Northrop Grumman (NOC) 24 Oct 242024 Q3 Earnings call transcript

Good day, ladies and gentlemen, and welcome to Northrop Grumman's Third Quarter 2024 Conference Call. Today's call is being recorded. My name is Josh, and I will be your operator today. [Operator Instructions] I would now like to turn the call over to your host, Mr. Todd Ernst, Vice President, Investor Relations. Mr. proceed. please Ernst,

good Third and and to welcome Thanks, XXXX morning, Conference Grumman's Quarter Call. Northrop Josh, everyone,

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

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

results from STS quarter Third to of the ] Space the division [ Defense reflect realignment Systems Systems.

presentation Relations our In is that addition, we website. posted Investor will a to on refer

are President; the to On XX; September Kathy. CFO this to I'd this Ken Chair, Warden, Kathy Kathy? our time, Keffer, the CFO, as our call of our Dave over ], through the CEO call today At of [ Cruse and month. first turn and like

again is to once capabilities to was our complex and against a evident third for portfolio year. the our new to morning, half Todd. deter advanced the threats. increasingly book-to-bill in for delivered We momentum us. building again thank achieved This defend third operating and which highlight demand level. results. In and performance we the strong, through differentiated Thanks, is need joining strong in the driving on continue drove record our the you of the quarter, everyone, very Global Good events the quarter, first backlog for

full billion, this we guidance our in our of growth. The has X% business. $XX Grumman the the track our quarter, highest strong now future for Northrop X% both years. year and is year-over-year efficiencies critical significantly which margins our is performance. Xx supporting of disciplined in continues more confidence in increased on our XX.X% achieve rate in year-to-date, annual over team Revenue increased to cost growth Segment are drive sequentially revenue, backlog customers, than in our business this operations margin pursuits deliver X and resulting operating remain capabilities and to new to Our

performance increasing range Solid and the quarter, results the drove year's cash solid shareholder us to our increase continues flow QX in per strong of $X operating our flexibility capital by from share of of and sales earnings to an growing with of on year return line was million last considerable expectations support our both volume and provide XX% year-to-date results. Free deploy in our $X.XX. guidance business our strategy. Based EPS we are full in outlook, and $XXX

it's to performance, taking We pleased because realize profitability. steps the intentional enhanced a with are we've continued result of this and growth been direct

capabilities, increased advanced initiatives continue production and implement including automation. We productivity efficiency engineering to and tools digital

than also performance quarter or estimates. to of testing in to half in We are better this mature total in solid AS, execute rework was the flight improved and reducing of in our comprises was contract it XX% progress at made program curves of B-XX evident at and execution and is and again is add AS has and streamlining aircraft well. perform production resulting more these performance. The our portfolio margins in to on program overall This outstanding. learning of and initiatives processes, was The improving scale, milestones our our with cost on where very portion ground as productivity. Space's The due operating line row AS, revenue, impact largely development continues also achieving a quarter. excellent contract its the management continuing quarter focus we production the third

up were improved program and NGI trends down leading expected, the mitigating was key the but on opportunities revenue and a modestly to wind of based earnings well, realizing team down performance the risks EAC driver as Strong recent executed we substantially. in restricted was year-over-year As program, quarters.

of with the in Margin for full solid building growth. foundation outlook. Our with future Defense quarter, Systems see is demand continues business performance broad-based our year-to-date the a and X.Xx to book-to-bill consistent year

While making a the continued book-to-bill XXXX. the growth. Mission to quarter that affected we have robust I margin strong in we confidence segments, Systems. deliberate in of cycle cost of a from in mix in sales. Like supply the and technology MS some also segment is in good taking been is in on seen they've DS, demand and progress also program timing business demand looking in to quarter, And our Systems sales track realized performance and see productivity that's this programs we've X% opportunities of forward, at results. with Mission line revenue This one our we've chain high X.Xx expected higher to had their our fastest-growing including leader achieve actions as And team international reflected The efficiencies. grow, margins shorter DS is deliveries. increased customers of improve as pressures, with drive this be top are expansion we seen is

number improving we our conditions, international that to chains, enhanced production, a contract our and As productivity programs trends of gradual forward, we look portfolio across expansion, in we our transition multiple are stabilizing supportive continued see including workforce of macroeconomic largest as portfolio. and margin mix, our shift supply build

in to strong we demand that priorities. national the operate and budgets. defense for where result, a sensors We environment. This provide security most are and continued threat support strong upward demanding the pressure budgets for on as also in is And to we our platform expect bipartisan customers seeing allow see deter there's adversaries systems reflected U.S. demand

our Senate and programs. playing budget the Authorization above is legislative year Defense process And strong funding is request. months, while legislation appropriations to administration's several see it budget both still past the additional defense XXXX Over proposed and for out, fiscal encouraging the support the the

