Northrop Grumman (NOC) 27 Apr 232023 Q1 Earnings call transcript

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

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

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

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

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

Good Grumman morning, and Todd. for to you to year. thank start off solid is Thanks, the us. Northrop everyone joining a

Our industry-leading customers the our executing global by our growing driving growth our from meeting performing strategy, demand on programs. and is team

quarter. As strong earnings the we and X% delivered a share in increased result, per sales by

$XXX investing Additionally, quarter, our and shareholders. customers' capital strategy we're shareholders capacity in accelerated through support share billion to of to investments initiatives repurchase and cash million needed nearly continued deployment share a delivering total dividends in returning operational our we thoughtful In which on and we prioritizes business plan, first a initiated $X our to the repurchases. returning the and capability

guidance. close and on our strong a to small and year. EPS our results reaffirming expectations of signed confidence week We're account investment divestiture operational segment this our the our in outlook continued increasing this we're performance, based business and our for first growth minority for expected guidance XXXX and on quarter to Based continued

world. persist and term, As breadth to long the we look increasing around freedom security to the

support with continued the the reaffirmed expect March. was administration well Given in solution. in this, Congress Northrop budget the in Defense This which was priorities request the portfolio for we outlined align the released in National Grumman which administration's and strategy support

XXXX. DoD major reflects computing nearly continued and key advanced the need and of investment GBSD of in for technologies. our XXXX programs, significant increases and missile well programs, increased funding the programs fiscal be defense of many to by budget year each approximately with accounts funding to account communication up weapon total strategic including capability which components. fall in provide compared year fiscal funding B-XX, XXXX investment the franchise Grumman we Two deterrence, future double XX% $X year and funding weapons in to supported request, year plan about also The X% defense billion XXXX Northrop increasing $XX for prioritizes more programs, fiscal XX%. from to these by with request or budget and The overall than nearly XXXX. particularly capacity, projected are to also growing areas in billion space,

many as continue landscape meet to and our Outside part Global growing capabilities. important in outlies leveraging U.S. defense expand needs these focused growth is An and global long-term increasing make area. U.S., portfolio our budgets the geopolitical defense dynamic. are their strategy the this progress we on remains modernize of to

this that Australia $XXX recent one missile interest countries value a this And million. for capability. contractor for Grumman capability. a expressing of issued request prime Australia AARGM-ER, dozen request high-speed, has Northrop provides defense counter February, over is a is half air of over a a additional In long-range air-to-ground FMS in potential AARGM-ER.

a to sale Security along E-XD expected These well extend with Japan. the backlog, Agency next approved aircraft, Defense In past with others of addition, existing additional our years. double-digit the and together in last are to over international X Hawkeye opportunities, at form IBCS, E-XD the grow Cooperation strong the broad a international sensors, rate foundation several revenue These production month, munitions set to aircraft a of mid-decade.

demand systems, a as a to executing strategy contractor. weapons as propulsion backdrop, global past result, includes electronics, been both and positions components few This in years as a prime supplier and well warheads, have as the as signal this over capabilities capacity key as portfolio. armaments missiles, And programs portfolio a we've multiple we significantly and a With infuses our interceptors. such on enhance

share a on medium- propulsion the for GMLRS. this rocket Bushmaster $XXX we've for awards multiple progress quarter, and guided and strategy. received million large-caliber the me ammunition, for launch few system, made Let nearly we cannon examples In or of first products

weapons addition, Weapon, we're the in and developing this with high-speed missile. a future Attack strike propulsion weapons, for One more longer-range known SiAW, example required ammunition. next-generation also advanced innovations of is smart Air Stand-in air-to-ground fight smarter, high-end In Force's as advancement high-speed

award received billion acquiring this us components. to of our area, $X missile an we the program. since meet next phase the in To growing competitive ATK, capacity demand building our have and customers' quarter, takes weapons nearly During invested that Orbital this first we for

also Laboratory capacity Our located produce at for which supports solid to capacity launch continued growing for West needs GEM civil and capacity motors for rocket to missile our in increased supporting demand in We're expectation Ballistics Virginia. customers. this increase capability significantly integration well investing as our the XX commercial the Allegheny as investments our of increased boosters facility

It facility a of foot is per square is missiles to XXX,XXX up to newest future. factory designed XXX strike production support the of Our year.

