United States

Asia/Pacific

Europe

All other

- International

Other Customers

Total Revenue

b54be365923146eeec5149491236c9eaff1d82c46da5b16c4c0639d690fecc6a

4f5a2435dbc837d240a9d3bd620162e09b247c1c354ade131a194cdd99198451

Adjustments for Non-Cash Items

Stock-Based Compensation

Changes in Working Capital

Capital Expenditures (CapEx)

Proceeds from Debt

Repayments of Debt

Share Repurchases

Dividend Payments

Net Change in Cash

1b3eaf4fdd0d6ca87ce0ba52d83a28f44fa884f857f04663a750268f626f8b0c

| Geographical Segment | Q1 2024 | Q2 2024 | Q3 2024 | Q4 2023 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2022 |
|----------------------|---------|---------|---------|---------|---------|---------|---------|---------|
| **U.S. Government (in millions)** | $8,844  **[0001133421-24-000026_noc-20240331.htm:16]**  | $8,888  **[0001133421-24-000052_noc-20240630.htm:19]**  | $8,622  **[0001133421-24-000064_noc-20240930.htm:19]**  | N/A | N/A | N/A | N/A | N/A |
| **International (in millions)** | $1,162  **[0001133421-24-000026_noc-20240331.htm:16]**  | $1,185  **[0001133421-24-000052_noc-20240630.htm:19]**  | $1,218  **[0001133421-24-000064_noc-20240930.htm:19]**  | N/A | N/A | N/A | N/A | N/A |
| **Other Customers (in millions)** | $127  **[0001133421-24-000026_noc-20240331.htm:16]**  | $145  **[0001133421-24-000052_noc-20240630.htm:19]**  | $156  **[0001133421-24-000064_noc-20240930.htm:19]**  | N/A | N/A | N/A | N/A | N/A |
| **Total Sales (in millions)** | N/A | $10,218  **[0001133421-24-000052_noc-20240630.htm:19]**  | $9,996  **[0001133421-24-000064_noc-20240930.htm:19]**  | N/A | N/A | N/A | N/A | N/A |

f1250159cbb8f036a30cc19e49d7a0211773006b971578605a8e1fb0b94b4371

Northrop Grumman Corporation is a leading global aerospace and defense technology company that provides a broad range of products, services, and solutions primarily to the U.S. Department of Defense and intelligence community, as well as international customers. The company operates through four main sectors: Aeronautics Systems, Defense Systems, Mission Systems, and Space Systems **[0001133421-24-000064_noc-20240930.htm:23]** **[0001133421-24-000006_noc-20231231.htm:2]** **[0001133421-24-000006_noc-20231231.htm:6]** **[0001133421-24-000006_noc-20231231.htm:64]**. Northrop Grumman specializes in military aircraft systems, advanced tactical weapons, electronic communications, and end-to-end mission solutions, including satellites and missile defense systems **[0001133421-24-000006_noc-20231231.htm:64]** **[NOC_3403592_2]**.

1. **Aeronautics Systems** - Focuses on military aircraft systems, including strategic long-range strike aircraft, tactical fighter aircraft, and unmanned autonomous aircraft systems.
2. **Space Systems** - Delivers end-to-end mission solutions, including satellites, missile defense systems, and launch vehicles, with a significant portion of business performed through restricted programs.
3. **Mission Systems** - Provides advanced technologies such as electronic communications, sensors, and secure communications.
4. **Defense Systems** - Specializes in advanced tactical weapons, missile defense solutions, and sustainment services for military and international customers.

c33601380c303e101eb0667f109529d3d0cf7e8d7d3bc659ef1cf2eb176b58aa

988e4ab6737d76b72e96e9eae7a2edbdd1a2b06dd0c343f6bf87ce7566aa2ed0

1. With ongoing supply chain challenges in areas like microelectronics and solid rocket motors, how confident are you in meeting your growth targets, and have you considered vertical integration to mitigate these risks?
2. Given the significant investments in solid rocket motor capacity amidst a surge in demand for missiles and munitions, how are you assessing the risk of overcapacity if demand levels decline in the future?
3. As you plan to reduce capital expenditures in 2025 after a period of elevated investment, how will this impact your ability to pursue growth opportunities and maintain competitiveness in the market?
4. Regarding the B-21 program's progression and previous charges taken, what steps are you taking to manage cost risks and supplier challenges to ensure margin improvement in the Aeronautics Systems segment?
5. Considering the recent headwinds in your Space segment and the expectations for multiyear growth, what specific strategies are you implementing to overcome these challenges and achieve your targeted growth rates over the long term?

ba95f6a18cda59695b5d7f072ec61a87b5a815143123440f60ad78c19639d74d

**Annual guidance for 2025:**
- **Revenue Growth**: 3% to 4%  **[NOC_3403592_2]**  (lowered from 5%  **[NOC_3394262_6]** )  
- **Operating Margin**: Improvement expected  **[NOC_3403592_2]**  (no prior guidance)  
- **Free Cash Flow**: Projected to increase by more than 20% year-over-year  **[NOC_3403592_2]**  (raised from >15% CAGR  **[NOC_3394262_3]** )  
- **Earnings Per Share (EPS)**: Increased guidance range by $0.75  **[NOC_3403592_1]**  (raised from $0.45  **[NOC_3394262_6]** )  
- **Capital Expenditure (CapEx)**: Expected reduction in 2025, above historical norms  **[NOC_3403592_19]**  (lowered from $1.8 billion  **[NOC_3394262_3]** )  

77233566a70d3393bcbfe72b7e2de48a3004cb62983389557066d9fec0dbd8e2

- The Boeing Company
- General Dynamics
- L3Harris Technologies
- Lockheed Martin
- RTX  **[0001133421-24-000006_noc-20231231.htm:6]** 

d82d7f9bfa79750cf7875347d1ec0ff622d2ed70ca7dda14ac33d2461c4d76a0

0daa87ca869d957e66188f0a8b7dc0051cfa7f64d963d450d50d4514454e90cd

23794d91c53ae875c8e247d72561e35d9d06ee07c70c9e0dbcc977a6d161504a

45517049e35e119baabad98d2fad02fad7bf9c75551673e93730b3e77c61dcad

### Q3 2024 Earnings Call
- **Issued Period:** Q3 2024
- **Guided Period:** FY 2024 and 2025
- **Guidance:**
  1. **Revenue Growth:** **3% to 4%** growth in sales for 2025, with strong growth in three segments except Space  **[NOC_3403592_2]** .
  2. **Operating Margin:** Improvement expected in 2025  **[NOC_3403592_2]** .
  3. **Free Cash Flow:** Projected to increase by more than **20% year-over-year** in 2025  **[NOC_3403592_2]** .
  4. **Earnings Per Share (EPS):** Increased guidance range by **$0.75**  **[NOC_3403592_1]** .
  5. **Capital Expenditure (CapEx):** Expected reduction in 2025, above historical norms  **[NOC_3403592_19]** .

