Q2 2025 Northrop Grumman Corp Earnings Call
Unknown Executive: Today's call is being recorded.
Josh: My name is Josh, and I will be your operator today. At this time, all participants are in a listen-only mode.
Todd Ernst: I would like to turn the call over to your host, Mr. Todd Ernst, Vice President, Investor Relations. Mr. Ernst, please proceed.
Todd Ernst: Thanks, Josh, and good morning, everyone, and welcome to Northrop Grumman's second quarter 2025 conference call. Before we start, matters discussed on today's call, including guidance and outlooks for 2025 and beyond, reflect the company's judgment based on information available at the time of this call. They constitute forward-looking statements pursuant to safe harbor provisions of federal securities laws. Forward-looking statements involve risks and uncertainties, including those noted in today's press release and our SAC filings. These risks and uncertainties may cause actual company results to differ materially.
A good day, ladies and gentlemen, and welcome to Northrup. Grumman's, second quarter 2025 conference call. Today's call is being recorded. My name is Josh and I will be your operator today. At this time, all participants are in a listen-only mode. I would like to turn the call over to your host Mr. Todd erns, vice president, investor relations Mrs. Please proceed.
Todd Ernst: Today's call will include non-GAAP financial measures that are reconciled to our GAAP results in our earnings release.
Versions of federal Securities laws for looking statements. Involve risks and uncertainties, including those noted in today's press release and our SEC filings. These risks, and uncertainties, may cause actual company results to different material.
Todd Ernst: In addition, we will refer to a presentation that is posted to our investor relations website.
Speaker Change: Today's call will include non-gaap Financial measures that are reconciled to our Gap results in our earnings release. In addition, we will refer to a presentation that is posted to our investor relations website.
Kathy Warden: On the call today are Kathy Warden, our Chair, CEO, and President, and Ken Crews, our CFO. At this time, I'd like to turn the call over to Kathy. Kathy? Todd, good morning everyone, and thank you for joining us. As you saw from this morning's earnings release, we delivered a strong second quarter. The breadth and depth of our company's portfolio and our ability to respond with speed to our customers' needs continues to drive robust growth as evidenced by our strong backlog. In addition, our revenue increased 9% compared to the first quarter. The team also delivered outstanding operating performance this quarter, as demonstrated by an 11.8% segment operating margin.
Speaker Change: On the call today, our Kathy Warden, our chair CEO and president and Ken crews are CFO at this time. I'd like to turn the call over to Kathy Kathy.
Speaker Change: Todd. Good morning, everyone. And thank you for joining us.
As you saw from this morning's earnings release, we delivered a strong second quarter.
So, breadth and depth of our company's portfolio and our ability to respond with speed to our customers, needs continues to drive for robust growth as evidenced by our strong backlog.
Speaker Change: In addition, our Revenue increased 9% compared to the first quarter with higher sequential sales, in all 4 segments,
Kathy Warden: As we look toward the second half of the year, we expect continued ramp on franchise programs and normal operational seasonality to support accelerating growth. We also expect segment margins to remain strong, consistent with our first half performance, excluding the B-21 charge, and this is driven by performance, favorable mix, and international growth. Based on the strength of our second quarter results and confidence in our second half outlook, we are increasing our guidance for segment operating income, earnings per share, and free cash flow. The US and our allies are making significant investments in defense capabilities, and we continue to see growing demand and opportunity for our broad range of product offering.
the team also delivered outstanding operating performance this quarter as demonstrated by an 11.8% segment, operating margin
As we look toward the second half of the year, we expect continued ramp on franchise programs and normal operational seasonality to support accelerating growth.
Speaker Change: We also expect segment margins to remain strong consistent with our first house performance. Excluding the B21 charge in the sister of in by performance favorable mix and international growth.
Speaker Change: Based on the strength of our second quarter results and confidence in our second, half Outlook. We are increasing our guidance for Segment operating income earnings per share and free cash flow.
Kathy Warden: Whether in the space, air, land, cyber, or undersea domain, our technologies and our ability to integrate hardware and software for mission solutions are core to what customers need today. Domestically, these investments in defense are highlighted by the recently enacted Reconciliation Bill and FY26 budget request, which represents a combined 22% increase in procurement and RDT&E over fiscal year 2025. This includes investments in Northrop Grumman programs and new potential growth areas. And the demand acceleration for our products extends outside the United States. In the second quarter, our international sales grew by 18% year over year, and are up 14% year to date.
Speaker Change: The us and our allies are making significant investments in Defence capabilities. And we continue to see growing demand and opportunity for our broad range of product offerings.
Speaker Change: Whether in the space are land cyber or undersea domain, our Technologies and our ability to integrate hardware and software for Mission Solutions. Our core to what customers need today.
Speaker Change: Domestically these investments in Defence are highlighted by the recently, enacted reconciliation Bill and FY. 26 budget requests.
Which represents a combined 22% increase in procurement and rdt&e over fiscal year 2025?
Speaker Change: This includes investments in North Grumman programs.
Speaker Change: And new potential growth areas.
Speaker Change: And the demand acceleration for our products extends outside the United States.
Kathy Warden: We have a strong international book to build for aircraft, weapons, missile defense, and airborne systems. In Europe, we see significant opportunities for IDCS and weapon systems. And in the Middle East, where I joined the president in May, there are several multi-billion dollar opportunities in integrated air and missile defense, munitions, E2D, Argym-ER, and ground-based radars. As part of our international strategy, we have extensive partnerships to support local industrial based growth. With a commitment to continue innovating and investing in capacity and a strong global demand signal from our customers, we are confident in our long-range potential growth.
Speaker Change: In the second quarter, our International sales grew by 18% year-over-year and are up 14% year to date.
We have a strong International book to bill for aircraft weapons missile defense and Airborne systems.
In Europe, we see significant opportunities for ibcs and weapon systems and in the Middle East. Where I joined the president in May, there are several multi-billion dollar opportunities in in integrated air and missile defense Munitions, e2d argaam, ER, and ground-based radars.
our International strategy, we have extensive Partnerships to support local,
Kathy Warden: One area of expected growth that I'll highlight today is air and missile defense. With products such as IDCS and GPI, we're positioned as a key capability provider for missile defense to customers around the globe. And as we look to Golden Dome for America, we see Northrop Grumman playing a crucial role in supporting the administration's goal to move with speed and have initial operating capability in place within the next few years. This includes current products that can be brought to bear, like IBCS, Gator, Triton, and programs in a restricted portfolio, just to name a few. It will also include new innovations, like space-based interceptors, which we're testing now.
Speaker Change: 1 area of expected growth that I'll highlight today is air and missile defense.
Speaker Change: Products such as ibcs and GPI were positioned as a key capability provider for missile defense to customers around the globe.
Speaker Change: And as we look to golden dome for America, we see northworks the administration's goal to move with speed and have initial operating capability in place within the next few years.
Speaker Change: this includes current products that can be brought to bear like ibcs gator, Triton and programs in our restricted portfolio, just to name a few
Kathy Warden: We have the ability to work across the entire architecture, and we bring the scale, innovation, and research and development expertise that we can apply to each layer of this critical homeland defense initiative. Golden Dome is just one example of how the administration is pushing for differentiating capabilities at speed and scale to achieve peace through strength. Importantly, they've recognized the need to remove barriers for industry and government that prevent us from moving faster. We are already seeing the benefits of this to include our work on Sentinel and V21. On Sentinel, we made significant progress on the program restructuring in the second quarter.
Speaker Change: it will also include new Innovations, like space-based interceptors, which we're testing now,
Speaker Change: we have the ability to work across the entire architecture and we bring the scale, Innovation and research and development expertise that we can apply to each layer of this critical, Homeland Defense Initiative,
Golden dome is just 1. Example of how the administration is pushing for differentiating capabilities at speed and scale to achieve peace through strength.
To remove barriers for industry and government that prevent us from moving faster.
Speaker Change: We are already seeing the benefits of this.
Speaker Change: To include our work on Sentinel and B21.
Kathy Warden: In close partnership with the Air Force, we reached agreement on a restructure approach which will lead to reestablishment of the program baseline. The work suspension on most aspects of the command and launch portion of the program was lifted, and we've resumed work on launch facility requirements and design. We continue to ramp on the program and make progress through development, testing, and risk reduction activities. Our second quarter results include strong fentanyl growth as well as a positive earnings adjustment, reflecting the agreements we reached with our customer, and improved confidence in achieving various performance incentives. We expect Sentinel revenue momentum to continue and for the program to be a meaningful contributor to our growth in the second half of the year.
Speaker Change: On fentanyl we made significant progress on the program. Restructuring in the second quarter,
Speaker Change: In close partnership with the Air Force. We reached agreement on a restructure approach, which will lead to reestablishment of the program Baseline.
Speaker Change: The work suspension on most aspects of the command and launch portion of the program was lifted and we've resumed work on launch facility requirements in design.
Speaker Change: We continue to ramp on the program.
Speaker Change: And make progress through development testing and risk reduction activities.
Speaker Change: Our second quarter results include strong fentanyl growth, as well as a positive earnings adjustment reflecting the agreements. We reached with our customer and improved confidence in achieving various performance incentives.
Kathy Warden: In partnership with the Department of Defense, we continue to work on acceleration options for the program, and we're confident in our ability to execute all phases of the program and deliver this critical capability for our nation.
We expect Sentinel Revenue, momentum to continue and for the program to be a meaningful, contributor to our growth in the second half of the year.
Speaker Change: In partnership with the Department of Defense, we continue to work on acceleration options for the program and we're confident in our ability to execute All Phases of the program and deliver this critical capability for our nation.