AARGM-ER, initial we support Hellfire and lot including that several GMLRS complex, second commence this Production currently Precision among of operations Missile, Strike others. programs rate will for with other low adding to production the

smart of and building manufacturing engineering from and excellence in production development summer, facility for full hypersonic hypersonic this provide Elkton, life In center new addition, and technologies. integration to weapons latest a Later open designed we're is Maryland. to to new the design production this cycle using digital production

leading powered we're a producing cruise within that The of of as set includes Air are business programs in Elkton a facility hypersonic launched Raytheon missile with our area weapon and a defense provider provider partnership only diverse systems, we like We're This not rapidly system. is a attack supports and growing Technologies. hypersonic missile franchise also missile, of programs. known

approaching of years Our is missile see and expand company revenue the in an defense XX% now ahead. in we work opportunity to that

control the strategic provide Our missile segment. constellation OPIR defense a interceptors OPIR contractor on will or portfolio defense missile Overhead end-to-end This broad prime Infrared, at warning capabilities. includes and and command Polar sensors, satellite critical orbit is role One Persistent our and operate example next-generation elliptical highly systems.

on recent awards Tranche for HBTSS orbit and missile SDA capabilities X. programs like Importantly, we tracking also provide proliferated low earth defense

Army air missile for In defense we're the its NGI production Shortly system. advanced quarter, regional phase Interceptor. will milestone next-generation defense and significantly on They U.S. unit prime fielding IBCS, a addition, integrator INTERCEPT missile schedule close against and including hypersonic protect ballistic of integrated key the rate for set we the after IBCS approval threats. received for to capabilities, glide capabilities. bolster and This allows to the an Air Defense which full

and of Poland as a by domestic as expected are centerpiece And serve period, also to deliveries allies other increase XX%. fighter the and IBCS its units number IBCS the missile system. selected to evaluating air reminder, of of a are modernization the defense Over

quarter expect EACs no continue baseline by the this program a we're the The B-XX. on There first updates, changes cost government's program turning to couple first starting year. program of events like with on key this and data over will and to are track receive remains flight work Before call touch material in to the schedule on informed phases to EMD LRIP and for remains towards we which continuing later I'd for our year. to Dave, and of award the for be this the and

as projected outlook the outlined steady B-XX for and long-term funding to the the be is Air site, for strike program Force's program its centerpiece in long-range and customer The the unmatched expected B-XX across remains growth range, the for With to decades come. robust. strong health survivability, of I demand portfolio the

fire tunnel system X followed both and the campaign full-scale our GBSD, key completion comprehensive and which modeling digital On rocket of of the and in includes missile. wind hypersonic maturity of tests a successful and The X test in first Stage design motor its simulations of subsonic validated we improved This achieved static the environments. quarter. the tested series test milestones the

telescope profitable for growth for believe shareholders and positioned winning year which of were robust led our Northrop And team deliver Overall, clear a trophy and earlier by of creation abroad well Web-based value James field design highest industry strong honor. unwavering our congratulate solutions physics. won continued We alike. start is the the we performance. our our and this see to prestigious maintain the for I want industry-leading in team's the customers Aster month, commitment we're a pioneering instrumental this demand the Grumman revolutionizing U.S. in the industry's to to and for and indicator team

With hand financial cover call that of outlook. to and Dave said, our over the results I'll details to Dave? the our

and Okay. Thanks, morning, everyone. Kathy good

to results strategic positioned first growth. in that provide working. that evidence differentiated is we're programs our us As investments priority further quarter have our customer deliver and areas Kathy franchise noted, The making strategy key

do respect of our in chain, environment. macroeconomic saw to added signs challenges to Our again With We supply outstanding managing team this the an progress to of the quarter. in job continues QX. substantially headcount we through modest

time. some supply inflation base time, effect areas experience have our And moderate our continue over costs begun that believe on to on but levels a continue longer-term programs. to pressure for will to of higher base have We especially

discussed year. from on past been we've over we've cost prior impacts experiencing As increases earnings the calls, inflation-related

in our business going reduce forward. effort continue impacts our We efficiencies in and with to drive those an to partner customers

in Bookings with billion, including our Now line turning QX restricted expectations, in $X awards. results. roughly $X.X were of billion to

solid a volume sales year of Our particularly restricted backlog were including At programs. at to sales $XX sales, the full year-over-year. in backlog. Space segment few than timing level, Xx grew XX% our were large run our of below remains annual rate, slightly billion our Systems at due strong which projected on Aeronautics QX nearly primarily the more

