissions gas in

ESG includes Our actions. portfolio strategy also management

we've a a that to role transition uranium and to As continue made our aging the transition contract to ammunition in complete. last year earnings the an that be to supplier, prime contract. depleted munitions, single surveillance decision production committed on prime supplier small another as is year, final while following inhibition and out cluster and discussed of have one provider, both And merchant we have we we for calls contract we

gas and progress sharing energy. as forward upcoming TCFD making with sustainability working conservation to diversion in water renewable on of they substantial we're to journey, we ESG our Overall, and waste emphasis and a and priorities, emissions, goals to currently We in are set establish relate greenhouse next our report. more our sustainability specifically look solid stronger

on it detail Dave provide sector So to comments move on with I and we to And results before have additional Q&A. turn few that, a guidance. then our I'll over more to

and Okay. company. Thanks, year performance strong the everyone. XXXX was Kathy, another for good of morning,

a going period guidance, note QX results items to comparing of Before to same to the the year. in details when I'd few mind through last our like and keep

divested $X.X per With said, QX QX As day in at IT billion of AS previewed sales the and in prior sale their XXXX in to over sales services days level represented were working we QX. at more working XXXX when quarters, business, the X in equipment XXXX. that highest compared

sector results. to Moving

fewer continue and The by equipment most significant F-XX. the on million working We COVID-related in were partially on QX, these unfavorable chain sale, driven $XX to sales and days AS XXXX effects aeronautics a also our effects and see was EAC and in included in supply labor QX decline our certain adjustment it sector.

to reduction and the to the working $XXX sales Turning million among up X% Higher XXXX, to QX down completion X% declined the in were X% of sales XXXX ammunition restricted days SABR, and GBSD, lastly, due in for in fourth by our X% almost contract Systems. Lake were full the Space due divestiture. Organic year, sales the and full X% GATR, and organic full plant, And in year. Systems increased sales services quarter, by driven QX Mission Systems primarily driven QX J.Crew City in organic the for programs, rose IT of year Sales sales by down at generated primarily Defense respectively. which the were and on volume others. XX%, XXXX. and

We was significantly Growth XXXX. $X.X by programs, on a programs in space increase continued including franchise to billion and well Artemis. restricted also as ramp NGI driven as on GBSD

due exceeded margin and to margin the Defense quarter Moving our F-XX. margin rate EAC in performance to the and Systems, the as rates improved other points unfavorable year year. rate both Systems to In full completions. rate contract margin the high our operating quarter for guidance rate or and X XX% for X.X% income At the Higher to increased operating grew operating XX on margin in XXXX income to to rate. prior full XX.X% XX operating in periods. met X.X% operating segment end due operating of well adjustment largely basis points sectors, AS as basis and recent the was ranges. segment decreased Mission

the the was for year. XX.X%. company EAC X.X% with and benefits AS in fourth even space, at of a to quarter the along same mind margin operating recognized At full overhead from operating XXXX. year. higher Favorable the As and grew Systems, the to the space XXXX. the And it adjustments MS, keep and in on quarter mix total fourth we offset that the first adjustments result commercial from for year in in rate QX basis helped XX.X% for the F-XX margin pension-related was programs the with benefited in the mix XX in points changes, the segment performance of XX.X% that rate level, as for And quarter and XXXX, charge quarter full increased business Space and full EAC The pressures XX.X% year. strong rate operating margin

Turning to EPS.

QX declined from from Our due earlier. described XXXX QX X% to factors transaction adjusted to volume primarily to I EPS sales the lower XXXX,

end Lower strong corporate segment corporate we full the guidance ATK October. provided an EPS was the EPS the Transaction to For state X% in year in we insurance grew exceeded costs. by due to in unallocated EPS range adjusted of the items performance X benefit discussed high lower quarters: and lower XXXX Orbital from $XX million unallocated taxes. former business; we've driven settlement related and the prior

was strong nearly of in XX%, asset returns. year again Regarding double-digit at our pension in the asset a XXXX plans, performance third row

a increased rate benefit Our resulted FAS $X.X to in factors XXXX. billion in of These mark-to-market points roughly discount XX basis X.XX%.

