Northrop Grumman Corporation

Good day, ladies and gentlemen, and welcome to Northrop Grumman's second quarter 2025 conference call. Today's call is being recorded. My name is Josh, and I will be your operator today. At this time, all participants are in a listen-only mode. I would like to turn the call over to your host, Mr. Todd Ernst, Vice President, Investor Relations. Mr. Ernst, please proceed.

Thanks, Josh, and good morning, everyone, and welcome to Northrop Grumman's second quarter 2025 conference call. Before we start, matters discussed on today's call, including guidance and outlooks for 2025 and beyond, reflect the company's judgment based on information available at the time of this call. They constitute forward-looking statements pursuant to safe harbor provisions of federal securities laws. Forward-looking statements involve risks and uncertainties, including those noted in today's press release and our SEC filings. These risks and uncertainties may cause actual company results to differ materially. Today's call will include non-GAAP financial measures that are reconciled to our GAAP results in our earnings release. In addition, we will refer to a presentation that is posted to our investor relations website. On the call today are Kathy Warden, our chair, CEO, and president, and Ken Kruse, our CFO. At this time, I'd like to turn the call over to Kathy. Kathy?

Thanks, Todd. Good morning, everyone, and thank you for joining us. As you saw from this morning's earnings release, we delivered a strong second quarter. The breadth and depth of our company's portfolio and our ability to respond with speed to our customers' needs continues to drive robust growth as evidenced by our strong backlog. In addition, our revenue increased 9% compared to the first quarter, with higher sequential sales in all four segments. The team also delivered outstanding operating performance this quarter, as demonstrated by an 11.8% segment operating margin. As we look toward the second half of the year, we expect continued ramp on franchise program and normal operational seasonality to support accelerating growth. We also expect segment margins to remain strong, consistent with our first half performance, excluding the B21 charge. And this is driven by performance, favorable mix, and international growth. Based on the strength of our second quarter results and confidence in our second half outlook, we are increasing our guidance for segment operating income, earnings per share, and free cash flow. The U.S. and our allies are making significant investments in defense capabilities, and we continue to see growing demand and opportunity for our broad range of product offerings. Whether in the space, air, land, cyber, or undersea domain, our technologies and our ability to integrate hardware and software for mission solutions are core to what customers need today. Domestically, these investments in defense are highlighted by the recently enacted reconciliation bill and FY26 budget request, which represents a combined 22% increase in procurement and RDT&E over fiscal year 2025. This includes investments in Northrop Grumman program and new potential growth areas. And the demand acceleration for our products extends outside the United States. In the second quarter, our international sales grew by 18% year over year and are up 14% year to date. We have a strong international book to build for aircraft, weapons, missile defense, and airborne systems. In Europe, we see significant opportunities for IVCS and weapon systems. And in the Middle East, where I joined the president in May, There are several multi-billion dollar opportunities in integrated air and missile defense, munitions, E2D, ARGM-ER, and ground-based radars. As part of our international strategy, we have extensive partnerships to support local industrial-based growth. With a commitment to continue innovating and investing in capacity and a strong global demand signal from our customers, we are confident in our long range potential growth. One area of expected growth that I'll highlight today is air and missile defense. With products such as IDCS and GPI, we're positioned as a key capability provider for missile defense to customers around the globe. And as we look to Golden Dome for America, we see Northrop Grumman playing a crucial role in supporting the administration's goal to move with speed and have initial operating capability in place within the next few years. This includes current products that can be brought to bear, like IBCS, Gator, Triton, and programs in a restricted portfolio, just to name a few. It will also include new innovations, like space-based interceptors, which we're testing now. We have the ability to work across the entire architecture, and we bring the scale, innovation, and research and development expertise that we can apply to each layer of this critical homeland defense initiative. Golden Dome is just one example of how the administration is pushing for differentiating capabilities at speed and scale to achieve peace through strength. Importantly, they've recognized the need to remove barriers for industry and government that prevent us from moving faster. We are already seeing the benefits of this to include our work on Sentinel and B21. On Sentinel, we made significant progress on the program restructuring in the second quarter. In close partnership with the Air Force, we reached agreement on a restructure approach which will lead