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

Kathy Warden: Right. So, we’re really pleased with the progress that we’ve seen this year, our sales guidance increasing at space and TS and our other two sectors continuing to see progression towards their growth objectives as well. As we think about this year, a good portion of that growth is the strong backlog that we developed and continued win of competitive bid. Part of it too though is what we’ve been talking about with the phenomena of having supplier deliveries to late last year and starting to come in this year having ramped our headcount significantly in the latter part of last year and early part of this year, is contributing to growth rate. Those elements you wouldn’t think of as it continued, it was a bit of at that wave that we’ve now seen come into this year. But the growth based on backlog performance and new winds, we do expect to continue into next year and its better see another year of healthy growth in 2024.

David Keffer: And the other point I’d add is to your point David around the segment level view. We do expect the growth to be more balanced going forward with opportunities for growth in each of the four sectors as we demonstrated in this period in Q2. We see the growth in our defense systems business having recovered really nicely over the last couple of quarters. There were continued opportunities really across all four of the segments to drive growth.

David Strauss: Great. A quick follow-up on the F-18. How big is that still for you today and when would you expect that to completely run off?

David Keffer: Sure. Consistent with the commentary from our prime on the program, we do anticipate that production will wind down over the next couple of years. And for us it’s 1% or less of sales and therefore not too dramatically impactful to the overall company topline. It’s incorporated into our thinking about opportunities for growth in sales that AES over the next couple of years as are the other moving pieces we talked about throughout the call today.

Operator: Thank you. One moment for questions. Our next question comes from Jason Gursky with Citigroup. You may proceed.

Jason Gursky: Yes, and good morning everybody. Audio has been a little choppy this morning. So, I apologize if you’ve already commented on this. But the comments you made early in your prepared remarks Kathy about the backlog of which you had at the end of ’21 and where you are going to sit as you exit this year with having delivered about 70% of that backlog. I’m just kind of curious the remaining 30% that is still in front of you, what how big is the B-21 program in the remainder of that 30% which you’ve got still going on?

Kathy Warden: So, the remainder of backlog on B-21 is relatively small because what’s in backlog is the EMD program completion. Production has yet to be awarded, so the lots we’ve been talking about is how to get to the first slot of production and contract later this year. But of course, it is priced and so that is a contractual commitment, but we have not yet been awarded it, so it’s not showing up in backlog. Programs that are a significant amount of that backlog, our program like Sentinel, a sizable program that was awarded in 2020 or 2021 and is going to carry forward for several more years as part of that EMD program and backlog. And there are several others, but none that rise to that level. But I will remind you that Sentinel program is a cost plus program.