PBO has funded. a basis, status over funding In billion. on improved now by addition, net And XX% is $X over our pension

project pension XXXX. continue more the cost the years period. our contributions to over and the competitive declining more for in summarized EPS headwind, several over causes rates to cash affordable. to recoveries pension are while particularly We XXXX products XXXX, through this next our makes an continue it our planning Also estimates minimal projected years. CAS And

billion CAS of year. Our X January this of as approximately is credit $X.X prepayment

$X.X to final line made of associated XXXX, In generated turning fourth services million. billion free transaction-adjusted state tax operating and $XXX in the Now with we our the expectations. billion nearly quarter, divestiture payments cash. of with our flow flow almost cash cash and in IT federal $X.X We of

$XXX roughly this also The made Act of from payment December. amount legislation. payment same deferred the of taxes payroll of first Cares million the our will We remaining occur

COVID billion are end range. of XXXX, consistent by impact expect and we of is to aeronautics, sales ahead of Looking mid- the XXXX. shown to from outlook passed the X. our on in experienced sector assumes bills that This we a guidance $XX QX, effects Slide the appropriation level in it assumes that At relatively high

F-XX headwinds projecting As in the portfolio due we last well restricted noted on as and quarter, F-XX expected be we to are as our on booked higher XXXX hail adjustment lower sales in we're QX. EAC in slightly Sales our to JSTARS, business.

is approximately which up expect rate an margin AS basis of We XX%, XX points year-over-year.

XX% to IT the sales of Space we a expect the projected range be expected divestiture XX% organic billion our is our continued become up and services Operating expected is to from our to low remain rate Systems, projected of range. in following and billion expected to in strength contract. XXXX. our City mid-$XX XXXX, segment the Lake billion up about Operating products. Defense margin high up business -- the to to is largest are For in XXXX range. in in mid-$XX billion XX% $X Sales margin with range. from the sales rate modest returns range, in Mission this the margin rate in in reflecting as remain business Systems fastest-growing low the for $X organic be are demand Systems completion growth in from very in sales strong high range, $XX.X billion the

XX. Turning to Slide

F-XX range X% rate lower X% was which due Our backlog, revenue X.X years by covers $XX.X guidance shift XXXX organic $XX.X billion total stands The award the estimated billion, a X and is more billion, consistent in we to than XXXX. October than This of to times the sales. annual of strong book-to-bill XXXX. expectation with prior to growth growth, our at of over enabled $XX is to our AS representing

of X.XX, book-to-bill and average trailing is the and X-year growth. foundation our current our remains future importantly, approximately More

be anticipate into less COVID-related the early we quarter XXXX year. XXXX, sales XX% XXXX than full first experienced of in continue that that we As headwinds will late

we rate adjusted we consistent earnings XX.X% This increased XXXX October, weighted approach in $XX.XX, to of roughly be our mix disciplined XXX segment operating expect in based as shares and offset continued with to now a cost in $XX.XX on transaction approximately management we that performance. with have Altogether, program strong to outstanding. the We efforts per margin between million outlook expect to share headwinds provided reflects our projection rate range XX.X%. the

count on recoveries shown corporate from in lower the and and volume due expense tax onetime XXXX. unallocated pension deferred this is help As amortization growth lower year-to-year reduction $X XX, strong by operating headwinds $X.X margin to the sales $X.X roughly share higher to performance R&D We will repealed. EPS the free of or those nonoperational the net cash items. billion, CAS benefits offset flow XXXX benefits assuming to driven includes transaction-adjusted Slide from of Earnings law project billion in

law taxes We remain cash continue in should tax project higher billion $X current of to about effect.

cash The recoveries mentioned, is our cash operational expected payment includes percentage of XXXX, flow our dollar provides tax we from transaction-adjusted payroll a on of sales. $X.XX From than payroll million and $XXX roughly roughly tax remain the midpoint as expect I million. final of longer-term absence flow includes approximately billion, basis driven cash. lower lower CAS the our As XXXX. free performance, through XXXX $XXX of an guidance a CARES lower is XXXX consistent CAGR free cash Slide by slightly and CapEx on the tax and there, absolute headwind. Act the double-digit to outlook with outlook CapEx of XX

case base the assumes again of Our R&D deferral for periods. tax all

We years. resolution appeals an filings certain projecting rate XXXX, with legacy underway, or effective proud divestiture key related of open in certain execute our focused we we're approximately over stages in but permanent appeals of an our years for XX% going Also, on financial the we're processes. Audit pension Kathy. you in earlier and and effects. forward, be the to those tax are we're and call mark-to-market taxes, back business both in nature Northrop to that, XXXX. of in turn our to processes Speaking excluding process XXXX consistent tax of well roughly on tax anticipate continuing to on resolved OATK timing you, XX-K I'll In XXXX. details performance closing, refer With strategy and of for the the items, additional for

summary, we have strong that In Dave. well budget programs Thanks, priorities. are franchise to aligned

