Northrop Grumman (NOC) 27 Oct 222022 Q3 Earnings call transcript

Good day, ladies and gentlemen. Welcome to the Northrop Grumman's Third Quarter 2022 Conference Call. Today's call is being recorded. My name is Michelle and I will be your operator today. [Operator Instructions] I would like to turn the call over to your host, Mr. Vice Relations. and Treasurer Ernst, President, Investor Todd Mr. Ernst, please proceed.

our and Northrop We'll Grumman's Michelle. posted to Good quarter to everyone morning, on is that call. Thanks, third this welcome XXXX PowerPoint presentation web IR page a morning. refer conference

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

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

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

The Thank Thanks, team everyone. Todd. quarter Good delivered morning, joining you Northrop solid another Grumman of performance. us. for

quarter, is continued Missile book-to-bill technology. allies, industrial world a key returned for threat working It landscape priority. security also spotlights our decisions. of with robust the Our top X, remained with National triad to a Biden like a results released the products budget deliver version And administration the we on the advanced look remain portfolios. to as restricted top on to track around to base The strong growth for a growth the start accelerate the for Demand dynamic strong of maintaining our the stresses the as guide invest global next and of and in a in continuing which Strategy to Taking and I'd number reinforces challenging execution. awards the including importance near and of its with an Defense strong ratio line a with Earlier environment. and a strategy month, from this update policy for moment year, year. Security expected with toward full we as step used back

that alignment Strategy. administration's to be the Security reflected portfolio clear extremely in This National requirements it's well year with showed is in outlined Northrop priorities for XXXX budget the request, with the many So, the administration's our higher committees inflation. we level of year aligned support off than fiscal this be request you continues funding Grumman's up this these programs. of President's summer, guidance. which currently defense Throughout generally strong in is extends and proposed increasing the country's marked budget another of to defense the of key as believe factored resolution posture this into on these with impacts started request. the defense intent additions, we ultimate our budget know, that continuing which addressing the year and And fiscal mid-December budget Based strengthening fiscal will the the and base 'XX congressional

backlog growth. business result, bolstering we're winning This solutions capability customers' be of continue. funding strong in Meanwhile, And We interest positions and for and in Maritime and seen pressing to to invest invest hopeful as we've we've as Grumman. Security and well solutions our Air other Defense demand points year, global to and a long-term Northrop we're our Mission are for by Pacific to expect Defense Asia environment and many CapEx All Missile as and our the needs. demand doing Air over Integrated address the and will and in investing commitments $X.X our part Radar by region, In Defense increased in our budget annual year-end. program confident In ammunition. similar weapons for Missile development. advanced most Systems. precision ISR, And that capacity Advanced billion research we National in and this new a passed Europe, seen and

each segments increased up X has overall. backlog in Our and of year-to-date our is nearly X%

Given areas book-to-bill year. be critical are industry that remains will lead our skills. XX-year that others this, improvement easing X, recognize extended we This high, at that of significant in where in we supply haven't environment defense have rate. started volatility a and shows budget competitive decades. attributed signs chain the also the a full only said, we but and ratio but remains labor tight the many certain experiencing from our Inflation over for year been increase of expect macroeconomic not our XXXX times market win now seen is it robust strong we to That

levels trend for in experience our we're to supports been growth we Our team sales will closely has it's describe worth guidance continue and quarter. in in driving a more has a on disruptions delayed In outlook. areas program efficiencies has that our mitigate. in XXXX. the improvements in with deliveries which that as of suppliers labor to Elevated labor This and as we focus customers in and support have we both To is solution address mission. as and more support to than implementing performance the -- It's reflected that time. outlook persisted our accelerated remain and higher year months into balanced supply of the is and now into tackling to the investment which retention working approach efficiencies favorable and We In fourth market, working operational XXXX quarter our base. business. temporal are With continued challenges segment And we're XXXX health in that the anticipate to But this, risk we these expected chain the see over driving third inflation challenges capabilities noting supply growth. return that to rates came our a industrial This past monitoring this we've is our headwind Dave margin our year. continue full to business this will people believe our continued chain and in do in we with well. and hiring we to many chain, committed instrumental into this across of XXXX the defense driven several our on in certain the challenges, was customers' our these the keeping detail. supply actions and the over contract other funding this best allow said,

strategy. now Turning long-term of execution the to our

XXXX of Grumman recognizes excellence One I our was achievements on award behalf key strategy The operational for Cup performance. relentless a receive improvement on culture this leadership our why week. creating is across and and a of pleased to the focus elements the Deming operational the Northrop earlier in company. excellence of of That's particularly continuous