This grow increasing sales spending look the As robust almost our from is quarter. to the There third over most we business several in at defense XXXX faster U.S., years. capabilities, which our in continue rest reflected Xx of the was members book-to-bill, the defense outside NATO for levels. we demand next international our demand particularly Europe, markets is than expect are in international to where international

While programs. executing is our current on programs focused an outlook, of driver growth winning remain important development also we profitable new our on

threats. this advantage our the develop will selection Our create strategy technical the is Missile our example address Interceptor, for Glide by GPI. missile deliver technology sophisticated increasingly Defense is to Agency based on or A Phase innovations continuing to This customers. of great competitive to hypersonic

and collaboration to the with Japan performance sales level, and a X% and further growth growth continue, between will NGI's strong industry. Putting between based we U.S. X and strong as partnership This continued further on segments. this growth In on expect Japanese record strengthen our alliance company and of we the backlog to solid X of we addition, in a project and includes all XXXX, forward execution. At this program X%. program look focus together, Japan is with our

the a earlier. For expect space, to to we decline referred on programs I wind-down mid-single-digit due

expect margin trends, program discipline. XXXX segment to macro by the and operating in continue performance cost to favorable improve We company's driven

increasing year-over-year. outlook flow XXXX cash greater Our remains in XX% our our with than Investing long-term is consistent prior forecast, business a free growing with priority.

but continues given historical peak to our shareholders industry XXX% shareholder-friendly level plan in need deliver needed dynamic returning company's of global offer environment invest through our to and calls We capabilities flow to of to free our Northrop for cash the edge year. The at for technology are outlook, Grumman reduced and they continue that approximately innovations we strong And anticipate norms. compete. competitive still in next cash spending them. customers CapEx to deployment the flow a capacity strategy, XXXX, to level coming period a above free our capital a

performance We and are differentiation. on also that competitive our enables focused the infrastructure intensely and digital talent

while and is today growth into Our is years, rapidly team several business future. Financially, a positioned a that expand over results our well foreseeable flows this for solid for the the future. translating is next to for building also plan now, cash profitable delivering

of our But Ken I'll to over, Before the who outlook Crews, CFO talk a forward our became last on first, our call call, turning October over recognizing leadership company. Dave, like like welcome Dave to over through will I'd to for his to thank so, Dave in I you. just Ken do X. be And moment. his discussion this things results. I'd a will for as our and turn QX to outstanding service

with Thanks, Ken you, role, do enjoyed continue Kathy. whole great work Northrop the years confident going It's and in X rewarding opportunity you'll been an Grumman forward. I'm the to team. and to things this incredibly I've

looking at the QX Now results.

and our experience continued in capabilities for enduring customers. to support international We of our U.S. demand

bookings. a billion. hit As driven another $XX by quarter strong record new Kathy of of backlog mentioned,

highest QX $X particularly aircraft the years. Key were urgent programs at ammunition $X.X to in DS international for backlog need ] awards and international Our E-XD increasing strong level in billion, radar MS. included capabilities awards at several Japan, almost our at and additional [ billion,

to can years. bookings coming We we over convert we're into revenue a opportunities in continue pipeline wide that optimistic range our global have the of and

those in few the sales QX, deck. on increase. partially portfolio. QX year of Higher first continued half volume driven sales increased Systems, the and sales X%. shifts were our [ throughout full Triton, below and to in restricted do weapons by impact year to a The Turning momentum outlook. Starting from slightly prior in QX are most primarily by the on EX portfolio X% due of increase sales slightly quarter our our programs. compared and on up the year. to not timing $X.X Sales billion, lower Slide QX on F-XX, but drove quarter At was X% DS Defense in by by our Aeronautics, with to sales Sentinel by the earnings X% expectations were increased third up sales X year-to-date. offset Strong the from ] higher delivery

to of higher due and by our period, work. the by programs headwind programs. of technology and down remaining a in at an driven digits led lower volume The with restructure program of of our resulted much restricted Sentinel, if Space portfolio partner on And saw QX, space MS its in sales noted, other In satellite $XXX higher X% million schedule. Mission advanced Systems certain and consistent by grew have the mid-single the up microelectronics sales with Force to the on been QX backlog. the refine latest as are $XXX in would the sales strong activities of in for I program, even into of in Air shift which a stronger, ammunition adjustments were we our not timing the to the SDA restricted space sales wind we continue million X%, on prior work sales roughly increase particularly to from were throughout that sales expectations on international of on As the programs. portfolio year. NGI compared