XXXX focused results investing cash and growth. also capturing well are in new to delivered set executing drive opportunities on and solid We earnings we are growing growth of We positioned and performing XXXX, and to in and beyond. in while a continue flow

cash deployment dividend for to priority Directors repurchase top repurchase at shareholders of Board approved that our a outlook Our based shareholder With least billion share mind, in increase $X.X authorization our of in recently XXXX. share on competitive repurchases. today, including and remains And return, $X share an on our we via returning plan billion. in

to to for delivering turning results and would Grumman operational with like dedication Before Northrop your the thank solid questions, severance. I team for

talent, includes and extraordinary have our leadership We this team.

Grumman and and has As in a with career after heritage November, helped quality. growth is important, focus performance we a its announced retiring our to Northrop companies. business for space as Larson, position Blake XX-year incredible on Blake and

contributions confident business. leadership country. my Space to the market. Tom are for this company I'm team as He space to part Wilson I'd our the in to his his to Blake. welcome our ability and like grateful of And lead We strong Tom team, brings also in and he experience was succeeds

we'll ahead up to So go Natalia, with the you. for open questions. and that, call back

Kristine from first Liwag [Operator Stanley. with line Instructions] Morgan question Your the is

issues issues persist? same labor on aeronautics? more last and quarter supply these the in flagged you the the How expect experienced elaborate long to year? do issues Are these you chain can Kathy, at

and year, the of availability, Delta our And been own are as of There in quarter the availability any is quarter as the in people that's see the of we to the we're in part we We fourth early when if third encourage people I about and are labor of our again absenteeism. what third isolate symptoms, in -- also contact. they fourth part to Omicron quarter related talk safety in our labor and quarter, in We work similar late employee the then with to variant out first be priority. of flagged late they're part largely our experiencing of XXXX. higher really what of close have part the seeing suppliers. workforce We levels well and who last issues early now

in an And production so in particularly where people impact, closer have whole be absenteeism been or as and it higher person a cells impacted proximity high-volume in surges, and if has X out. these work lines result, high-rate, our might has we where are sick

our you But you but in where aeronautic stronger of high-volume the to we've And about And the so that's would that's impact to we're we X certainly, sector not aren't we program. F-XX. of a high-rate, really that top the production them talked business, have better, see quarter see had that we why and X specifically to it able the conditions, impact program, pronounced a fourth we not in because rest mitigate the X only Across more see experiencing same less surges. line experienced have period. expected pronounced those any it's

look at you're you also, When ESG sounds your where you And exposure? strategy. fairly like there other are areas a portfolio, what reevaluating your comprehensive outlined

a not at taken our is. do but want and we've be I only exposure look, our that assessed to So clear. what strategy, comprehensive very portfolio

We are defense contractor. a

of weapon they munitions. proliferation, systems. to we said, are global uranium inclusive making because And largely today, parts believe but supporting not of of exit plan we so contrary. confirmation those that the have support continue human missions, our of the cluster in expect some we we depleted security And But we like ammo directly. wanted evaluated in portfolio about we longer And to portions actually that I've past that deterrents, talked in areas with that the no promote portfolio the to also as global rights businesses

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

we of out contractor out and that years that towards goes if to persist of asking top the decade how kind bit line? classified in aeronautics wonder are headwinds about and means program, the the rates place talk up further risk of a years? then you terms several in of down beyond, the in the that from much and a production coming when very a prime if little line the And could I where think full the of expected into terms. every about at you're here rough qualitative gets What middle the Aeronautics XXXX,

a Seth, specificity. see more into aeronautic year start then headwinds ask and so color I'll I little as our that provide to going sector and XXXX. dissipate Dave having this will

time don't we levels And decline I the So particular expect into XXXX but reversing same move frame. to year. that And expect the it of the in in and we aeronautics time in. point trend the some us program, that at be as start volume in growth of then largely next to won't in point to to discussed we any for kick is of headwinds that production that we've behind opportunities higher

upward both for their also over see that but margin would period that so have progressively line, trajectory rates an well. top improving And we as

to So view. like anything that add gives you you'd to Dave, the that? macro

Kathy. covered well, you it think I

what talked decline is mid-single-digit outlook in both in sources of decline recent we and the 'XX with the our think about that consistent I calls.

you XX out, more expect opportunities As growth have that. beyond to be stable we and pointed

point on we're expenditures. well cost is management, focused thing the very other the capital in managing The I'd business meantime, our out managing

on And optimize that focused and business day to that every we're delivery execution so looking on in outlook.