our to entrusted the facilities tied preparation excited we enhancing and continues developing collaboration aircraft and this the on commitment most advanced to U.S. us for of public the who Air next-generation outstanding The to B-XX, program the Last investment across deliver on this Force such access technologically sharing and recognize example some announced to performance data incredible directly team, sixth-generation and The unveil month, flight through first XXXX. in data testing digital progress Grumman in B-XXs solutions. agreement platform. a December on systems the twin. tools including Northrop data This program. a maturity Air can X. and and our X B-XX the launch further environment with be company's demonstrates and is sharing customers and of to in program, partnership agreement Force our are digital the shared Our Raider the we're digital The the enhances have for B-XX

success, Our the Mission able and be share our for threats this we're where growing solutions to sensors, portfolio and fast and to of our critical need pace of of Systems broader new is a part another the and technologies for win communications innovation platforms to market, are strong is driving to opportunities. be connect of position area another, one sensors family new systems. networking data compete secure and building in on with In where

For Australian ABMS we're where across Defense demonstrated Consortium. member of from Force's link solution be Digital product sensors to recently Force interest functionality global Air domains. seeing and selected we customers robust to the a we example, CX last the including with Infrastructure month, And also a were effectors

U.S. modernization Missile missile and solutions of our of Defense to current focus Another the future the and area significant allies threats. is address for

And survivable the and our Northrop of faster, on this integration upgrades. continue program continue need, Guidance and our accuracy solutions. highlight in the targeting to capabilities sub, weapons with This last a just Missile requirements These selected safety also new new in third high-speed the XXX,XXX products our builds now builds the multiple navigation strengthen value a U.S. Precision pleased want expertise few our This billion to enhanced customers solutions and is approaching award one portfolio. I'm to and business. that And and Attack to we've our customers System this team features. and our continue to come develop HACM. Weapon Kits position opportunities more Force delivering area our long-term examples is provide to our prime our Hypersonic Raytheon are win and turning units quarter. business. Air technology where as building Defense of We exceeded our Missile for defend grow within intermediate more where projectiles precision to our we that $X.X several intercontinental Army. HACM both on while weapons. markets These also propulsion to business that area and both we Ground-based on in a a and Cruise as market attacks. award month, delivered helps the Midcourse bringing known survival missile share a systems against propulsion, Last portfolio with competitive hypersonics, and to era embedded reliability by with these built-in Grumman ushers artillery We've shareholders. scramjet I'll of than hypersonic in one Defense We're and

our who turn QX XXXX. provide on So Dave, will results now, our I'll over color and touch Dave? to for more it expectations on

everyone. and Kathy good Thanks, Okay. morning,

full solid across inflection point the in bookings in performance new heard year billion awards. increase driven year-to-date in in reaching This growth, business in by success $X.X our strong for you our an with we from Kathy, another and We're environment, delivered and key our in X.XX to quarter contributed As employees. book-to-bill our expectations. of metrics book-to-bill ratio strength roughly hiring the results all an retaining sales demand had a QX. We and

roughly the QX employees about X,XXX-plus third and people We line been by positive we in up Our of our key $X positive results This XXXX. added sales retention achieving year sequentially visibility, and hiring trends. billion, QX. QX others, chain, costs X,XXX With the challenges from our temporal the base net including new up the our nearly additional and longer now has full continued QX to seeing in an labor-driven were some We're lead hiring X% in areas. most acceleration driven we've improved is outlook. with in times so of are compared and supply sales added top quarter supply higher as results,

suppliers Industrial comments by Defense contracts, we're who on are the felt our we're Base are and to most being inflationary recent our small critical particularly vulnerable element this actively customers working effects mitigate We're suppliers. monitoring to those this businesses, on help challenges environment, of with including and macroeconomic the by Our from our of Congress topic a closely inflation. encouraged the

that part execution to of XX.X%, net lower the noted. margins segment the program we've in remained in pressures adjustments quarter, EAC solid reflecting inflationary with due Our

continue As it the in costs are in be our full effect the rate to our segment and our of to to XX.X% a margins we've in XX.X% estimates opportunities year have latest downward But This inflation to mitigate on margins had EACs. XX.X%. QX. year-to-date, we remained of elevated, range expect and our captured

Turning per to share. earnings

lower million in a that EPS in as nonoperational diluted businesses quarter securities on was $X.XX out, The in returns execute Together, unfavorable insurance I was for to settlement but these year-over-year our decline the $XX recognized of complex $X.XX. roughly pointed very and environment. EPS third by including year-over-year net pension headwinds items driven continue represented the an earnings XXXX. our income, quarter marketable Our were well of factors,

and terms and track in of million $XXX we're approximately outstanding This QX, cash related made the share generated roughly In of In law the expect payment to billion amortization million billion for the -- operational and aided billion in be an our even R&D the the collections repurchases full to quarter. expect completed we R&D we in better. to third payments continue our we historical we tax year. $X and for $X.X of tax consistent QX end on $X we over $XXX with flows Through associated cash is in of disbursements. the fourth cash quarter additional cash, pattern quarter, third over with of

to XXXX moving Now guidance.

