Kathy Warden: So they were largely in line with our expectations, which is reflected in the fact that we had no EAC change in the quarter. We are far along in negotiations with all of our suppliers, and we expect to be closing on those shortly that we’re making sure that we have the best scale possible and that we work those negotiations diligently. So I’m not at a time barrier to the team more so an outcome set of objectives for them, and they’re doing quite well against those expectations. And our suppliers are obviously key to us. We want to make sure that they are able to support investment in this program that’s necessary. And so we’re taking their interest in line as well.
Gavin Parsons: Okay. Great. That’s helpful. And then, Dave, maybe just on Aeronautics margin, I think you mentioned the strength in 1Q will be a little lighter through the rest of the year. But was 1Q as expected? Was that in guide? Or did you perform better than you thought you would in the first quarter?
David Keffer: The first quarter was particularly strong, as we mentioned. We had anticipated an opportunity for productivity gains and indirect rate-driven enhancement to the margin as well this year that was baked into our guidance, and the timing was such that a lot of that came in, in the first quarter, which is why we’ve noted that we expect the margin rate to be slightly lower in subsequent quarters than it was right out of the gate at 10%. And so while there’s no single onetime item in the first quarter, it was a particularly strong start and a great way to kick off the year for AS.
Gavin Parsons: Thank you, both.
Operator: Thank you. One moment for questions. Our next question comes from Matt Akers with Wells Fargo. You may proceed.
Matthew Akers: Hey good morning guys. Thanks for the questions. I wanted to ask on Sentinel. You mentioned you’re supporting the Nunn-McCurdy review. Just curious what you think the outcomes of that could be? And if there’s any risk to that program or do you think that’s not the case just given sort of health criticality?
Kathy Warden: Well, there has been strong bipartisan support for the program. We expect that will continue. It, of course, is the nation’s policy as reviewed in the nuclear posture review to have 3 legs of strategic deterrent. So we do expect that the program will be recertified, but the government needs to take the process seriously. It’s a good process and they’re working through the phases of that recertification now. And as I said, we’re providing support to them and stay committed and very focused on delivering the program in the meantime, not getting distracted by the activity associated with the Nunn-McCurdy but supporting it fully.
Matthew Akers: Yes. Got it. And I guess one for Dave. Just thoughts on where EACs at the company level kind of go from here, you’re still running quite a bit below where you were a couple of years ago, it sounds like AS had some good EACs, but just thoughts on the progress from here.
David Keffer: Sure. I agree with your characterization that there was good progress in the first quarter. And you’ll see that further detailed in our 10-Q disclosures as well. We had been running substantially above the levels of 2022 and 2023 in prior years before the macroeconomic disruptions. And so over time, we anticipate that we will normalize to levels more like our history and we saw progress towards that in the first quarter, as you mentioned, particularly in AS. But really across the business, you’re seeing the results of our heavy focus on program performance and cost efficiency. It’s one of the three drivers that we anticipate for margin expansion, along with business mix enhancement, and the gradual decline of macroeconomic pressures. And so across those three dimensions, we see an opportunity to continue to see margins normalize over the next several years, and Q1 was a good example of what you can anticipate there.
Matthew Akers: Great. Thank you.
Operator: Thank you. One moment for questions. Our next question comes from Jason Gursky with Citi. You may proceed.
Jason Gursky: Hey good morning everybody. Kathy, I was wondering if I could ask you to dive a little deep on the space business in two areas, maybe starting with sensors and patent loads. And talk a little bit about the pipeline of business opportunity that you have there where you’re seeing the most interest kind of like type of sensor, letter optical communications, SAAR, RF, that kind of thing. Just talk a little bit about the general kind of ecosystem and what’s going on in the sensors and payload business that you’ve got there and what you’re kind of excited about today?
Kathy Warden: So we are seeing interest in modernizing really the entire architecture and space. And I’ve been talking about this for a while, so whether it’s intelligence surveillance reconnaissance, communications, missile warning and tracking, the entire space architecture is being upgraded, both in terms of advancing the capability of those sensors and payloads but also the coverage with the broadening of the space architecture. And so we’re involved selectively in all of those areas. As you know, we play a key role in ISR communications, and very informed of both missile tracking and missile warning. So really, we have a very broad portfolio that stretches across those areas we don’t focus in on one over the other, and we see them all equally attractive and really, in many ways, that modernization is well underway and is what has contributed to the strong growth of our backlog and space over the last few years.
Jason Gursky: Okay. And maybe a similar kind of discussion on the ground systems side of things and whether that’s all the sensor payloads that we’re launching open space are driving the ground system business, just kind of what the competitive environment looks like for you there?
Kathy Warden: Yes. They are, and we do participate in the ground segment. I’d say our strength is more in the sensors and payloads we look at a full integrated solution and often are asked by the government to support them on the ground systems development that go with the satellites that we’re fielding. And so we see that as a marketplace where we absolutely can compete. We just choose to be a bit more selective there, again, back to where we’re differentiated.
Jason Gursky: Great. Thank you.
Kathy Warden: Thank you.
Todd Ernst: Just have time for one more question.
Operator: One moment for our last question. And our last question comes from Peter Arment with Baird. You may proceed.
Peter Arment: Hey good morning Kathy and Dave. Nice results. Kathy, can you maybe just talk a little bit about what you expect on your CapEx kind of profile when we think about last year, you had a big step up and things are staying elevated here, but you also have just tremendous demand signals, both domestically and internationally. Just how you’re thinking about how CapEx should trend? Have you made enough of the investment? It sounds like you have on the solid rocket side and microelectronics, but just thinking about more broadly?
Kathy Warden: Yes. Some part of why we highlighted today some of those investments that we’re making that will support growth over the long-term is to reflect the statements that we’ve made that we do see this year being the peak 4% of revenue CapEx expenditures and then starting to see those come down gradually more towards a normalized level in our company. Still see those as a robust growth environment. And so there will be investments that we’re making. We’re committed to do that. But we do not see the same demand for those investments over the next several years that we’ve seen over the last several.
Peter Arment: Very helpful. Thanks.
Kathy Warden: Well, thank you all for joining us on the call today. We, as you see, we’re off to a strong start to the year, and we will carry that momentum into the following quarters as our team focuses relentlessly on delivering that technology advantage for our customers and value to our shareholders. So thanks again for joining us. I look forward to speaking with you on our next call in July.
Operator: Thank you. Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation.