Jefferies. is Next Kahyaoglu of with from Sheila question the line

for it expectations. space, was was transition more prior I like for you GBSD aeronautics wondering seemed in if the we growth 'XX could than could maybe space, to and thanks the additive color. bridge us if the maybe on Kathy,

growth the about think of do growth And do we balance So other about cadence? that we the across how portfolio? space how think

unclassified a component space for out. and in But XX-XX was GBSD level continues GBSD to So with in that that foreseeable. same It's $X to the all growth trend billion well as year from the GBSD been coming in in significant Balancing and broad-based this point It's and the of that business sales the well of space that as the work customers, or areas we the projecting it's expect contributing variety as a today. of space. with as as last classified has Air propulsion, as the X pace to for well. we're new components. really rest But as a of out base year, from years, growth. and to element that work continue so Force with portfolio be both as I there coming highlighted we business, expect satellites said, you're and well about the start to growth of is from growth right And significant NASA last that COS growth coming restricted

seeing to we we as So And even foreseeable not expect are but future. the really XXXX, look XXXX be quite fastest-growing even or for so in more growth balanced, if one to XXXX. forward be space to of, we sector it the continue

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

start away. to away. opportunities portfolio going some of the class just Yes. I stuff in assets, seen fade asset was to wondering if HALE your there that? out that world? that believe Are you Because is could speak to go -- legacy that, What's to hard you've some there -- replace of the it's maybe to

assets if So the Grumman future? there speak you replace Northrop to opportunities are those could in for to,

that an part autonomous was of strategies for is portfolio our asset then the and still Air both systems early is in Force, which thanks But a we've then and of headwinds Triton U.S. for were production question Force plateauing several its going bit about still customers; well the portfolio. the good production important and phasing HALE are U.S. with our the production. an important those U.S. that's Navy Ron, the not reality international headwinds Global Air pause in customers. in as of of off Triton, the talked Hawk the Global and coming Yes, out. the international more only because as and Hawk, And for forward which And

that your I Kendall see in see Air that we call about to market to we we the unmanned within will launching Force opportunities Secretary question, mentioned that those systems Force, continuing specificity With So been new earlier U.S. Air this and specific efforts in as the some pursue. do some is recently evolve. has more

bones to to more opportunities So meat as see those the will to market what do the some specific continuing there's on We be. starting attractive. be as be

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

sense today for free things you flow can 'XX what pension, drives -- in XXXX, sales cash I really earnings most and and some those give us And in volatile here. quantity cash, XXXX. guidance you can is profile of but XXXX, around gave type cash I actually the understand And You 'XX? a guess, mean, project I cash of numbers

I'm happy to Dave. Doug, it's question. into dig appreciate the that. I

find at again you'll consistent a what we had higher call. outlook with level today's October on is think our I projected

I important when talk provide years. cash over think some free context flow to few we our outlook next these about it's

of talking next that's And that Our 'XX reimbursements million to of and years were that After point is that what us billion benefit this grow in with funded the projecting last over driver the just pension a we were to now pension the minimis great really years. in them XXXX, us new of in we've XX-plus build CAS to us reimbursement couple reach over of side. X that been legislation XXXX. off is by on couple $X a CAGR and change returns, does create ago percent And a rapidly few the for years. CAS de just $XXX over along and the fantastic primary improved supports But status of more much for years about. asset foundation

about around We creating flow year in over reimbursement unchanged, payroll down was million late billion. that the 'XX $XXX The beyond. is working from deferral almost similar roughly cash opportunity in talked assumption 'XX. 'XX as about, So in 'XX a $X.X with 'XX 'XX. talked bit next more we tax payment ends in is capital before And the free a and CAS

tailwind and we other CapEx So as a lower creates that, is 'XX beyond. And we particularly too, the 'XX and into enter around 'XX. get as

years. make and the that, working over performance-based that timing, strong payment capital the really really about see opportunities So combined optimistic from of with next us we CAGR incentive timing couple