or for products. Xx have our seeing increasing book-to-bill demand foundation again this not outlooks. performance earnings quarter improvement continued a for expectation. The the financial cash than We our with changed We're sales, our for original starts our we're strong significant our to is which from greater expectation

an the job end has trusted winning year-to-date We're we described outstanding year last be of expect based partner done to full to to top low customers for consistent the sales trends team business. our the serving the And a quarter. original Our as with new our maintaining continue on of our guidance line. results, we range, in around

billion excellent which Our QX and full growth. year outlook $X.X of roughly year-over-year represents sequential implies sales

year, volume also the earnings QX across X segments. of for guidance our per receipts maintaining we that including share. each and material line, segment OM throughout noted a we've of anticipate will We're bottom the strong rate include our As

also. XXXX on our our be to accounting continued that the its end be QX. will securities Given portfolio, near expect pressure range anticipated earnings an of Within low benefit tax end offset around we're marketable we volume federal outlook, the rate in of year-to-date EPS range, for by sales low the

resolved We which businesses. would EPS tax the marketable those from in represents in XXXX. possible to income are from reflecting share QX, securities tax pressure. be matters the of about XXXX expect on to of about expectation filings XXXX concluded effective related $XXX be $X.XX in benefit historical shift to securities also that resulting which our rate we've the down in lowered of offsets per in XX% X marketable currently our into the matters in earnings Our line, benefit It's pressure. item progress QX million XX.X%, resolving that could nearly $X.XX But

to flows. cash Moving

Operationally, flow Congress remain as is in on progress from outlook. laws have unchanged would full focused we taxes spike in the our While the repealed is year we onetime our in expect flows unallocated pleased corporate that cash optimistic in cash law, law If or the XXXX. we're as cash made refund we tax defer quarter. we in recognized QX, the well current a free state a year very confidence or which repeal will R&D amortization this QX, expense, bolstering in guidance the last with scenario in deferred

remains GAAP the points. and noncash few plans moments statement discount nearly experienced The in our to Next, the year-to-date pension have describe and I'd affect importantly, a nature. effects provide a flow today roughly CAS for rates our are like of years. and benefit. over our returns combination next describe basis have earnings to years Most modest outlook XXX take Year-to-date, I'll GAAP in This double-digit implications negative results risen plans. our will future strong current several cash changes of funded unchanged status the income

costs CAS XXXX X.X% moment based we a to year-end on experienced income today. which also expense roughly this of a take presentation grid to returns a calibrate under rates our this rate provide and to on pension X%. have discount provided wanted asset like help potential that discuss earnings provided deck of and on our discount which various of changes XXXX slide, FAS nonservice estimates Based January, would the January look our funds service table on net asset scenarios. to call incorporates X year, Slide pension to we've found XXXX high be of pension expected you far income. in like In of the in outcomes I'd returns the volatility, FAS level so related in were a So highlighted I sensitivity can pension what To our and

our of Given $XXX less in rates QX, previous expect than currently the and end FAS would discount of significantly million returns pension the asset income over projection. lower year-to-date at net we in XXXX, the range

also lower current described, to I've lead regarding in provide modestly this Over to additional noncash higher time, wanted a expectations that the Note nature. is CAS higher on this would predicated pension. income environment. related pension cash high-level I outlook insights net is for As macro XXXX. financial our our recoveries flow FAS on to

to As XXXX. demand into strong Kathy we said, continue expect

based environment as with now hiring In beginning the and incorporate a industry that we've projections 'XX in indices. will since expected, project and will remain challenges XXXX terms times, throughout latest where this been which regard improvements of continue persistent we the has challenging seen retention and originally more disruptions, XXXX. and delays inflation I've easing year. gradual chain, our shared trends, few we than next various consistent of on material And those the has with anticipate labor supply to In remained the that

$XX to XXXX. As on us expect for a our sales sales next by business, low range. we to the sales growth continue year, to billion fastest-growing growing Kathy Space Based our In billion for over we X% we've our range we remain would $XX momentum expect XXXX. segments, the expect on XXXX, building our expectation put XXXX. to X% described, to high $X in accelerate driven with growth another in total, that in Within billion continue

strong their AS we to And the anticipate at latest mid-single-digit MS expect compared range. and sales growth sales We with in XXXX be DS in levels. flattish

also expect to solid We rates. generate segment margin

be net described, improvements likely inflation lighter are usual than to begins EAC to until I've As normalize.