Kathy Warden: On the B-21 program, it continues to be well supported by the Defense Department and Congress, and the value and importance of a stealth strategic bomber was certainly shown with Operation Midnight Hammer. The Air Force has recently confirmed it is committed to the successful fielding of the B-21 and is investing in the infrastructure necessary to support an increased yearly production capacity. Through reconciliation, the B-21 received an additional $4.5 billion to increase production capacity. This builds on the efforts that we in the Air Force have made previously to prepare for a more rapid production ramp. We are in discussions with the Air Force regarding the potential for an accelerated production ramp on the program.
On the B21 program, it continues to be well supported by the defense department and Congress.
Speaker Change: And the value and importance of a stealth strategic. Bomber with certainly shown with operation midnight hammer.
Speaker Change: The Air Force has recently confirmed. It is committed to the successful Fielding of the B-21 and is investing in the infrastructure. Necessary to support an increase yearly production capacity,
Speaker Change: Through reconciliation, the B21 received an additional 4.5 billion dollars to increase production capacity.
This Builds on the efforts that we in the Air Force have made previously to prepare for a more rapid production ramp
Kathy Warden: And while the ultimate outcome of these discussions remain uncertain, we currently expect any agreement to accelerate production ramp would require further investment by the company to expand production capacity, along with the opportunity to earn improved returns on the LRIP and NTE production lots.
Speaker Change: We are in discussions with the Air Force, regarding the potential, for an accelerated production ramp on the program. And while the ultimate outcome of these discussions, remain uncertain. We currently expect any agreement to accelerate production ramps would require further investment by the company to expand production capacity along with the opportunity to earn improved Returns on the lrip and nte production lot.
Kathy Warden: With a pace of change and advancements in technology coupled with our customers push for speed, we are constantly working to introduce new technologies and concepts to address our customers needs. Beacon, which is highlighted on the cover of our slide deck, is one example of how we approach this. With Beacon, which we revealed in the second quarter, we've taken decades of autonomy experience and 500,000 autonomous flight hours to create a flying mission test bed. We bring software from companies of all sizes together with our flight software and hardware. Beacon will accelerate autonomous mission capabilities for our customers by allowing a variety of industry partners to move faster because of the work Northrop has done and is doing on autonomy.
With a pace of change in advancements in technology, coupled with our customers push for Speed. We are constantly working to introduce new technologies and Concepts to address our customers needs.
Beacon, which is highlighted on the cover of our slide deck is 1 example of how we approach this.
Speaker Change: with Beacon, which we revealed in the second quarter, we've taken Decades of autonomy experience,
Speaker Change: and 500,000, autonomous flight hours.
Speaker Change: To create a flying Mission test bed.
Speaker Change: We bring software from companies of all sizes together with our flight software and Hardware.
Kathy Warden: Our investment in Beacon also supports the administration's call for more next-generation autonomous systems. Before wrapping my remarks, I want to highlight the importance of our strategy to invest in the business. The speed of bringing technology to market is important in this environment, and capacity is an important enabler to rapidly fielding capability. The capital investments we've made, and that we continue to make, allow us to meet this demand from our customers, remain competitive, and lay the groundwork for our future growth. In the area of solid rocket motors, we have invested a billion dollars over the past six years, significantly improving our capacity and flexibility across multiple facilities.
Speaker Change: Beacon will accelerate autonomous Mission capabilities for our customers by allowing a variety of Industry Partners to move faster because of the work Northrop has done and is doing on autonomy.
Speaker Change: Our investment in Beacon also supports the administration's call for more Next Generation autonomous systems.
Speaker Change: Happy my remarks. I want to highlight the importance of our strategy to invest in the business.
Speaker Change: Speed of bringing technology to Market is important in this environment, and capacity is an important enabler to rapidly Fielding capability.
Speaker Change: The capital Investments we've made and that we continue to make allow us to meet this demand from our customers remain competitive and lay the groundwork for our future growth.
Kathy Warden: This includes investments at the Allegheny Ballistic Laboratory facility in West Virginia for small motors and in Elkton, Maryland for medium sized and hypersonic motors, both of which support growth in our tactical weapons business at DS. As a result of this investment, we were recently selected by the U.S. Navy to provide the 21-inch second-stage solid rocket motor for its extended-range missile program. We developed and demonstrated this capability in less than a year. In the space segment, our investments at the Bacchus facility for large rocket motors support the build out of the Kuiper satellite constellation. Overall, we expect to increase our total annual solid rocket motor production rate from 13,000 units today to 25,000 by 2029.
Speaker Change: In the area of solid rocket Motors. We have invested a billion dollars over the past 6. Years significantly, improving our capacity and flexibility across multiple facilities.
Speaker Change: This includes Investments at the iligan ballistic laboratory facility, in West Virginia for small motors.
Speaker Change: And in Elkton, Maryland for medium-sized and Hypersonic Motors.
Speaker Change: Both of which support growth in our tactical weapons business at DS.
Speaker Change: As a result of this investment, we were recently selected by the US Navy to provide the 21-inch, second stage solid rocket motor for its extended range missile programs.
Speaker Change: We developed and demonstrated this capability in less than a year.
In the space segment our investments, at the Bacchus facility for large Rocket Motors, support the buildout of the Kyper satellite constellation.
Kathy Warden: We will continue to make strategic investments in our business to ensure we have the scale and capabilities needed to support our customers effectively. This includes emerging missile defense opportunities such as Golden Dome for America and second source qualification for several tactical missiles.
Speaker Change: From 13,000 units today to 25,000 by 2029.
We will continue to make strategic investments in our business. To ensure we have the scale and capabilities needed to support our customers effectively.
Speaker Change: This includes emerging missile defense opportunities such in Gold such as golden dome for America and Second Source. Qualification for several tactical missiles.
Kathy Warden: At the same time, we remain committed to returning capital to shareholders. This includes returning approximately 100% of our free cash flow to our shareholders through dividends and share repurchases this year. We repurchased nearly $900 million in stock in the first half of the year, and in the second quarter, we announced a 12% increase in our quarterly dividends, marking our 22nd consecutive annual increase. This increase is supported by the strong growth in free cash flow at the company. Reflecting our focus on delivering long term value to shareholders over the past 10 years, we've increased our dividend at approximately 11% compounded annual growth rate.
Speaker Change: At the same time, we remain committed to returning Capital to shareholders.
Speaker Change: This includes returning approximately 100% of our free cash flow to our shareholders through dividends and share repurchases this year.
Speaker Change: We've repurchased nearly 900 million in stock in the first half of the year. And in the second quarter, we announced a 12% increase in our quarterly dividends marking our 22nd consecutive annual increase.
This increase is supported by the strong growth in free cash flow at the company.
Reflecting our focus on delivering long-term value to shareholders over the past 10 years, we've increased our dividend at approximately 11% compounded, annual growth rate.
Kathy Warden: In summary, I'd like to thank our team for an excellent quarter. We have an outstanding portfolio, robust global demand and funding environment that supports it, and a high-performing team. This all leads to a strong outlook for our company.
Speaker Change: In summary, I'd like to thank our team for an excellent quarter. We have an outstanding portfolio robust Global demand and funding that supports it and a high-performing team.
This all leads to a strong outlook for our company.
Todd Ernst: I'll now turn to Ken to share more details on our second quarter financial results and our outlook.
Ken Crews: Ken. Good morning, everyone. I'll begin my comment with top-line results for the quarter. As shown on slide 4 in the earnings deck, second quarter sales were $10.4 billion, up 1% year-over-year. Sequentially, Q2 sales were up 9% compared to Q1, with all segments contributing to this meaningful growth. And organic sales were $10.3 billion, up 2% year-over-year, reflecting the divestiture of the training services business which closed ahead of schedule at the end of May. Aeronautic second quarter sales increased by 2% year over year due to higher volume on B-21 and TACMO, partially offset by lower restricted sales.
Speaker Change: I'll now turn to Ken to share more details on our second quarter Financial results and our Outlook Ken
Hey, Kathy, and good morning everyone. I'll begin my comment with Topline results for the quarter.
As shown 054 in the earnings deck. Second quarter sales for 10.4 billion up. 1% year-over-year sequentially, Q2 sales were up 9% compared to q1 with all segments contributing to this being full growth.
Speaker Change: And organic sales were 10.3 billion up 2% year-over-year reflecting the dest of the training services business which closed ahead of schedule at the end of May.
Ken Crews: At CS, sales grew by 7% on a gap basis driven by the Sentinel program and from higher ammunition sales. The training services business generated $40 million of sales in Q2 before the transaction closed. So on an organic basis, DS sales increased 9% compared to the prior year. Mission Systems was our fastest-growing segment in Q2, with sales up by 14% year-over-year. This was driven in part by liquidation of inventory on a restricted award received in the period, which we had originally expected in Q1, and higher volume on marine programs. And at Space, Q2 sales were lower, primarily due to the previously communicated wind-down of work on two programs, reflecting $283 million of year-over-year headcount.
Speaker Change: Aeronautics second quarter sales increased by 2% year-over-year due to higher volume on B21, and tax mode partially offset by lower restricted sales.
Speaker Change: At DS, sales, grew by 7% on a gap basis. Driven by The Sentinel program and from higher ammunition sales,
The training services, business generated $40 million of sales in Q2 before the transaction closed.
Speaker Change: So, on our organic basis, DSL is increased 9% compared to the prior year.
Speaker Change: Mission systems was our fastest growing segments in Q2 with sales up by 14% year-over-year.
Speaker Change: By liquidation of inventory on a restricted award received in the period.
Speaker Change: Which we had originally expected in q1.
And higher volume on Marine programs.
