Northrop Grumman Corporation · NYSE:NOC
Northrop Grumman — Q2 2023 Earnings Presentation
16 slides from Northrop Grumman's earnings presentation, Jul 27, 2023
Slide 1: Second Quarter 2023 Conference Call
NORTHROP GRUMMAN Second Quarter 2023 Conference Call July 27, 2023 Kathy Warden Dave Keffer Chair, Chief Executive Officer Corporate Vice President and President and Chief Financial Officer
Slide 2: Forward-Looking Statements
Forward-Looking Statements This presentation and the information we are incorporating by reference, and statements to be made on the earnings conference call, Business and Operational Risks contain or may contain statements that constitute “forward-looking statements” within the meaning of the Priva
Slide 3: Q2 Highlights
Q2 Highlights Enterprise Spotlight • First B-21 flight test aircraft successfully powered on $78.8B • AARGM-ER completed fifth consecutive successful flight test, final test scheduled for 2H 2023 Q2 Backlog • Selected Rheinmetall as a supplier to expand F-35 center fuselage production capacity in Eu
Slide 4: Q2 Sales
Q2 Sales $9,083 $8,720 9% Three Months Ended June 30 ($M) 2022 2023 ▲% Aeronautics Systems $2,534 $2,595 2% Defense Systems 1,294 1,420 10% $9,576 $8,801 Mission Systems 2,516 2,641 5% Space Systems 2,979 3,488 17% Intersegment Eliminations (522) (568) Total $8,801 $9,576 9% Q2 2022 Q2 2023 Continue
Slide 5: Q2 Segment Operating Income
Q2 Segment Operating Income(1) (2)% Three Months Ended June 30 ($M) 2022 2023 ▲% Aeronautics Systems $258 $278 8% Defense Systems 168 166 (1)% $1,073 $1,052 Mission Systems 413 401 (3)% Space Systems 310 283 (9)% Intersegment Eliminations (76) (76) Total $1,073 $1,052 (2)% Q2 2022 Q2 2023 Continued
Slide 6: Q2 Diluted EPS Bridge
Q2 Diluted EPS Bridge (12)% Q2 2022 $6.06 Net Pension(1) (1.01) Marketable Securities 0.33 $6.06 $5.34 All Other (0.04) Q2 2023 $5.34 Q2 2022 Q2 2023 Q2 EPS includes a headwind of over $1 per share from lower net FAS/CAS pension income 1. Net Pension tax effected on a 21% federal statutory tax rate
Slide 7: FAS/CAS Pension Adjustment Impact per Share
FAS/CAS Pension Adjustment Impact per Share Three Months Ended June 30 $ in millions, except per share amounts 2022 2023 FAS/CAS operating adjustment $(51) $(21) Non-operating FAS pension benefit 377 133 Total net FAS/CAS pension adjustment 326 112 $1.56 Tax effect(1) (82) (28) After-tax impact $244
Slide 8: 2023 Segment Guidance
2023 Segment Guidance(1) As of 4/27/2023 As of 7/27/2023 Sales ($B) OM Rate % Sales ($B) OM Rate % Aeronautics Systems Mid $10 ~10% Mid $10 ~10% Defense Systems Mid $5 ~12% Mid to High $5 ~12% Mission Systems High $10 Low 15% High $10 Low 15% Space Systems Mid $13 Mid 9% High $13 ~9% Eliminations Lo
Slide 9: 2023 Company-Level Guidance
2023 Company-Level Guidance(1) $ in millions, except per share amounts As of 4/27/2023 As of 7/27/2023 Sales $38,000 — $38,400 $38,400 — $38,800 Segment operating income(2) $4,300 — $4,400 $4,300 — $4,400 Total Net FAS/CAS pension adjustment(3) ~$450 ~$450 Unallocated corporate expense: Intangible a
Slide 10: Key Takeaways
Key Takeaways Strong global defense budget Structural opportunity to grow earnings and margins outlook driven by... • Continued improvement in macroeconomic conditions Franchise programs • Implementing digitally enabled efficiencies well aligned to customer priorities • Shift in contract mix to more
Slide 11: Appendix
Appendix Second Quarter 2023 Conference Call 11
Slide 12: Financial Guidance
Financial Guidance Financial guidance, as well as outlook, trends, expectations and other forward looking statements provided by the company for 2023 and beyond, reflect the company's judgment based on the information available to the company at the time of this release. The company’s financial guid
Slide 13: Non-GAAP Definitions
Non-GAAP Definitions Non-GAAP Financial Measures Disclosure: This presentation contains non- Free cash flow: Net cash provided by or used in operating activities, less GAAP (accounting principles generally accepted in the United States of America) capital expenditures. We use free cash flow as a key
Slide 14: Non-GAAP Reconciliations: Segment Operating Income
Non-GAAP Reconciliations Segment Operating Income Three Months Ended June 30 Six Months Ended June 30 ($M) 2022 2023 2022 2023 Total sales $8,801 $9,576 $17,598 $18,877 Operating income $954 $967 $1,851 $1,914 Operating margin rate 10.8% 10.1% 10.5% 10.1% Reconciliation to segment operating income:
Slide 15: Non-GAAP Reconciliations: Adjusted Free Cash Flow
Non-GAAP Reconciliations Adjusted Free Cash Flow (1) Three Months Ended Six Months Ended June 30 June 30 ($M) 2022 2023 ▲% 2022 2023 ▲% Net cash provided by (used in) operating activities $(197) $919 (566)% $(685) $217 (132)% Capital expenditures (263) (304) 16% (507) (613) 21% (1) Adjusted free cas
Slide 16: Second Quarter 2023 Conference Call
Second Quarter 2023 Conference Call 16