segment our faster strong sales execution expect XX%. between lower in we next per But XXXX, driven and Slide a earnings, earnings to would headwind grow be a rate the count. and in pension, pension to continued noncash share will than as on quantified high high by OM X. excluding be mid-XX% share otherwise year, which So income the projected XX% regard been expect the With range our have we'd to

our year of and CapEx XXXX. We We to continue in based normal strength cash modest intact to expect by And more new free year. outlook our growth and flow level tax year's offset business with XX% prior of wins flows on our of the to rate our increases generate its backlog prior projections around X-year return cash expected cash we anticipate to excellent growth, next another this half in corresponding operating acceleration proud the very We're of we're environment and year delivered XXXX. XXXX forward pleased multiyear projected and of And With and that, the value in your this improvements we're in cash our flow growth create questions. with our ready customers shareholders. for we've with continuing looking to intact, to performance a second cash continued challenging outlook flows. we're for in

[Operator from the comes Bernstein. with Instructions] Harned Our first of line question Doug

just about and a the an Is issue sort possible supply trying quarter not constraints? talked those chain you figure look from chain might obviously of supply of sense being the year You like constraints had and that’s to the looked the here to what We’re give be normal at had board. and how much out, across back? the and it would have had us you is what held

the not to Doug, central only year this the but is of remainder thanks question. for certainly chain Supply next.

So -- let terms been what to quantitative seeing. is in the particularly chain. have more in of terms, me areas less try It in not particular numerical characterize, supply we but

is result it's those in important that then but in programs, that widespread particular, not where our development development -- impacts we efforts. to is seen component it delays have to in So are areas

will. of this late the of chain we've disruption, And guidance were I of that necessarily of duration to that chain supply the the was put or anticipating no disruption either timing our level year, if sales, chain our year, we when together nor a not with supply plan not experienced. would minimal last sales XXXX And so supply because original point disruption you which it's expectations deferment we

supply you would the of the we've had be year, the to impact to high guidance throughout end that to best now say the end experienced chain the I would the we sales guidance. on way quantitatively not we our of have So disruption. about low pointed expected is, And think

these Now out that to call said I persist into do challenges and in XXXX. to we we've point expect want it the

do when XXXX. expect not by So end of we what the in experienced to XXXX about I we all talk timing, recover of

to a to We expect year. in We these bit the XX-month issues be do expect to for sticky the time XX- frame. resolve them next

flat go that And up by billion into at as in XXXX, be outlook Aeronautics. Space about said the to is you you expected $X but

to can different that X understand in units us somewhat huge trajectories? X results? what in you Obviously, are help So lead drivers backlog But the Space. you understand have trying those those to just

Sure. that the the some to Doug, we both are shed previously stable what communicated with I'm a drivers cases, are AS, well. consistent we've light therefore that. Starting offset is F-XX growth including portfolio, programs XXXX on but programs, as In there those consistent and of in happy trends the programs given in project declines over STARS, modest couple decline et B-XX the anticipated Joint likely then years. HALE in cetera, like next by in modest in legacy

expansion multiple broad-based across supportive ISR, missile from side. orbits, segment outstanding It's So we been again, continue we've us is across for while to talking growth growth the In recently for the a capabilities. areas and continuation anticipate to in our for really opportunity Space, on an a that and trends performance growth of of launch multiple the growth about business. in XXXX tracking recovery mission

share. a growing market our also see growth in market You but

Of means in our course, business that Each clip. only no is at by is the but GBSD that a a one. of contributor growing to nice divisions growth

So be we’re able pleased really ‘XX. in to that continue outlook to

of next question with Epstein Ronald Bank America. comes our line the of from And

just question Maybe capital on deployment. a

how year? You're cash you going to next you as selected there with What's about share into is are plans is just it your -- that? buybacks? do M&A? lot a out. Is Or there Or thinking to be generating that of some that pointed

higher into successful coming as been because are but which growth experienced in balanced in capital been approach plans we've said, competitive a we deployment, not that quite business wins. the what we we all supporting this aligned we've deployment with So has capital just the robust is -- saying investing still have year, for demand to more been still of anticipated even our year,

be and resulting cash to from invest continue deliver the that to we'll and flows business So to able earnings generate successfully it.

part at as We of also capital significant our our a strategy. deployment look dividend

We the this another consistently increase. have been year XX% raising dividend,

question And repurchase part a into complete which was so be and on we know billion the for of dividend the plan next as capital expect to this year piece year, year. favorably do to The share core I mechanism shareholders. think we about remaining will is returning your for repurchase. are track $X.X share higher to that. slightly next We We of that

As in share we capital we our the But safe free are X share we'll what that ways the January. in mindset say, to shareholders. those look at for And you elements for major on our specificity in and cash more which plans guidance deployment, count XXXX. returning will we of do our XXX% still those of flow is with to are in

it. I Got follow-on, can. then one if And

On some everybody’s the the DoD it, anything it? resolve the seeing like supply it. doing chain stuff into seems the into Because it to you’re that’s whole of anything Is help industry? to been running issues, Are impacting doing help you running DoD industry.