Speaker Change: and at space, Q2 sales were lower primarily due to the previously communicated windown of work on 2 Programs, reflecting 283 million a year of your headwinds
Ken Crews: Turning to slide five. Operational performance for the quarter was strong. Segment operating income was higher by 11% compared to Q2 of last year, and our segment operating margin rate increased 100 basis points year-over-year to 11.8%. AF's operating income was up 3% compared to the prior year, with a Q2 operating margin rate of 10.3%. This portfolio continues to have a mix of mature production programs and newer development programs. And coupled with strong program execution and disciplined cost management, it provides a formula for AF to deliver healthy margin rates. Defense Systems had a standout quarter of margin performance, with a quarter to margin rate improving to 12.7%.
Speaker Change: Turning to slide 5 operational performance for the quarter was strong segment. Operating income was higher by 11% compared to Q2 of last year and our segment operating margin rate increased 100 basis points year over year to 11.8%.
Speaker Change: as operating income was up, 3% compared to the prior year with a Q2 operating margin rate of 10.3%,
This portfolio continues to have a mix of mature production programs and newer development programs.
Speaker Change: and with coupled with strong program, execution, and discipline cost management and provides a formula for as to deliver healthy margin rates,
Ken Crews: This performance was driven by the recognition of a favorable EAC adjustment on the EMD phase of the Sentinel Program, primarily based on expectations for achieving certain contract incentives. Admission systems, second quarter margins expanded to 14%, and operating income increased 22% year-over-year. This quarter's margins reflect improved production efficiencies and performance across Airborne Radar Program. And at Space Systems, operating income dollars were reflective of the lower sales volume, partially offset by improved program performance. Operating Margin Rate was 10.6%, up 50 basis points from Q2 of last year, driven by higher net EAC adjustments.
Speaker Change: Defense systems had a standout order of margin performance with a quarter to margin rate, improving to 12.7%.
Speaker Change: This performance was driven by the recognition of a favorable EAC adjustment, on the EMD phase of the Sentinel program primarily based on expectations for achieving certain contract incentives.
Speaker Change: At mission systems, second quarter margins expanded to 14% And operating income increased 22% year-over-year.
Is marked and reflect improved production, efficiencies and performance across Airborne radar programs.
Speaker Change: And at Space Systems, operating income dollars were reflective of the lower sales volume. Partially offset by approved program performance.
Speaker Change: Operating margin rate was 10.6% up 50 basis points from Q2 of last year, driven by higher net. EAC adjustments.
Ken Crews: Moving to earnings per share. Slide six shows year-over-year EPS comparison. In total, second quarter diluted earnings per share was $8.15, an increase of 28% compared to the second quarter of 2024. This was driven by two factors, higher sales and improved segment performance, which contributed 80 cents of year-over-year benefit and a gain of $1.04 recognized on the divestiture of the training service.
Speaker Change: A gain of A14 Cent recognized on the Destra of the training services business.
Ken Crews: Next, I'll provide updates on our Forward Outlook, starting with segment-level guidance on slide 7. For sales, we are maintaining our top line outlook at AS and DS of low $13 billion and low $8 billion respectively. Aeronautic cells reflect mid-single-digit annual growth, driven by the continued ramp on B-21 and Takimoto, as well as higher volume on F-35 and B-2. We continue to expect DS will achieve double-digit sales growth this year, driven by signal, IBCS, and higher volume in our weapons business, stemming from 2024 award volume. At Mission Systems, we are increasing our sales expectations to low to mid $12 billion based on the strength of their year-to-date results and continued growth on domestic and international programs throughout their portfolio, including airborne and ground-based radar, EW, and restricted programs. And at Space, we now project sales of mid to high $10 billion, reflective of the award decision on the ESS program.
Speaker Change: Next I'll provide updates on our Ford Outlook starting with segment, level, guidance, on slide 7.
Speaker Change: for sales, we are maintaining our Topline Outlook at ASN DS upload 13 billion and low 8 billion dollars respectively
Speaker Change: Aeronautics sales, reflect mid single digit, annual growth driven by the continued ramp on B21 and tacamo as well as higher volume on F-35 and B2.
Speaker Change: We can continue to expect DS will achieve double digit sales growth, this year driven by Sentinel ibcs and higher volume in our weapons, business stemming from 2024 award volume
Speaker Change: At mission systems, we are in our sales, expectations to low to mid 12 billion based on the strength of their year-to-date results and continued growth on domestic and international programs throughout their portfolio including airborne and ground-based radar. Ew and restricted programs.
And at space, we now project sales of mid to high 10 billion dollars, reflective of the award decision on the ESS program.
Ken Crews: With respect to operating margin rate, we are maintaining our margin rate expectations for AS, MS, and SPACE. At DS, we are increasing our margin rate expectations to mid-10% based on their notable Q2 results. At the company level, as shown on slide eight, we are narrowing the range on our top line outlook and expect organic sales growth of approximately 3% for the year. This outlook projects sales in the second half of the year to be higher than in the first half by approximately $2.5 billion. This increase in revenue is driven by a few factors. First, we expect the TRIAD programs on B-21, Sentinel, and Columbia to collectively deliver roughly $750 million in higher second-half sales.
Speaker Change: With respect to operating margin rate, we are maintaining our margin rate expectations for asms and space.
Speaker Change: At DS. We are increasing our margin rate. Expectations to Mid 10% based on their notable Q2 results.
Speaker Change: The company level as shown on slide 8, we are narrowing the range on our Topline Outlook and expect organic sales growth of approximately 3% for the year.
This Outlook project sales and the second half of the year to be higher than in the first half by approximately 2.5 billion dollars.
Speaker Change: This increase in revenue is driven by a few factors.
Ken Crews: B-21 LRF Lot 3 and Lot 5 Advanced Procurement are expected to be awarded in Q4. These awards will also include a significant amount of revenue recognition due to inventory liquidations for materials purchased to support production schedules. Meanwhile, the Sentinel and Columbia programs are expected to continue to ramp, including higher material receipts and subcontractor deliveries in the second half of the year. Another element of Second Half's growth is the ramp on new, recently awarded programs, including TACNEMO, IBCS, International Ground-Based Radars, and multiple ammunition programs. Collectively, these new programs are expected to contribute nearly $700 million of higher second-half sales.
Speaker Change: First, we expect the tribe programs on B21 Sentinel and Colombia to collectively deliver roughly 750 million in higher second. Half sales.
Speaker Change: B21. Alright, plot 3 and Lott. 5 Advanced procurement are expected to be awarded in Q4.
Speaker Change: These Awards will also include a significant amount of Revenue recognition due to inventory liquidations for materials purchased to support production schedules.
Speaker Change: Meanwhile, The Sentinel in Columbia programs are expected to continue to ramp including higher material receipts and subcontractor deliveries, in the second half of the year.
Speaker Change: Another element of second half growth is the ramp on new recently awarded programs.
Speaker Change: Including tact mode ibcs International ground-based Radars, and multiple ammunition programs.
Speaker Change: Collectively, these new programs are expected to contribute. Nearly 700 million of higher second, half sales
Ken Crews: And lastly, G4 has historically been our strongest quarter of revenue generation, driven by production schedules and timing of materials. We expect this normal seasonality to continue this year, contributing roughly $1 billion of higher second half sales. All together, we expect Q3 sales to be up 3% to 4% compared to Q2, with further acceleration in Q4, positioning us to deliver on our full-year sales guidance. For segment operating income, we are increasing the guidance range by $50 million at the midpoint, driven by higher margins at DS that I previously described. This reflects a company level segment OM rate of almost 11.4% in the second half.
Speaker Change: And lastly, G4 has historically been our strongest quarter of Revenue generation driven by production schedules and timing of materials.
Speaker Change: We expect this normal seasonality to continue this year, contributing roughly 1 billion of higher second. Half sales
Speaker Change: Altogether. We expect Q3 sales to be a 3 to 4% compared to Q2 with further acceleration in Q4 positioning us to deliver on our full year sales guidance.
Speaker Change: For Segment, operating income. We are increasing the guidance range by million dollars at the midpoint driven by higher margins at DS that I previously described.
Ken Crews: I reemphasize that excluding the B21 EAC adjustment in Q1, first half margins were also 11.4%. MS is expected to be the driver of margin dollar growth in the second half. The MS profile is enabled by continued strong program performance, higher international sales and seasonal volume increases to higher margin production programs later in the year. With respect to earnings per share, we are increasing our guidance range, driven by higher segment operating income. This increase in operational performance is being partially offset by non-operational item. While the reconciliation bill recently signed into law includes several provisions that benefit cash flow, it also modifies the treatment of certain R&D tax credits that increase our estimated tax rate.
Speaker Change: This reflects a company level segment om rate of almost 11.4% in the second half.
Speaker Change: I'd re-emphasize that excluding the B21 EAC adjustment in q1 first half. Margins, were also 11.4%.
Speaker Change: Ms. Is expected to be The Driver of margin dollar growth in the second half. The MS profile is enabled by continued. Strong program performance, higher, International sales and seasonal volume increases to higher margin production programs later in the year.
With respect to earnings per share, we are increasing our guidance range driven by higher segment. Operating income this increase in operational performance is being partially offset by non-operational item.
Ken Crews: As a result, we now expect a tax rate of high 17% for the year. Given the bill was approved in July, we expect an effective Q3 tax rate of approximately 21% to reflect the cumulative impacts to date. We are reaffirming our guidance for corporate unallocated expenses and expect roughly $100 million of expense in both Q3 and Q4 due to timing of state taxes and normal seasonality. Taking all those elements into account, we are increasing our EPF guidance by 5 cents and now expect a range of $25 to $25.40.
While the reconciliation Bill recently signed into law includes several Provisions, that benefit cash flow. It also modifies the treatment of certain R&D tax credits, that increase our estimated tax rate
Speaker Change: As a result, we now expect a tax rate of high 17% for the year.
