Northrop Grumman Corporation (NYSE:NOC) Q2 2023 Earnings Call Transcript

George Shapiro: Yes, hello. On the options for the B-21, I mean you still got the same commentary in the queue. I think that you’ve been expecting the first option to get called in the third quarter. Is that the time yet that we’d expect to see some real update on what the losses might be. And if that will you sit there and provide a number for that one option and then subsequently rate fill other options are exercised and what you’re thinking as to how you will handle that. Thanks.

David Keffer: Hey George, it’s Dave. So, as we talked about on the call, the first flight at aircraft was successfully powered on in Q2. We remain on track for first flight this year. Again, that timing continues to depend on events and data of course over time. And we anticipate that that first LRIP contract will be awarded following first flight. We will continue to evaluate the performance in the outlook for B-21 LRIP as well as the EMD portion of the program on a quarterly basis and provide updates as we have them. Of course, those will be informed by continued progress in driving efficiencies on the program as well as our understanding of that first LRIP contract lot and beyond. So, we’ll take all of that into account each quarter as we update our thinking.

Operator: Thank you. One moment for questions.

Kathy Warden: Go ahead, well you can give us a follow-up.

David Keffer: We can take that one follow-up if you don’t mind.

Operator: Oh, no problem. [Audio Gap] — 9% or so. So, about half what you experienced in the first step. Can you provide reasons for that slowing?

David Keffer: Sure. A few things I’d point out there. Obviously the growth rate for the year for space is increased with its guidance update to the low double-digits now and we’re really pleased with that. The first half of the year has been close to that 17% range. Some of what you see there is just a matter of the year-over-year compares where the first two quarters of the year were a bit lighter compared than Q4 in particular. And that’s frankly the case across the business. We had a tremendous Q4 for sales volume in 2022, so we anticipate that the touch compare will lead to a lighter year-over-year growth rate in the second half of the year across all four of our segments as we get to Q4. But overall the sequential growth is where we’ll continue to look for from space and other sectors.

When you look across the company, you’ve got about 51% of our sales guidance in the second half, 49% in the first half. So, you see the demonstration of continued sequential growth and the year-over-year growth rates are more of a matter of those compares.

Unidentified Analyst: Okay. Thanks very much, Dave.

Operator: Thank you. One moment for questions. Our next question comes from Seth Seifman with JPMorgan. You may proceed.

Seth Seifman: Hey, thanks very much. Good morning. I wanted to ask first about space and it seems like definitely I appreciate the detailed commentary on the overall margin outlook. It seems like space has been the business where a lot of that margin pressure has been felt most not just maybe from foreseeable things like mix but from surprises that have caused the company to go down the margin there. What is it about the portfolio in space that’s driving that now? And how do you assess the risk from here, is space still the sector where there is maybe the most margin risk due to continued work on fixed price development programs like HALO and maybe exposure to either the SDA Tranches which I think are also kind of fixed price development work. How do you see that now?