Networked were sales customer business. given the strong and Solutions earlier, experiencing global X%. up X% Systems up several It's Missile Systems was particularly in in by threat demand, expansion Battle business, Kathy Information the is Defense MS And sales of in described quarter, environment. Management which driven restricted components the

line AS pension CAS on impacts. margins B-XX basis of EAC segments. higher line points Segment associated unfavorable spread were Those the margins included X were XX of evenly pension for impact roughly XXXX, favorable margins the year. and with were the of our change from impacts million rates our were first full QX, across about CAS costs in year in our in down incorporated EMD in into the quarter were GS $XX the with primarily last relatively that QX. XX.X% adjusting phase outlook expectations with because

license slightly partially was its we unconsolidated by a on X% XXXX. margins MS in offset an the to At compared in volume the quarter sales a quarter of generated of loss recognized to due representing customer. enterprise first joint of projection, a EAC growth under solid And XXXX level, with venture. Space $X.X part were the the adjustments billion, of to lower sale

Consistent of we our the what and both were our midpoint of trends QX were hiring XX% quarter, last over communicated supplier with our estimate just deliveries. sales driven year and by full

Our lower corporate first amortization. and operating to X%, also intangible income unallocated due grew quarter asset expense

share $X XXXX from of the income. pension per quarter lower included net over share a of diluted compared were first earnings headwind $X.XX Our to and per

throughout factor be comparisons in This year. pension estimates, And will income increase our based XXXX. begin year-over-year next on to noncash pension a to EPS headwind expect current to we continue

We earnings share. contributed below our benefits QX the to that line also a had per few segment

only for benefit weighted unallocated already was per $X.XX corporate roughly corporate the half the expenses were other this second unallocated our of toward share forecast a quarter. $X timing while year, in million. our First, created the of And

$X.XX period roughly the Our earnings. to securities in favorable marketable were and contributed

our the various estimated nature. our in full of credits upside. related the contributed was And in XX.X%, they these EPS due than tax QX benefits of was another our year approximately Altogether, quarter. $X.XX primarily timing recognized to rate tax in benefit are but lower of This contributing of items $X.XX to forecast, QX part

cash. to Turning

totaled is the experienced usage quarter, first approximately cash due expenditures As our we a million trends. our Capital million, with flow cash $XXX pattern, consistent an outflow and primarily of first typical historical to quarter of was working in timing. $XXX capital operating

In payment taxes period of tax in year currently first Section but also this a of forecasting year, a R&D with year. modest XXX. last was made we're the cash our owed inflow QX we associated outflow including QX April, the cash

to be to repeal associated taxes projecting XXX amend law. in we and cash For Congress that way the over find hopeful full $XXX year, a with million the we're or continue Section will

to Moving guidance.

full with first any in guidance quarter of roughly changed was ranges. have we segment not line the our that our expectations, Given year

year. ratio We book-to-bill under continue project to a the for just X.Xx

with expect quarter than XX% less second be higher sales of to estimate. We than year and QX full or our our in line slightly

expect I year, the We to normalize mentioned timing interest including previously many expense. over of course items of the the

capital more year our respect remain cash dividends With to via this committed free and we returning deployment, shareholders than to of XXX% share to flow repurchases.

we a we'll Kathy the share repurchase stock initiated And of the in our open market As million period. million mentioned, first repurchase $XXX accelerated quarter. roughly repurchases, in $XXX including

attractive the we using We quarter also $X first raised in part are in of new that QX. billion rates which at billion notes notes $X in retire to the anticipate in maturing

our continue through capital expect at flows our to strong of decade cash our growth expand that several a in plans. Kathy not free as deployment business. for demonstrated we've areas underlying XXXX and robust of durable cash to in highlighted, the the on stable term, long our second flexibility the the through ability to we business just half flow Over our long-term based And well, rate, providing generate but

equity year, this And business. later we sell most international and is QX, to in this signed occur in minority just agreement to closing approvals small expected likely an morning, our as in we subject XX-Q Closing government a conditions. to our noted investment

outlook. We transaction have our to gain guidance EPS business from strong estimated additive with consistent by $X.XX, the our increased and our

the to In signals conclusion, robust start macro our abroad. demand our and improvements domestically certain the in customers with and year, environment pleased we're from