work DoD doing. Yes, applaud they And the is are. I that

need a They we even we think and in where small to to may would themselves continue businesses, the fixed more, supply and who contract. in I cost-plus find particularly lower that need and have for do that they agree prices often medium have we to primes adjust. circumstances chain

this benefit have will businesses in to we’ve historically be Base. the our managing large industry, to health of business began last that some is of for supply impact and cash I done not though, Certainly the now doing small as an to my healthy. in And that on And businesses, so those into ways are expect do well. we, And on for important prime been going the to those outlined continue earlier looking our that the of working the pandemic There Defense government call, that. I since the Industrial for part. are the address doing comments we really keeping as and years, we at the investments impacts, with chain several

that ahead to challenges. we And so together, us on all start point Congress’ we these identifying the this they budget their Base of hopeful the have continue the am that address will will path and together, as of as to some I expect Defense are to in they keep work you healthy. administration And XXXX that funding by encouraged would that budget puts ‘XX I’m us. comments Industrial out allow the

question to come the And Myles Walton Wolfe our from line next is going with of Research.

Kathy, The not quarter come I’m you receipts. performance, more or timing I way to Is the from as of Dave think own quarter? receipt I’m that think put does at that fourth the curious, you performance recovery, your which. was just from go internal you sure to going material out or about pointed risk supplier fourth into than it?

Myles, address it's Dave. I'm happy to that one.

program over fourth broadly, labor your a but the supply adding XXXX the range who chain the are think X shores pressures lot QX accustomed performance and for the year The supply our to really those and base growth for end count managing there folks it our where to that had particular in a said, mitigating for we've challenges are its really we credit captured or the means think a sales the on caution that we've the I of last months these every range to And outlook And more as and to With day. I had good date 'XX. supply now. challenged conditions become constraints we visibility our X% the the teams, We as labor-driven we've employees key give sales to a our in chain that's for of and track QX. think bounded in conditions overall that it are but and approximately of pushed about to up and quarter, strong low of are quarter. to the us way X,XXX supply we point, over count us year sets appropriate now off towards feel not. that where have chain and full we've that is, head the full at the think for look employee last result well that year there got

maybe Okay. Within it negative the cost any EACs Space, to through the is it negative portfolio? follow-up. Is a EACs? dropping and there. purely just inflation program-driven across those And is drivers Or – there

the was EAC drove that There this portfolio. in or X change a program other across business material any not single our any quarter Space

very business. I latest QX. across our and year effect, our to margins Costs level on the a a But have that did our broader you're the or in think to at fact, escalating right dampening EACs market factored expectations expected in conditions. programs not well particularly mitigating X Space's We're a that point are in into are ago.

And the our next with Morgan of Kristine Stanley. line Liwag comes question from

One the has repurchase ago? the the significant multiyear balance decade using a of an Considering visibility authorizations consider share pressure company budgets, new in what buyback did would recently in the cash the the upward sheet defense debt. you your up to similar and announced peers flow, on strength increased levering

for balanced said not executing a strategy which our few rule Well, I sit it thing we as that for capital the think We our also but and out here announcing is any we strategy company. plans. today right I wouldn't ago, Kristine, I'm is, are minutes a as deployment currently

foundation fundamentals strong. and Our are incredibly

for we're in best we that that. the in ensure our With shareholders our top we're as long-term, capability grow we that line, ability who our this to customers believe, well the business want appropriately growth thing as capacity in delivering. need to the investing the It's and backlog, the

free return used as So as our that flow at you repurchase apprised basis we'll and continue any the and past And we have to balance that and we year top we'll remains have said, have do change regular our and are our you do plan. But to and in know, in ASRs XXX% of dividends our the to I in this shareholders of that keep priority. we, on looked repurchase. share a and cash of share that committed

could a I if do And follow-up.

are Where you outlook to the more You Can opportunities embedded to color risks X% that? issues mentioned to into provide XXXX revenue supply chain XXXX. in you on of and expect that X%? your what’s persist

call, So that in X elements the major -- closely. earlier we monitoring are we in outlined the

have level is at the the of turn adding headcount fuel needed corner seen And first a the you've headcount nearly as in really growth. results as were year. to retaining headwind us third growth, talked the labor. in our for being And net to The throughout first our in the quarter, this started and that we outlined, We of bit year half X,XXX that robust adds. with a headcount Dave about not own And summer. we the in

we're necessarily X,XXX not environment what that quarter retention but be this environment currently, opportunity There a experiencing are hiring some in is nearly into there. We adds this could and XXXX. persisted

reducing As least hiring. or their know at are headcount firms you their certain all

noted, disruption supply So what to it now supply to aren't best were is would worse, we ER, them done seen reflected better. I the risk. continuing labor the as they lingering see chain, next year. in our now market counting starting updated soften. I we to We're noted, In expect expect don't that we areas, we if significant in But to chain to some it as at as certain today. like that see the being a certainly we that do we XXXX. downside into we've significantly effects looking have on tailwind get about have get capture us our those to guidance. we've But And in

