I think we all see in our day-to-day lives, prices are going up all over the place. So we tend to try to want to hold pricing flat. But the new reality is, it’s cost you more to buy components and labor. And Michelle mentioned, holding the employee benefit costs flat for 2 years in a row. Those are going to be priced into our products, plain and simple, and that’s going to help keep the profitability where it is, if not maybe even increase it. And again, we’ll try to leverage the supply chain and power the enterprise. We recently had some successful negotiations by working across all the segments and sectors, getting all the buy together and negotiating at a corporate-wide basis for actually direct material, and everybody does that for indirect, but direct is a lot harder, and we were able to pull that off.
So I think that’s a key part of it. We haven’t talked about E3. That is just in the DNA. It’s something we do every day, and that will continue to offset some of the headwinds and contribute to our bottom-line. LHX NeXt, as Michelle gave a great description is, I think, is really a key differentiator for us. It’s the continuation, like you said, of what we started with the merger. I think we did the easy stuff first and this is the harder piece and the ultimate goal is to simplify the business and change the way we do business. Everyone wants to just take an arbitrary cut to lower their G&A or overhead, but we are looking at everything and seeing if we can eliminate it, do it differently. And she gave some good early examples, but I think there’s a heck of a lot more we can do and that will contribute to lowering our cost base, which will make us more competitive and/or contribute to the bottom-line.
And I said it earlier, and I think it’s the truth. If you just look at the programs, which you don’t have all the visibility to, I appreciate. But if you don’t debook profit and you don’t have losses, the margins will just naturally grow. So that comes back to the discipline, and I will trade off revenue growth every day of the week for profitable programs. And it’s easy to say and sometimes it’s harder to do, but if we can get to the point where we’re not writing off money on programs for whatever reason, there’s only overhead material and labor sounds simple, but you have to get the right contracting vehicle, the right contracting terms, push back on the customer and negotiate a fair deal for all, and that’s something we are absolutely going to do.
Relative to the mix, I think what you’re getting out there is, we do have a portfolio, and we’re always going to have cost-plus jobs and fixed price and the cost-plus jobs, generally our development and on the front-end of a potential long-term franchise or annuity of programs. So we will bid, and we will win cost-plus programs. And we all know those margins are dilutive. But I look at it on an ROIC basis, it’s effectively infinite. So if we can get 9%, 10%, 11%, 12% cost-plus jobs that lead to low-rate production that lead to full rate production that lead to exporting. That is the grand slam of new business. We will bid it each and every time. And as a portfolio, as Michelle said, we run the company as a portfolio, we look at our financial results as a portfolio.
Some segments have a good quarter, some don’t. We put it all together, I could not be more proud of the team and what we were able to accomplish in the third quarter, we exceeded expectations on revenue, EPS and cash and it’s something we’re quite proud of.
Chris Kubasik: So I think with that, I’ll just thank everybody for joining the call this morning and another shout out to the employees who are really coming through and delivering a great third quarter. I know we’re all working hard on Q4 and can’t wait to see everybody in early December for our Investor Day down here in Florida. So with that, we will sign off, and thank you again.
Operator: Thank you. This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.