Its income delivered EAC Moving operating retirements QX. Systems cost expanded in income XX% Space operating the solid a XX.X% outstanding a XX%. lower and to enabled by operating by bottom prior of than and adjustments rate focus generating our quarter line. rate DS ] and mix. Mission operating performance up margin period. net efficiencies, income was change modestly In rate QX X%, rate period in margin performance an grew AS with year segment fewer from [ operating half included This of and to program an risk income performance. the its with QX income margin to increased the first the generated the X%, OM operating excellent improved great in on of XX.X%. contract XX.X%. operating continued

the improvements of continue level the to on performance program period. net this favorable taken, actions in deliberate reflected was We earnings see and in based adjustments in space's we've

per and in in performance A by Slide also Earnings from tax to QX securities our I rate well federal described driven segment solid net share higher lower by portfolio pension uplift. marketable Turning the as provided an X. XX%, performance as increased income. strong

associated in of in Our year, QX of gain quarter for last share of than the certain tax period. reduction the the per a comparison net rate a investment. minority recognized $X.XX Keep we a from EPS with in purposes benefited sale third mind, reserves in

moment performance. cash our take discuss to a I'll Lastly,

compared Third expectations. with $XXX that, of we Year-to-date, it generation off expect you, remain Ken. position quarter last hand was pattern. And quarter this historical free flow QX, with a with in cash consistent million, in time ahead cash to year, I'll flow our of and line strong our our cash to free we

this margins updating year, by volume our connected and high a confidence expect XX%. as our our level. spend the with our And high guidance a driven of Thanks, $X outlook, now are even XX%. Dave, reflects latest are We increase a the timing rate we rate and Sentinel rate. lower are generate guidance segment operating mid-single-digit for guidance. B-XX business of performance, with sales on rate as our expectations good I'll to perform This lowering sales margin quarter increasing This our restructure, its reflecting to are at everyone. mid- our forward MS margin reflects latest a morning, XX% guidance of scales. At program's and Space result, a sales few strong margin earnings rate Aeronautics Slide on high modestly increasing roughly we the continues this margin its to both X increasing for range, in operating we With moments billion, year-over-year while deck. year-over-year XX%. $XX to beginning at increase in another reflecting to approximately to we the growth billion at expectations healthy to update range, DS, guidance high

to Moving level guidance. company

sequentially We At programs rate are will to B-XX strong production fourth cost year and are range. international quarter and increasing to due at Space improve savings phase of represents the production end and roughly margins sequentially during our to billion lower be ammo lower sequential in deliveries XX% sales midpoint in at of DS are successful at the and adjustments. Altogether, we and segment X, margins program higher OM are at our our operating AS deliveries, to of the range, execution of to due expected Fourth our net similar mix the while full XXXX. of the earnings guidance ramp and reaffirming sales $XX.X volume continues sales by expected mix lower income a reflect on to experienced our quarter DS guidance. we MS be this a on year performance, initiatives expected of midpoint. MS. Based latest full QX segment quarter increase the driven LRIP to the multiple

the via are reaffirming guidance and to year. range greater Year-to-date, that dividends ability in generate than continue for repurchases We confident $X strong our cash projects for predictable the cash remain shareholders midpoint. of we've $X.X repurchases, at and and we billion flows. billion growth We returned cash free flow in to our expect to XX% full share

now range range to interest segment to again by of strong earnings per tax increasing costs, corporate $X.XX. our in favorable up rate. are share Lastly, we expectations, performance, confidence lower continued updated our expense more $XX.XX unallocated a reflects $XX.XX, This lower and a

to Next, talk moment I take to wanted about pension a income.

shape remain pension the in funded a over several cash next contributions minimal status Our projected and plans great with over years. XXX%

status Our affordability capital returns help and to our strong for customers funded our shareholders. support drives