### Q2 2024 Earnings Call
- **Issued Period:** Q2 2024
- **Guided Period:** FY 2024
- **Guidance:**
  1. **Revenue Growth:** **5% growth**; total sales between **$41 billion and $41.4 billion**  **[NOC_3394262_6]** .
  2. **Earnings Per Share (EPS):** Increased by **$0.45**  **[NOC_3394262_6]** .
  3. **Free Cash Flow:** Long-term outlook with >**15% CAGR** through 2026  **[NOC_3394262_3]** .
  4. **Capital Expenditures:** Targeted at **$1.8 billion**  **[NOC_3394262_3]** .
  5. **Dividend:** Increased by **10%** in May 2024  **[NOC_3394262_3]** .
  6. **Federal Tax Rate:** Mid-**17%** range  **[NOC_3394262_6]** .
  7. **Interest Expense:** Lowered to **$650 million**  **[NOC_3394262_6]** .
  8. **Weighted Average Shares Outstanding:** Mid **147 million**  **[NOC_3394262_6]** .
  9. **Segment Guidance:**
     - **Aeronautics Systems (AS):** High **$11 billion** sales, mid- to high **9%** margin  **[NOC_3394262_5]** .
     - **Mission Systems (MS):** Mid **$11 billion** sales, low to mid **14%** margin  **[NOC_3394262_5]** .
     - **Defense Systems (DS):** Roughly **$9 billion** sales  **[NOC_3394262_5]** .
     - **Space:** Flat sales, mid- to high **$11 billion** range  **[NOC_3394262_5]** .
  10. **Corporate Unallocated Expense:** **$150 million**  **[NOC_3394262_6]** .

### Q1 2024 Earnings Call
- **Issued Period:** Q1 2024
- **Guided Period:** FY 2024
- **Guidance:**
  1. **Book-to-Bill Ratio:** Close to **1x**  **[NOC_3380702_6]** .
  2. **Sales and Segment Margin:** In line with Q1 results, modest expansion expected  **[NOC_3380702_6]** .
  3. **Aeronautics Sales Guidance:** Mid-$11 billion range  **[NOC_3380702_6]** .
  4. **Space Sales Guidance:** Low to mid $14 billion range, **3% annual growth**  **[NOC_3380702_6]** .
  5. **Margin Rates:**
     - AS: Mid-**9%**  **[NOC_3380702_6]** .
     - DS: Slightly higher  **[NOC_3380702_6]** .
     - MS: Slightly lower  **[NOC_3380702_6]** .
  6. **Corporate Unallocated Costs:** Weighted toward second half  **[NOC_3380702_6]** .
  7. **Interest Expense:** Higher due to debt issuance  **[NOC_3380702_6]** .
  8. **Effective Tax Rate:** **17%**  **[NOC_3380702_6]** .
  9. **Share Repurchases:** >**$2 billion**  **[NOC_3380702_6]** .
  10. **Capital Expenditures:** **$1.8 billion**  **[NOC_3380702_3]** .

### Q4 2023 Earnings Call
- **Issued Period:** Q4 2023
- **Guided Period:** FY 2024
- **Guidance:**
  1. **Earnings Per Share (EPS):** **$24.45 to $24.85**  **[NOC_3370797_8]** .
  2. **Free Cash Flow:** **$2.25 billion to $2.65 billion**  **[NOC_3370797_8]** .
  3. **Sales Growth:** **4% to 5%**  **[NOC_3370797_7]** .
  4. **Segment Sales and Margins:**
     - Aeronautics: Low **$11 billion** sales, mid-**9%** margins  **[NOC_3370797_7]** .
     - DS: **$6 billion** sales, low **12%** margins  **[NOC_3370797_7]** .
     - MS: Low to mid-**$11 billion** sales, **15%** margins  **[NOC_3370797_7]** .
     - Space: Mid- to high **$14 billion** sales, **9%** margins  **[NOC_3370797_7]** .
  5. **Book-to-Bill Ratio:** Around **1x**  **[NOC_3370797_7]** .
  6. **Tax Rate:** **17%**  **[NOC_3370797_7]** .
  7. **Capital Expenditures:** Elevated in 2024  **[NOC_3370797_8]** .
  8. **Debt Issuance:** New debt for refinancing and share repurchases  **[NOC_3370797_7]** .
  9. **Share Repurchases:** At least **$2 billion**, including **$1 billion** ASR  **[NOC_3370797_4]** .
  10. **Free Cash Flow Outlook for 2026:** **$3.3 billion**  **[NOC_3370797_4]** .

3f169012734c6388e6427818248ef1dc883eb54a7075c6e75c5af18f1cba4a11

| Name               | Position                                              | Start Date         | Short Bio                                                                                                                                                                                                 |
|--------------------|-------------------------------------------------------|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Kathy J. Warden    | Chair, CEO, and President                             | January 2019       | Kathy J. Warden has been serving as the Chair, CEO, and President of Northrop Grumman since January 2019. She joined the Board of Directors in July 2018 and has held various leadership roles within the company since 2008  **[0001133421-24-000021_noc-20240403.htm:10]** **[0001133421-24-000014_noc-20240321.htm:10]** **[0001133421-23-000021_noc-20230331.htm:10]** .          |
| Mark A. Caylor     | Corporate VP and President, Mission Systems Sector    | 2018               | Mark A. Caylor has served as Corporate VP and President of the Mission Systems Sector since 2018. He is set to retire on July 26, 2024  **[0001133421-24-000006_noc-20231231.htm:132]** **[0001133421-23-000006_noc-20221231.htm:134]** .                                                                                                   |
| Robert J. Fleming  | Corporate VP and President, Space Systems Sector      | 2023               | Robert J. Fleming began serving as Corporate VP and President of the Space Systems Sector in 2023. He previously held roles in the Strategic Space Systems Division and Business Development and Strategy  **[0001133421-24-000006_noc-20231231.htm:132]** .                                    |
| Michael A. Hardesty| Corporate VP, Controller, and Chief Accounting Officer| 2013               | Michael A. Hardesty has been the Corporate VP, Controller, and Chief Accounting Officer since 2013  **[0001133421-24-000006_noc-20231231.htm:132]** **[0001133421-23-000006_noc-20221231.htm:134]** .                                                                                                                                       |
| Thomas H. Jones    | Corporate VP and President, Aeronautics Systems Sector| January 1, 2021    | Thomas H. Jones has been the Corporate VP and President of the Aeronautics Systems Sector since January 1, 2021. He previously served as VP and General Manager of the Airborne C4ISR Division  **[0001133421-24-000006_noc-20231231.htm:132]** **[0001133421-23-000006_noc-20221231.htm:134]** .                                           |
| David F. Keffer    | Corporate VP and Chief Financial Officer              | 2020               | David F. Keffer has been serving as the Corporate VP and CFO since 2020. He will retire on February 21, 2025  **[0001133421-24-000006_noc-20231231.htm:132]** .                                                                                                                                |
| Roshan S. Roeder   | Corporate VP and President, Defense Systems Sector    | October 17, 2022   | Roshan S. Roeder has been the Corporate VP and President of the Defense Systems Sector since October 17, 2022. She previously held roles in the Mission Systems Sector  **[0001133421-24-000021_noc-20240403.htm:62]** **[0001133421-24-000014_noc-20240321.htm:62]** .                                                                  |
| Kathryn G. Simpson | Corporate VP and General Counsel                      | 2023               | Kathryn G. Simpson has been the Corporate VP and General Counsel since 2023. She previously served as VP and Associate General Counsel for the Mission Systems Sector  **[0001133421-24-000006_noc-20231231.htm:132]** .                                                                       |
| Kenneth B. Crews   | Corporate VP and Chief Financial Officer              | October 1, 2024    | Kenneth B. Crews was elected as Corporate VP and CFO, effective October 1, 2024. He was appointed as VP, Corporate Finance, effective July 1, 2024  **[0001133421-24-000060_noc-20240514.htm:0]** .                                                                                          |
| Ben Davies         | Corporate VP and President, Defense Systems Sector    | July 1, 2024       | Ben Davies was elected as Corporate VP and President of the Defense Systems Sector, effective July 1, 2024. He previously served as Corporate VP and General Manager of the Strategic Deterrent Systems division  **[0001133421-24-000034_noc-20240514.htm:1]** **[0001133421-24-000034_noc-form8xk051424xex991.htm:0]** .                        |