And with call for open questions. that, the let's up

Instructions] of from [Operator The Doug Bernstein. will first question come Harned

on in LRIPs you my in what I is presumably, here. progressed that mostly recently And years couple maybe reason inflation we of LRIPs your first sense profitable inflation see you inflation years we've is, you assume recent just low would I'd since And the the a that you a high inflation level like that be to go because And over how one X-year last of to period? the won concerned to back B-XX. become kind is we XXXX, of X seen trying inflation. inflation for the original that that made relative first, the an question quarter, all could going quarter how you making contract in where assumptions in profitability about the of And the the when are last forward, costs possibility you're originally back assumptions And watch should should think and to not issue profitable. Just those ultimate raised pricing the were that with assumptions about? really see here? has there time,

Yes, Doug, thanks question. the for

about tend that about talk now, think assumptions publicly on to the to we're on would long-term look projections making I and that made even information. we to available We So then condition. use inflation macroeconomic indices to

the Fed effectively. look back to X% target So at and pretty what a roll was doing and were managing to inflation clock that doing, you XXXX the if they

of I'm imagine set So have out disclose good not of been as indices been we that's you would we can that saying would that what a give those sense that's that into assumptions have you not on going thinking. but We're exactly the did. we looked we relying what to future. the

set that. than about is And back labor, particularly to labor come couple tend once the they are been it doesn't benchmark. labor inflation, new relates as to down elevated, course, the last years, has a on salaries higher of to inflation Of thing tend it

over areas those materials remain like we as the will least commodities. expecting we the and follow supplies, indices elevated the execution those at with costs of believe do In of future, remainder associated the so contract. other the to think about And we're those

into And so of as the indices some to about the can out are there and variation buy good we a will what well. be way future those materials think that

is of think I is LRIPs two it possible coming is -- to And these -- finalize so each to there forward you which I guess us for shouldn't think soon, the adjustment when But mean, go at cost? to an labor could have of to of get of and materials that some on least equitable be also opportunity inflation then sort concern? you a levels on things.

so. believe what that we're working is in certainly toward. last And I we call, Well, as noted our

to the once both work those have the continue And how discussions funds saw that inflation think inflation relief. actively. or just annual funds in allocate very with they for like with as so separate the program for Defense like we of And to the dollars that at appropriations they congressionally relief all continue of course, this the about have and in government, and appropriated for a contracts relief XXXX Department come we'll associated to wouldn't but that we with expect to

these rates, Now inside that to with as have operating flow offset we other also with a the said, margin control, working costs well. our of are beneficial elements effect can that that overhead increases our into segment other

we government relying take, government this together. and Northrop to We're impacts risk working these do that believe mitigate actions be both and fully not the should although share on will the Grumman

Our coming next question Seifman JPMorgan. will be of Seth from

the do in of if mature for excluding Air assume about stabilizing? see B-XX, than Force's the and have talk little in growth potentially portfolio could how over a Those and there? a programs. especially not rest then, potential when aligning And you're the drivers number the the about portfolio, of thinking programs. Autonomous very kind time could sort documents, that's you where talk with of declines bit quarter. you area And budget in B-XX, the about if Aeronautics strategy other any But of the other we are do wonder the I I restricted where we kind saw of you Aeronautics surprising. you see,

Well, thanks, Seth.

top of about long-term the Aero line. view have talked We

not said XXXX, while a flattish factors. for we so to we few expect again begin And revenue driven next. that's do to and year be And then by guiding that this have grow

those Aero in first do become The Hawk Stars, is pressure the that comparison, Global decline. terms minimal programs and year-over-year on been putting point sales we have you noted that from in of year-over-year Q, like noted Joint this forward our

continue. happening programs B-XX. we program would stable, drivers Air some as addition are have and operational in well fairly Aviation And that, I to new have And will the add as F-XX, activity Force's like also Navy well. that's like growth that We as that imperatives for the then

some for compares as 'XX. in us So to look create all but modest upside those we of the 'XX