X% returns for last years, year the low Through pension few done the sensitivity upcoming discount earnings range and our in the we down we've a table XX, provided deck. September asset As modestly. net were been income rates in have

our expectations that shared net no here XXXX sit there pension we change January. we in to is as So today, income

our confident strategy. we As look remain forward to business in we XXXX,

of on outlined, returning I create Slide contributions of expenditures. his customers to the strategy this of for I conditions And flows. leadership stable have year. continued cash Dave will Kathy the the take higher with year grow to our At flow coming flow even shareholders, our for ahead. cash a to cash a cash a quarters. over Also, and company further have XXXX and macro look of margin growth for questions. growth to share believe during our with growing combination, wanted free your with profitable investment transition. With growth, I I'm capital let's for outlook another the the forward free resolution duration our we CAS thank along and engaging call rapidly recipe investing expect produces continuing opportunities continue we XX% years. In also our closing, midpoint, business our about that, our of deployment shown faster. As for those support will per over community as will expect confident lower the to similar moment next taxes strategy open value is cash and to shareholders, in recoveries, and R&D XX, assumes a This lower and to capital expansion and to level recent that remain we and and solid

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

you, Best couple of questions program luck, for with contract Kathy. or your Dave, A next ventures. of

secondly, is in financial like timetable implications First as there was around of [indiscernible] looks all, here a but it schedule this result bit, the any practical then on change? And I Sentinel, wondering of on or a was moving quarter, mean, the program was here? if might it are a if and us you be I for the structure likely how this detail was bit more to of -- classified, I wondering contract wondering give from GPI, revenues I the could progress the

Rob. Thanks, Great.

me Let with start Sentinel.

As this from that program Air going through. has restructure we we review the in into the process the Nunn-McCurdy concluded. for quarter not process both had outlook result restructure noted our that is the incorporated the and will It That and started. Force changes the call, has last,

is at into into we We yet year. incorporated to of on well continue any expect next that we have happen we our and likely as programs it looked do most our what believe estimates. to And

into it of 'XX expect smoothing look And will so over grow us ramp XXXX. the as from we 'XX. to that still program And our view about talk the just as what that move resulted from 'XX in you into 'XX, sales did is the do like heard of the we year-over-year

supporting as there, to we're build GPI, that in missile profile longer security this be a missile And to very of you know interceptor bit pleased out threats moved is hypersonic important defend similar defeat an a a national threats. just against a area very agency will area evolve. for be to defense able to time. On they the period So this over these

work piece to eventually after we continue move We a will doing to more next in have with of design to around are phase, that And the this risk design mature phase and been will that, a of getting starting a move what reduction review. then and the we design next preliminary program.

process an it continue but important select with is like agency, funding was their us. approach, wants it the because incremental defense and to this design, signifies missile development that down So in

from question Ronald Our comes America. next with of Epstein Bank

worried the growth to have, and across chain? seeing you are Are supply supply Going about large sector going about? Kathy, what worried it? you're And you there the on? from in to heard tight that and the chain broadly, there companies there demand the are that that areas be given right places broadly issues. you're Are are How working businesses now? still are you're you across seeing the managing points what

productivity. Ron, a let chain And They're and mostly Yes, supply bit. still be to of with unpack see we concentrated now supplier They and in more any dependent. one broad-based tend me capacity aren't challenges area business. that they the

with them. It and microelectronics challenges. from of ramp particular And are so AS, the Space of to our It address that respectively. chain try to in supply includes as to to even capacity stands working space and partners some asking motor them suppliers our their Aerostructure they we all increased are individual help we solid business rocket

these risk we they're monitoring work many carrying issues see with. and do extensive these top XXXX expect chain our support, that into with certainly can teams We but all see so in we supplier soon issues hopefully are And with list plans of of have stabilizing, to mitigated that the some And as of and segments provide coming. and suppliers engage do then of as working to will monitor suppliers. so continue I to their our each across that our improving places, the year. It's this we don't we supply

make so it? sense supply to some anywhere it vertically of chain integrate control in Does can just the you

where that remaining that there to integrating we path from in forward we But to we support are viable. instinct away no remediate of source few, time, have, places a commitment. It strategy times is is our obviously, needing generally to do some even customer first first enforce on is We that. ensure We our feel that unless and is vertically bring to capability them. or there time find to sole ourselves the supplier performing we behalf taken try to have not to we not in-house very not from support a when supplier supplier another suppliers ultimately, move perform of to

Kahyaoglu Sheila with Our next question comes from Jefferies.

