Northrop Grumman Corporation · NYSE:NOC
Northrop Grumman — Q4 2023 Earnings Presentation
19 slides from Northrop Grumman's earnings presentation, Jan 25, 2024
Slide 1: Fourth Quarter 2023 Conference Call
NORTHROP GRUMMAN Fourth Quarter 2023 Conference Call January 25, 2024 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 Business and Operational Risks call, contain or may contain statements that constitute “forward-looking statements” within the meaning of the Priva
Slide 3: 2023 Highlights
2023 Highlights Enterprise Spotlight • First lot of B-21 LRIP phase awarded following successful entry into flight test campaign $84.2B • Continued to develop critical air vehicle and propulsion systems hardware for Sentinel program 2023 Backlog • GEM 63XL solid rocket boosters helped power first la
Slide 4: Sales
Sales 7% Three Months Ended Twelve Months Ended December 31 December 31 ($M) 4Q22 4Q23 ▲% 2022 2023 ▲% Aeronautics Systems $2,757 $2,910 6% $10,531 $10,786 2% Defense Systems 1,657 1,645 (1)% 5,579 5,862 5% $39,290 Mission Systems 2,927 3,063 5% 10,396 10,895 5% $36,602 Space Systems 3,278 3,602 10%
Slide 5: 2023 EPS Walk
2023 EPS Walk $24.00 Guidance Range $22.00 $22.45 – $20.00 $22.85 $7.68 $18.00 $16.00 $2.08 $14.00 $12.00 $10.00 $13.53 $8.00 $6.00 2023 GAAP EPS MTM Adjustment B-21 Charge Oct 2023 MTM-adjusted EPS(1) Guidance Exceeded high end of MTM-adjusted EPS(1) guidance range excluding B-21 charge 1. Non-GAAP
Slide 6: 2023 MTM-adjusted EPS Bridge
2023 MTM-adjusted EPS(1) Bridge 2022 $25.54 Segment Performance(2) 0.85 Corporate Unallocated(2) 0.77 Sale of Minority Investment(3) 0.44 B-21 Charge (7.68) Net Pension(4) (4.07) All Others (0.24) 2023 $15.61 Strong segment performance offset by B-21 charge and lower net pension income 1. Non-GAAP f
Slide 7: Pension Estimates as of 1/25/2024
Pension Estimates(1) as of 1/25/2024 2023 2024E 2025E 2026E Actual ($M) Actual / Expected Return on Plan Assets 11.1% 7.5% Discount Rate 5.15% 5.15% Required Funding ~100 ~100 Mark-to-Market Pension & OPB (Expense) (422) 2023 2024E 2025E 2026E Actual ($M) CAS Pension Expense 154 ~270 ~390 ~240 FAS P
Slide 8: Pension Sensitivities as of 1/25/2024
Pension Sensitivities as of 1/25/2024 Mark to Market / Net Pension Liability(1) Inc/(Dec) to Expense ($M) +25 bps ~(700) Discount rate(2) — 25 bps ~740 Plan asset returns +100 bps ~(290) (1) —100 bps ~290 FAS Pension Service Expense Inc/(Dec) to Expense ($M) +25 bps ~(10) Discount rate(2) — 25 bps ~
Slide 9: 2024 Segment Guidance
2024 Segment Guidance(1) As of 1/25/2024 Sales ($B) OM Rate % Aeronautics Systems Low $11 Mid 9% Defense Systems ~$6 Low 12% Mission Systems Low to Mid $11 ~15% Space Systems Mid to High $14 ~9% Eliminations ~($2.3) High 13% Expect similar sales growth rates across the segments in 2024 1. See Page 1
Slide 10: 2024 Company-Level Guidance
2024 Company-Level Guidance(1) $ in millions, except per share amounts As of 1/25/2024 Sales $40,800 — $41,200 Segment operating income(2) $4,475 — $4,550 Total Net FAS/CAS pension adjustment(3) ~$700 Unallocated corporate expense: Intangible asset amortization and PP&E step-up depreciation ~$100 Ot
Slide 11: Free cash flow Outlook as of 1/25/24
Free cash flow(1) Outlook(2) as of 1/25/24 >15% CAGR Outlook Range Free cash flow(1) growth driven by: • Operational performance • Lower cash tax payments $3.10B $2.85B • Higher CAS recoveries • Stable working capital $2.25B • Lower CapEx starting in 2025 $2.1B $1.6B Expect to return well over 100%
Slide 12: Key Takeaways
Key Takeaways Strong global defense budget • We remain laser focused on performance as we deliver critical outlook capabilities in partnership with our customers Franchise programs • Visible path to grow margins over coming years driven by improvements in macro environment, digitally enabled efficie
Slide 13: Appendix
Appendix Fourth Quarter 2023 Conference Call 13
Slide 14: Financial Guidance
Financial Guidance Financial guidance, as well as outlook, trends, expectations and other forward-looking statements provided by the company for 2024 and beyond, reflect the company's judgment based on the information available to the company at the time of this release. The company’s financial guid
Slide 15: Non-GAAP Definitions
Non-GAAP Definitions Non-GAAP Financial Measures Disclosure: This presentation contains non-GAAP (accounting Free cash flow: Net cash provided by or used in operating activities less capital expenditures. principles generally accepted in the United States of America) financial measures, as defined b
Slide 16: Non-GAAP Reconciliations
Non-GAAP Reconciliations Segment Operating Income Three Months Ended December 31 Year Ended December 31 ($M) 2022 2023 2022 2023 Total sales $10,033 $10,638 $36,602 $39,290 Operating income $906 $(393) $3,601 $2,537 Operating margin rate 9.0% (3.7)% 9.8% 6.5% Reconciliation to segment operating inco
Slide 17: Non-GAAP Reconciliations
Non-GAAP Reconciliations MTM-adjusted Net Earnings and EPS Three Months Ended December 31 Year Ended December 31 $ in millions, except per share amounts 2022 2023 2022 2023 Net earnings $2,080 $(535) $4,896 $2,056 MTM (benefit) expense (1,232) 422 (1,232) 422 MTM-related deferred state tax expense (
Slide 18: Non-GAAP Reconciliations
Non-GAAP Reconciliations Adjusted Free Cash Flow Three Months Ended Year Ended (1) December 31 December 31 ($M) 2022 2023 ▲% 2022 2023 ▲% Net cash provided by operating activities $2,251 $2,430 8% $2,901 $3,875 34% Capital expenditures (632) (803) 27% (1,435) (1,775) 24% Free cash flow $1,619 $1,627
Slide 19: Fourth Quarter 2023 Conference Call
Fourth Quarter 2023 Conference Call 19