Great. if I in could sneak I more. guess one

You How talked you're a making for on investment and helpful. that investments recognize remarks you capacity. different spare world the customer that plays where world a of about there's think prepared we're there of more that kind And into willingness And a need return some sort lot your of spare provide about it the very the in of I kind I well? to in side customer thought as capacity? is kind on do for that maybe that where this idea more and needs a in was value

Yes. as Excellent question well.

about And like that We then support a thinking is made government will respond proposals of be level those investments additional to comes. likely be the stable say that there, to. their making, for that by the we're believe government a the be capacity. investments. look get there put that got we're out industry we've ahead funding we it to expenditures. as But would because that to So share of we and we to period forward to what would at And is we demand government we've can that as ready gain signal capacity we by look curve being long-term supported believe what surge

well. billion but was dollars I about those example the in the the today today, way motors, gave in tactical own capacity focus $X nearly really commentary that talked which areas. us expanding So We're of in expanding of investing strategic rocket to both for solid our missiles I missiles as my all

in We laid have capacity plan investments more doubled we've the make. than the with to or

to support can For complement suggesting for further government even but that we we go that, would are that to look the it. government than funding

next will Jefferies. of Kahyaoglu Our come Sheila question from

mentioned to suppliers bid we revenues How it flow through Kathy, we doubling you the programs your versus relates How money, current And to think think nearly beyond B-XX GBSD free relative do target. you growth to the or plan Northrop's and contribute obviously, going growth? as the do cash also funding about government? the some of up. that to mentioned these this

B-XX So and as profile look the we at on programs like large Sentinel.

You that all that suppliers. point come our Grumman doesn't out and to Northrop are right of

of collaboration in field is associated activities that's a Some there funding. the because Sentinel the and the and the government particularly scope. And on government significant will with with coordination to true that is work missile the of that program go government enable construction across

growth. profile months look we year funds subset will budget takes on will overall XX scope depending in XX of tends it in be it our these extended, relative necessarily and experience, of at funds, programs, what we So that the to or to of growth but it because extend of a like the What kind to terms those those on us when then is year-over-year program follow B-XX Sentinel. work appropriated time sometimes not for

So programs just sustained be growth how the growth you through XXXX you when about is ramp moving of those and what be ramping. period from time and when continued continue, come production that that the still expect on at Sentinel both I as not could said, net will if what there through and budget well in of just to they sustained that, that tells look quantities it said you all signal B-XX and has both as you in frame government into the the

the see decade. you the not in beyond Fidelis looking So 'XX it's that next into projections 'XX about but just that to

that thing raised we flow X-year growth, were second Sheila, cash period I'd to provided there what beyond point add really on is touching you the outlook free specifics. one around the we've with

capital been the driven some will an been throughout call. of describing provides free by Kathy period be returns this of have opportunity flow growth returns opportunity for of less for making. course, amortization are the period. the opportunity will the and exists CAS through second some for cash in the like investments lower of The items to It on a be half the investments get as and And less more be decade second heavy that's that we And half currently pension continued recoveries of intensity we has half then, operational the the XXX and to second of of the in of way taxes on in higher Section continue cash those decade. decade

So that what optimism flow gives all a free also. that's told, us perspective about expansion period cash from

next Bank from Epstein America. will The Ronald question be coming of of

opening Maybe a about gears a you can just changing strategy Kathy, -- talk and mentioned bit your about little market. in space bit the Northrop's it bit. little in you a remarks

of space the out space is changing. whole imposing, learned the that architecture as One we things big the of

But vision You on kind presence just and forth. Firefly commercial? some you with pretty in a on if and and there's guys had so of your huge and could there through so on walk going your interesting partnership defense Northrop stuff us with space,

Yes, certainly.