Maybe being growth the about solid could just pretty and chain about and talked able the cadence, to the talk supply execute backlog a gaps. looking close competitor at potentially to if we multiyear

what Assuming targeting time should programs, the headwinds growth just we and thinking of the flagship in Space thinking about go type Northrop and multiyear away over be horizon? about for

compound since annual to maintain X Well, And proud that growth we very the come very we've risks of been able mitigate, that we year solid last growing at been keep years. team the the opportunities into and XXXX. each X% work and to having growth with rate for year, and I'm for

if at we've our successful able our guided on continue to that too that of we growth these forward, rate opportunities. that capture growth to upward rate. we we X% growth in on Xx international could at to rate. and upward it's we are we we -- the sales, could pressure approach. risks in As opportunities X%, pressure you pressure and think that the both on challenges see a the pipeline, We competitively has are on certainly third And If ease, supply provide were balanced upward business in very as know, some some will quarter chain see did we see rate look second to if that at

believe just opportunities. to clearly that that today. We things But is of I don't really, starting I we point realistic each year X% continue business this grow outlined. guide to a side is know. that you mid-single-digit of said what beyond as well. the I range. as materialize believe flip to next There we risks the enter know hard in downside those have So as we we can that But are with X% the working that, are year those

And ourselves. plan we based we've on that that's laid what think And the so is today, see we achievable. that out for

Our next Strauss comes from with David question Barclays.

Kathy, touch in and taken, kind there broadly see just relative charge if the the where on up of to wanted you are additional sign LRIP progress you you've lots, I B-XX to could that pricing where and those, it progression suppliers. at kind with in are an Yes, on you then just wherever B-XX of locking want terms take kind margin of update you to on in your of AS.

So B-XX let and because I will picture broader margin important me that. then with AS that's to start in the tie it

performance associated quarter. With are this [ said, While program it out company, drawing B-XX with majority important meeting is of margin on picture rest an so for we and of is AS as a LRIP our milestones key just again on is B-XX, in the for I in the which, not was the the the award of outstanding track the business, view ]. X sales

the that so quarter. are in expecting happen And to we fourth

We annually. to [indiscernible] have talked approximately awarded you about being

is of to year And the on get contract. we expect so where this time that happens, and

have no pricing. change We to

priced. And based change estimate quarter have review. our our those to you As no know, we [indiscernible] on third complete were

It's of as in alignment ago, they So production. continuing doing, development on quite we very are plan a I proud remarkable team. what that that few accomplishment out have to we and laid said a the the for to moments B-XX. I'm are with perform, both

the the broader doing to day innovative through some training they're the to more activities factory drive at and learning they've in workforce manage look work floor, curve AS get really and new down X costs on productive quicker. productivity, As employees taken we onto

performance the that very AS that production team mature being provided we which well. that production had well, and I'm to We executed margin as strong portfolio. We mature the have it vision, on further really been year able lift ago has contributed very to say even more the our to has on pleased are about programs and to rates seeing the talked that a improve

Gursky from Citi. question next Our comes with Jason

given what going shifts be [ I'm the that international a one there types and quick seeing FMS as and And that generally little just that curious that with Europe the bit a is on just Kathy, of portend the on you pipeline in demand. across maybe business you've trends there, operating work? kind forward more you'll speaking, does contract direct there commercial? the for Question, been going the bookings mix versus for margins to ] the some

It's integration, sales for ammunition that see sales. direct as more across systems, to And as tend anything contract weapon would typically margin we and of types and both that entail sales. In FMS our products. a for those see our to instance, [indiscernible] Triton, both we as combination rate. international weapons see our those accretive cases, commercial portfolio would We those see complex we overall for segment company

lines. being us result learning of down we a we're As further when the of product mature because curve price those building off

next pipeline of also sales the the do trend of contributor we is year see And larger. into continue DCS some into to both as growing that growth. an see part year. the weapon next we [ as ] and system pipeline, at because bigger so are we to that look We international expect the important But a

Great. contracting are to sticking get you in ask with or observations going Okay. follow-up, quick just yourselves strategy contract how all that you seeing can DoD on going any you then environment on just about shifts make types domestically, to -- they're a comments forward? And in the interesting the current contract

based And a another significant result, work we seen particular what [indiscernible] contract on engagement. conducted. sure, for being the type shift opportunities, of have industry as any appropriate more but a is terms type I dialogue is that on in haven't to seen for shift from one

and of invest the element, want when what what's that us that's industry understand get government Because sure the deliver think able but schedule one to. not price and the cost end another, is at is I to can healthy. fashion. that It's be motivates timely to the to what, to day, and ability So is the we agreed for a the in in but business in products way at the only of helping really conditions make government that supports terms necessary to we

So work. an important getting is contract that make type all to ingredient the right

next from Deutsche Deuschle question with Our comes Scott Bank.