423ee571b4ebcbfffb8d32edde5ce6a8cd8294e324d351d95d33138b44b7914a

| Program Details            | Program 1       | Program 2       |
|----------------------------|-----------------|-----------------|
| Approval Date              | January 24, 2022  **[0001133421-24-000064_noc-20240930.htm:10]**  | December 6, 2023  **[0001133421-24-000064_noc-20240930.htm:10]**  |
| End Date/Duration          | February 2024  **[0001133421-24-000064_noc-20240930.htm:10]**  | Ongoing as of September 30, 2024  **[0001133421-24-000064_noc-20240930.htm:10]**  |
| Total Additional Amount    | **$2.0 billion**  **[0001133421-24-000064_noc-20240930.htm:10]**  | **$2.5 billion**  **[0001133421-24-000064_noc-20240930.htm:10]**  |
| Remaining Authorization    | **$0**  **[0001133421-24-000064_noc-20240930.htm:10]**       | **$1.6 billion**  **[0001133421-24-000064_noc-20240930.htm:10]**  |
| Details                    | Completed  **[0001133421-24-000064_noc-20240930.htm:10]**    | Commences after 2022 program completion  **[0001133421-24-000006_noc-20231231.htm:102]**  |

92568e6c65150ddfd4bde9a37c197204c49d7766e09f95bc6d1c8c1238fe369e

| Name                 | Start Date | End Date | Reason for Change |
|----------------------|------------|----------|-------------------|
| Deloitte & Touche LLP | 1975  **[0001133421-24-000006_noc-20231231.htm:82]**    | Present  | Current auditor   |

d0bf5eada6e4e32d53c68d7b76731b7f4c8e61ddbb842da9b956342e5d1bba96

a46f813cc8e3ed252dda02f644a9cc9a156fe856e4bb960c8eeae85172d7beb2

- Total Revenue: $9.996B (+2% YoY)  **[0001133421-24-000064_noc-20240930.htm:18]** **[0001133421-24-000064_noc-20240930.htm:2]**   
- Defense Systems: $2.084B (**+47% YoY**)  **[0001133421-24-000064_noc-20240930.htm:18]** **[0001133421-24-000064_noc-20240930.htm:2]**   
- Mission Systems: $2.823B (+7% YoY)  **[0001133421-24-000064_noc-20240930.htm:18]** **[0001133421-24-000064_noc-20240930.htm:2]**   
- Space Systems: $2.870B (**-18% YoY**)  **[0001133421-24-000064_noc-20240930.htm:18]** **[0001133421-24-000064_noc-20240930.htm:2]**   
- Europe: $685M (+7% YoY)  **[0001133421-24-000064_noc-20240930.htm:20]**   
- All Other Regions: $155M (**-30% YoY**)  **[0001133421-24-000064_noc-20240930.htm:20]**   
- Net Income: $1.026B (+9% YoY)  **[0001133421-24-000064_noc-20240930.htm:2]** **[0001133421-24-000064_noc-20240930.htm:4]**   
- Diluted EPS: $7.00 (**+14% YoY**)  **[0001133421-24-000064_noc-20240930.htm:2]** **[0001133421-24-000064_noc-20240930.htm:4]**   

155cec66a383e6827fbced930b771ea8bfadd017fd9f1acf5fe59445a9ed7e62

- **Strong International Growth Prospects:** Northrop Grumman expects its international business to accelerate and grow faster than U.S. sales in 2025, driven by increased demand from NATO countries seeking to counter aggressive threats with U.S. products. They have a strong international book-to-bill ratio of **1.4x**, indicating robust future sales growth.  **[NOC_3413733_20]**
- **Participation in Next-Generation Defense Programs:** The company is actively involved in the competition for the Navy's next-generation fighter (**F/A-XX**) and is well-positioned to offer sixth-generation aircraft based on their successful **B-21** program. Success in these programs could significantly boost future revenues.  **[NOC_3413733_28]**
- **Margin Expansion and Cash Flow Growth:** Despite ramping up major programs like B-21, Northrop Grumman is maintaining strong margins, with the Aeronautics Systems segment expected to maintain mid to high **9%** returns. The company is also on track to achieve **$4 billion** in free cash flow by 2028, indicating strong financial health.  **[NOC_3413733_29]** **[NOC_3413733_17]** **[NOC_3413733_26]**

519273d372a905f2807f106c823e6edd21175084085521fc7311e169521f0ea7

- **Northrop Grumman expects growth contributions from its major programs B-21 and GBSD/Sentinel to be more modest than in previous years**, potentially slowing overall company growth. Both programs are expected to remain **less than 10% of sales** but will gradually increase from 2024 into 2025.  **[NOC_3413733_7]**
- The ramp-up of **B-21** production may pressure **aeronautics segment margins**, with margins expected to be in the **mid-to-high 9% range** in 2025, lower than the **double-digit returns** seen in early 2024. This suggests that increased B-21 activity could dilute margins in this segment.  **[NOC_3413733_17]**
- **Northrop Grumman is not the prime contractor on the Air Force's Next Generation Air Dominance (NGAD) program**, which could limit its opportunities in future advanced aircraft programs. The company is contributing through Mission Systems but is not including any NGAD revenue in its forecasts due to **uncertainty of timing**.  **[NOC_3413733_19]**

61afce40944e7bddba44c2df3fed52638b70cb958163b463781922bf4fdd3754

1. **B-21 Production Acceleration**  
   **Q:** If the Air Force accelerates B-21, will unit pricing change?  
   **A:** Kathy Warden stated that they would work with the Air Force to discuss pricing for any accelerated units. While accumulating performance data to inform discussions, it's premature to comment on expected pricing ( **[NOC_3413733_8]** ).

2. **Sentinel Program Risks**  
   **Q:** Any news on Sentinel program review and risks?  
   **A:** Kathy Warden affirmed that they believe the outlook is well calibrated. They are meeting important milestones on the EMD contract, and while the government projects the restructure to take **18 to 24 months**, they expect 2025 Sentinel revenue to be in the **mid-single-digit percentage** of total revenue, continuing to grow from '24 into '25 ( **[NOC_3413733_16]** ).

3. **Mission Systems Margin Expansion**  
   **Q:** Drivers behind Mission Systems margin expansion in 2025?  
   **A:** Kenneth Crews highlighted performance improvements driven by cost reductions, factory efficiencies, and digital technologies. Mission Systems expects about **50 basis points** of margin expansion in 2025, building on strong performance improvements since Q2 2024 ( **[NOC_3413733_9]** ).

4. **International Growth Outlook**  
   **Q:** How will international growth trend in coming years?  
   **A:** Kathy Warden expects double-digit international growth in 2025, with a path to continue for multiple years. International book-to-bill was **1.4x** in 2024, and the pipeline includes programs like IBCS, E-2D, and Triton. She believes there's strong demand from NATO countries for U.S. products that can be fielded quickly ( **[NOC_3413733_15]** ,  **[NOC_3413733_20]** ).

5. **Participation in NGAD and CCA**  
   **Q:** Thoughts on NGAD and CCA opportunities?  
   **A:** Kathy Warden stated they are well positioned to offer sixth-generation aircraft based on B-21 experience. For the Air Force NGAD program, they are a contributor through Mission Systems; for the Navy's next-generation fighter (**F/A-XX**), they are in the source selection and would be excited to be selected ( **[NOC_3413733_21]** ,  **[NOC_3413733_28]** ).

6. **Defense Systems Strategy**  
   **Q:** What's the focus of Defense Systems after changes?  
   **A:** Kathy Warden explained that Defense Systems is now focused on strategic missiles, tactical weapons, and command and control. This alignment enhances customer focus and creates synergy across these businesses, completing the life cycle from missiles to command systems ( **[NOC_3413733_12]** ).