you're to also and freely within in exploration. strategic a space and that our ventures as broad-based. the evidenced and largely two point right tied exploration our So to in in pillar commercial supporting in scientific And have to operate to it The the but is cornerstone Artemis is of significant our our space program pillars enabling space those national James we security our allies But work our in cornerstone strategy out space U.S. in space. of work business effectively missions also tied Webb more in the and as business. are our strategic

meaning space, command technologies So provide even about to in assets having launch. to of to provider elements if partnerships able being across that provider, not with well are both integrated launch being we're launch, we solution, then us that's those we the when the companies the build relationship that payload, as all we are need think control looking satellites bus operate, a in well provide we the that at a being we space. with have Firefly, as the value and And that's the and ability able can

mind. more with space that's the JADCX of So a domain contribution in

well being And share that data. operate be course, to as able satellites these able means then, ground and the as of able to communicate on have to

this domain the So And working is but not have core of competencies are other growing our to budget, the and this budgets space of continue. space domain. recent ties to company Defense business to expect well bring Department across of we the we we in and fastest to that the customers' the been all both our NASA that area, has and in only very supported domains

our opportunity So our is in continue this share use to our to objective and to grow relevance markets. those

we growth of then, I think mean, of just you think that. you for huge been growth about And quick about next it's When driver continuing years? if in I business, how should the a you. couple may a follow-on ask that growth to the that that business? Do the foresee into

winning been itself has And that happened to It's shouldn't business the amazing consistently significant few a we we've I've we doubled. and And experiencing seeing that double-digit do. see wedded for pretty programs because I years. in the growth the get last several have said those what's of ramp. years programs last to new nearly been in position

profile margins. the phase, So where and the very are I building are opportunity to into many programs still don't most we as be the The the that growth just continue much higher those yet of but Sentinel, higher the like significant that's it engine I expect first to on just And And ahead of. we be when in to is the of volumes us. for next company. come some is do because about in talked our production these transition expect of growth development growth years for programs both a to several

be Melius. The of Spingarn coming next from question will Robert

positive that's SpaceX with a to So think follow-up Shield of an actually it Star national announced division work. there security? And defense on them? partner negative? going or a do So Kathy, separate How be to potentially question just is on into focused a on space. opportunity Ron's called push is you their about more

see don't a significant it change. as I

partnering with have We been SpaceX.

standing And partner work into structural expect with continue a more this together, our they've the customers to to of good to them that been and versus aspirations. to in my do ability to us. dealing SpaceX, so. government in differences within terms sense is with the work it's We up their commercial But help

Of expect in hones they're to in Northrop embrace makes we a us our competitor stronger. and that's we but think Grumman. space course, competition And We skills normal so it continue. our also that

this as see a for And so we positive industry the overall.

from Citi. will question of next coming Gursky Jason be The

did a job of making. nice and and Kathy, recent some investments of wins the you're you outlining that developments

a and the Aeronautics in years. bit out little touched Space You growth about

So if you for not do out you headwinds of the like? a Defense see the any so kind in potential 'XX look of Mission kind of in the your growth there, can and but just rates we Systems that I positives wonder all on good 'XX and might focusing same what get might sense

Yes.

a critical the within lot is business to one remain not say is that's at technology grower happening I why I are just start anticipate to Systems really It's will differentiation And position where fastest been expect that and don't our continue We it's and going there highly be. that hasn't It So It been they Mission forward. that competitive. aren't with competitive of consistent. but Systems. the it to finds technical itself a to And steady Mission a grower. changes of staying be but forefront business.

So, of some fourth are eventually, have of of some aircraft on those. roles retired significant they -- roles that examples are gen the as

radar award out see to starts for upgrades. platform that about the But with the we And at are playing this modernized that where on time, they new being talked dissipate. the so that next-generation is is F-XX, And competing IV we Block got development technologies. you same work even

I'm that team's really so mid-single-digit And that position at work continue to got technology to pleased of stay win the necessary growth with for we've competitive forefront continue that accustomed rate there. will new become to be but them this and

going and because we were modernization dependent was What different it Defense, both quickly declines other been second little demand business today's of of weapons I the more and In global pretty existing a net is growth will the new successful weren't on in I a to well story. matures call weapons. in business as it's our have on about aircraft source our stable There, growth terms a been that and winning programs. see the work expect we seeing weapons in than and is in flattish that of on as programs It decline. the talked us. be work portfolio much a has forward How some we are we that seeing significant a grower part bit how portfolio that in for development how offset also

do this But be we it there. will growth But what year. the year in optimistic being I'm business will be. And think see really pivotal growth for next that indicating we business a

