Northrop Grumman Baird 2026 Global Industrial Conference

It's great to be back with you. I do want to start by reminding you that I will likely make some forward-looking statements today, and those come with uncertainties and risks. Those can be found outlined in our SEC filings on the northropgrumman.com website. I also want to recognize that it is Veterans Day today, and just mention my loyalty and support to our veterans and their families for their service and sacrifice to our country. With that said, let me talk a little bit about Northrop Grumman. We just reported third quarter results a couple of weeks ago, and it was another strong quarter of disciplined execution by the team, with growing momentum on top-line growth.

We put out an outlook for 2027, and that outlook shows continued momentum going into next year on top line with accelerating growth, continued margin expansion, and strong free cash flow generation. All of that is underpinned by a strategy and a portfolio that we have defined and intentionally created to be well-aligned not only to U.S. demand, but also growing international demand. I have said before, and it is still true today, that I see this as an unprecedented demand cycle in recent history. That demand really is coming across every segment of our business, and we are investing and facilitizing our organization to support our customers and the growth in both capability and capacity that's needed, and we expect that to be enduring.

We have record backlog in the company, and as we are working our way through that backlog, we are also continuing to see new opportunities for growth in each segment of our business. I look forward to answering questions that you have. I know this is a time post-election where there's likely some questions about the U.S. budget environment, but I will say, and will point to some artifacts that we provided in our third quarter earnings call, that our programs are very well supported in the base budget of the President's Budget Request, and we look into 2027 with a good deal of optimism around continued bipartisan support for our efforts.

Right. We do expect that the continuing resolution will be extended, right now it expires on December 11th, likely into the early part of 2027 after the new Congress is seated, and that extension will provide the resourcing at the level sufficient for our programs to continue without disruption. With that in mind, as we put our outlook together and shared it a few weeks ago, we were anticipating that to be the base case for support of our outlook and portfolio. As we get into the new year, I think there will be debate in the new Congress as to how the base budget is reflective of the threat environment and the programs that we have.

Things like strategic deterrence supported through the nuclear triad, space and its increasing role in both the U.S. and international and allied operations, the advancement of microelectronics to support every aspect of modernization of our weapons systems, from weapons themselves to sensors to surveillance to communication. All are areas of growth that we anticipate to be enduring under any circumstances. As I talked about a purpose-built portfolio and the work that we're winning and what we have in backlog, we do feel that those will be well-supported priorities under any condition as we look out into the future.

Yes. There are really three key pillars to our strategy. The first is technology leadership. We offer our customers a technological advantage over others that will not bring those same capabilities to conflict or just to their overall priorities to exercise mission. That technology advantage is not just over the competitors who are offering similar solutions to the U.S. government and our allies. This is a technological advantage over foreign governments who our adversaries are looking to beat the U.S. and our allies with technology. We want to make sure that we preserve that edge for the United States. We also make sure that we have a laser focus on performance within the company. That is the way that we generate returns for shareholders and turn the revenue growth into profit and cash, and there is strong discipline in the company focused on those return deliveries.

Finally, it's about smartly and in a disciplined way, investing that capital to both expand our business, but also to return to shareholders. We have executed that strategy consistently, but we've also adapted that strategy, particularly in regards to technology leadership, making sure that we are staying at the cutting edge of the technologies that make up our solutions and that create that differentiation for our customers. We also have invested to build out capacity as needed.

In this demand cycle that is as strong as it is, we have been investing in an elevated level, and we foresee that starting to tail off to a more normalized level in the next couple of years, only because we have capacitized for the growth that we see, not only today, but in the latter part of this decade as our programs more and more start to shift into production phases. That strategy, at its core, has not changed, but the execution of it has adapted to the realities of the environment that we're in.