Ken, EACs a positive ] opportunity quarter? on newer was Aeronautics center again the driver that there lots then years have better some And additional would them? as be over F-XX you coming to program this fuselage the pricing at of margins expand on move [ to

We're we're a what positive absolutely drove -- thanks was Scott. and terms the of in portfolio earnings adjustments. quarter performance the AS' for It in approach. with So net the really question, overall pleased

that mature expect And so it it's drive create of was of that and the be It really off. out across the programs deliberate business, from to portfolio, paying wasn't case, to and alone. we're the actions to that production showing benefits costs and efficiencies one taking the program it's we

we focused look the drive in our is factories efficiencies. made on forward, we our to leveraging As investments team

across improved do leading to forward, anticipate And I so opportunities booking rates. moving mature our production programs

However, to saw we knowing AS year. programs, have you in the XXXX, the mix a growth restricted booking in will pressure on shift, related to relative this particularly do overall put the which rates

walk through would And drivers Okay. just having And there that Ken, could next what maybe as to the of do margins opportunity maybe some the underpin greatest segments that? then view then, you year? you expand

Sure.

we've the made the systems, about year next given shareholders. are MS major on on with is expansion. Also, of focus temporal margin AS. company important think we XX%. to one value our comments I before, X creates drivers We've to too, it's believe say, comments an -- my for expand seen weapon X close opportunities international, MS, as headwinds we that the of that margin of to has is that of mix is the They're would for across see segments amount in immense communicated when nature. booking DS the our So I some Kathy and realize previous that of

space, drive historical that norms that I as they to the absolute move so more into get term, and reflection we've we space continue margin will quarter focus on activities MS performance, the think seen. we And great And as business. an the margins. And forward, this efficiencies taking expansion ] are expect back in of [ is continue to see to then to do then that shift back accretive FFP to long towards

see well. we to margins there as opportunities so And expand

So across should be it's primary a to DS approach be driver. going those segments X and the portfolio

question next Gautam TD Khanna Cowen. comes with from Our

Dave election see up. between or follow-up. we an I'm broadly? just dramatic Congrats, Do on a administration Ken. any your picture, curious Yes. two you on defense differences candidate I big have then got either One, coming And and and things. programs

and do particular than Gautam, defense over change. time not seen significant the the I reflects administration environment have more we welcome. is that any difference. What see a threat budget Thanks,

that much around National expect a supports program of Defense U.S. upon. it's has fully portfolio in that well and our aligned And allies over being the portfolio we and builds threats of responsive very U.S. conflict both defend nuclear the supporting past so able both defending. triad, and and portion years again globe to last has remained because The with this significant focused And Grumman couple work that the strategy emerging in in the the also of the is it time. the to believe consistent regard, when in administrations. a called several but And deterring Northrop that to and our that's we the modernization on

features be the those a the defense and therefore, budgets driving expect continue will to strategy, we support and national to So what of reflect.

mean you will of trajectory longer-term follow-up quick beyond think the do be? space kind a just what And that of on XXXX. revenue I

mid-single return we've said about are growing the programs we headwinds beyond of have to that two it's What it digits said XXXX that we is also do And growth. down. Space expect without to that winding the

good you might that we of it sense run XXXX. like rate coming So out think look a of gives what

next question Harned from with Bernstein. comes Our Doug

more classified been of follow it's is and and forward compare NGI wanted backlog we with the of Sentinel about? on When important possible highlight space other I here, areas of of be because the you're question or on up look -- the getting the kind Space complicated in over then year, movement apples-to-apples program the to the past programs? And out if all, Kathy, program. will first to those programs I guess, from in talking it what's you changed rate growth what the can take some you

space program. defense, the the sentinel at it move portfolio is look When you Sure. [indiscernible] the largely to of from

is that the there see we backlog profile support to what's can a well while shifts of that that made number gives civilian sense a also business. And the of what you there And it it significant of supporting you so missions. intelligence is is is remaining look broad-based and is as and up restricted, Sentinel. the a programs, healthy and at ground, it is a builds, Defense a supporting it's many which made nature. sized And very of take backlog of Department of portion related are NASA missions in its satellite as It space