Speaker Change: Given the bill was approved in July, we expect an effective Q3 tax rate of approximately 21% to reflect the cumulative impacts today.
Speaker Change: We are reaffirming our guidance for corporate and unallocated expenses and expect roughly 100 million of expense in both Q3 and Q4 due to timing of state, taxes, and normal seasonality.
Taking all those elements into account, we are increasing our EPS guidance by 5 cents and now expect a range of 25 dollars to twenty, 5 dollars and 40 cents.
Ken Crews: Lastly, with respect to cash, we are increasing our 2025 guidance range and now expect free cash flow of $3.05 billion to $3.35 billion. This increase is driven by the revision to Section 174 in the tax code related to treatment of R&D expenditures partially offset by the application of the corporate minimum tax. In the quarter, we generated $637 million in free cash flow, a significant improvement compared to the first quarter. We continue to expect the largest quarter of cash generation in the fourth quarter, consistent with our seasonal pattern and sales ramp. In addition, there are a few other unique items driving higher Q4 cash flow.
5 billion to 3.35 billion.
Speaker Change: This increase is driven by the revision to section 174 in the tax code related to treatment of R&D expenditures. Partially offset by the application of the corporate minimum tax.
Speaker Change: In the quarter, we generated 637 million in free cash flow, a significant Improvement compared to the first quarter.
Speaker Change: We continue to expect the largest quarter of tax generation in the fourth quarter, consistent with our seasonal pattern in sales ramp.
Ken Crews: First, as previously noted, reduce cash tax payments. Second, we have a higher than average level of milestone payments in the second half, including contract closeout payments at space. And lastly, we expect a significant benefit from inventory liquidations, particularly in aeronautics in Q4.
Speaker Change: In addition, there are a few other unique items driving higher Q, forecast flows.
Speaker Change: First, as previously, noted reduced cash tax payments. This year, second we have a higher than average level of Milestone payments. In the second half, including contract, closeout payments at space.
Ken Crews: In summary, we had an outstanding quarter of operational and financial performance. Sales, margins, earnings per share, and cash all increased immediately from Q1, with momentum that we expect to continue in the second half of the year. These results demonstrate the value of the Northrop Grumman portfolio, as well as our continued focus on discipline, program performance. We remain focused on delivering on our four-year commitments while executing our business strategy and deploying our capital in value-creating ways.
And lastly, we expect a significant benefit from inventory, liquidations particularly in Aeronautics and Q4.
In summary we had an outstanding quarter of operational and financial performance sales margins earnings per share in cash. All increased meaningfully from q1 with momentum that we expect to continue in the second half of the year.
Speaker Change: These results demonstrate the value of the north of GMA portfolio, as well as our continued. Focus on discipline program performance.
Unknown Executive: With that, we'll open the call to questions. Thank you.
Speaker Change: we remain focused on delivering on our full year commitments, while executing our business strategy and deploying our capital in value creating ways,
With that, we'll open the call to questions.
Unknown Executive: As a reminder, ladies and gentlemen, if you wish to ask a question, please press star 1 followed by 1 1 followed by please press star followed by 1 1 on your touchstone telephone. Again, press star 1 1 to ask a question. Please limit yourself to one question and one follow up. One moment for questions.
Speaker Change: Thank you, as a reminder, ladies and gentlemen, if you wish to ask a question, please press star 1. Followed by 1, 1, followed by, please press star. Followed by 1 1 on your touchtone. Telephone, again, press star 1, 1 to ask a question. Please limit yourself to 1 question and 1 follow-up 1 moment for questions.
Doug Arnett: Our first question comes from Doug Arnett with Bernstein, you may receive. Good morning. Thank you. Good morning. You had a really strong quarter for margins, as you described, really, really good performance. But when you look at the guidance increase for the year, it's pretty small. I mean, if you if you look at least where I think many of us were expecting this to come out, the Q2 was was really positive. Can you explain how that works, given that you're also talking about maintaining this positive momentum from Q2 into the second half? Absolutely, Doug. Thank you for the question.
Speaker Change: Our first question comes from Doug, Garnet with Bernstein. You may receive
Doug Garnet: Uh, good morning. Thank you.
Speaker Change: Good morning. Good morning.
Speaker Change: You know what, you had a really strong quarter for margins as you described really, really good performance but you know, when you look at the guidance, increase for the year, it's pretty small. I mean, if you, if you look at least where I think many of us were expecting this to come out the Q2 was, was really positive. Can you explain? You know how that works? Given that you're also talking about maintaining this positive momentum from Q2 into the second half.
Ken Crews: As mentioned in my comments, we did have very strong segment operating performance within the quarter, as you mentioned. One non operational item that offset that was the change regarding tax reform. And overall tax reform was a positive change increasing cash flow that we can invest in the business provide opportunities for people things of that However, due to general limitations on certain credits, as well as deductions related to certain R&D expenditures, the offset on operational performance was driven by that. It increased our effective tax rate. But overall, I would like to highlight the strong performance of the operations.
Speaker Change: Absolutely Doug. Thank you for the question. Um, as mentioned in my comments is we did have very strong segment operating performance within the quarter. As you mentioned. Um 1 non operational item that offset. That was the change regarding tax reform and overall tax reform was a positive change, increasing cash flow that we can invest in the business provide opportunities for people, things of that nature. However, um, due to General limitations on certain credits, um, as well as the deductions related to certain R&D expenditures,
Ken Crews: If you look across the segments, very strong performance in line with expectations where we need them to deliver in order to meet the guidance rates that we provided.
Doug Arnett: For more information visit www.FEMA.gov And then if I look forward and you look at the 2026 budget, this is sort of laid out combination of the administration's proposal plus reconciliation. There are big additions. and Funding for B-21 Sentinel. And what we're trying to understand is, if you look at that very strong funding profile. When and how might we see an impact in your revenues and earnings in those two programs? So Doug, as you know, the overall budget environment is favorable for defense with the potential of a double digit increase in FY26 when you take the FY26 budget, as well as reconciliation.
Uh the offset on the operational. Performance was driven by that, it increased our effective tax rate but overall I would like to highlight the strong performance of the operations. If you look across the segments, very strong performance in line with expectations where we need them to deliver in order to meet the guidance range that we provided
Speaker Change: And and and then if I if I look forward and you look at the 2026 budget, he says it's sort of laid out the combination of the administration's proposal plus reconciliation. There are big additions.
Speaker Change: Funding for B21 Sentinel.
and what um what we're trying to understand is if you look at that, very strong, funding profile,
Speaker Change: Should when and how might we see an impact in your revenues and earnings in those 2 Programs?
Kathy Warden: And we do expect reconciliation, although it can be spent over a multi-year period, to be loaded towards the front end of that period. With programs like E21 and Sentinel, as you note, that are receiving significant increases, E21, $4.5 billion in funding in reconciliation, Sentinel, a couple billion, and E2, which you didn't mention, with a billion and a half. We do expect those extenditures to be spread over a multi-year period, but certainly provide tailwinds going into 2026 and that those expenditures would begin as early as this year. Thank you.
Speaker Change: And that those expenditures would begin as early as this year.
Thank you.
Gavin Parsons: Our next question comes from Gavin Parsons with UBS. Good morning.
Speaker Change: Our next question comes from Gavin Parsons with UBS, you may proceed.
Gavin Parsons: Great, thanks. Good morning. Good morning.
Kathy Warden: Kathy, I believe you said in the agreement to accelerate B-21. I was hoping you could just go into it a little bit. that would allow you to reopen. LRIP or . Yes, Gavin, so the important takeaway here is that the reconciliation bill now provides the funding for the expansion of production capacity for the B-21. And so we have entered into discussions, as I have alluded to before, we were already working with the Air Force on plans to accelerate production capacity, and now we are in discussions about how those funds will be used to make that happen.
Gavin Parsons: Kathy, I believe you said any agreement to accelerate B21 further would would require further investment on your part but it would also include the ability to to earn improved returns. I was hoping you could just go into a little bit more detail on that and if that would allow you to to reopen pricing on the lrip or if that's only on future, Lots, thanks.
Kathy Warden: And we are looking to get a fair and equitable business arrangement where we would be incentivized to invest in that production capacity. And with that would come the opportunity to earn improved returns on both the remaining lots of LRIP and the MTE units, which, as you know, already have some price in MTE, but also have the ability to adjust based on inflation and other factors.
Speaker Change: Yeah. Kevin so the important takeaway here is that the reconciliation bill now provides the funding for the expansion of production capacity for the B21. And so we have entered into discussions, as I have alluded to before we were already working with the Air Force on plans to accelerate production capacity in. Uh, now we are in discussions about how those funds will be used to make that happen. And we are looking to get a fair and Equitable business Arrangement, where we would be incentivized to invest.
Kathy Warden: So taking all of that into consideration, we're in discussions now, we should have more clarity in the coming months, and we'll certainly share that with you as the business arrangement comes together. Thank you.
Speaker Change: In that production capacity and with that would come, the opportunity to earn improved Returns on both the remaining lots of elre and the nte units which as you know, already have some price, um, nte but also have the ability to adjust based on inflation and other factors. So, taking all of that into
Speaker Change: Consideration. We're in discussions. Now we should have more clarity in the coming months and we'll certainly share that with you as the business Arrangement comes together.
Speaker Change: Thank you.
Ronald Epstein: Our next question comes from Ronald Epstein with Bank of America. You may proceed. Yeah, hey, excuse me. Hey, good morning, guys. Hi, Ron. Maybe if you could talk a little bit more about international business. You said there was what, 18% international sales growth in the quarter. And any details you could share with International Backlog Growth, or how we should think about that. And how do you expect the growth to continue as NATO x the US starts to ramp up their spending towards that, you know, three and a half percent goal for sort of the core defense piece that they all sort of agreed to?