we the indices I now labor, are inflation, tying the of would as that We a And of to unlike then third certainly that look more risk. we segment inflationary one So inflation the in captured operating pressures forward. have third say is your we mine when the quarter as as guess year. is of as on this that the saw to, was in rates downside good we of this really modulate. And margin indicated to some what area start

indices get that So we're best I to big as don't or our arms that. as around a our opportunity see risk. using way the

one we're I I have monitoring hedged we it, think that well probably pretty said. but as

early following we But the it’s context. in important we XXXX will more into year. but at we time volatile of was is that outlook a a I a often I do often say because lot going than of stage experience did front even you, think this this which So, put

of from with Vertical Our next Research Rob Stallard line Partners. the comes question

I’m to you. Dave, going with start

this any versus end you major of segments expecting On likely up the guidance, end changes are at the margin to the XXXX year? in they’re where

Thanks we Rob. 'XX. as the anticipate for question, movements not segments the do at meaningful We in look

give in aggregate then Let's and I'll first talk on segments. you some the color

a Year-to-date, the As and the and that worked from first and that, supply will challenges face guidance for We about result. the fact that that our most around the chain provided on we We quarter-to-quarter. in industries fluctuate inflation talked today segment in year. range such you'll year. full of of temporal some call these range recall, through QX OM of rate other some in in days was noted -- this and bit that we've the we're the half XX%

few range a year. noted basis business seeing As next that of expectation. highlight we half of the the land to level, And we first create year, in talk that current of next unique mid- where of about note, to had than our of where year, next we're the what that's XX% normalize year. profile AS lower a in would is we sale expect margin or as XX points high lower areas the in second in the a and this the quarter. some Think we I'd year had upside I'd at

Space, basis. pressure as of comp the that's they've this volume you and and XX, likely side of pressure first there. rate Defense next think In basis the margin the we work a new Space. of perform points you'd to reflector So the year-over-year don't and of movement did year meaningful think to see can on year Systems add have that continued good on continues some is well margin on XX be put in development their strong margin anticipate a Mission upside we in rate MS again what to half.

continue just meaningful across of some the to view. segment adjust look a 'XX. I'd in level can comparability movements Again, we'll for see what to those no So get deliver board. they items in to 'XX

B-XX. great. a follow-up That’s just for then on quick helpful. And Kathy Very the

looking to program But Practically, with a progress. wondering, you’re good margins rollout price how on I progressing. are on December. was this how fixed inflation, numbers We’re making the program given But in are it’s the forward program the going? the

question. the Yes, Rob, thanks for

We also the but December we our very performance on on focus the of X excited the are rollout are about keeping program.

So while it's important as for long-term come. suggest. also us as milestones to It's they program, you celebrate

as earlier are assumptions the the projections we outlined we all actually a year, That we going our forward. what continues bit updated. and spent were our this talking that so we reflect working B-XX as we quarter about hold and current how to true. program know And each environment to And good keeping time through of are we

the on you so for nothing to that change program. our any to outlook And on in report there’s material profitability

Our line Sheila next Kahyaoglu with the comes from question Jefferies.

and think next and some do to in You year. that give programs, Does and chain? what’s talked you opportunities maybe playing about with well? the missiles that IBCS continue as about how such And us flattish Defense side? going Can of incremental with linger you into the sales in takes the and as business puts Europe supply on services

long more disruption that short-cycle little than Thanks, does about hit we're talking businesses Sheila. Certainly, cycle. the a

in there the that Defense and in so is One more the is that the of we which shift and significantly coming more see IBCS to growth expect last out particularly we of have months. I it's in growth, making. about seeing increased bit demand several in on really, noted over are portfolio IBCS more as centerpiece but But demand that we munitions of with Ukraine. we that even a we're And in that internationally. Europe comments also interest gotten conflict my both domestically that a the grow

out Systems headwinds felt the DS. we’ve are legacy as drivers. those talking platforms And by are about retired, Defense of retirements sustainment platforms But a growth been as programs are being for sustain are sector. to those impacts So AS But those offset while. those of that those we in

be would programs like and Joint that So Hawk. STARS Global

next with of from our George question Research. And line Shapiro Shapiro the comes

like guidance year but AS margin EACs you terms yet was in running Dave, how much next $XXX it’s lower year, looks getting they’re turn you’re the be and similar in far million like to it year. Because lower this be? than to year, of out so to going last last to expecting help margin your where are

of our trends we as had XXXX, a we've year. benefit this the we that environment. upside items, aggregate in pension continuation the macro of those couple the the we've for nicely broadly I'd AS. unique environment volume. is example, we EACs in in of George, one mentioned, year. you benefit. do in going inflationary associated dollar speaking, you expectation rates macro in the And a into the specific is pressures, from of of What a from a what in typical sense outlined as know, program had or dollar net more aggregate, and Kathy pressures fact, XXXX, as have trend characterize get on 'XX In any And But with don't Sure. some in a as for chain a for kind noted supply of earlier