of call and Now others for deployment And corollary of to example. a of for over target on XXXX, be repo with that noted next a able is nice to billion top priority our volume shareholders. to there in course, couple the that, as this our $X.X us that in remains cash we've our years return puts cash position healthy the

too cash, strong that get to carefully performance along as to So we'll wouldn't or continue closer those years. Certainly, more we read in sales a out-years while get into way. these target company into specific to I we'll deliver related and guidance margin grow the the to look

comments that Part is as made. what what provide point not while you is our to some are I'll And of specific of said, I we're Dave to you outlook. the going asking numbers,

expect line expansion. this top earnings And expect XXXX. business in We we beyond continued growth the

And so are we XXXX earnings. on in, And outlined And that as we've cash. an you. assumption factored what those both profile see make XXXX accelerated draw 'XX into some conclusion on our for 'XX for growth a and to be that you can would well going to expectations from based fair

to of few the Northrop we've time I missiles And missile programs, budgets the years, lot missile then And a just over turn was is this. this back in But less. a had Grumman seen one period, budget. considerably as the of discussion over third a and know demand legacy, one working that legacy of I essentially supplier. certainly, areas we hottest around follow-up, large really become piece a go If

do some kind market? and that this at Is important but you ago? opportunity of a few years see still missiles looking now programs, You've the were how got you programs same development

we outperformed our at line space Doug, been few were has expectations seen a out And say were than merchant offsetting opportunity more but on into return more supplier with expectations, much to the And a date between years we is a space would space. we've gotten feel investment. space what more when the we we looking as missile. project as balanced say we've missiles has be continue our Missiles in maybe this that. out-years, to strong will is in expectations. not I I ago, and that

them we and as will, with to market it systems. to of -- in hypersonics, and partnered expand expect the do those weapon are particularly important larger we so providers weapons that And components provide continues grow

we, space. maturing in And return significantly quickly no maturing is more space. by the investment and on believe It's in weapons so more means, our that just not

Robert with is line question from the next Stallard Research. of Vertical Your

I XX. of qualitatively flow could that's Slide leading you've if to that parts wondering XXXX. years' some in what was moving And I strong had large in really, time? a and in question free growth on projected Doug's walk follow-up maybe are you got cash through pickup the that particularly couple a of

years time those. shows reasons lower our a CapEx And in see we particularly and One we've into XX-plus guidance. to CAGR up our over more and go start that talked a for 'XX it's really to. Happy We've XXXX XXXX. couple Sure. couple coming gradually that as strongly described, is around that the the line. of the about a mentioned, percent sales, I Like in in 'XX percentage I'll that of detail and bit of down expectation on next of

level 'XX. down get on percentage that dollar to to basis a see in to CapEx further beginning of expect we a bit decline we we of As sales and continue to the 'XX, as a come demand for

On we none the working obviously, sheet of overall of aggregate quite side, the sales much them too or all we in the when But capital few programs, balance company. timing of significance of line more working we have 'XX in that performance-based for 'XX time we given milestones that, efficiency payments incentives. than capital and opportunity the some in drives or 'XX, of and do particular see a

half us factor improvement. of that well. in a now 'XX we're free we 'XX paying that and we as cash So other benefit earlier, that, at tax the the on beyond deployment flexibility payroll is that and XXXX as as opportunity mentioned more And for I the about for side had the provides excited course, we're the deferral which of look timing the 'XX. just of in

unique mix. So Hope that's that I'd item kind only to add the of that helps.

it doesn't in nonoperating sort side So massively 'XX. accelerating then. on the like anything It's sound really that's of items there's operations

it. a that's characterize think good way I to

our are flow issues cash I years timing of well and for these the expectations and over think couple growth next performance Kathy covered layered onto outlook. that

Yes.

then quick a the cash. on just Okay. And follow-up

the thing, that legislation and 'XX. 'XX changed? don't out your if get in potential this hit they hit it billion this mentioned $X on in tax doesn't sort -- if You 'XX, thinking could R&D be latest What's the credit

after for approximately it's potential should such. years. the idiosyncrasies the some Thanks in follow-up lower and note the in timing coming over million Yes. billion on about XXXX, $XXX But 'XX down $XXX not I the $X question million next and year of per to think exactly that. X given XX% of that

or off to we so. you when levels normalizes and imagine, it get As can XXXX eventually

still matter So the resolving or optimistic doing Section support broad a challenging about XXX to meantime, has be through And so deferral certainly are really that continues bipartisan far. finding of for vehicle. legislative there the just In of course, we repeal. good, It's proven right so.