Speaker Change: Our next question comes from Ronald Epstein with Bank of America, you may proceed.
Speaker Change: Yeah. Hey excuse me. Hey good morning guys. Hi Ron. Um,
Maybe if you could talk a little bit more about um, you know, international business.
Kathy Warden: Yes.
You said there was what 18% International sales growth in the quarter and you know, any details you could share with, you know, International background growth or how how we should think about that. And how do you expect the growth uh to continue as you know, NATO X, the US starts to ramp up their spending towards that you know 3 and a half percent goals for sort of the core defense piece that they all sort of agreed to
Kathy Warden: So, as you know, there is a generational shift in defense spending that's underway in Europe. And we had seen that reflected in very strong book-to-bills, 1.4 in international. And now what we're seeing is that those awards are reflected in the strong sales growth that I mentioned, 18% year-over-year, 14% year-to-date. And so, as we look going forward, we expect those commitments that NATO countries have made to increase defense spending and general national security spending to 3.5% and 5% respectively of GDP to continue to provide a basis for this strong awards and sales growth within the company.
Kathy Warden: It's broad-based. It's certainly weapons and ammunition, but it's also integrated air and missile defense, E2, Triton sensors. So, looking across our portfolio, three of our four sectors, MS, BS, and AS, all have a very strong international pipeline. Got it.
Yes, so as you know, there is a generational shift in defense spending that's underway in Europe and we had seen that reflected in very strong book to build 1.4 in international. And now what we're seeing is that those awards are reflected in the strong sales growth that I mentioned 18% year-over-year 14% year to date. And so as we look going forward, we expect those commitments that NATO countries have made to increase defense spending and general National Security spending to 3 and a half percent to 5% respectively of GDP to continue to provide a basis for this strong Awards and sales growth within the company. It's broad-based
Weapons and ammunition, but it's also integrated air and missile defense E2 Triton sensors. So looking across our portfolio, 3 of our 4, sectors MSDS. And as all have a very strong International pipeline,
Kathy Warden: And if I can just just a quick follow up on In the quarter, you guys took a positive EAC on Sentinel, and I think that surprised everybody. I can't speak for everybody, obviously, but it surprised us, for sure, because of the press around Sentinel. You talked a little bit about it in your prepared remarks. Can you peel back any more on that, how that happened and what it means? Yes, first, we are making substantial progress on the Sentinel weapons system, the milestones that we've talked about on prior calls about test milestones, and continued maturation of design.
Got it and then if I can just just a quick follow up um on.
In the quarter. Do you guys took a positive VAC on Sentinel? And I think that surprised everybody. I I can't speak for everybody but a surprise to us for sure. Um, because of, you know, kind of the press around Sentinel and you talked a little bit about it and your prepared remarks can, can you peel back the onion? Any any more on that kind of how that happened and what it means?
Kathy Warden: There's one segment, the command and launch segment, where we had been paused on work while the Air Force was working through a restructure and revisit of both the acquisition approach and then working to rebaseline the entire program. And yet, all during that time, good progress was being made on all other aspects of the program, and that continues. Now, we have been restarted on that work in the command and launch segment, and we've made really good progress in the second quarter. I highlighted in my prepared remarks, some of that progress has come from a just open discussion about alternatives and options to accelerate the Sentinel program, and working jointly with the department to evaluate and implement those changes and get specificity around the program plan forward has helped us to be able to move more quickly and remove barriers to performance.
Kathy Warden: So, I think it's really just a transformation in how the program is operating over these last couple of quarters that will provide us that strength and stability going forward as a joint team between the government, Northrop Grumman, and all of our teammates that has improved our outlook for the program meeting its milestones, and we're just really encouraged with how it's progressing. Great, thank you very much. Thank you.
Speaker Change: Program and that continues. Now, we have been restarted on that work in the command and launch segments and we've made really good progress in the second quarter. I highlighted in my prepared remarks, some of that progress has come from a just open discussion about Alternatives and options to accelerate the Sentinel program and working, uh, jointly with the Department to evaluate and Implement those changes and get specificity around. The program plan, forward has helped us to be able to move more quickly and remove barriers to Performance. So, I think it's really just a transformation in how the program is operating over these last couple of quarters that will provide us that strength and stability. Going forward as a joint team between the government northward from and and all of our teammates that has improved. Our outlook for the program meeting.
Speaker Change: Its milestones and we're just really encouraged with how it's progressing.
Speaker Change: Great, thank you very much.
Scott Deuschle: Our next question comes from Scott Deuschle with Deutsche Bank. You may proceed. Hey, good morning. Good morning.
Thank you.
Our next question comes from Scott Daw with Deutsche Bank, you may proceed.
Kathy Warden: Kathy, can you share your latest framework and how we should be thinking about growth of space systems over the next couple of years, then how you see the segment's growth comparing to the market as a whole? Obviously, a lot going on in terms of NASA. Transcripts provided by Transcription Outsourcing, LLC. Yes, Scott, I would agree that it is the most dynamic of our market segments that we're operating in right now, both with NASA budgets in question. Of course, the Congress has provided support to continuing programs like Artemis and specifically SLS and HALO, which is where we currently have work with NASA.
Hey, good morning. Good morning.
Speaker Change: Kathy, can you share your latest framework and how we should be thinking about growth of Space Systems over the next couple of years than how you see the segments growth? Comparing to the market as a whole, obviously, a lot going on in terms of NASA, budgets DVD, budgets, Etc, in space. So just kind of a muddled picture for investors and curious for some clarity from yourself. Thank you.
Kathy Warden: I would remind you, NASA is only about three percent of our overall sales as a company, so not a big driver of our space revenues, but nonetheless important. Missions that we're supporting, we also see changes in the Department of Defense architectures and those reflected in some pauses and reconsideration of acquisition strategies ongoing right now. But if I cut through all of that noise in the near term, we do believe space budgets are going to continue to grow after a couple-year period of relative flatness from the U.S. Department of Defense on space. And we expect Golden Dome for America to be a significant driver of increased budgets that would be available to our space sector in everything from space-based interceptors to the broader support to a Golden Dome for America architecture.
Speaker Change: Getting in right now both with NASA budgets. In question, of course, the Congress has provided support to continuing programs like Artemis and specifically, Atlas and Halo, which is where we currently have, uh, work with NASA. I would remind you now. So, it's only about 3% of our overall sales is the company. So, not a big driver of our space revenues, but nonetheless, important, uh, missions that we're supporting. We also see changes in the Department of Defense architectures and those reflected in some pauses and reconsideration of acquisition strategies ongoing right now. But if I cut through all of that noise in the near term, we do believe space budgets are going to continue to grow. After a couple year period of relative flatness from uh the US Department of Defense on space and we expect golden dome for America to be a significant, right?
Kathy Warden: So overall, we are optimistic that our space business has significant opportunity ahead, would continue to grow after this year where we had talked about the business would be down, but start to regrow into 2026, and we still have that expectation. very helpful. Thank you.
Prefer of increased budgets that would be available to our space sector in everything from space-based interceptors to the broader. Uh support to a golden zone for America architecture. So overall we are optimistic that our space business, has significant opportunity ahead would continue to, uh, grow after this year where we had talked about, uh, the business would be down, but start to regrow into 2026 and we still have that expectation.
Speaker Change: Very helpful. Thank you.
Kristine Liwag: Our next question comes from Kristine Liwag with Morgan Stanley.
Speaker Change: Thank you.
Kathy Warden: Hey, good morning, everyone. Good morning. It really is about partnering, as you noted, and I noted in my prepared remarks, we have product lines that really lend themselves to working with local industry. For example, IDCS is an architecture where we provide hardware and software, but the key element of that architecture is that it can integrate indigenous systems that are part of the country's current air and missile defense, whether that be sensors or shooters, and the ability to do that locally within their industrial base. So we can bring partners in to facilitate. An example of that is in the UK where we're working with Marshall or in the Republic of Korea, where we've just signed a similar agreement with Hanwha.
Our next question comes from, Christine leag with Morgan Stanley. You may proceed.
Um hey, good morning everyone. Good morning.
Speaker Change: Hi. So so Kathy, you know,
Speaker Change: That said our European allies have been focused on growing its indigenous capabilities and shift away from the uas in the longer term. And you're prepared remarks, you talked about Partnerships with some European players and having capacity, Lockheed has a partnership with Ryan mettetal on missiles.
Speaker Change: How do you make sure that Northup Grumman would have a long-term foothold in these markets once local capabilities, catch up and they expand out their capabilities and capacity.
Kathy Warden: So we really look at these local partnerships as a way to not only bring the best capability to the country, but support local industrial base. And I've also talked in the past about co-production, where we have expertise, but it's best for a local industrial partner to actually build the capability. Munitions is a key example of this, and we just in the quarter signed another agreement, this one with a Lithuanian provider. That helps us to transfer knowledge and expertise through a license, but for them to actually have the ongoing ability to produce locally.
Speaker Change: Industrial base. And I've also talked in the past about co-production where we have expertise, but it's best for a local industrial partner to actually build the capability. Munitions is the key example of this, and we just in the quarter signed another agreement. Uh this 1 with Lithuanian with a Lithuanian provider that helps us to transfer knowledge and expertise through a license but for them to actually have the ongoing ability to produce locally.
Kathy Warden: Thanks, Kathy. And maybe as a follow up, you know, you've talked about the B-21 procurement acceleration, the restructuring of Sentinel, and the increasing orders internationally. I mean, these all showcase the strength of your portfolio. Taking a step back, when you've looked at where you've seen the most dollar changes for program funding, which three programs are you most excited about today, the change versus maybe where expectations were a year ago? So the three that I'm most excited about are three that I mentioned that are in our portfolio today. That would be B-21 with the additional four and a half billion, mainly focused on production capacity expansion.