7. **Rocket Motors Growth**  
   **Q:** Are there constraints or growth in rocket motors?  
   **A:** Kathy Warden said they are growing tactical solid rocket motor capacity, with additional capacity coming online in late **2026**. Demand is expected to consume all capacity, supporting stockpile replenishment and new weapons entering production later this decade ( **[NOC_3413733_13]** ).

8. **2025 Bookings Expectations**  
   **Q:** Expectations for 2025 bookings and book-to-bill?  
   **A:** Kenneth Crews anticipates 2025 book-to-bill to be around **1x** sales. Growth opportunities include space (restricted activities, strategic comms), B-21 (advanced procurement, production), Mission Systems (sensors, radars, EW systems), and Defense Systems (IBCS, weapons, ammunition) ( **[NOC_3413733_24]** ).

9. **Aeronautics Margins and B-21 Ramp**  
   **Q:** Any change in aeronautics margin pressure with B-21 ramp?  
   **A:** Kenneth Crews stated that despite B-21 expansion, efficiencies are helping maintain mid to high **9%** margin levels in 2025. The team has driven performance improvements and maintained margins in 2024, even with increased B-21 activity ( **[NOC_3413733_18]** ).

10. **Capital Deployment and Acquisitions**  
    **Q:** Does a relaxed regulatory environment open up acquisitions?  
    **A:** Kathy Warden believes it's early to predict the regulatory environment, especially in national security. While concerns about over-consolidation remain, they will continue active portfolio management where opportunities to create shareholder value exist ( **[NOC_3413733_27]** ).

11. **Free Cash Flow Outlook**  
    **Q:** Is the trajectory to $4B free cash flow in 2028 intact?  
    **A:** Kenneth Crews confirmed they are on track to achieve **$4 billion** in free cash flow by **2028**, with growth normalizing in line with the overall business growth rate beyond 2025 (  ).

12. **Impact of Russia-Ukraine Hostilities Ending**  
    **Q:** What impact if Russia-Ukraine hostilities end?  
    **A:** Kathy Warden stated that revenue from tactical weapons directly expended in Ukraine is less than **1%** of total revenue. A multi-year stockpile replenishment is expected, so they don't foresee an immediate ramification (  ).

13. **Industry New Entrants and Portfolio**  
    **Q:** Thoughts on new industry entrants and portfolio focus?  
    **A:** Kathy Warden embraces new entrants and often teams with companies bringing new ideas or technology. This doesn't cause a shift in their technology differentiation strategy but sharpens focus on investment areas. She sees more opportunity than risk in this collaboration ( **[NOC_3413733_14]** ,  **[NOC_3413733_23]** ).

14. **Top Priorities for the Year**  
    **Q:** Top 2 or 3 priorities for the year?  
    **A:** Kathy Warden's priorities are advancing technology differentiation to support customers, improving efficiency within the company, and strategically deploying resources to areas with the most impact for shareholders and customers ( **[NOC_3413733_25]** ).

26dbfe6d242fd02661d623ece3e2df886c30e149e7015b8a8d6d31309ccb834e

Northrop Grumman projects double-digit international growth in 2025, backed by a 1.4x book-to-bill, while B-21 & Sentinel remain under 10% of sales but steadily ramp. Margins stay near 9%, and management reaffirms a $4B free cash flow target by 2028.

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554a85b14e8af680be0761c5c00ae2727cfe586d39688b73391344c1d022b9d1

**Annual guidance for FY 2025:**

- **Sales Growth**: 3%–4%  **[NOC_3413733_5]**  (no change from 3%–4%  **[NOC_3403592_2]** )  
- **Free Cash Flow**: greater than 15%  **[NOC_3413733_6]**  (lowered from greater than 20%  **[NOC_3403592_2]** )  
- **Segment Margins**: expand roughly 10 basis points  **[NOC_3413733_5]**  (no prior numeric guidance  **[NOC_3403592_2]** )  
- **Mark-to-Market Adjusted EPS**: $28.5  **[NOC_3413733_5]**  (no prior guidance)  
- **Aeronautic Sales**: below $13B, mid-single-digit growth  **[NOC_3413733_5]**  (no prior guidance)  
- **Defense Systems Sales**: low $8B range, double-digit organic sales growth  **[NOC_3413733_5]**  (no prior guidance)  
- **Mission Systems Sales**: mid-single-digit growth, reaching approximately $12B  **[NOC_3413733_5]**  (no prior guidance)  
- **Space Segment Sales**: roughly $11B  **[NOC_3413733_5]**  (no prior guidance)  
- **Operating Margins by Segment**:  
  – Aeronautics: mid- to high 9%  **[NOC_3413733_5]**  (no prior guidance)  
  – Defense Systems: mid- to high 9%  **[NOC_3413733_5]**  (no prior guidance)  
  – Mission Systems: expected to expand ~50 bps to mid-14%  **[NOC_3413733_5]**  (no prior guidance)  
  – Space: high 10%  **[NOC_3413733_5]**  (no prior guidance)  
- **Pension Adjustment**: $800M  **[NOC_3413733_6]**  (no prior guidance)  
- **Corporate Unallocated Expenses**: $280M  **[NOC_3413733_6]**  (no prior guidance)  
- **Pretax Gain from Training Service Divestiture**: $205M  **[NOC_3413733_6]**  (no prior guidance)  
- **Estimated Tax Rate**: low to mid-17%  **[NOC_3413733_6]**  (no prior guidance)  
- **Capital Expenditures**: $1.5B in 2025  **[NOC_3413733_3]**  (no prior guidance)  

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ce12668f3e215874a0ac1aa6939039dc8bdc8d56f193d355164afcccee80864b

- Total Revenue (Q4 2024 vs. Q4 2023): $10,686 million  **[0001133421-25-000005_noc-12312024xearningsrelea.htm:5]**  vs. $10,638 million  **[0001133421-24-000006_noc-20231231.htm:123]** **[0001133421-24-000006_noc-20231231.htm:121]** **[0001133421-24-000006_noc-20231231.htm:85]**  (+0.5% YoY)  
- Aeronautics Systems: $3,220 million  **[0001133421-25-000005_noc-12312024xearningsrelea.htm:5]**  vs. $2,910 million  **[0001133421-24-000006_noc-20231231.htm:123]** **[0001133421-24-000006_noc-20231231.htm:121]** **[0001133421-24-000006_noc-20231231.htm:85]**  (+10.7% YoY)  
- **Defense Systems**: $3,551 million  **[0001133421-25-000005_noc-12312024xearningsrelea.htm:5]**  vs. $1,645 million  **[0001133421-24-000006_noc-20231231.htm:123]** **[0001133421-24-000006_noc-20231231.htm:121]** **[0001133421-24-000006_noc-20231231.htm:85]**  (**+116% YoY**)  
- **Space Systems**: $1,633 million  **[0001133421-25-000005_noc-12312024xearningsrelea.htm:5]**  vs. $3,602 million  **[0001133421-24-000006_noc-20231231.htm:123]** **[0001133421-24-000006_noc-20231231.htm:121]** **[0001133421-24-000006_noc-20231231.htm:85]**  (**-55% YoY**)  
- Europe Region: $809 million  **[0001133421-25-000006_noc-20241231.htm:118]**  vs. $667 million  **[0001133421-24-000006_noc-20231231.htm:123]**  (+21% YoY)  
- Operating Income (EBIT): $1,089 million  **[0001133421-25-000005_noc-12312024xearningsrelea.htm:2]**  vs. -$393 million  **[0001133421-24-000006_noc-20231231.htm:85]**  (turned positive YoY)  
- Net Income: $1,264 million  **[0001133421-25-000005_noc-12312024xearningsrelea.htm:2]**  vs. -$535 million  **[0001133421-24-000006_noc-20231231.htm:85]**  (turned positive YoY)  
- EPS (Diluted): $8.66  **[0001133421-25-000005_noc-12312024xearningsrelea.htm:2]**  vs. -$3.47  **[0001133421-24-000006_noc-20231231.htm:85]**  (turned positive YoY)  