to reestablishment of the program baseline. The work suspension on most aspects of the command and launch portion of the program was lifted, and we've resumed work on launch facility requirements and design. We continue to ramp on the program and make progress through development, testing, and risk reduction activities. Our second quarter results include strong Sentinel growth as well as a positive earnings adjustment, reflecting the agreements we reached with our customer, and improved confidence in achieving various performance incentives. We expect Sentinel revenue momentum to continue and for the program to be a meaningful contributor to our growth in the second half of the year. In partnership with the Department of Defense, we continue to work on acceleration options for the program. And we're confident in our ability to execute all phases of the program and deliver this critical capability for our nation. On the B-21 program, it continues to be well supported by the Defense Department and Congress. And the value and importance of a stealth strategic bomber was certainly shown with Operation Midnight Hammer. The Air Force has recently confirmed it is committed to the successful fielding of the B-21 and is investing in the infrastructure necessary to support an increased yearly production capacity. Through reconciliation, the B-21 received an additional $4.5 billion to increase production capacity. This builds on the efforts that we in the Air Force have made previously to prepare for a more rapid production ramp. We are in discussions with the Air Force regarding the potential for an accelerated production ramp on the program, and while the ultimate outcome of these discussions remain uncertain, we currently expect any agreement to accelerate production ramps would require further investment by the company to expand production capacity, along with the opportunity to earn improved returns on the LRIP and NTE production lots. With a pace of change and advancements in technology coupled with our customers' push for speed, we are constantly working to introduce new technologies and concepts to address our customers' needs. BEACON, which is highlighted on the cover of our slide deck, is one example of how we approach this. With BEACON, which we revealed in the second quarter, we've taken decades of autonomy experience and 500,000 autonomous flight hours to create a flying mission testbed. We bring software from companies of all sizes together with our flight software and hardware. BEACON will accelerate autonomous mission capabilities for our customers by allowing a variety of industry partners to move faster because of the work Northrop has done and is doing on autonomy. Our investment in BEACON also supports the administration's call for more next generation autonomous systems. Before wrapping my remarks, I want to highlight the importance of our strategy to invest in the business. Speed of bringing technology to market is important in this environment, and capacity is an important enabler to rapidly fielding capability. The capital investments we've made and that we continue to make allow us to meet this demand from our customers, remain competitive, and lay the groundwork for our future growth. In the area of solid rocket motors, we have invested a billion dollars over the past six years, significantly improving our capacity and flexibility across multiple facilities. This includes investments at the Allegheny Ballistic Laboratory facility in West Virginia for small motors and in Elkton, Maryland for medium-sized and hypersonic motors, both of which support growth in our tactical weapons business at DS. As a result of this investment, we were recently selected by the U.S. Navy to provide the 21-inch second stage solid rocket motor for its extended range missile program. We developed and demonstrated this capability in less than a year. In the space segment, our investments at the Baucus facility for large rocket motors support the build out of the Kuiper satellite constellation. Overall, We expect to increase our total annual solid rocket motor production rate from 13,000 units today to 25,000 by 2029. We will continue to make strategic investments in our business to ensure we have the scale and capabilities needed to support our customers effectively. This includes emerging missile defense opportunities such as Golden Dome for America and second source qualification for several tactical missiles. At the same time, we remain committed to returning capital to shareholders. This includes returning approximately 100% of our free cash flow to our shareholders through dividends and share repurchases this year. We repurchased nearly $900 million in stock in the first half of the year, and in the second quarter, we announced a 12% increase in our quarterly dividends, marking our 22nd consecutive annual increase. This increase is supported by the strong growth in free cash flow at the company. Reflecting our focus on delivering long-term value to shareholders over the past 10 years, we've increased our dividend at approximately 11% compounded annual growth rate. In summary, I'd like to thank our team for an excellent quarter. We have an outstanding portfolio, robust global demand and funding environment that supports it, and a high-performing team. This all leads to a strong outlook for our company. I'll now turn to Ken to share more details on our second quarter financial results and our outlook. Ken?