Speaker Change: Thanks Kathy and maybe as a follow-up, you know, you've talked about the B21 procurement acceleration the restructuring of Sentinel and the increasing orders internationally. I mean these all showcase the portfolio taking a step back when you've looked at where you've seen the most uh dollar changes for program funding, which 3 programs are you most excited about today? Uh the change versus maybe where expertise expect expectations were a year ago.
Speaker Change: so, the 3 that I'm most
Kathy Warden: That's something, as you know, that we have been working for a while. And it's good to see it reflected in the reconciliation bill and to now be into discussions with the Air Force about implementing and bringing that vision to reality for the good of the Air Force. The second is Sentinel, where we have not needed additional budget increases this year, but now are seeing the opportunity in FY26 to really accelerate the program and begin working risk reduction activities that will lead to schedule and cost improvements potentially on the program. So that's very exciting. And then finally, E-2D, which has a billion and a half additional funding to support the program being extended, partly for the Homeland Defense mission, but also, you know, partly just as the only production capability that can match the E-3 and be a replacement for that capability.
Speaker Change: Excited about or 3 that I mentioned that are in our portfolio. Today that would be B21 with the additional 4 and a half billion, uh, mainly focused on production capacity expansion. That's something. As you know, that we have been working for a while and it's good to see it reflected in the reconciliation Bill. And to now be into discussions with the Air Force about implementing and bringing that Vision to reality for the good of the airport.
Kathy Warden: So those are three of our existing programs. But I'm equally excited about Golden Dome for America, which is a new set of opportunities, very significant funding there, as you know, in the reconciliation bill and our opportunity to pursue some of that work.
Speaker Change: The second is Sentinel where we have not needed additional budget increases this year but now are seeing the opportunity in FY 26 to really accelerate the program and begin working risk reduction activities that will lead to uh schedule and cost improvements potentially on the program. So that's very exciting and then finally e2d which has a billion and a half additional funding to support the program being extended partly for the Homeland defense Mission. But also you know partly just as the only production capability that can match the E3 and be a replacement for that capability. So those are 3 of our existing programs but I'm equally excited about golden dome for America, which is a new set of opportunities, very significant funding there as, you know, in the reconciliation Bill, uh, and our opportunity to pursue some of that work.
Kathy Warden: Great, thank you. Thank you.
Great. Thank you.
Robert Stallard: Our next question comes from Robert Stallard with Vertical Research. You may proceed. Thank you so much. Good morning. Kathy, I just want to dig into the Sentinel situation. It sounds like it's improved. But as I understand it, a lot of the problems are on the silos. breakout here where you can carry on an accelerated race. and then follows.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Robert Stallard. With vertical research, you may proceed.
Speaker Change: Thanks so much. Good morning. Good morning.
Kathy Warden: or is this still a It is not the way we look at it is all three segments of the program need to move forward. And that's what is most exciting about what happened in the second quarter, we actually made progress such that the work was turned back on for the launch requirements that will lead us to be able to move faster and potentially reduce costs on the program from the baseline that emerged coming out of the Nunn-McCurdy. So that is the work that we're doing right now, to bring that leg of the program in alignment with the others.
Um, Kathy just wanted to dig into this Sentinel situation. Um, it sounds like it's improved for you, for sure. Uh, but as I understood it, a lot of the problems are on the silos. Um, so is there sort of, um, some sort of breakout here where you can carry on an accelerated rate with the missiles offense, essentially, and then silos are completely independent, or is this still a pacing item for you? You know, can the customer just buy the missiles regardless?
Kathy Warden: While we have continued to make good progress on the missile and the support and sustaining equipment, we are focused now on bringing the command and launch to that same level of maturity and design.
It it is not uh, the way we look at it is all 3 segments of the program need to move forward and that that's what is most exciting about. What happened in the second quarter, we actually made progress such that the work was turned back on for the launch facilities or as you reference them, the silos themselves. And so, we are back into designing those and really nailing down with the Air Force, the appropriate requirements that will lead us to be able to move faster and potentially reduce costs on the program, from the Baseline that emerged coming out of the non mertie. So that is the work that we're doing right now to bring that leg of the program in alignment with the others. Uh, while we have continued to make good progress on the missile and the support and sustaining equipment. We are focused now on bringing the command and launch to that same level of maturity in design.
Ken Crews: I was wondering if you could give us an idea of... Yes, so when we think about cash flow in the future is we you should anticipate approximately $200 million of cash tax benefit over the next few years. And in terms of the ETR impact relative to our P&L side, it was roughly about $50 million. Thank you very much.
Speaker Change: That's great. And then just a quick look for Ken. Um, I was wondering if you could give us an idea of the annualized impact of this, uh, change to the R&D tax credit uh in terms of the, the p&l tax charge, uh and also the cash, thank you.
Speaker Change: Yes. So when we think about cash flow in the future is we you should anticipate approximately dollars of cash tax benefit over the next few years. Um, and in terms of the ETR impact relative to our p&l side, it was roughly about 50 million dollars.
Ken Crews: Thank you.
That's great. Thank you very much. Thank you. Thank you.
Thank you.
Sheila Kahyaoglu: Our next question comes from Sheila Kahyaoglu with Jeffreys, you may proceed. Good morning, Kathy, Ken, Todd, maybe Kathy, two part question on defense for you. First, just on the revenue growth profile, you called out solid rocket motors increasing to 25,000 by 2029 versus 13 today. Can you just talk about how defense systems revenue growth profile changes based on weapons commentary and international growth outlook?
Speaker Change: Our next question comes from Sheila, kalu with Jeffrey's, you may proceed.
Kathy Warden: And then second, similar questions on Sentinel to Ron and Rob, you know, how does the maturation of the command and launch segment change the E&D margin profile for defense through the end of the decade when production? Great. So let me start with your first question. And I do want to remind everyone that the 13,000 solid rocket motors to 25,000 is inclusive of small, medium and large, small and medium predominantly for our defense systems business and large for our space business. And we've been investing in all three. The work on small and medium leads to increased opportunities for our tactical weapons, both second source missiles that we are not currently a provider as well as growth on those that we are.
Speaker Change: Um, first, just on the revenue growth profile, you called out solid rocket Motors increasing to 25,000 by 2029 versus 13 today. Can you just talk about how defense systems Revenue growth profile changes based on weapons commentary and international growth Outlook and then second similar questions on Sentinel to Ron and Rob you know how does the mature, uh, maturation of the command and launch segment change? The and deep um, margin profile for defense through the end of the decade. When production starts
Kathy Warden: In addition, we have multiple programs where we are the prime and an attack weapon, a weapon, Argym-ER, and those will likely contribute significantly to growth. Each of those have an international and a domestic component. So growth in US spending and expected for international. And then the last piece that we don't talk a lot about is hypersonics. We built the hypersonics integration facility in Elkton, Maryland, and we are also providing rocket motors for those weapons as well and expect that to be an area of growth well into the future. So we have said in the past, and I still believe it to be the case that defense systems is likely to have our highest exchange growth rate over these next several years, largely fueled by weapons systems, as well as our integrated air and missile defense.
Speaker Change: Great. So let me start with your first question and I do you want to remind everyone that the 13,000 solid rocket Motors to 25,000 is inclusive of small medium, and large small and medium predominantly for our defense systems business and large for our space business. And we've been investing in all 3, the work on small and medium leads to increased opportunities for our tactical weapons. Both Second Source add missiles. That we are not currently a provider as well as growth on those that we are. In addition we have multiple programs where we are the prime standard attack weapon, a weapon, argaam e r and those will likely contribute significantly to growth.
Kathy Warden: And I talked about the strength of that portfolio. Shifting to your second question on Sentinel and the EMD margin profile, as we looked at the program in the second quarter and the agreement that we reached with the customer on how the restructure will be accomplished, but then also beyond the restructure, the pathway to rebaseline and completing EMD, that is, those agreements are what led us to have confidence to increase our overall booking rate based on our expectation for realizing incentives on the program during that phase. So, our confidence increased based on increased certainty that we have through that agreement reached with the government.
Each of those have an international and a domestic component. So growth in us, spending and expected for international. And then the last piece that we don't talk a lot about is hypersonics. We built the hypersonics, um, integration facility in Elton, Maryland. And we are also providing Rocket motors for uh, those weapons as well and expect that to be an area of growth, well, into the future. So we have said, in the past and I still believe it to be the case, the defense systems is likely to have our highest sustained growth rate over these next several years, largely fueled by Weapons Systems as well as our integrated air and missile defense. And I talked about uh, the strength of that portfolio.
Shifting to your second question, on Sentinel and the EMD margin profile. Uh, as we looked at the program in the second quarter and the agreement that we reached with the customer on how the restructure will, uh, be accomplished but then also beyond the restructure, the pathway to rebase line and completing EMD that is those Agreements are what led us to have confidence to increase our overall, uh, booking rate based on our expectation for realizing incentives on the program during that phase. So our our confidence increase based on uh, increased certainty that we have through.
Kathy Warden: And now that certainty also translates into a better platform for the integrated Air Force and Northrop Grumman team to execute on the program. The turn back on of the design work on command and launch, the pathway for taking the missile through design and testing and completing those milestones, all of which are leading us to have higher confidence in the ability to complete the EMD phase of the program. Do we still think about defense systems as a 10% margin business on a go forward basis then? So we're not ready to provide any guidance beyond this year, but certainly we raised our guidance for the segment for this year.