5d8655b605dec787d9c39c2794c025753ea191ede76fddb04bf50e9e607e5c5b

7f883922df246a2fb3250a143d38c2c2adfbd9403278683b868d28309335920c

11a71eb37f4eff9a314d70cc0be7c0b5f6ccda4439cf95a7630f253cec51fc62

1. **B-21 Program Profitability**  
   **Q:** When will B-21 margins improve?  
   **A:** Northrop Grumman expects the B-21 program to see increased earnings and modest sales growth, indicating that margins are currently at their lowest point and will improve going forward.  **[NOC_3394262_15]** 

2. **Sentinel Program Cost Impact**  
   **Q:** Is cost growth in Sentinel a risk?  
   **A:** The projected cost growth in the Sentinel program is over a long period and mainly outside the current contract scope. Northrop Grumman is working with the Air Force to find cost-saving alternatives, and the program is not expected to have significant budget impacts in the next five years.  **[NOC_3394262_26]** 

3. **Space Segment Outlook**  
   **Q:** Will the Space segment decline next year?  
   **A:** The Space segment is expected to be flat this year and down modestly next year due to the impact of the NCI and a canceled restricted program, but it is projected to return to growth in 2026.  **[NOC_3394262_13]** 

4. **Mission Systems Margins**  
   **Q:** Why did Mission Systems margins decline?  
   **A:** Mission Systems margins declined due to a shift toward cost-type contracts, increasing from the **mid-30%** range to the **mid-40%** this year. The mix is expected to shift back toward more fixed-price work, improving margins in the second half.  **[NOC_3394262_12]** 

5. **Bookings and International Growth**  
   **Q:** How is the bookings outlook, especially internationally?  
   **A:** Northrop Grumman expects a book-to-bill ratio over **1.0** this year, with strong international bookings growing faster than domestic, particularly in their shorter-cycle businesses like Defense Systems and Mission Systems.  **[NOC_3394262_19]** **[NOC_3394262_20]** 

6. **Aeronautics Margins Outlook**  
   **Q:** Will Aeronautics margins decrease in H2?  
   **A:** Despite a strong first half, Aeronautics margins are expected to be slightly lower in the second half due to the timing of top-line items and sales growth moderating. However, the full-year margin guidance has been increased to **10%**.  **[NOC_3394262_14]** 

7. **Solid Rocket Motor Supply**  
   **Q:** Has the ammonium perchlorate supply issue been resolved?  
   **A:** Northrop Grumman addressed the ammonium perchlorate supply constraint by creating an alternate supply and improving predictability for solid rocket motors.  **[NOC_3394262_9]** 

8. **Triton Export Opportunities**  
   **Q:** What’s the status of Triton exports?  
   **A:** NATO and Norway have expressed interest in the Triton system, with announcements expected soon, adding to the production outlook for the decade.  **[NOC_3394262_24]** 

9. **Impact of Inflation on B-21 Contracts**  
   **Q:** How does inflation affect B-21 contracts?  
   **A:** Future B-21 contracts include an Economic Price Adjustment clause, providing inflation protection for the Not-to-Exceed lots, whereas the initial LRIP contracts did not include this clause.  **[NOC_3394262_16]** 

10. **Potential Budget Impact on B-21**  
    **Q:** Could Sentinel costs affect B-21 funding?  
    **A:** Despite Sentinel's projected cost growth, Northrop Grumman believes strong budget prioritization for both programs will prevent significant impacts on B-21 funding. Appropriations have fully funded the programs, reflecting broad-based congressional support.  **[NOC_3394262_26]** 

8f3be740ded57a5262f9f832ebb629d3502e1d9420d896d38492d006d39b8577

- Northrop Grumman expects a **book-to-bill ratio over 1** for the year, indicating strong demand and a growing backlog, with particularly strong bookings in both domestic and international markets.  **[NOC_3394262_19]**
- The company anticipates **margin improvements** as macroeconomic headwinds dissipate, cost efficiencies are realized, and digital enablement enhances program performance, potentially contributing to an additional **100 basis points of margin performance** over the decade.  **[NOC_3394262_27]**
- The **Defense Systems** segment had a particularly strong quarter, with operating income up **23%** and a margin rate of **13.5%**, driven by higher net EAC adjustments and favorable changes in contract mix, indicating robust profitability and growth potential in this segment.  **[NOC_3394262_4]**

f178978a731891b1f98d88be8bd3e5149966e4297b81059990e6f8500d56b5bf

| Year  | Amount Due (in millions) | Debt Type               | Interest Rate | % of Total Debt                     |
|-------|---------------------------|-------------------------|---------------|--------------------------------------|
| 2025  | $1,582 **[0001133421-25-000006_noc-20241231.htm:104]**           | 2.93% Senior Notes     | 2.93% **[0001133421-25-000006_noc-20241231.htm:103]** | 9.7% = (1,582 / 16,378) * 100 **[0001133421-25-000006_noc-20241231.htm:104]** |
| 2026  | $534 **[0001133421-25-000006_noc-20241231.htm:104]**             | 7.75% - 7.88% Notes    | 7.75% - 7.88% **[0001133421-25-000006_noc-20241231.htm:103]** | 3.3% = (534 / 16,378) * 100 **[0001133421-25-000006_noc-20241231.htm:104]** |
| 2027  | $755 **[0001133421-25-000006_noc-20241231.htm:104]**             | 3.20% Senior Notes     | 3.20% **[0001133421-25-000006_noc-20241231.htm:103]** | 4.6% = (755 / 16,378) * 100 **[0001133421-25-000006_noc-20241231.htm:104]** |
| 2028  | $2,044 **[0001133421-25-000006_noc-20241231.htm:104]**           | 3.25% Senior Notes     | 3.25% **[0001133421-25-000006_noc-20241231.htm:103]** | 12.5% = (2,044 / 16,378) * 100 **[0001133421-25-000006_noc-20241231.htm:104]** |
| 2029  | $592 **[0001133421-25-000006_noc-20241231.htm:104]**             | 4.60% Senior Notes     | 4.60% **[0001133421-25-000006_noc-20241231.htm:103]** | 3.6% = (592 / 16,378) * 100 **[0001133421-25-000006_noc-20241231.htm:104]** |
| 2030  | $750 **[0001133421-25-000006_noc-20241231.htm:103]**             | 4.40% Senior Notes     | 4.40% **[0001133421-25-000006_noc-20241231.htm:103]** | 4.6% = (750 / 16,378) * 100 **[0001133421-25-000006_noc-20241231.htm:103]** |
| 2031  | $466 **[0001133421-25-000006_noc-20241231.htm:103]**             | 7.75% Senior Notes     | 7.75% **[0001133421-25-000006_noc-20241231.htm:103]** | 2.8% = (466 / 16,378) * 100 **[0001133421-25-000006_noc-20241231.htm:103]** |
| 2033  | $1,000 **[0001133421-25-000006_noc-20241231.htm:103]**           | 4.70% Senior Notes     | 4.70% **[0001133421-25-000006_noc-20241231.htm:103]** | 6.1% = (1,000 / 16,378) * 100 **[0001133421-25-000006_noc-20241231.htm:103]** |
| 2034  | $850 **[0001133421-25-000006_noc-20241231.htm:103]**             | 4.90% Senior Notes     | 4.90% **[0001133421-25-000006_noc-20241231.htm:103]** | 5.2% = (850 / 16,378) * 100 **[0001133421-25-000006_noc-20241231.htm:103]** |
| 2040  | $800 **[0001133421-25-000006_noc-20241231.htm:103]**             | 5.05% - 5.15% Notes    | 5.05% - 5.15% **[0001133421-25-000006_noc-20241231.htm:103]** | 4.9% = (800 / 16,378) * 100 **[0001133421-25-000006_noc-20241231.htm:103]** |
| 2043  | $950 **[0001133421-25-000006_noc-20241231.htm:103]**             | 4.75% Senior Notes     | 4.75% **[0001133421-25-000006_noc-20241231.htm:103]** | 5.8% = (950 / 16,378) * 100 **[0001133421-25-000006_noc-20241231.htm:103]** |
| 2045  | $600 **[0001133421-25-000006_noc-20241231.htm:103]**             | 3.85% Senior Notes     | 3.85% **[0001133421-25-000006_noc-20241231.htm:103]** | 3.7% = (600 / 16,378) * 100 **[0001133421-25-000006_noc-20241231.htm:103]** |
| 2047  | $2,250 **[0001133421-25-000006_noc-20241231.htm:103]**           | 4.03% Senior Notes     | 4.03% **[0001133421-25-000006_noc-20241231.htm:103]** | 13.7% = (2,250 / 16,378) * 100 **[0001133421-25-000006_noc-20241231.htm:103]** |
| 2050  | $1,000 **[0001133421-25-000006_noc-20241231.htm:103]**           | 5.25% Senior Notes     | 5.25% **[0001133421-25-000006_noc-20241231.htm:103]** | 6.1% = (1,000 / 16,378) * 100 **[0001133421-25-000006_noc-20241231.htm:103]** |
| 2053  | $1,000 **[0001133421-25-000006_noc-20241231.htm:103]**           | 4.95% Senior Notes     | 4.95% **[0001133421-25-000006_noc-20241231.htm:103]** | 6.1% = (1,000 / 16,378) * 100 **[0001133421-25-000006_noc-20241231.htm:103]** |
| 2054  | $1,150 **[0001133421-25-000006_noc-20241231.htm:103]**           | 5.20% Senior Notes     | 5.20% **[0001133421-25-000006_noc-20241231.htm:103]** | 7.0% = (1,150 / 16,378) * 100 **[0001133421-25-000006_noc-20241231.htm:103]** |