Kristine Liwag will question be from Morgan coming next Stanley. The

ramping there's tend With discussion or transitioning. the of debt ceiling been more disruptive on which 'XX have programs CR standoff, of extended of year a are in to an that lot fiscal impact a

the September expect as fiscal 'XX, of this what into you first and the slips could for year end it that B-XX if the that past award program year development. previously from LRIP contract You've program? mentioned the date transitions But later mean

because look used we CRs. navigating we B-XX, that be the were appropriated lot. issue don't to are our as will there that believe For with them FY awarding And production as an 'XX, across part of those funds portfolio, you

of won't CR But more risks government have a any it CR. case, goes, aren't with always is not won't the there indeed environment we'll I'm But extended issues program. points if point we I the would that Congress be the we an but that major individual given that industry am this to work those I'm that, so the hopeful CR see saying hopeful if threat out become that's as recognizes longer I appropriations, material on out, a short-term the material. to issues you And CR. period a importance and any timely the address that the

Walton The Wolfe. next question comes of from Myles

high a the the of a JV And if if in absolute here this for mix, from is high far could Kathy, I keeps Orbital you license the the truly it or is was and or in going wonder I like? favorable think this the Dave, size high And relative loss maybe, thus the then you I'm first acquisition done. level, since at higher terms quarter watermark? watermark terms cost-plus curious XX%

and as and into then in in EAC it millions, I to on of we of Kathy. do things the $XX things the the year's those of them [ph], first quarter, $XX hand start level in case, detail. EMD When as every we talked When JV. about quantify to describe tend on question, your well the this a the we business tend benefit our this Well, and the to to have as that we I'll million from tens last those over describe B-XX have together why $XX license and On we the sale disclose the first don't quarter. imagine call and downside size, million million the we on benefit program you'd get of group and more magnitude, in

expect lower still but you of terms that year meaningful full been thinking and can So, through things like to in much in impacts. have run that range rates

to Myles, second wanted margin talking your year in the just I if on been coming the where which margins adjusted before our impact add programs quarter. be you of first right to And out the that answer gate about, segment we pension at for hitting I'll operating that in the look question we've the for

that not segment. breaking we're So down by

for pension, guidance with minor those for our just of line X be and the outlined accounted right adjusted then you each and our businesses they in took you which X exceptions for year. If

with to that we've that goes where right guidance. quarter in that, tell be math you So into we're they item of segments through are with we walk that all X need the each the in deliver impacts can for not adjusted those outlined their line first to those exact on you going to

do fluctuations don't that production In higher even is answer bit balance MS. high their for that of drove within MS the year had on on question, full particularly a the mix our we to to a sustain mix believe quarter in just quantities your some watermark We expect within second because I cost plus.

So we think a we would start programs, be and as going for are. for towards had B-XX, major said, we've space shift little but we we are still until, into year to see development these of be you'll material where cost that we move to that a over likely couple XX% that's years a don't probably fixed Sentinel us the which shift next then where And we're price. the bigger of is in mix ones signaled end plus and see more some programs it in production, like will especially the the the

The Cai coming next of from question be von Rumohr will Cowen.

Terrific.

this off. small little be So expected Kathy, under lots start bookings wins bit you mentioned Xx year. of times, have key a that But book-to-bill to to

color milestones So us year? give opportunities or the key what the some the could competitions of rest the of are you what for? And terms look over should booking you in we are see

Yes.

So a very it's question. intuitive

down at As awards we competitive XXXX, there not many new look select. are or even

'XX It's I'll As like in we in example way race of good we don't They this is XXXX we'll substantive new of you us see this I've even are portfolio 'XX. year. on and NGI this tell guide backlog talked X-horse our this in And What so those are and where provide usually color that -- sales of the good more don't competitive really in majority more for we year. year our about much bit we become year. programs about, later 'XX we many the of for But those have as awards. a a that. immaterial work of a is see in

The Vertical. from of Robert Stallard is next question

of put they to think they a in was wondering sophisticated the be strategy B-XX buy at it little bit a bit out the is to I Northrop Grumman? government more contemplated which was report, this Kathy, U.S. week. a more exporting one open least. be U.S. defense me thought defense its seem for might that you. I earlier Australian the might of a The industry a And to this is government there, sign equipment, whether surprise some including they

expecting is would the be premature be took buy Yes, why government to on were the think it? question you I'm hear. of ago I important you're did. the been another would that years handful way B-XX for surprised told might might glad ongoing was ones you I they ask, U.S. someone And with that have obviously It to you have on. the right me happen, there a if program. would it working I discussions didn't But

that it it is least the of relationship long of Australia at wouldn't where is U.S., not nuclear-powered U.K. I on the in capabilities and strategic strategic a their the B-XX and think that and between those particular collaboratively the X to defense together strategic So become I count other part think it on nations how more in appropriate submarines change the with going the opening dialogue. take work they today, table review. off run But that did I in