Speaker Change: That agreement reached with the government and now that certainty also translates into a better platform for the integrated air force and North work team to execute on the program. Uh the turn back on of the design work on command and launch the pathway for uh taking the missile through design and testing, and completing those Milestones, all of which are leading us to have higher confidence and the ability to complete the EMD phase of the program.
Speaker Change: Do we still think about defense systems as a 10% margin business on a go forward basis? Then
Kathy Warden: And the drivers for that increased confidence certainly are fundamental. They are not one time items. So, you know, I would have you wait until we give you some guidance for 26. But my expectation is that defense systems continues to perform very well and that the tailwinds for both international growth and the which is a mixed factor and performance are both leaning favorably for them. Thank you.
So you know, we're not ready to provide any guidance Beyond this year, but certainly we raised our guidance for the segment for this year and the drivers for that increased confidence certainly are fundamental. Uh, they are not 1-time items so, you know, I would have you wait until we give you some guidance for 26, but my expectations is that defense systems continues to perform very well and that the Tailwind for both International growth and the, which is a mixed factor and performance are both, uh, leaning favorably for them.
Speaker Change: Thank you.
Seth Seifman: Our next question comes from Seth Seifman with JP Morgan. You may proceed. Thanks very much and good morning.
Thank you.
Speaker Change: Our next question comes from set Siteman with JP Morgan. You may proceed.
Kathy Warden: I think you may have touched on the answers to these questions, but when you've talked about the out years before, Kathy, you've said B-21 was going to grow but probably remain a high single-digit percentage of company sales, likewise for Sentinel at mid-single digit. But now that we see this funding in the reconciliation bill, I don't know if it's possible to revive that outlook, and likewise for what it does for the $4 billion of cash flow in 2028. Yeah, so depending on the final agreement for the production rate ramp on B-21, we do now believe it could exceed the 10% of our total revenue in the future, but it's really early to provide any more definitive outlook.
Siteman: Thanks very much and uh good morning.
Kathy Warden: And as I said, in the next couple of months, as we have clarity on the entire business arrangement, we would update that. The same is really true for our cash flow outlook. As we think about the investments that we would make as part of this arrangement, the improvement and incentives that we would expect, we will look at all of that in combination to be able to update you. But it is our expectation that in the long run, these investments result in both better profitability and cash flow. And then with Sentinel and how large it could become as part of the portfolio, I don't see it reaching that 10% of revenue in the next couple of years, despite the additional funding that we've received.
Kathy Warden: But certainly, as we move into the production phase of the program, which is now still several years out, I would expect at that time, we might revisit whether it becomes a larger part of the portfolio. Great, great. Thanks very much. Thank you.
Siteman: Yeah, so depending on the final agreement for the production rate ramp on B21, we do now believe it could exceed the 10% of our total revenue in the future, but it's really early to provide any more definitive Outlook. And as I said in the next couple of months, as we have Clarity on the entire business arrangement, we would update that the same is really true for our cash flow Outlook. As we think about the Investments that we would make, as part of this Arrangement, the Improvement in incentives that we would expect. We will look at all of that in combination to be able to update you. But it is our expectation that in the long run, these Investments result in both better profitability and cash flow and then uh with Sentinel and how large it could become as part of the portfolio, I don't see it breaching that 10% of Revenue in the next couple of years despite the additional
Siteman: Funding that we've received. But certainly, as we move into the production, phase of the program,
Siteman: Which is now still several years out. Uh I I would expect at that time, we might revisit whether it becomes a larger part of the portfolio.
Great, great. Thanks very much. Thank you.
Richard Safran: Our next question comes from Richard Safran with Seaport Research Partners, you may proceed.
Thank you.
Our next question comes from Richard. Saffron with Seaport research Partners, you may proceed
Kathy Warden: Kathy, Ken, Todd, good morning. I have a two part question for you on the contracting environment. First, I want to know if you could discuss, you know, the contracting environment generally with the new administration, if you're seeing an improvement in terms and conditions and things like incentives, like award fees.
Speaker Change: Kathy, Ken Todd, good morning. Um, good morning. I
um, I got
Kathy Warden: Second, you know, you've been talking a lot about the growth in international, which has been terrific, but I'm kind of wondering if you're seeing more DCS versus FMS, or just in general, is this FMS going to be the pretty much the norm going forward? Thanks. Sure. So let me start with what we're seeing in contracting. There are certainly reviews underway, both driven by executive order and congressional review, to look at acquisition reform. And it would be early to comment on the outcome of any of those. But we are seeing this administration have a perspective that speed is important and we need to break down barriers.
Speaker Change: 2, part question for you on Contracting environment. Um, first I want to know, if you could discuss, you know, the Contracting environment generally uh, with the new Administration, if you're seeing an improvement in terms and conditions and things like uh incentives, like award fees,
Speaker Change: Second. Um, you know, you, you've been talking a lot about the growth in international which, which has been terrific, but I'm kind of wondering if you're seeing more DCS versus FMS. Um, or just in general, is this FMS going to be the uh, pretty much the norm going forward, thanks.
Speaker Change: Sure.
Kathy Warden: Some of those may be barriers in the contract itself. Others might just be the way that we're operating on programs. And that has been very positive. And you see that reflected in our 2Q performance, but also our outlook as we've talked about a couple of programs here today. So that fundamentally, in my view, is a net positive, even outside of formal acquisition reform or changes in contracting. With international, we continue to see a mix of direct commercial sales and FMS, and we expect that to continue. Certainly, on more complex efforts where the US government involvement is key, not only in the technology that is being deployed and shared with our allies, FMS is most appropriate.
Speaker Change: So, let me start with what we're seeing in Contracting. There are certainly reviews underway, both driven by executive order and uh, Congressional review to look at acquisition reform. And it would be early to comment on the outcome of any of those. But we are seeing this Administration. Have a prospective that speed is important, and we need to break down barriers. Some of those may be barriers in the contract itself. Others might just be the way that we're operating, uh, on programs and that has been very positive. And you see that reflected
Kathy Warden: But as I've talked about, in munitions and other areas that we are selling off of hot production lines, DCS certainly is a more expeditious way of working with customers.
Unknown Executive: So we don't expect a significant change in our mix between DCS and FMS. Well, thanks very much. Sure. Thank you.
Speaker Change: In our 2q performance, but also, our Outlook as we've talked about a couple of programs here today. So that fundamentally in my view is a net positive, even outside of formal acquisition reform or changes in Contracting with International, we continue to see a mix of Direct commercial sales and FMS and we expect that to continue certainly. I'm more complex efforts where the US government involvement is key. Not only, uh, in the technology that is being deployed and shared with our allies. FMS is most appropriate, but as I've talked about in Munitions and other, uh, areas that we are selling off of hot production lines. CCS certainly is a more expeditious way of working with customers. So we don't expect a significant change in our mix.
Speaker Change: Between DCS and FMS.
Speaker Change: Well, thanks very much.
Speaker Change: Sure.
Jason Gursky: Our next question comes from Jason Gursky with Citi, you may proceed. Hey, good morning, everybody. Good morning.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Jason gersky with City. You may proceed.
Kathy Warden: bit more time talking about one of the phrases you used in your opening remarks on making some investments in some new areas for the company. I'm just kind of curious what was on your mind when you made that comment. So we certainly highlighted one today, and that's with Beacon, where we are creating a mission test bed. This is something we typically would have done in the past, where we're inviting other industry partners to come and benefit from the knowledge that we've gained by having over 500,000 hours of autonomous vehicles operating and the data off of those.
Jason Gersky: Hey, good morning everybody. Good morning. Hey, Kathy wondering if you could a bit more time talking about, um, 1 of the phrases you used, in your opening remarks, on making some investments in some new areas, uh, for the company and just kind of curious what was on your mind when you made that comment? Yeah, yeah.
Kathy Warden: This idea of being able to provide very high fidelity physics-based models is something our company does very well. Many small companies don't have that insight, and yet they have good ideas on software or hardware that can be applied and need to be tested and run up against both threat scenarios and operating conditions to see how they will perform. So Beacon is a test bed that allows that to happen, and we've signed a number of partners to come and work with us in that integrated environment so we can learn together and really inform ourselves and the government on what the right mix and set of solutions are for autonomous vehicles.
Kathy Warden: That's just one example, but it gives you an indication of the things that we are investing in, and these aren't large investments, but they are important investments that really unlock for us the opportunity to partner in new ways and provide value to the government in new ways. Okay, great.
That can be applied and need to be tested and run up against both threat scenarios and operating conditions to see how they will perform. So Beacon is a test bed that allows that to happen and we've signed a number of Partners, uh, to come and work with us and that integrated environment. So we can learn together and really inform ourselves and the government on what the Right Mix and set of solutions are for autonomous vehicles. That's just 1 example. But it gives you an indication of the things that we are investing in and these aren't large Investments. But they are important Investments that really unlock for us, the opportunity to partner in new ways and provide value to the government, in new ways.
Kathy Warden: Maybe as a close follow up to that, you know, Northrop has obviously been very successful in what I would describe as kind of large, exquisite systems to date. There seems to be this growing view that in the future, you know, the future of warfare and the systems that we're going to need are going to be less exquisite and maybe more attritable than we have seen in the past. I'm just curious to know what your strategic approach is to new purchasing patterns and new systems. Does Northrop stand the chance here to do it all, be involved in unmanned, autonomous and attritable mass, as well as the large exquisite systems?
Jason Gersky: Okay, great, maybe as a you know, close follow-up to that.