461fe6e8902f198b7e51874d0a539698bd80c9cef3b5bab4f81aef04ae14a5c4

- Northrop Grumman is experiencing **strong demand and growth in key programs**, such as B-21 and solid rocket motors, leading to an **18% sales increase in Aeronautics Systems** in Q1. They are also **raising sales guidance** for Aeronautics on the strength of their current portfolio.  **[NOC_3380702_8]**
- The company is efficiently managing capital expenditures, expecting 2024 to be the **peak at 4% of revenue**, and **CapEx to gradually decrease** while still supporting a robust growth environment.  **[NOC_3380702_29]**
- International sales, currently at **14% of revenue**, are expected to be a **faster segment of growth than domestic business** over the next several years due to a **rich pipeline** of opportunities.  **[NOC_3380702_19]**

d1f6a37110bffce41decc3a275ff856ffa09a23aa0092464a38462f277833673

- **Cost pressures and uncertainties in the B-21 program are impacting margins and future profitability.** The company acknowledged a charge on the B-21 program due to higher projected manufacturing costs and lower expectations for inflation relief, especially as negotiations with suppliers are still ongoing and speculative over the program's long-term ( **[NOC_3370797_9]** ,  **[NOC_3370797_16]** ,  **[NOC_3370797_17]** ,  **[NOC_3370797_20]** ).
- **Losses on fixed-price contracts like B-21 and Halo are leading to changes in bidding strategy, possibly affecting future revenue opportunities.** Management admitted to previous risks taken on fixed-price contracts without mature designs, resulting in losses, and indicated they have declined to bid or lost some recent contracts due to a more disciplined approach ( **[NOC_3370797_15]** ).
- **Margin pressures in the Aeronautics segment due to B-21 challenges are reducing expected margins in the near term.** The company projected Aeronautics Systems margins to be in the **mid-9%** range, down from previous expectations, as the B-21 program's growth puts pressure on margin rates ( **[NOC_3370797_20]** ).

5978cd2ed91dd0fdb74bed44407f3ba803838854abb7b195d14555e26979e9d0

1. **Impact of $95 Billion Supplemental Funding**  
   **Q:** How will the $95B supplemental benefit Northrop?  
   **A:** The $95 billion supplemental aligns with our portfolio in areas where we're prime in weapons programs and as a supplier of solid rocket motors. We've already tripled our capacity for solid rocket motors, and additional funding will allow us to expand capacity even further to meet increased demand. We're bullish on fulfilling this demand through our investments and capacity expansions over the coming months and years.  **[NOC_3380702_7]** 

2. **Sentinel Program Delay and Impact**  
   **Q:** How does the two-year Sentinel delay affect growth?  
   **A:** The Sentinel program's growth profile remains similar despite the Air Force moving the IOC schedule back by **two years**. This delay was beyond our projections for '24 and '25, so it doesn't impact our near-term outlook. We still expect a healthy ramp and are laser-focused on meeting our schedule commitments with the Air Force.  **[NOC_3380702_10]** **[NOC_3380702_26]** 

3. **B-21 Program Budget and Economics**  
   **Q:** Does reduced B-21 funding affect program economics?  
   **A:** The Air Force lowering near-term requested funding levels for the B-21 in FY'25 doesn't change the economics of the program. The budget shift reflects moving from independent cost estimates to our contract value, which is lower. There was no change in price, schedule, or quantities, so there is no impact on the program's economics or risks of incremental charges.  **[NOC_3380702_11]** **[NOC_3380702_24]** 

4. **Book-to-Bill Outlook and Backlog**  
   **Q:** What will drive book-to-bill above 1 this year?  
   **A:** Despite a lighter first quarter and backlog down in each segment, we expect to achieve a book-to-bill near **1** for the full year. This will be driven largely by our shorter-cycle businesses like Mission Systems and Defense Systems. Our space business, while digesting the NGI loss and a program cancellation, still carries a large backlog supporting our projected growth rates.  **[NOC_3380702_9]** 

5. **Mission Systems Margin Decline**  
   **Q:** What's causing lower margins in MS segment?  
   **A:** The decrease in Mission Systems margins is due to a mix shift towards higher cost-plus contracts and supply chain disruptions as we ramp up production. We're focused on improving productivity at this higher volume level. Historically, MS margins start slower and ramp up through the year, and we expect improvements based on productivity gains throughout the year.  **[NOC_3380702_15]** 

6. **Space Segment Growth and Margins**  
   **Q:** Will slower space growth improve margins?  
   **A:** Slower growth in our space segment is largely due to development programs that are dilutive to margins. As these programs become less significant, we anticipate both margin rate and margin dollar expansion. Additionally, reduced capital expenditures planned for these programs will be a cash tailwind.  **[NOC_3380702_16]** **[NOC_3380702_21]** **[NOC_3380702_27]** 

7. **International Demand and Export Opportunities**  
   **Q:** How significant is international growth potential?  
   **A:** Exports currently represent about **14%** of our revenue. While this may not change significantly in the near term due to the time required to translate pipeline opportunities into sales, we expect international business to grow faster than domestic over the next several years given the richness of our pipeline. We're seeing new franchise opportunities, particularly with products not previously in our backlog.  **[NOC_3380702_19]** **[NOC_3380702_23]** 

8. **Capital Expenditure Trends**  
   **Q:** How will CapEx trend after recent increases?  
   **A:** We see this year as the peak for CapEx at **4%** of revenue, with expenditures gradually decreasing towards normalized levels. While we remain committed to making necessary investments to support robust growth, we do not foresee the same demand for CapEx over the next several years as we've had in the past few years.   