is runway production large, can say of early of stage that a the It program. so in in lot backlog with is cases, them of development future either programs volume and still many front or terms And in diversified. well it is have awards associated is

percentage it Can I then of And the a picture all for you since what years international over on Defense is next clearly of one can, follow-up you'll your at is just Systems. the if expectation couple expanding? give get from

both Doug, I'd because laying know, process we rapidly important until this we'd our year, happy And that in is expanding. growth it guide you in Systems I'll of time international significant like is just as in but still we're call in prefer the and give it out the part believe some to our wait able growth have more Systems, we opportunities be Defense XXXX at be asking does for our with material flip as you're But to January not over plan. of in In company a what in that Mission on do know look time. And look Aeronautics an and what associated other trajectory two to since ] And details well. strategy, not like it's I [ that of so segments, to long-range does the overall. color X-year XXXX. just

question. from with Wolf moment next our comes for One Our Myles Research. Walton next question

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

autonomy. wanted question about ask you to Kathy, I a

characterize strong. programs seems as the just industry next few we incredibly as technologies number here You've [ for across the you a to are of years? over today? funding your opportunities see maybe to go and Where autonomy legacy be you big of And got a AUSA you How portfolio do the would autonomy related you couple in ] what for and investing? look

and in and to We leader across certainly weapon domains multiple have system Yes. been types. be continue autonomy a and

of So a clearly to in maneuverability when about today you you vehicles, control think is opportunity and vehicle. more, about our that invest having autonomous of and history, and and in around the and piloted, truly it's several autonomous, uncrude are it truly think satellites, area for future continue space operations more largely there aircraft, remotely command leader the not and the been aircraft. When associated command is autonomous an ultimate satellite, in a but in we with control. And set

So there. And in expensive, in weapon many about in think we're as finally, when that you then role they think the about investing not they defense. uncrewed less vehicles systems, itself, we cases, weapon and but the just are that's play

which we've get the about So to coming autonomy in benefit just the in platform the that we across the investments integration, are demonstrated scale software that one drawing company-wide our a and the together and us this of both programs not that that more are and of at we're hardware, of not self, operation. and differentiation investing and really in much allow leading-edge worlds number through we software company technology of integration. And it's threads and case, those so thinking in is

side? to on able appetite on do customer to helpful. able That's think keep opportunities think to could the there's do or of risk back the of some do with And how you adoption potentially side, the a Or up continues here? that hold what here, as customer be driver you sort risk is software the you're the technology

program, what and that that through an your for impacts to And not getting many have for capability is should not a would communications and to certification it there's strong, rudimentary think and think able remain is is reasons. need you is an rigorous, rigorous under where where one appetite be with the jamming about and it, good autonomy we've done denied particularly piloting. when operate other vehicle you be we conditions a but and sufficiently airworthiness it have, process and of tested protected companies ways is autonomous you I easy, remote to software or may to supporting be that's and assured really that have,

So a task. it share, detail of not to into just little I'm going is bit an easy

for The ability is respond be I certainly companies. demand think, there. item to that the will pacing some to So demand, the

Walton comes Research. from with question next Our Wolfe Myles

your comfortably on is going million. the flow be that and comments. Dave, Ken, with or is flow, it the maybe XXXX sounds free the taxes. high like right? And But CapEx pension, at guidance cash end for the range the outlook $XXX of it's just looks on about like Is based cash to XXXX that covered increase then free

off So there is working a burn B-XX earnings? capital maybe offsetting or that's of

of year. beyond. We be for indicate end Myles, to start, Ken toward hand cash it flow discussion a happy to I'll direction on didn't for a then free mean this of range either and periods the XXXX to

noted, flow. we cash for and As had performance we've a strong third free quarter year-to-date

prior expected that a the be look it has progression line to toward to the of XXXX. trends, not meaning But such similar flow a reflects this of through trend we're range. cash a strong cash free you'd in that you in We're year strong flow as free either quarter. a been past, at if year-over-year end range to indicate quarterly think prior years really QX that is strong pleased maintain continue I see direction the year to growth

So discussion Ken, you to for 'XX. over on any follow-up

Sure.