Jason Gersky: Um, you know, North rip is obviously been um very successful in what I would describe as kind of large Exquisite systems uh, to date. Um, there seems to be this uh, growing view that in the future. Um, you know, the future of warfare and the systems that we're going to need are going to be less Exquisite um and maybe more attributable uh than we have seen in the past, I can just curious to to know what your strategic approach is to uh new purchasing patterns and new systems. And
Kathy Warden: And how do you go about kind of layering in the more kind of lower end attritable systems into your overall revenue mix and the ability to execute profitably on programs? A few thoughts on that. First, I don't believe that it will be an either or on exquisite systems versus lower capability, but also lower cost systems. I think it's going to be a combination and usually a combination of those systems working together. And so part of the expertise that we bring is how to have that whole family of systems work effectively. The second is that I believe Northrop already has demonstrated the ability to work on both ends of that spectrum in our aero business, in our space business, and certainly the mission systems and weapons that go on platforms of varying sizes, complexity, and cost.
Jason Gersky: You know, does uh does North stay on the chance here to to do it all? Uh be involved in, you know, unmanned autonomous and a treatable mass as well as the large Exquisite systems. And you know, how do you go about um, kind of layering in the more?
Jason Gersky: Kind of lower end of tribal systems into your overall Revenue mix, and the ability to execute profitably on programs.
Well first, I don't believe that it will be an either or on Exquisite system versus lower capability but also lower cost systems. I think it's going to be a combination and usually a combination of those systems working together. And so part of the expertise that we bring is how to have that whole family of systems work effectively. Um, the second is that I believe North have already had demonstrated the ability to work on both ends of that Spectrum in our Arrow business, in our space business and certainly the mission systems and weapons that go on platforms of varying sizes, complexity and cost. So yes we are uh pursuing that whole Continuum I'd say with the exception of very low cost.
Jason Gersky: Uh, where you aren't basically incorporating mission systems or weapons and they are meant to be fully at tribal, uh, units. So, but
Kathy Warden: What we are doing is partnering to come up with the best integrated solution, and it will likely be us and other players coming together in a teaming construct to then bid and deliver on the units themselves. So that really is the change here in the way that we're thinking about go-to-market, but the systems that we would provide are across that entire continuum of value. Great. Thank you very much. Thank you.
Jason Gersky: Dodd spectrum that are DOD. Clients is talking about, we are operating across most of it and the Investments that I talked about like beacons are a unique way of doing that. We're not trying to sell Hardware. In that case, or even software, what we are doing is partnering up with the best integrated solution and it will likely be us and other, uh, players coming together in a teeming construct to then bid and deliver on the units themselves. So, that really is the change here in the way that we're thinking about go to market. But the systems that we would provide are across that entire Continuum of value.
Jason Gersky: Great, thank you very much.
Jason Gersky: Thank you.
David Strauss: Our next question comes from David Strauss with Barclays, you may proceed. Morning. Thank you. Good morning. Morning, Kathy.
Speaker Change: Our next question comes from David, trust with sparkle. I see you may proceed.
Speaker Change: Morning, thank you. Good morning.
Kathy Warden: Could you give a rundown on F-35, the status there, how you're going across your, you know, your different efforts there? I think there's been some news on the press about a delay in the next gen radar on F-35. So just just an update there. Yes, we're doing well on supporting the production needs for the current platform. Of course, that includes the center fuselage and other related components out of AS and the APG-81 radar. As we look forward, we are involved in the modernization program. There's not a lot I can say about that program due to its classification, but simply to say that we have an excellent radar in the APG-81 today on the aircraft, and we are working toward the fielding of APG-85 in the and there'll be more details to come about that capability.
David: Morning, Kathy. Uh, could you give a rundown on F-35, the status there, how you're doing across your, um, you know, your different efforts there. I think there's been some news out on the Press about a delay in the uh NextGen radar on F-35. So just just an update there.
Speaker Change: We're doing well. Um,
Kathy Warden: But I would really just suggest that overall, we are progressing well in partnership with both Lockheed Martin and the Joint Program Office for the F-35 to deliver on those modernization efforts for the program.
Speaker Change: Capability. But I would really just suggest that overall we are progressing well in partnership with both black and Martin and the joint program office for the F-35 to deliver on those modernization efforts for the program.
Ken Crews: Okay, thanks for that.
Kathy Warden: And as a follow up on on B-21 and the potential for an increase in the production ramp there. So as whereas in Q1, there was this charge, you know, to potentially accommodate additional production. As things stand here today with additional money and reconciliation, if you were to agree with the Air Force on the increased production, you wouldn't anticipate a further charge on the program, you would expect that to be covered as part of whatever arrangement you reach with the Air Force. So as I said, in my prepared remarks, and we had in the 10 Q, we recognize that accelerating the production ramp will likely require future investment by the company.
Speaker Change: Okay. Thanks for that. And as a follow up on on B21 and the potential for um an increase in the production uh ramp there. So as whereas in in q1, uh, there was this charge uh, you know, to potentially accommodate additional production as things stand here today with additional money and Reconciliation. Uh, if you were to agree with the Air Force on increased production, you wouldn't anticipate a a further charged on the program. You would expect that to be covered as part of whatever Arrangement uh, you reach with the Air Force.
Ken Crews: And our discussions with the Air Force are to accompany that with the opportunity to earn improved return on the program to get a return on that increased investment that we would be making. Okay, thank you very much.
Speaker Change: so, as I said in my prepared remarks and we had in the 10 Queensway,
Ken Crews: Thank you.
Speaker Change: Okay, thank you very much. Thank you.
Myles Walton: Our next question comes from Myles Walton with Wolf Research, you may proceed. Thanks. Good morning.
Speaker Change: Thank you.
Our next question comes from Mi Walton with wolf research. You may proceed.
Ken Crews: And maybe it's just a kind of personal clarification. I think the R&D capitalization reversal you said was a couple hundred million dollar benefit. Is that in addition to the absence of the $250 million headwind from capitalization?
Ken Crews: So, regarding our future cash, let me break it down into two pieces. Number one is, in terms of our roadmap in terms of cash flow, nothing has changed from the previous commentary that I've made regarding, hey, we're continuing to focus on managing risk, managing opportunities, making sure that we're rationalizing investments to hit the guidance in the baseline case. The only change that has been is an additional benefit of $200 million due to the additional benefits from tax reform, cash tax benefits. And then beyond that, we have opportunities, as we've mentioned, whether it's new development programs, whether it's opportunities around B-21 investments, as well as the value creation that comes with those in terms of providing for long-term cash flow in the future.
Thanks, good morning. Um and maybe just a just a can of person clarification. I think the R&D capitalization reversal you said it was a couple hundred million dollar benefit. Is that in addition to the absence of the 250 million headwind from capitalization, your previously anticipating in the 25th
Speaker Change: We regarding our future cash in the. Let me break it down into 2 pieces. Number 1 is, in terms of our road map, in terms of cash flow, nothing has changed from the previous commentary that I've made regarding. Hey, we're continuing to focus on managing risk managing opportunities, making sure that um, we're rationalizing Investments to hit the guidance. In the Baseline case, the only change has been is an additional benefit of 200 million due to the additional, um, benefits from tax reform cash.
Speaker Change: Benefits.
Kathy Warden: And so we'll provide updates in the future for our normal process in terms of what the out years look like as we understand and get further in discussions and understand various awards.
Speaker Change: And then beyond that, we have opportunities, as we've mentioned, whether it's new development programs. Whether it's opportunities around B21, uh, Investments, um, as well as the value creation that comes with those in terms of providing for long-term cash flow in the future. Um, and so, we'll provide updates in the future for our normal process. In terms of what the out-year looks like. As we understand, uh, and get further in discussions and understand various Awards.
Kathy Warden: And Kathy, maybe the question for you, you mentioned in the opening remarks around space-based interceptors that you were testing currently. Are you actually testing on-orbit space-based interceptors currently and is it a directed energy or? Yeah, so these are ground based tests today. And we are in competition, obviously, so not a lot of detail that I can provide here. But it is a capability that we believe can be accelerated and into the timeframe that the administration is looking for.
Okay. Um and Kathy maybe the question for you. You you mentioned the opening remarks around space-based interceptors that you were testing currently, are you actually testing on orbit space-based interceptors currently? And is it a directed uh, energy or kinetic Approach at this point that you're testing a? Yeah, so these are ground based tests to
Speaker Change: so not a lot of detail that I can provide here but it is the capability that we believe can be accelerated and into the time frame. That the administration is looking for.
Ken Crews: Okay, thank you. Thank you.
Unknown Executive: All right, Josh, we're going to have to leave it there.
Speaker Change: Okay, thank you. Thank you.
Speaker Change: All right, Josh, we're gonna have to leave it there.
Kathy Warden: Right, so let me close by thanking the Northrop Grumman team for another really strong quarter of performance. The team just continues to deliver for our customers when they need us most. And many of our most valued abilities are unknown to the world because of classification. But this quarter, the results of our work were on full display and really proud of how the team stepped up to support the US government. We remain strong on our outlook for the company as both global demand as well as domestic demand for our solutions grows and the team delivers outstanding performance.
Speaker Change: Right. So let me close by thank
Speaker Change: You to deliver for our customers when they need us. Most and many of our most valued abilities are unknown to the world because of classification, but this order, the results of our work were on full display and I'm really proud of how the team stepped up to support the US government.
Speaker Change: Uh, we may remain.
Kathy Warden: So all of that allows us to deliver value for each of you as our stakeholders and shareholders.
Unknown Executive: And I thank you for your continued interest and for joining us on our call today. So thanks again. Thank you.
Speaker Change: Strong on our outlook for the company as both Global demand, as well as domestic demand for our Solutions growth and the team delivers outstanding performance. So all of that allows us to deliver value for each of you as our stakeholders and shareholders. And I thank you for your continued interest and for joining us.
Speaker Change: On our call today. So thanks again.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation.
Speaker Change: Thank you, ladies and gentlemen, this concludes today's conference call. Thank you for your participation.