9. **Autonomous Aircraft Strategy Post-CCA Decision**  
   **Q:** How does CCA outcome affect autonomy strategy?  
   **A:** While we're disappointed not to be selected for this phase of the CCA program, it doesn't fundamentally change our autonomy strategy. The Air Force describes the acquisition as a continuous competition with future phases. We continue to pursue opportunities in both U.S. services and international markets, focusing on providing affordable, high-end solutions without competing in commoditized, low-cost, non-survivable systems.  **[NOC_3380702_13]** **[NOC_3380702_14]** 

10. **Ammunition Demand from Allies**  
    **Q:** What opportunities from allies' ammo demand?  
    **A:** Our weapons portfolio, about **6–7%** of revenue and growing double-digit, benefits from increased demand as allies replenish munitions stockpiles. We're seeing opportunities across Europe for basic and non-standard ammunition contracts, as well as international demand for programs like AARGM, especially as allies field the F-35. Expansion in solid rocket motor facilities supports several programs, including GMLRS and PAC-3.  **[NOC_3380702_22]** 

965b2d304bd408e383207890bc2e113cd92914d0453b0d069b5b7189cf8c60fc

- Northrop Grumman expects **aeronautics sales growth to moderate and margins to be slightly lower in the second half of the year** due to timing of top line items and supplier deliveries, impacting programs like B-21 and F-35.  **[NOC_3394262_14]**
- The **Mission Systems segment has experienced a step down in margin rate** due to a shift towards more cost-type contracts, with margins expected to be lower than historical performance.  **[NOC_3394262_12]**
- The **Space segment continues to face challenges with negative Estimate at Completion (EAC) adjustments**, indicating ongoing issues in program performance despite some improvements.  **[NOC_3394262_22]**

307496ddc917911d7da27d31d1a115f0805e8fd60c2c95c67663a0fd6d31c385

1. **B-21 Progress and Potential Expansion**  
   **Q:** Update on B-21 progress and potential for higher units?  
   **A:** Northrop Grumman is on track with the B-21 program, expecting the award of LRIP  **[NOC_3403592_8]**  in Q4. Pricing remains unchanged, and there is no change to the estimate to complete. The Air Force is pleased with execution and is undergoing a force structure review that may consider increasing B-21 units from 100 to 150. The company's performance provides the Air Force with options, offering capability below the cost target.  **[NOC_3403592_9]** **[NOC_3403592_20]** 

2. **Growth Outlook**  
   **Q:** What is the multi-year growth outlook for Northrop Grumman?  
   **A:** The company has been growing at a 5% CAGR since 2019 and is guiding 3-4% growth for next year. Supply chain improvements, competitive successes, and international business capture could drive upward pressure on growth rates. Northrop Grumman believes it can continue to achieve mid-single-digit growth over the long term.  **[NOC_3403592_8]** **[NOC_3403592_12]** 

3. **Margin Expansion Opportunities**  
   **Q:** Which segments have the greatest opportunity to expand margins next year?  
   **A:** Opportunities to expand margins exist across three of the four segments, with Defense Systems as the primary driver due to international growth and focus on weapon systems. Mission Systems is expected to see accretive margins, and Space shows potential through performance improvements and efficiencies. Aeronautics Systems may face margin pressure due to a mix shift towards restricted programs in 2025.  **[NOC_3403592_11]** 

4. **Free Cash Flow and CapEx Trends**  
   **Q:** What are the expectations for free cash flow and CapEx?  
   **A:** Free cash flow for 2024 remains within the guided range, reflecting strong year-over-year growth. For 2025, cash flow expansion of about **$600 million** is expected, driven by operating performance and investment reductions. CapEx will decrease from elevated levels, aligning with historical norms as capital-intensive investments from prior years taper off.  **[NOC_3403592_17]** **[NOC_3403592_19]** 

5. **Supply Chain Challenges**  
   **Q:** What supply chain issues are you facing, and are you considering vertical integration?  
   **A:** Supply chain challenges persist, mainly in capacity and productivity, affecting areas like microelectronics and solid rocket motor supply chains. Northrop Grumman is working closely with suppliers to mitigate issues, which are expected to continue into 2025. Vertical integration is not generally pursued unless there's no viable path with existing suppliers, but capabilities may be brought in-house if necessary to meet customer commitments.  **[NOC_3403592_7]** 

6. **International Sales and Margins**  
   **Q:** How do international sales impact margins and contract types?  
   **A:** International sales are a combination of direct commercial sales (for ammunition and weapons) and FMS (for complex weapon systems). Both contract types are accretive to segment and company margins, leveraging mature product lines. As international business grows, particularly in Defense Systems, margins are expected to benefit.  **[NOC_3403592_10]** 

7. **Space Segment Future Growth**  
   **Q:** What is the outlook for the Space segment beyond 2025?  
   **A:** The Space segment is expected to return to growth beyond 2025, with mid-single-digit growth anticipated without the headwinds from two winding-down programs. The backlog remains healthy and diversified across ground systems, satellite builds, intelligence missions, and NASA projects.  **[NOC_3403592_12]** **[NOC_3403592_13]** 

8. **Investments in Autonomy**  
   **Q:** What are your investments and opportunities in autonomy?  
   **A:** Northrop Grumman is a leader in autonomy across multiple domains, including aircraft, satellites, and weapon systems. Investments focus on software and integration, with several truly autonomous vehicles already in operation. The company sees strong demand and is confident in responding to customer needs despite rigorous certification processes.  **[NOC_3403592_15]** **[NOC_3403592_16]** 

9. **Missiles and Munitions Demand**  
   **Q:** How enduring is the demand for missiles and munitions given recent investments?  
   **A:** The demand is expected to be enduring for multiple years as the U.S. and allies restock munitions donated to Ukraine. Northrop Grumman is investing to increase capacity, moving toward tripling production with U.S. government support, while carefully monitoring to match the demand signal.  **[NOC_3403592_18]** 

10. **Contracting Environment Changes**  
    **Q:** Are there shifts in DoD contracting strategy or contract types?  
    **A:** There is increased dialogue on appropriate contract types, with some shifts occurring based on industry engagement. The focus is on selecting contract types that enable timely delivery at agreed prices, balancing cost and schedule considerations.  **[NOC_3403592_10]** 

11. **Impact of Upcoming Election on Defense Programs**  
    **Q:** Will the upcoming election affect your programs and defense spending?  
    **A:** No significant differences are expected between administrations. Defense budgets are influenced more by the threat environment, with the National Defense Strategy remaining consistent. Northrop Grumman's programs are well-aligned with defense priorities, focusing on deterrence and defense capabilities.  **[NOC_3403592_12]** 

91e2dc2a2fc84faac3dbc926a2fb543e1f68aaa1a4d62552a857ff9f09e74bdd

- **Supply chain challenges are broad-based and expected to continue into 2025**, affecting multiple areas including microelectronics, solid rocket motors, space, and aerostructure partners.  **[NOC_3403592_9]**
- **Potential risk of overcapacity in solid rocket motors** as other companies enter the market, which may lead to a reevaluation of how much capacity is needed.  **[NOC_3403592_7]**
- **The Sentinel program is under a Nunn-McCurdy review and restructuring**, causing delays and a smoothing of sales; this process is expected to continue well into next year.  **[NOC_3403592_6]**

