Operator: Thank you. The next question is from the line of David Strauss with Barclays. Please proceed with your question.
David Strauss: Thanks. Good morning.
Christopher Kubasik: Good morning, David .
David Strauss: So, Chris, I guess following up on Ron’s question, SAS, I think in ’23 you did something like 8% organic growth. It looks like your guidance for this year is only 2% organic growth. So if you could touch on the slowdown there that you’re anticipating, I guess, broken out between Space and maybe the Avionics piece of the business. And then could you also touch on the forecast for Aerojet this year? It looks like if you just kind of annualize the run rate of sales, you’re not really anticipating any growth at all out of Aerojet this year. Thanks.
Christopher Kubasik: All right, David. No, good questions. Yeah, so if I look at SAS, we have several sectors there, two of them, relatively large are flat. The air domain that we’ve talked about is a flat business. It’s a good business with good margins. This is where we perform on mission systems for F-35, F-16, F-18, some classified platforms, but a relatively flat market. And as I just mentioned, those missions are migrating into Space in some cases. So that’s how we see that playing out. Mission Networks, which does a lot of work for the FAA, is a very solid business. Good margins, but that’s traditionally a pretty flat business for the foreseeable future, especially given some of the budget pressures at the FAA. So that’s two of our segments or two of our sectors.
Space is growing and Intel and Cyber are growing as well. Just as an aside, I mentioned a lot of this — more of this business is cost plus than most. So as we continue to reduce cost, I think, David, sometimes — not sometimes, it always does ultimately reduce your revenue a little bit as well. So the good news of taking out costs, you get higher margins. And as continue to say revenue is interesting, but I’ll take margins and cash and EBIT every day, and that’s a little bit of the headwind. So that’s how I see SAS coming out where it does. And second question on Aerojet Rocketdyne, interesting that you say that, because nobody really knows what their 2023 revenue is. We will disclose that in the 10-K, they only reported the first quarter.
There were four months that weren’t reported, and then we reported the five months. Anyway, when you see those numbers, you will see that we’re right around 5% top-line growth, 2024, compared to the pro-former 2023. Aerojet disclosed three months, we disclosed five. The four fell through the cracks just based on how the accounting works. So we’ll put that all in there, and you’ll see the 5% growth.
Operator: Our next question is from the line of Michael Ciarmoli with Truist Securities. Please proceed with your question.
Michael Ciarmoli: Hey, good morning, guys. Thanks for taking the question. Maybe, Chris, just to stay on Aerojet, looks like, I think, you said you got all $50 million of cost synergies achieved. I mean, it sounds like that was a lot of low-hanging fruit, public company cost. Is there more there? I mean, is that layered into the next initiative? And then I guess just on NeXt, what flowed through in the quarter? I mean, we saw the $47 million in cost. What did you net out in savings? I think the goal was $175 million for the year. And does one segment maybe benefit disproportionately as you progress through NeXt?
Christopher Kubasik: Yeah, I’ll take the first part. Ask Ken to chime in on the second part. Yeah, the $50 million, we did go quickly to realize it. It obviously was a little more lower-hanging fruit than not, but it still takes a lot of time and effort, and we execute it, and we absolutely expect to get a little more out relative to what I’d call the integration. I mean, there’s more work to do on the IT systems and tools. We have already aligned them on policies and procedures. All the personnel are already on our payroll systems, our benefit plans, and that type of stuff. So, yeah, we think there’s probably an additional $20 million or $30 million that we can get that I would call integration. That will just roll into LHX NeXt. But Ken?
Kenneth Bedingfield: Yeah. No, I agree on that front. I would say the team did a great job of working aggressively to get on top of the initial integration cost savings. We did hit that target. We’re continuing to drive for more, but at this point, the primary focus is really around some of the operational efficiencies working to drive the throughput through the business and getting what were some bottlenecks to increased production out of the way so that we can deliver these critical capabilities to our customers at Aerojet. So, great work by the team, certainly continues. And as Chris mentioned, we’ll continue to drive opportunity for further, not only integration, but I would say at this point, more importantly, operational efficiencies, again, to drive volume.
In terms of LHX NeXt, what I would say is we are very consistent at this point with what we discussed at Investor Day, the gross run rate of a $1 billion savings. We talked about, to your question, $175 million of margin improvement exiting 2024. And I think we see that across the business. I don’t necessarily see any individual sector that will benefit first from that. I think Chris talked about the margin opportunity at the sectors through 2026 in getting to our 16% margin framework, but in terms of LHX NeXt, a lot of confidence in the program, confidence in the team. We had set an initial target out there. As we started to work through it, we saw the ability to drive further savings out of that. I’ve got confidence that we’re working to drive at least to that level of savings.