to wanted on call. we why today's that that's for a So volume sense you give

Noah question Sachs. Your next is the from with Goldman Poponak line of

margins in have you've down layered a in profit The space revenue. come amount of significant new as

there, you growth the rate how business? should about that in As of the how in could sort profitability we think transitions much recovery see

a NGI the development We about few layer in glide I things Noah, at program. of that talked if look interceptor, new work. the we to continue those today: So phase business,

happens a expect a rate would perform to and biggest of business that exceptionally in margin see well, continues the mix of And headwind. in transition around not it's tailwind that to margin the to we are driver GBSD be rate. for development middle early others. so into very GBSD solid the decade. just the even business as space causing meantime, comparison But stages from is that the phenomena production, our In phase the to And the that that

towards work the middle So maintain that that those we rates for ingest of and line performance in we're the believe what XXXX of decade. projected have with we really can this as development pleased and all with we increases see

the up quickly of -- low business relative of of anything to If out gets tax cash been a the the to sort then, past. excluding or back pretty years to as number a Great. where Dave, that all and compared take in segments And working capital. inputs ratio segments flow back on math. free pension provided, you've That I the now provided, following Understood. the then cash CapEx is each the out on clean just the business number you've which with you've

are you the or a headwind the that indicate case? wrong? that my segments. capital math would specifically headwind assuming Or other that business is Is outside So of working some

if details get Happy those to like Sure. another you'd dig to time into further.

numbers same with Yes, easier us. of the it could front in be

progress XXXX, XXXX. capital great seeing expand outstanding capital cash. of working capital summary seeing of over of think of Right, more in headline the before that improvement and in in stable the in couple opportunity kind is more opportunity working project XXXX other XXXX, seeing again when especially tailwinds on period We had years in expand over normalized years what think couple exactly. In of last And we've a like I before had performance aggregate, of important you're after and the here from working is that that next just I industry We're 'XX. be performance, the couple things perspective the we again years. payment the performance may a

think sometime. it. happy that gives But for with that up feel again, So you I to a follow

capital of not assuming it's 'XX. an not change But It's does. relatively no just -- 'XX, working It you're headwind, sort actual year-over-year. incremental

correct. That's Yes.

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

Yes.

mean, it's clear space, that So toward shifting pretty mix in your I GBSD NGI. is and

because the move quite mentioned I meaning to read line 'XX, the next they're that's, 'XX, headwinds. we 'XX, up, means that a better, So the but I total mentioned mean get they in years. reversal can 'XX see go maybe probably in assume But development space. in margins is would the can that lower company, over but dissipation, it's you dissipation fair stage, going I And they're at of not that margins profile the you -- that getting at therefore, level? same a 'XX. you be for saw so dissipation in but And And 'XX. X maybe in does maybe aeronautical the to down 'XX, just Is assessment? flat guess, for margins better bottom looking the down but 'XX,

just XX But expansion of what 'XX opportunity. growth top we as demonstrated, 'XX. line seeing margin seen to the from and basis we've right, the At Cai, on we've points is level, going are continued improvement company

brought holding that mix more development these offset largely we we portfolio. constant ended As look range work we've and XXXX, where we're into that's we XXXX, as at with the because pressures have

so that, mix continue move direction But be until we case the providing And cost production. and in margin are suggesting that having that what tailwinds the we to improvements rates. of more we are the on are is efficiencies would performance

to margins continue with to work those us opportunity as and expect levers even for would mix, XXXX. see we you even current we into So this look

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

was clarification you NGI, end 'XX. bookings And wondering backlog movers big the do to But and in a there. imagine, if you at expect the I could F-XX, are I opportunities year on Kathy, comment that higher just Dave, then, the ever CAS And a It's clear you just and slide prepaid based funding backlog? not of clarify? you Can recoveries. the $X.X on billion recover on that credit. of

competitive the We this much last view many to pushed because not expect focus new We I'll year. this book-to-bill start book-to-bill but at instead see was exception tend in with the multiyear into look timing. X book-to-bill awards to has also so and we a the our being average of see year awards. longer-term so AS when F-XX X.XX. 'XX which We years, backlog year with singular multiyear mentioned, have have year. as on And award, about we do Dave we not XXXX. It's your awards, question expectations. fewer And opportunities fewer X just

