Northrop Grumman Corporation (NYSE:NOC) Q2 2019 Earnings Conference Call Transcript

Jul 24, 2019 • 12:00 pm ET


Northrop Grumman Corporation (NYSE:NOC) Q2 2019 Earnings Conference Call Transcript


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Good day, ladies and gentlemen and welcome to Northrop Grumman's Second Quarter 2019 Conference Call. Today's call is being recorded. My name is Natalia, and I will be your operator today.

[Operator Instructions] I would now like to turn the call over to your host, Mr. Steve Movius, Treasurer and Vice President, Investor Relations. Mr. Movius, please proceed.

Stephen C. Movius

Thanks, Natalia and welcome to Northrop Grumman's second quarter 2019 conference call.

Before we start, please understand that matters discussed on today's call constitute forward-looking statements, pursuant to Safe Harbor provisions of federal securities laws. Forward-looking statements involve risks and uncertainties, which are noted in today's earnings release and our SEC filings. These risks and uncertainties may cause actual Company results to differ materially. Matters discussed on today's call will also include non-GAAP financial measures that are reconciled in our earnings release and supplemental presentation.

On the call today are Kathy Warden, our CEO and President and Ken Bedingfield, our CFO. At this time, I'd like to turn the call over to Kathy.

Kathy J. Warden

Thank you, Steve. Hello, everyone and welcome to today's call. We had an excellent second quarter results across the board, including business capture, backlog growth, sales, earnings and cash. Based on our strong performance and our outlook for the remainder of the year, we are increasing 2019 guidance. I want to thank the Northrop Grumman team. I'm particularly proud of our ability to deliver innovative, quality products and services, which enable global security and human advancement.

Starting with Space, as we celebrate the 50th anniversary of our nation's Apollo 11 lunar landing, we are proud of our strong legacy in supporting each of our nation's manned space flights to-date. Looking forward, we are poised to continue supporting manned space flight through NASA's Artemis program, which is expected to return humans to the moon by 2024.

In addition, this quarter, Innovation Systems has passed its one-year anniversary as our fourth sector, and I'm delighted with the progress we're making.

Costs and operational synergies are on track and our margin rates across the Company are benefiting from the synergies realized since the acquisition. We are also realizing revenue synergies sooner than we expected.

A good indicator of our success in capturing revenue synergies is our growing share of restricted work. We booked $843 million in restricted space awards during the second quarter and $4.5 billion in the first quarter. At the Company level, restricted work across multiple domains continues to grow as a percent of total revenue. This demonstrates our strong alignment to the national defense strategy and our ability to leverage our entire portfolio to create innovative solutions for our customers.

We booked net awards of $13.5 billion in the second quarter and $25.8 billion year-to-date. Now, net awards are approximately 1.6 times sales and our total backlog is up 18% to $63 billion. The large multi-year awards we are capturing across the Company are the building blocks for sustainable long-term profitable growth.

Year-to-date, Aerospace Systems has booked net awards of