of on that give based We'll But I today. characterize on net in put what more know too EAC today. as what wouldn't call. you a insights the we'd into I'd trend January anticipate the on 'XX And continuation dollar point a so amount get the lower we guidance of we as fine

to they margin million last just I’m likely Yes, $XXX fact running similar at is to below looking year’s that and be where the are segment last EACs this year. year’s yet were already

be down maybe year. So for $XXX the they’ll million

so you’re year. like this And XX% the margin otherwise, high to year? why seeing sizable, got to have next drop be pretty maybe you I similar bigger a mean, wouldn’t the a

and macro Kathy the both with earlier, we're certain mid-XXs the performance in net projecting today. high of a That project, margin given environment predicated We're volume too currently EAC is a noted high XXs, it's range much wider in as program XX% to to the benefits. on tough specificity rate because

kind Our about is program today, lower the continuation next the appropriate net performance in margin points seeing trends this EACs. second half continues think to outlook we're year be of year XX of we basis with exceptional. -- But rate

specific as George. at in I we process, think point the be can that's this about as

beat NGI that GBSD the How quick to $X about and talking in one. contribution the in billion one will ‘XX? then you’re And much growth Okay. Space

talked at growth. security, will year drivers number growth then programs. in but We are less the to that than there also NGI half civilian both wins our a about the Space be there. of other portfolio, growth Development continued a contributor There across a number are this national be of Kuiper portfolio project Space GBSD The of expansion a Agency, with GEMXX we've little otherwise. and of Amazon

And our from of comes question Seth next JPMorgan. with Seifman line the

just up you target also XXXX segment in so range. talked that know and the guys you early cash for still Are in on sorry XXXX, those are year the have and target goals? XX% I think, for margin, you flow bring Dave, I Kathy but about to stages of reaching

Sure. I can touch on that.

outlook. we today, As our noted flow we've to cash continued multiyear reaffirm

multiyear do we intact, 'XX, For on typical another noted be well. today, free our our as year outlook. XXXX. we'll call update in cash January the as that of We'll 'XX And call in more the when expect on for growth quantifying flow that's we specific quantified

status And in legislation Section so there We'll January. continued numbers on XXX update from strength returns the the specific in based the expected business.

see depend level we that as as that at recovering the execute currently the But acceleration of factors. that the level of to of anticipate were sales continued environment. guidance project stage XX year, value year. this indicative free mitigate range, again, flow is broader back recovery we're noted, delivering high X% will operating XX% to at we in pace to in remaining longer-term basis economic the tough We kind XX% well this these anticipating whether half we think, of macroeconomic to intact, Businesses what multiyear points or We're the X% next of occurs the recovery. I XXs in on a game the see cash on this whether lot macroeconomic based the first and decline It's critically, expansion the of subsequent to the as growth that On of it's challenges. and margin side, XXXX rate soon that, XXXX. even about we of do

that lessening terms the Great. the sales with ‘XX chain quick in XXXX a a of as we’ve supply the just quarter? of throughout probably seen into and similar per challenges year, percentage the follow-up, through And expect in in distribution lingering year we ‘XX should

me It's by give the latest at into a stage. insights you We're to full premature our our quarter this give best you year to doing percentage for outlook.

that material the receipts of ends business quarterly Some profile being timing large on programs and of by determined the space. up across

typically more do. months in us to give more on profile. you We'll a January as so. give quarterly we that insights few a So certainly you give do We'll

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

read the through gains Kathy, year, expectations that set gains stronger this has much to based out little of year. sort how or timing we’ve gone versus you’ve you acceleration much ‘XX seen I’m an for – you opportunity the how of expanded Dave, the think or heading contracts? relative called out if we that into in parse share to bookings on about you can called initial relative the just or should share And out wondering, but And as stronger some of bookings around know maybe maybe that year? you’ve through an bit. a I been

opportunities out the we've where portfolio, some look in Space, at we the projecting it has over been that it has question. X terms segments now And been were All in book-to-bill. in that called for Thanks When broad-based X. improvement for of pronounced the seen expectations our competitive. we've most specific

XXXX 'XX in anticipated ultimately as able backlog that and We it up the we as next outlook that the have again into accelerated but growth that do will going the don't position not each a as do of We So many is picking in that our year, we year because year. the that are see was as we've year we we feel be of with of we in taking will in next be as for then to those year strong businesses in the a good book-to-bill expect that carrying quite have. your were opportunities have bit may robust this and share we we 'XX. not backlog into as to that winning we laid our that secure supporting point, XXXX, out started

tell year would is on continue look at strong, awards our basis running and X a to year. book-to-bill a we a look into the single basis I an on you, on So only not expect we it last over as future. at years, calculate tend system to and well aggregate the single We that

the side, more strength That’s just comment made be Launch helpful. color Space you ‘XX, maybe you the strength the or that the helpful? Space on in side on would think more that would on Missile or about within any be as and the And on –

next seen both multiple we've Space phase frame Missiles Launch be as that both Space expect across and business. broad-based we in for programs of time selected there and that be Space, awarded our to well elements For will are and our in segment that continue, opportunities as