expect as to So from capital communicated the past, be we've we a that relatively flat. working perspective, in

it X that's right now, will historical elevated the and norms. sales just with see our through level levels profile, as quarter timing You'll to get we it

expect two drivers. We what we put the driving about it in XXXX, when think in primary cash and expansion that flow XXXX, is I would in

performance. operating is first The

[ we ] So as expand and to margins we those convert cash. margins

driver as going but major regarding benefits in cash investment be some are pension the peaks. and is other really There minor cash The recoveries, well it's investment historical R&D taxes as reductions levels. operations to driven by from our

Our next question Seth Seifman with from comes JPMorgan.

we munitions, missiles demand Kathy, and solid solid lot how Defense in if kind saw And We rock bit that you area. of so missiles talk of surge I sense some Systems the saw but think [ the and little and capacity I within and could little additional for in Congratulations is a a level wonder of the some rock the about to wonder about a making? And given a investments, you're investments that you enduring munitions, motor demand bit you there? into a and kind if I could that Dave see ] talk motors. investment there's and there's Ken. coming how

Yes. need for We believe And that to to have a do see that years. enduring to allies as likely multiple not result, only we multiple higher demand this is signal munitions. Ukraine. the restock pile They but donated U.S. are

support but as We we it's know, than tripling it's doubled have laying at capacity, capacity entire as moving do some you working of our our and invested to with build through ensure supported their's toward funding. And not are we point chain as more to the U.S. increased well a to capacity, capacity process. in that, government just supply the

is coming capacity time at others into there how to As when marketplace, the are come I think much look enough. a need we will

where of the plenty monitor that we'll time, in of it we're at are point and in investments get our demand are that for out to to we any there area will ahead company that we making, ensure do this we certainly don't we making, demand be signal. committed the capacity. are not But We believe place continue to facilitizing at we that as

Our next question Fargo. comes from Matt Akers Wells with

Can talk term. you trends longer about kind

you mentioned in sales now? in absolute percentage either room a remarks, I that levels. sort sort that right down kind driving of [ Is or still elevated what's versus there of of think, and historical out as Kathy, investment lower, move of opening of but terms further for the sort ] XX

cash the We more that. the years, shareholders. were is to and because were would And to true profitable there, it these take as to long-term growth I'll for continue ensure certainly for opportunities able that return to we're have in the create last want growing our company. business well in investing heavily opportunities we as business been Yes, good several the invest

growth see we still capital intensive As the we invested grow what as opportunities the the program now and to production. ahead horizon, that and of to over to this have look many not experienced in its us have have opportunities we support of we decade, as move we the business, but

years. will are naturally out pressure the going in responsive expenditure. I of by it just that, a less for at seeing years below So And be our several numbers come as haven't it has we said elevated that We've also put in down we've plan. CapEx will past XXXX. to what it And are as it still to that looks lowering historical level, to like but specific more beyond not believe the been been further we that be we about CapEx in our norm in XXXX, but not XXXX.

Our last question comes from Scott Mikus Research. Melius with

record publicly Northrop's B-XX's. Air B-XXX. for that very units, Force has I Air on XXX XXX is inventory of desired to The ask, Force production but the pleased with seems stated for Kathy, program wanted execution it's calls

least of Could With NGAD. of that inventory Force for B-XX up at the that get units? Force desired men to the your Air get part XXX the funding to Air free reevaluating to

them we for the think structure a I and providing about design me of they close we commitment give working believe to are whom where all is force structure. Well, after gives who to NGAD, undertaking production we've Scott, [ cost the focused let Force that them the for below that and short very long the Shapiro that, increasing and that looking as capability optionality. platform. well. environment has XX truly that Air customers that's on is today. they looking would premature delivering industry, Air are know the will respectively, capabilities end their I get thank the thanking review is in need Force to thinking Secretary for incredibly has the Well, from Ivan a better in the the open months, our what at. structure also I George B-XX by the that face. I this they're and of both about In exactly think me is expertise neither industry. It delivering this them The They a have for that are in quantities to to their importantly, as been review do remain how executing the and call coming and up. But about is the which miss moment retiring quarter. that amazing. talked take ], we options team another B-XX we run. in our suggest covering size specifically outstanding now dynamic for at with think But means we and mix that's the that indication various well government run, may that And just they're performance as be the And a on They Northrop options And industry XX target of want ] are role you force Rumor Grumman about [ for this they their know just the strategy. in think enjoyed years to

but to do So Dave retirement, our the congratulate the truly the best I and company XX all retirement. in quite outstanding been you -- on his addition, have not industry, in in X your with wish years want years

call. joining our if of not thanks to for before. you to in We all you look talking forward So again to January,

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