Northrop Grumman Corporation · NYSE:NOC
Northrop Grumman — Q3 2023 Earnings Presentation
17 slides from Northrop Grumman's earnings presentation, Oct 26, 2023
Slide 1: Third Quarter 2023 Conference Call
NORTHROP GRUMMAN Third Quarter 2023 Conference Call October 26, 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: Q3 Highlights
Q3 Highlights Enterprise Spotlight • Strong growth and performance continues across all business segments $84B • Solid rocket motor production ramp progressing well in support of growing demand for launch, Q3 Backlog strategic and tactical missile capacity • Selected by Air Force to develop the Stan
Slide 4: Q3 Sales
Q3 Sales 9% $9,083 Three Months Ended September 30 $8,720 ($M) 2022 2023 ▲% Aeronautics Systems $2,537 $2,766 9% Defense Systems 1,345 1,421 6% $9,775 Mission Systems 2,456 2,628 7% $8,971 Space Systems 3,163 3,506 11% Intersegment Eliminations (530) (546) Total $8,971 $9,775 9% Q3 2022 Q3 2023 Q3 s
Slide 5: Q3 Segment Operating Income
Q3 Segment Operating Income(1) 8% Three Months Ended September 30 ($M) 2022 2023 ▲% Aeronautics Systems $262 $283 8% Defense Systems 158 182 15% $1,089 Mission Systems 368 386 5% $1,007 Space Systems 290 312 8% Intersegment Eliminations (71) (74) Total $1,007 $1,089 8% Q3 2022 Q3 2023 Laser focused
Slide 6: Q3 Diluted EPS Bridge
Q3 Diluted EPS Bridge 5% Q3 2022 $5.89 Segment Performance 0.55 Sale of Minority Investment(1) 0.44 $6.18 $5.89 Net Pension(2) (1.00) Corporate Unallocated and Other 0.30 Q3 2023 $6.18 Q3 2022 Q3 2023 EPS increase of 5% driven by growth in segment volumes and sale of minority investment 1. Gain on s
Slide 7: 2023 Segment Guidance
2023 Segment Guidance(1) As of 7/27/2023 As of 10/26/2023 Sales ($B) OM Rate % Sales ($B) OM Rate % Aeronautics Systems Mid $10 ~10% Mid to High $10 ~10% Defense Systems Mid to High $5 ~12% Mid to High $5 ~12% Mission Systems High $10 Low 15% High $10 ~15% Space Systems High $13 ~9% ~$14 ~9% Elimina
Slide 8: 2023 Company-Level Guidance
2023 Company-Level Guidance(1) $ in millions, except per share amounts As of 7/27/2023 As of 10/26/2023 Sales $38,400 — $38,800 ~$39,000 Segment operating income(2) $4,300 — $4,400 $4,300 — $4,400 Total Net FAS/CAS pension adjustment(3) ~$450 ~$450 Unallocated corporate expense: Intangible asset amo
Slide 9: 2024 Net Pension Income Sensitivities ($M)
2024 Net Pension Income Sensitivities ($M) Asset Returns FAS(2)(3) 0% 1.5% 3.0% 4.5% 6.0% 7.5% -25 bps 190 225 255 285 315 345 0 bps 165 195 230 260 290 320 Discount Estimates(1) as Rate +25 bps 135 170 200 230 260 290 of 1/26/23 Change(5) inclusive of +50 bps 110 145 175 205 235 265 Demographic +75
Slide 10: 2024 Outlook as of 10/26/23
2024 Outlook as of 10/26/23(1) Reaffirm free cash flow(2) range of $2.25 to $2.65 billion • Represents >20% growth from midpoint of 2023 guidance • Continue to expect rapid free cash flow(2) expansion over next 5 years Expect sales and segment operating income(2) growth between 4 and 5% • Balanced o
Slide 11: Appendix
Appendix Third 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: FAS/CAS Pension Adjustment Impact per Share
FAS/CAS Pension Adjustment Impact per Share Three Months Ended September 30 $ in millions, except per share amounts 2022 2023 FAS/CAS operating adjustment $(55) $(20) Non-operating FAS pension benefit 376 132 Total net FAS/CAS pension adjustment 321 112 $1.55 Tax effect(1) (81) (28) After-tax impact
Slide 15: Non-GAAP Reconciliations: Segment Operating Income
Non-GAAP Reconciliations Segment Operating Income Three Months Ended Nine Months Ended September 30 September 30 ($M) 2022 2023 2022 2023 Total sales $8,971 $9,775 $26,569 $28,652 Operating income $844 $1,016 $2,695 $2,930 Operating margin rate 9.4% 10.4% 10.1% 10.2% Reconciliation to segment operat
Slide 16: Non-GAAP Reconciliations: Adjusted Free Cash Flow
Non-GAAP Reconciliations Adjusted Free Cash Flow (1) Three Months Ended Nine Months Ended September 30 September 30 ($M) 2022 2023 ▲% 2022 2023 ▲% Net cash provided by operating activities $1,335 $1,228 (8)% $650 $1,445 122% Capital expenditures (296) (359) 21% (803) (972) 21% Proceeds from sale of
Slide 17: Third Quarter 2023 Conference Call
Third Quarter 2023 Conference Call 17