And Suisse. question comes the Credit our next line from Deuschle with of Scott

similar Anything can that you sales Is sales back? equipment the nature to while equipment about say booked that QX the in AS free flow? impacted large cash that a

cash associated with equipment that It while booked sale flow is actually a back.

particular So it you quarter but past. is with fully noted of equipment driving sale a the associated from cash is timing the the receipt it payments this

you there, the the to your there if commonality would Is between then design that Okay. to Interceptor on the think be reasonable benefit you and able might booster? Kathy, in there’s customer? order it. And commonality cost NGI. then, some cost drive Got that customer potentially it to for offer to And product GBSD to just savings

constantly Defense threat, I've excellent won't But the is well would as I to because say an Missile growing broad approach. to our and the strategy bringing entire customer with expertise both the we from as it active our development elements mission submission. deliver threat of a case but for expect and question. we the portfolio it's understanding more solution is noted, will the the level continue been that in based of what capabilities, to our it ways has as set I to too that it Interceptors evolves And full a we're of look benefit which about product competition, in speak that of across have much Well, value also and NGI grow. an environment on into we Taking back key portfolio

our David line the next comes with of from Barclays. question Strauss And

F-XX across a of your Kathy, businesses. cuts number

off ‘XX? to rolling give Can on? of give total in it’s can idea sales for baked in in think F-XX us in – or you’ve F-XX whether And look declining idea XX% stabilizes what of begins But for it ‘XX, total. and you baked being grow DAS again? assume, what’s us so of with in a you you’ve an I an talked F-XX in a from I got bit about you maybe even as beyond XXXX

Well, look flat is going company, David, entirety the we when actually, into F-XX pretty XXXX. the across of

So of volume our lot of In indicated. of parts, moving have fairly Because we we couple case. is Lockheed years, about remember, a consistent have a months we ahead in Aerospace, you that build XX Martin. as

fuselages. out And maxing are our for at we of capacity so center building limitations

earlier. as our into insertion. working XXXX, flattish portfolio. products project new Systems in the is noted replaced also product on with which side the in DAS insertion Dave Mission while of the elements that And being business, so we other new But of have We're

fairly sustainment grow going to on this X we production time period out is So that growing. some over continues too, have we Block in development as work and is there, stable look and

the and across of bit maybe we going portfolio, F-XX XXXX, into expect is elements to be a of that. our flat when little pretty of all relatively going flat those So entirety you into upside take XXXX to

very thinking are next next I of guide Would then of margin that combination drop, think characterize All Would helpful. before for a on lower lower more improving or then is Maybe the right. faster we in the I related this flattish you mix – related? you bit And both? That’s guide, characterize Or Perfect. had guess, ‘XX. back your expected? year. margin programs all maybe kind on some year accelerating the is were and the you inflation than

a in the This factors. been it's it's we're say, pressures in of we impact continuation of those macro unique but wide and to all XXXX. a days why that of a all operating environment more leaning we've to lot but those And huge the eyes not XX the a would in that's combination is these it, factors compared operating high think XXXX. call we're towards levels points open basis I at of

even pension to you as down it, X% line, than sales faster get importantly, excluding the anticipate X% of to growth share noncash earnings element we think per growth. I the accelerated the EPS

you managing well. think we're I times, think, of as these acceleration particularly So well when pace about through EPS the

one We're going right. leave to We’ll to have I’ll there. give more. right. remarks. turn it Kathy there. it it will for All over leave All I to closing

Thanks, Todd. in like take challenging I'd we a Look, call, to another strong concluding before to for today's time. entire this what have quarter our moment thank macroeconomic characterized team appropriately just

many company, But who Roeder She President as all the I'm I experienced to the So level has next and to of company. want Mary service recently On of years our business our I'm X Northrop to and in incredibly and Petryszyn, October to of Systems. Grumman outstanding that's the be Defense her think retiring work confident new to our we an of team. XX strong in She front of sure January. became remain this you. you her wish Defense the fundamentals is for best. her XX, Systems forward introducing team Northrop due will that our especially in ability the Grumman to to members, noted entire provided look I business very very most take Roshan executive from

you for season many healthy and in for months. you I to the wish happy expect So, you don’t holiday But January. talking of look to me our in let we thank to you coming and see a forward joining those, I today. see, call

Have conference Ladies you a gentlemen, and concludes great participating. day. today's call. Thank for this