1ed2e45a2a15027e373b2288bab33b60263080aceaa3f7dc8254a2104e6c59c0

- **Northrop Grumman reaffirms its $4 billion free cash flow target for 2028**, effectively doubling from 2023 levels, driven by top-line growth, margin expansion, reduced capital expenditures, and benefits from pension and taxes.  **[NOC_3370797_20]**
- **Capital expenditures are expected to decline after 2024**, leading to strong cash flow growth in 2025 and beyond, enabling significant cash generation and flexibility.  **[NOC_3370797_20]**
- **Margin expansion is anticipated due to stabilization in macroeconomics, cost and productivity actions, and favorable mix shifts**, including a transition from cost-type to fixed-price contracts and increased international sales, providing tailwinds starting in 2024 and growing into 2025 and beyond.  **[NOC_3370797_19]**

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- **Strong performance in Aeronautics Systems (AS) segment**, with outstanding execution across mature production programs leading to high margins, not limited to individual programs like the F-35.  **[NOC_3403592_11]** **[NOC_3403592_9]**
- **Significant opportunities for margin expansion in three of four segments**, particularly in Defense Systems (DS), driven by strong demand, growth in international sales, and favorable contract mix supporting future profitability.  **[NOC_3403592_11]** **[NOC_3403592_9]**
- **Enduring demand in missiles and munitions business within Defense Systems**, with restocking needs from the U.S. and allies driving multiple years of higher demand, supporting the company's investments in increasing production capacity.  **[NOC_3403592_18]**

0a39a84f7fad4eee55d002aad898a943aa62134167f0941160d0973134e2edea

1. **B-21 Charges and Future Outlook**  
   **Q:** How should we think about B-21 charges and program profitability going forward?  
   **A:** Management acknowledged that the **$143 million EAC adjustment** represents the current anticipated loss on Lot 1 of the B-21 program.  **[NOC_3370797_14]**  Future projections indicate modest growth in losses across subsequent lots, but they believe there are opportunities to outperform over the long term by driving efficiencies and engaging with suppliers and the customer.  **[NOC_3370797_14]**  They emphasized that the program is expected to provide value to customers and shareholders over time.  **[NOC_3370797_11]** 

2. **Sentinel Program Risks and Government Support**  
   **Q:** What actions are you taking to get the Sentinel program back on track, and how do you assess risks and government support?  
   **A:** Management emphasized that Sentinel is a **top priority for the Department of Defense** as the land-based leg of the nuclear triad.  **[NOC_3370797_10]**  The Nunn-McCurdy breach is largely due to cost growth in military construction and procurement, not issues in the EMD phase, where they are performing well.  **[NOC_3370797_10]**  They are working closely with the Air Force to mitigate costs, and the delay to **Initial Operational Capability (IOC)** does not materially impact their profitability outlook.  **[NOC_3370797_12]** 

3. **Free Cash Flow Guidance and Drivers**  
   **Q:** Can you discuss your free cash flow guidance and its key drivers?  
   **A:** Management reaffirmed their free cash flow outlook, highlighting strong working capital performance and the strength of their broad program base offsetting headwinds from the B-21 charges.  **[NOC_3370797_13]**  They expect continued **double-digit growth** in free cash flow, driven by top-line growth, margin expansion opportunities, stable working capital, and factors like growing CAS pension reimbursement and declining cash taxes.  **[NOC_3370797_13]** 

4. **Bidding Strategy Changes on Fixed-Price Contracts**  
   **Q:** Have you changed your bidding strategy on fixed-price contracts given recent losses?  
   **A:** Management stated that they have revised their approach to bidding contracts where they did not have a mature design at the time of bid yet committed to fixed-price options.  **[NOC_3370797_15]**  They have declined to bid on some high-profile programs and are being more disciplined to ensure the right **risk-reward balance**.  **[NOC_3370797_15]** 

5. **Margin Expansion and Productivity Efforts**  
   **Q:** Are you seeing more opportunities for margin expansion through cost and productivity efforts?  
   **A:** Management noted that stabilization in macroeconomics and their cost and productivity actions are providing tailwinds for margins in 2024, with growing benefits into 2025.  **[NOC_3370797_19]**  They anticipate a gradual **mix shift** from cost-type to fixed-price contracts and increased international business, supporting margin expansion in the latter half of the decade.  **[NOC_3370797_19]** 

6. **Aerospace Systems Margins and Outlook**  
   **Q:** Is Aerospace Systems still a 10% margin business, or will margins decline further?  
   **A:** Management indicated that while the Aerospace Systems segment margins are projected at **mid-9%** due to higher B-21 growth, margin dollars remain consistent with expectations.  **[NOC_3370797_20]**  Future margins will depend on new programs entering the portfolio and the rate at which they are booked.  **[NOC_3370797_20]** 

7. **International Opportunities with IBCS**  
   **Q:** Can you discuss the international opportunities with the IBCS program and its growth prospects?  
   **A:** Management stated that IBCS is an area of strength, with strong performance on the U.S. Army program and deployment in Poland.  **[NOC_3370797_21]**  They see follow-on opportunities in Poland and additional countries expressing interest, which could drive growth in the **2025 timeframe**.  **[NOC_3370797_21]**  Currently, the program generates about **$400 million** in annual sales.  **[NOC_3370797_21]** 

8. **Supplier Costs on B-21 Program**  
   **Q:** What proportion of supplier costs on B-21 LRIP lots have been fixed?  
   **A:** Management reported that the **majority of supplier costs** for the B-21 LRIP phase have been fully negotiated, with the remaining suppliers in advanced stages of negotiations.  **[NOC_3370797_17]** 

9. **Shifting Priorities in Space Business**  
   **Q:** What government shifting priorities are impacting growth in the space business?  
   **A:** Management mentioned that shifts in government budget priorities are affecting certain programs in the national security space portfolio.  **[NOC_3370797_23]**  While specific details are restricted, they noted that their guidance accounts for the latest understanding of these programs, and they still see value creation through top-line growth and **margin rate improvement** in the space sector.  **[NOC_3370797_23]** 

10. **IRS Appeal Process Cash Impact**  
    **Q:** Can you estimate the possible cash impact of the IRS appeal process?  
    **A:** Management stated that it's tough to put a range around the potential cash impact from the IRS appeal process.  **[NOC_3370797_16]**  They are looking forward to resolving open tax years with the IRS and will update on any differences from current reserves as they progress.  **[NOC_3370797_16]** 

1ea930b89706c8b674f70a582bbe7a2a2cccc40d86694c93eb0e451218fc19f3

- **The U.S. Air Force lowered its near-term requested funding levels for the B-21 program in the fiscal year 2025 budget proposal and negotiated lower prices on low-rate production, which could impact Northrop Grumman's revenues or margins on this key program.**  **[NOC_3380702_11]**
- **The Sentinel program is facing delays, with the Air Force moving the Initial Operational Capability (IOC) schedule back by two years, leading to a flattening of growth in the program over the next few years, which could slow down growth in the company's Space segment. Additionally, there is an ongoing Nunn-McCurdy review due to cost overruns, which could affect future profitability.**  **[NOC_3380702_10]**
- **Aeronautics Systems' strong first-quarter margins are not expected to continue, with management anticipating lower margins in subsequent quarters. The first quarter benefited from favorable timing, but margin rates are projected to be lower for the rest of the year, suggesting that current strong performance may not be sustained.**  **[NOC_3380702_24]**

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Northrop Grumman Corp (NOC)

Financials