Herbert coming is Ken RBC. next question The of from

we're Orbital been now seeing of good, very to seems now what Your Missiles in hindsight the in and Space timing growth considering just ATK, have acquisition Munitions. in and

standpoint forward You an are Within with could the areas organic allocation investments to in obviously of moving or more at growth? well other from market the today. perhaps think favorably how perhaps inorganic you inorganic context, acquisition look maybe that there what opportunities? broader sort of standpoint capital And portfolio? relative acquisitions But view number would do fit on point you outlined a you the

that certainly earlier tool that mind important to with external an to the through companies both strategic of and organic those we acquiring acquisitions are the looking have that through gaps with fill risk in We imperative with investing say as see I I strength to partnerships so environment remain it, largely with of well. portfolio toolkit. about positioned top in are for partnering acquisition. the active use said, gaps I opportunities at do acquisition those is to the in call that our expand It execution would is when very which of there of to about doesn't talked on breadth regulatory our and But think we them, instance. require an which associated certainly one Firefly, no

a do near path consideration to all significant acquisition wouldn't into a likely and in strategic So see term. of that we the take

is Strauss of David next The coming question from Barclays.

the budget. you for Sentinel that the B-XX Kathy, updated mentioned funding profile and in were

wanted to shifted shift dollars right. added were was B-XX. there Specifically, the like some development looks dollars where to I It were ask about and production there

comment performance your mean what that what during your the could of second of for given profile So if all? in you strong on phase? could program, margin reflects, that all, first development the And

Yes, David.

budget. below may you our government which needed we had previously program to the independent for So set cost cost about their were estimates talked upon recall, projections the

now in cost see cost for more the budget. as to that see of independent the hitting the targets might And production we that have that estimates. are future programs their below in those reflected starting that You're we're modifying those you

understand production. that's for modernization The production you that associated they today now. the them funding and RDT&E to ask what program the needs beginning supports in see the So the Congress is government happening requested them more really that accounts with as of in we modernization allowing and

with thinking on always Air phase the the of this working And Force the the program. but spaces I next complement how way manage not want really will and executing to just They the execute programs. we are we're us ahead current

our moved EMD. through way So we have largely

really production. only will modernization margin where that's in we what natural that we the at to to modernization overall what their I the -- And from a to be to you that work B-XX we're so starting perspective, better it's is expect a you be yes, program looking reflected LRIP expect do want budgeting. get in and it production, with we positive which We be associated see would picture. Now than know on margins net go, margin the

We one for have question. time more

Peter question The from coming of is Arment question final next Baird. and

just Defense call kind demand Missile Munitions the kind the about increased off like IBCS. back to on how and of kicked of capabilities Kathy, signals of talking you some circling

'XX it in international, actually beyond? do Is see up left think growth of Just you 'XX, a the do Or of about lot or of growth in? when showing how to some starts layer this this that? more we you more to think

some up of show starting it to see We now. Yes.

to the that Defense not as of $XXX fill And the part production awards of first deliveries now the that that with but Poland see full IBCS, million in has quarter So associated well. received of starting portfolio, gotten weapons. I with Missile as demand out we course, mentioned just rate here are approval we

carry in Defense year decade. those sector 'XX, part somewhere see XXXX. the have seen example of that majority support NGI good is going programs as the a after provide there this. down certainly do significant where see we growth But in some is 'XX, the into opportunity either opportunities is and but forward of We'll we last in System So, those into of to a scale. later, to the XXXX select or moving later X the real of parties production another

again So today. thanks, for you I our speaking with look earnings forward extend another call everybody, call to also our quarter. joining in and my on to all solid want thanks July. to We congratulations for team next our

call. concluding with today's So we're that, Lisa,

and And you may in disconnect. thank Ladies you This call. conference. you. for today's Thank all concludes gentlemen, participating today's