So it established to a really strong continue foundation us grow. for to

year, look average over year with As we X.X. then to trailing still at of expect this we end this X-year

to a not that are future. book-to-bill continues that average we a the So it have support an outlining the expect just backlog, sense gives that into growth strong we to but you only

next a multi-decade CAS perspective. years CAS And on a prepayment future billion We FAS current for the plans, and both briefly X $X.X you the projections in of pension then our credit. show just from

been that forecast of ahead of return or in market put we'd think next us line in on final ahead really at there, We've expect side in be double-digit wouldn't many the us at indicate us continued to that this pension a enthusiastic of a there. we've particular we're But over lot years. the movement the so than XXXX, funded the many, X has about I performance years is years period. resolved And got better bottom many that position and

on of really as So things. a today pension side news good the of story

line question the Richard of from next with Seaport Global. Your is Safran

I wanted I your free in question. respect but majority $X.X means deployment flow to of free XXXX, flow long-term guide 'XX billion in capital a could, cash thinking billion, paid you had about adjusted cash deployment. return of ask get and a $X.X the the you you, With and if cash of to and In to free dividends what actions majority expectations to term reflect if to capital you're flow long I'm sense shareholders, trying repurchases. how

your thinking retiring planning given deployment For longer are Just more example, the could cash the over about, cash you about be on capital debt? curious long-term might credit you draw -- Given guide, term. recent balance further? sheet flow was bit any down upgrade, how you a the any

Yes. the divestiture, deployed we And with had committed we the services start that year. into back me this which also let would. We we past generated just business, IT as cash

even deployment capital And what of level opportunity free our that flow in that's above cash so drove XXXX. higher

the so share talk $X.X looking against to our of about $X.X we about repurchase billion our the talked shareholders, free in of midpoint flow. is at we of returned when cash we're this at year, As forward, majority billion least guide cash or being and that

year. have to will dividends take -- continue early we top up this which that, committed and course, of competitive So paying of which our again dividend, on Board

So gives have our and in balance mean majority. by solidified what we also a opportunity sense There's down you paid we really of debt that sheet. that

So stated around cash $X be, what we currently we target have that's higher balance to than our a which billion. have is

debt XXXX look tranches but we due. that we as some so us only any And really coming gives well. flexibility at have not major don't And as beyond

on that on outlined, have to credit at that in XXXX point pay sits. flexibility We or refinance but have this based where rating whether our to we we've X

deployment. we're thinking So capital that's about how

longer that contract term, event? right might portfolio thinking Okay. that might the wondering contracts? how starts real thinking more leaning price. trend fixed quick, start about you towards mix just when plus if I'm when possibly your that's Is fixed-price think you cost 'XX And again, just 'XX now, roughly -- or you XX-XX a something

couple to with expect other gets out over And It higher of in balance direction. significantly is a shift the then years, ratio. never in start XX-XX we next to the XXXX that little of when it

All right.

question. for have more one We time

with of is question Spingarn Research. Melius Robert last Your line from the

aeronautics certain LRIP. end on in about term just wanted chain and aeronautics pressure, risk ask from This supply Seth forth. development especially cost actually profile type. so the revenues. classified decade to longer-term, programs asked of the I light about transition and to And nearer of touches contract the as

all of So we initial we portfolio, lots were our estimate-at-complete process. our those that as we just programs, look low-rate, incorporate into priced at classified on do production our as

looking only as we're that on not know basis. at an financial being but on so And ongoing we reflected them today. is risk based monitored, That in expectations our statements

production And think such, early we production inform so we how all that have, aircraft test lots. experience in even and about low-rate initial the on those

talk price? this about 'XX? in in to to way cost fixed all a there plus Or revenues from how 'XX is transition Is the

in So not level, aggregate. but that about particular we talk at do a program

we to case continue I XXXX. expect as XX-XX. even the about be so And being our in said, to aeronautics the And that specific balance, sector, is to in

the joining and another ahead team today. for positioning out with and our in and beyond. that to go positioning also up. are are had urgency we XXXX us continue innovation wrap our to customers I solid to want for strong us performance, year XXXX think going Again, for need. and us I again our products I'm time. thank that wanted well So investments for they of and We so delivering the Thanks

for in look to forward to April. again thanks We support. talking you your So

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